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Development aid
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Development aid or development cooperation (also development assistance, technical assistance, international aid, overseas aid or foreign aid) is aid given by governmental and economic agencies to support the economic, social and political development of developing countries. Since the 1990s, the idea of partnership and the corresponding term development cooperation have replaced the traditional situation in which the relationship was dominated by the wealth and specialised knowledge of one side.
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Encyclopedia
Development aid or development cooperation (also development assistance, technical assistance, international aid, overseas aid or foreign aid) is aid given by governmental and economic agencies to support the economic, social and political development of developing countries. Since the 1990s, the idea of partnership and the corresponding term development cooperation have replaced the traditional situation in which the relationship was dominated by the wealth and specialised knowledge of one side. Development aid may come from developed or developing country governments as well as from international organizations such as the World Bank or the United Nations Agencies (UNDP, UNICEF, UNAIDS, etc.) It is distinguished from humanitarian aid as being aimed at alleviating poverty in the long term, rather than alleviating suffering in the short term. (By contrast, foreign aid, includes both development aid and humanitarian aid. Some governments include military assistance in the notion "foreign aid", although many NGOs tend to disapprove of this).
The nations of the Organisation for Economic Co-operation and Development (OECD), made up of the developed nations of the world, have committed to providing a certain level of development assistance to underdeveloped countries. This is called Official Development Assistance (ODA), and is given by governments on certain concessional terms, usually as simple donations. It is given by governments through individual countries' international aid agencies (bilateral aid), through multilateral institutions such as the World Bank, or through development charities such as Oxfam.
Background
The offer to give development aid has to be understood in the context of the Cold War. The speech in which Harry Truman announced the foundation of NATO is also a founding document of development policy. "In addition, we will provide military advice and equipment to free nations which will cooperate with us in the maintenance of peace and security. Fourth, we must embark on a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas. More than half the people of the world are living in conditions approaching misery. Their food is inadequate. They are victims of disease. Their economic life is primitive and stagnant. Their poverty is a handicap and a threat both to them and to more prosperous areas. For the first time in history, humanity possesses the knowledge and skill to relieve the suffering of these people.“
Development aid was aimed at offering technical solutions to social problems without altering basic social structures. The United States was often fiercely opposed to even moderate changes in social structures, for example the land reform in Guatemala in the early 1950s.
Quantity
Over the last 20 years, annual official development assistance (ODA) has been between US$ 50bn and US$60bn but has reached over $100bn in 2005. The United States is the world's largest contributor of ODA in absolute terms ($15.7 billion, 2003), but the smallest among developed countries as a percentage of its GDP (0.14% in 2003). The UN target for development aid is 0.7% of GDP; currently only five countries (with Norway in the lead with 0.92%) achieve this.
Saudi Arabia’s ODA volume is second only to the USA. As percentage of GDP, Arab states of the Persian Gulf are the most generous, with Kuwait contributing 8.2% of its gross national product and Saudi Arabia 4% in 2002.
Private contributions also make a significant, albeit harder to track, contribution to development aid. Private donations in the US are estimated to be at least $34 billion a year, broken down as such:
- International giving by US foundations: $1.5 billion per year
- Charitable giving by US businesses: $2.8 billion annually
- American NGOs: $6.6 billion in grants, goods and volunteers.
- Religious overseas ministries: $3.4 billion, including health care, literacy training, relief and development.
- US colleges scholarships to foreign students: $1.3 billion
- Personal remittances from the US to developing countries: $18 billion in 2000
The last figure, remittances, blurs many definitions of aid: for example, money sent home by foreign workers is counted in this sum. The exact result and effect of remittance money is of some debate. However, even if it is factored out, private donations still match ODA in the US. In many cases, privately donated money is spent much more effectively than ODA, which must go through various governmental layers before reaching the problem. However, in other cases private sums disappear completely without any trace of their existence. Unfortunately, private aid figures are not tracked as well as ODA in many countries, so it is difficult to make across-the-board comparisons between various nations.
In the United States, popular estimates of spending on aid are often highly inflated. Surveys show that people typically think about 20% of the federal budget is spent on aid; the official number of ear-marked aid is little less than 1%. Though this percentage is accurate for planned dedicated monetary aid by the US government, it doesn't include the previously stated $34 billion from private donors, which would increase the US donation percentage to over 4.4%. It also do not include the billions of dollars in US cost of unplanned aid operations such as the 2004 Indian Ocean earthquake which involved tens of thousands of US personnel and the use of billions of dollars of US equipment and supplies.
Effectiveness
Aid effectiveness is the degree to which development aid works, and is a subject of significant disagreement. Dissident economists such as Peter Bauer and Milton Friedman argued in the 1960s that aid is ineffective. Many econometric studies in recent years have supported the view that development aid has no effect on the speed with which countries develop. Negative side effects of aid can include an unbalanced appreciation of the recipient's currency (known as Dutch Disease), increasing corruption, and adverse political effects such as postponements of necessary economic and democratic reforms.
There is also much debate about which form development aid should take in order to be effective. It has been argued that much government-to-government aid was ineffective because it was merely a way to support strategically important leaders. A good example of this is the former dictator of Zaire, Mobuto Sese Seko, who lost support from the West after the Cold War had ended. Mobuto, at the time of his death, had a sufficient personal fortune (particularly in Swiss banks) to pay off the entire external debt of Zaire.
