The Other Face of OPEC: Financial Assistance to the Third World

By Ibrahim P.I. Shihata. New York: Longman Inc., 1982. 281 pp. $12.95 (paperback).

Reviewed by Joseph C. Story

As implied by the title, a major objective of this book is to modify, if not alter, a widely held public view of OPEC as an evil and voracious international cartel. This book comprehensively and eloquently documents the magnitude and importance of OPEC's financial assistance to the world's developing nations over the past decade. However, it is doubtful that the constructive and responsible foreign aid activities undertaken by OPEC will much impress most OPEC haters, since it is unlikely that many of them will read the book.

Perhaps the single most important aspect of The Other Face of OPEC is the fact that it was written by Ibrahim Shihata. As the Director- General of the OPEC Fund for International Development from the time of its founding in 1976 through mid-1983, and as legal counsel to the Kuwait Fund for Arab Economic Development over most of the period 1966-1976, few individuals are as knowledgeable about the theory and practice of OPEC and Arab economic assistance to the Third World. Dr. Shihata not only knows his subject, but also writes well and persuasively.

Filling the Information Gap

Considering the size and duration of the OPEC foreign aid program, there has been remarkably little coverage in the Western media of the activities of the OPEC Fund. Happily, Dr. Shihata's book goes a long way toward remedying this information gap. A detailed picture of the size and composition of the OPEC aid disbursements between 1973 and 1980 is provided. A good deal of emphasis is placed on the relative merits of OPEC and Western aid, the forms, terms and mechanics of OPEC and Arab economic assistance programs, and the obvious importance of the aid contributions of the Gulf Arab nations.

In addition to the principle theme of OPEC financial assistance to the Third World, almost half of the book is devoted to a number of related, but essentially non-aid topics and issues. Three chapters dealing with the North-South Dialogue, Arab oil policies, and the New International Economic Order most clearly point up the sense of community existing between OPEC donors and Third World aid recipients. (Although much is made of the per capita annual income of some OPEC nations, few would argue that all of the members of OPEC belong in the category of developing nations compared to the countries of the industrialized West). Other chapters provide lucid and informative discussions on a variety of topics, including the working relationships between the OPEC Fund and other development finance institutions, such as the IMF and UNDP, and the Arab Investment Guarantee Corporation. The final two chapters concern OPEC's interest in Third World food and agriculture.

Although published in 1982, Dr. Shihata's book covers only the period of rapid growth of OPEC and Arab foreign aid programs from 1974 through 1980. Since 1981, the world economic recession and the steep drop in demand for OPEC oil has resulted in a real decline in the amount of Western bilateral aid, funding by multilateral institutions such as the World Bank, and in OPEC and Arab economic assistance to developing countries.

The Ebb and Flow

Compared to total net aid flows to developing countries of just over $6 billion from Saudi Arabia, Kuwait, the United Arab Emirates and Qatar alone in 1976, aid commitments from all the Gulf countries and from the OPEC Fund amounted to only $2.67 billion in 1982, and the decline has been continuing this year. If world demand for OPEC oil picks up in 1984 as expected, foreign assistance programs are likely to begin to expand once again. The Arab nations of the Gulf in particular attach a high priority to economic aid to the Third World, for both humanitarian and political reasons. Several OPEC nations, however, including Nigeria, Iraq, Venezuela and Indonesia, are at present in serious financial difficulties and are not likely to be aid donors for the foreseeable future. Partly for this reason, the OPEC Fund is not expected to be a major source of foreign economic assistance funding over the next several years. Rather, such aid organizations as the Arab Fund for Economic and Social Development, and the Abu Dhabi Fund for Arab Economic Development, the Arab Bank for Economic Development in Africa, the Islamic Development Bank, the Kuwait Fund for Arab Economic Development and the Saudi Fund for Development should grow in relative importance.

As for the expected mandatory criticisms, some readers may have a problem with the format of Dr. Shihata's book. The 16 chapters are made up of essays, lectures and articles prepared by the author over a period of eight years, from 1974 to 1981. This arrangement proves to be both a strength and a weakness. Each chapter basically stands alone, but the whole provides a valuable historical perspective of OPEC oil, aid and financial issues over the entire time period. On the other hand, there is a certain amount of repetition in several of the chapters and a smooth flow in the discussion of issues and developments is not attained. Still, in conclusion, this book is an important addition to the library of any serious OPEC watcher.

Joseph C. Story is a senior economist at the Wharton Middle East Economic Service in Washington, D.C.