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Volume :5 Issue : 18 1979      Add To Cart                                                                    Download

ABU DHABI’S FOREIGN AID: A.D.F.A.E.D. & OTHER CHANNELS

Auther : By Barry Macdonald

Precedent and Prior Institution:

It is worth-mentioning that Abu Dhabi’s foreign aid program existed as early as 1950’s when Abu Dhabi was dominated by the British.

As the guardian of all the Gulf Emirates, the British established the Trucial states council in 1952 to promote cooperation among the member states.

In 1965, the Trucial states development fund was formed with a large initial input from Britain and several other Gulf states; T.S.F. was targeted toward the internal infrastructure improvement of the emirates. With excess funds generated by oil, T.S.F. chose to finance its fellow Arabs.

In 1966, with the emergence of Sheikh Zayed, and the increasing volume of oil, T.S.F. foreign aid was tripled and Abu Dhabi was in a position to become a major donor and lender to the developing states.

Creation, structure and growth of A.D.F.A.E.D.:

Actually, T.S.F. was only a foundation for a similar organization with international clientele, i.e. Abu Dhabi Fund for Arab Economic Development or A.D.F.A.E.D.

On July 15, 1971, A.D.F.A.E.D. was established, initially set at $125 million.

The purpose of A.D.F.A.E.D. is to offer economic aid to Arab countries and Muslims through loans, or participation in project, or guarantees.

In practice, the Fund sends missions of experts to countries requesting aid to evaluate specific project plans.

The key criteria in evaluation are: the nature of the project, the total economic soundness of the potential recipient, and the provision of the Fund with information on the progress of a project throughout its duration. Besides, an anti-nationalization clause to protect A.D.F.A.E.D. assets, and assurances that funds borrowed will be used only for the purpose intended.

By law, A.D.F.A.E.D. may not invest more than 10% of its capital in any given project, nor may it underwrite more than 50% of the total cost of any project.

The rate of interest will be assigned according to a scale of preference based on the project-team’s analysis, with rates running from theoretical low of 1.5 to a high 5%.

The loans are repayable over period ranging from 12 to 22.5 years with grace periods of 1.5 to 8 years.

Just as the jump in oil prices, A.D.F.A.E.D. capital was quadrupled to cover not only Arab national but also African, Asian and other Islamic countries. A.D.F.A.E.D. enlarges its activities and technical services to foreign development projects. Yet it is note-worthy that the aid of A.D.F.A.E.D. does not exceed the Islamic spheres.

Gifts and Aid Multi-lateral Agencies:

As I have mentioned that the purpose of A.D.F.A.E.D. is to offer economic aid to Arab states, that include heavy donations to those states directly involved with the confrontation with Israel, and a large array of donations and loans to multilateral development agencies. Information extended on gifts is scattered and incomplete.

Co-operation among the international agencies already exist, such as the I.M.F., the United Nation and the World Bank. The United Arab Emirates is a member of all these organization, and through Abu Dhabi had donated or loaned fund to all of them.

Why foreign aid:

A.D.F.A.E.D. is directed towards the foreign aid policy because of the existence of surplus capital engendered by increasing oil production and the oil price increases. It is impossible for all revenues to be absorbed alone in Abu Dhabi itself, given its current population about 125,000, the modest amounts of skilled labor, and its general level of infrastructural and industrial development. Therefore, resources are available for use as foreign aid.

Abu Dhabi like, other oil-rich Arab states, has an essentially one-product economy complete with the attendant risks of shifting demand and exhaustibility of supply.

Hence, the need to diversify and a need to develop regional markets for goods.

One important factor is the sense of obligation, which seems to exist, based on a blend of Islamic ethics and the remembrance that the grinding poverty of many world nations exited in Abu Dhabi not very long.

Consequently, Abu Dhabi has gained political incentives of increased prestige, regional security, support for the internal political status and the ability to influence foreign governments on important issues.

Prospects:

The unpredictability of the surplus, and the demand for oil seem to warn A.D.F.A.E.D. against the level of outright grants.

Therefore, for the sake of long-term economic stability, the level of outright grants would be slowed and the proportion of Dirhams allotted to A.D.F.A.E.D. and other investment groups increased. Evidently, the foreign aid will continue because of the general lack of growth of aid from Western resources. However, a rationalization of aid grants procedures and closer coordination of aid efforts among those Middle Eastern nations must take place if they are to continue in long run.

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