Another criticism has been that Western countries often project their own needs and solutions onto other societies and cultures. In response, western help in some cases has become more 'endogenous', which means that needs as well as solutions are being devised in accordance with local cultures.
It has also been argued that help based on direct donation creates dependency and corruption, and has an adverse effect on local production. As a result, a shift has taken place towards aid based on activation of local assets and stimulation measures such as microcredit.
Aid has also been ineffective in young recipient countries in which ethnic tensions are strong: sometimes ethnic conflicts have prevented efficient delivery of aid.
In some cases, western surpluses that resulted from faulty agriculture- or other policies have been dumped in poor countries, thus wiping out local production and increasing dependency.
In several instances, loans that were considered irretrievable (for instance because funds had been embezzled by a dictator who has already died or disappeared), have been written off by donor countries, who subsequently booked this as development aid.
In many cases, Western governments placed orders with Western companies as a form of subsidizing them, and later shipped these goods to poor countries who often had no use for them. These projects are sometimes called 'white elephants'.
A common criticism in recent years is that rich countries have put so many conditions on aid that it has reduced aid effectiveness. In the example of tied aid, donor countries often require the recipient to purchase goods and services from the donor, even if these are cheaper elsewhere. Other conditions include opening up the country to foreign investment, even if it might not be ready to do so.
An excerpt from Dr. Thomas Dichter's recently published book Despite Good Intentions: Why Development Assistance to the Third World Has Failed reads: "This industry has become one in which the benefits of what is spent are increasingly in inverse proportion to the amount spent - a case of more gets you less. As donors are attracted on the basis of appeals emphasizing "product", results, and accountability…the tendency to engage in project-based, direct-action development becomes inevitable. Because funding for development is increasingly finite, this situation is very much a zero-sum game. What gets lost in the shuffle is the far more challenging long-term process of development."
The Massachusetts Institute of Technology's Abhijit Banerjee and Ruimin He have undertaken a rigorous study of the relatively few independent evaluations of aid program successes and failures. They suggest the following interventions are usually highly effective forms of aid in normal circumstances:
- subsidies given directly to families to be spent of children's education and health
- education vouchers for school uniforms & textbooks
- teaching selected illiterate adults to read and write
- deworming drugs and vitamin/nutritional supplements
- vaccination and HIV/AIDS prevention programs
- indoor sprays against malaria, anti-mosquito bed netting
- suitable fertilizers
- clean water supplies
Private aid
Development charities make up a vast web of non-governmental organizations, religious ministries, foundations, business donations and college scholarships devoted to development aid. Estimates vary, but private aid is at least as large as ODA within the United States, at $16 billion in 2003. World figures for private aid are not well tracked, so cross-country comparisons are not easily possible, though it does seem that per person, some other countries may give more, or have similar incentives that the US has for its citizens to encourage giving.
Remittances
It is doubtful whether remittances, money sent home by foreign workers, ought to be considered a form of development aid. However, they appear to constitute a large proportion of the flows of money between developed and developing countries, although the exact amounts are uncertain because remittances are poorly tracked. World Bank estimates for remittance flows to developing countries in 2004 totaled $122 billion; however, this number is expected to change upwards in the next few years as the formulas used to calculate remittance flows are modified. The exact nature and effects of remittance money remain contested, however in at least 36 of the 153 countries tracked remittance sums were second only to FDI and outnumbered both public and private aid donations.
The IMF has reported that private remittances may have a negative impact on economic growth, as they are often used for private consumption of individuals and families, not for economic development of the region or country.
See also
Further reading
- Gilbert Rist, The History of Development: From Western Origins to Global Faith, Zed Books, New Exp. Edition, 2002, ISBN 1842771817
- Perspectives on European Development Co-operation by O.Stokke
- European development cooperation and the poor by A.Cox, J.Healy and T.Voipio ISBN 0 333 74476 4
- Rethinking Poverty: Comparative perspectives from below. by W.Pansters, G.Dijkstra, E.Snel ISBN 90 232 3598 3
- European aid for poverty reduction in Tanzania by T.Voipio London, Overseas Development Institute, ISBN 0 85003 415 9
- The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It by Paul Collier
External links
- , by Tanya Narozhna
- Tender alert service informing you of all newly published development aid tenders/procurement opportunities relevant to your organisations core areas of business activity by sector/region/funding agency. Published on a daily basis with business opportunities from more than 25 international/bilateral donor funding agencies including World Bank, European Commission, African Development Bank, DFID, EBRD amongst many others.
- Abhijit Banerjee & Ruimin He . MIT, 2003. (Full text).
- Abhijit Baerjee . Boston Review, March/April 2007.
- Håkan Malmqvist (2000), "Development Aid, Humanitarian Assistance and Emergency Relief", Ministry for Foreign Affairs, Sweden
- Andrew Rogerson with Adrian Hewitt and David Waldenberg (2004), "The International Aid System 2005–2010 Forces For and Against Change", ODI Working Paper 235
- A compilation of case studies of successful foreign assistance by the .
- - working towards greater aid effectiveness
- . A source for international development tenders and procurements and foreign aid relief news from 80 major donor agencies.
- - the German think tank of development aid
- from globalissues.org looks at issues such as aid targets, and numbers, the effectiveness of aids, and the politics of aids; who it really benefits, etc.
- brings together NGOs from across Europe to monitor aid's impacts on poverty, produce research and conduct advocacy.
- A project aimed at improving EC Development Aid to Africa, through brining African civil society voices to policy makers in Europe.
- makes information on Europe's development cooperation more accessible
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