China and Aid Coordination: Feasibilities of Trilateral Cooperation on Geothermal Financing in Kenya

Abstract

Traditional donors have made wide debates and attempts to coordinate aid to reduce transaction cost and increase aid effectiveness. Several obstacles have been studied, one of which is emerging donors' bilateral approach with recipients. This not only complicates existing aid coordination, but also increases transaction cost for recipients. Relation between China and traditional donors is mostly heated discussed due to its prominence in aid provision. This paper, applying the geothermal financing in Kenya as a case, tests the hypothesis that trilateral cooperation based on comparative advantages can provide a configuration to coordinate traditional and Chinese donors at project or sectoral level, with expected results of reducing transaction cost and increasing aid effectiveness. This paper contributes to the field by showing potential improvement of transaction costs and aid effectiveness through trilateral cooperation engaging emerging donors in energy project or sector, which also sheds lights on aid coordination in infrastructure sector.