If donor and recipient countries act with mutual priority with regard to official development assistance (ODA), the recipient can manage the ODA with less transaction cost and the donor can pay extra attention to its recipient with more responsibility for development. For example, the United States and Japan used to be South Korea's primary donors and South Korea used to be their primary recipient, as well. This could be a factor explaining the effectiveness of aid that South Korea had received in the past. However, this mutual priority is not observed when South Korea is disbursing its ODA as a donor. Policies of providing more ODA to stronger commercial ties as well as the current international trend of donor proliferation and recipient fragmentation may explain this.
- Aid effectiveness
- Mutual priority