Development aid or development cooperation (also development assistance, technical assistance, international aid, overseas aid, official development assistance (ODA), or foreign aid) is financial aid given by governments and other agencies to support the economic, environmental, social and political development of developing countries. It is distinguished from humanitarian aid by focusing on alleviating poverty in the long term, rather than a short term response. The term development cooperation, which is used, for example, by the World Health Organisation (WHO) [1] is used to express the idea that a partnership should exist between donor and recipient, rather than the traditional situation in which the relationship was dominated by the wealth and specialised knowledge of one side. Most development aid comes from the Western industrialised countries but some poorer countries also contribute aid. Aid may be bilateral: given from one country directly to another; or it may be multilateral: given by the donor country to an international organisation such as the World Bank or the United Nations Agencies (UNDP, UNICEF, UNAIDS, etc.) which then distributes it among the developing countries. The proportion is currently about 70% bilateral 30% multilateral.[2]
About 80-85% of developmental aid comes from government sources as official development assistance (ODA). The remaining 15-20% comes from private organisations such as "Non-governmental organisations" (NGOs), foundations and other development charities (e.g. Oxfam).[3] In addition, remittances received from migrants working or living in diaspora form a significant amount of international transfer.
Some governments also include military assistance in the notion "foreign aid", although many NGOs tend to disapprove of this.
Private consulting firms, such as PricewaterhouseCoopers and Deloitte, are increasingly being contracted by donor agencies to manage and implement elements of their aid program, due to their perceived ability to perform higher quality program management and delivery.
Official development assistance is a measure of government-contributed aid, compiled by the Development Assistance Committee of the Organisation for Economic Co-operation and Development (OECD) since 1969. The DAC consists of 22 of the largest aid-donating countries.
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While the concept of development aid goes back to the colonial era, that origin of modern development aid roots in the context of Post-World War II and the Cold War: Launched as a large-scale aid program by the United States in 1948, the European Recovery Program, or Marshall Plan was concerned with strengthening the ties to the West European states to contain the influence of the USSR. This political rationale is well summarized in the Truman Doctrine, in which United States president Harry Truman stated the anti-communist rationale for U.S. development aid in his inaugural address of 1949, which also announced the founding of NATO:[4]
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.
Most official development assistance (ODA) came from the 23 members of the Development Assistance Committee (DAC), or about USD 120 billion in 2009.[6] In 2007 a further USD 11.8 billion came from the European Commission while all non-DAC countries gave USD 5.56 billion.[7]
The largest DAC donors in 2009 were the United States (USD 28.8 billion), France ($12.6 billion), Germany ($12.1 billion), United Kingdom ($11.5 billion) and Japan ($9.5 billion). The largest non-DAC donors in 2007 were Saudi Arabia (USD 2 billion) and Turkey ($0.6 billion). However, none of these countries met the UN target of giving at least 0.7 percent of the Gross National Income (GNI) as aid. United States (0.21% of GNI) and Japan (0.18% of GNI) were ranked 19 and 21 respectively out of the 23 DAC countries. The only countries meeting the targets in 2009 were Sweden (1.12% of GNI), Norway (1.06% of GNI), Luxembourg (1.04% of GNI), Denmark (0.88% of GNI), and the Netherlands (0.82% of GNI).[6][7]
Development aid is often provided by means of supporting local development aid projects. In these projects, it sometimes occurs that no strict code of conduct is in force. In some projects, the development aid workers do not respect the local code of conduct. For example, the local dress code as well as social interaction.[8] In developing countries, these matters are regarded highly important and not respecting it may cause severe offense, and thus significant problems and delay of the projects.
There is also much debate about evaluating the quality of development aid, rather than simply the quantity. For instance, tied aid is often criticized as the aid given must be spent in the donor country or in a group of selected countries. Tied aid can increase development aid project costs by up to 20 or 30 percent.[9] There is also criticism because donors may give with one hand, through large amounts of development aid, yet take away with the other, through strict trade or migration policies. The Commitment to Development Index measures the overall policies of donors and evaluates the quality of their development aid, instead of just comparing the quantity of official development assistance given.
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:[10]
... an excellent method for transferring money from poor people in rich countries to rich people in poor countries.— Peter Bauer
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.[11]
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.[11]
Besides some instances that only the president (and/or his close entourage) receives the money resulting from development aid, the money obtained is often badly spent as well. For example, in Chad, the Chad Export Project, a oil production project supported by the World Bank, was set up. The earnings of this project (6,5 million dollars per year and rising) were used to obtain arms. The government defended this purchase by stating that "development was not possible without safety". However, the Military of Chad is notorious for severe misconduct against the population (abuse, rape, claiming of supplies and cars) and did not even defend the population in distress (e.g. in the Darfur conflict). In 2008, the World Bank retreated from the project that thus increased environmental pollution and human suffering.[12]
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.[13] For example, sometimes projects are set-up which wish to make several ethnic groups cooperate together. While this is a noble goal, most of these projects fail because of this intent.[12]
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'.
According to Martijn Nitzsche, another problem is the way on how development projects are sometimes constructed and how they are maintained by the local population. Often, projects are made with technology that is hard to understand and too difficult to repair, resulting in unavoidable failure over time. Also, in some cases the local population is not very interested in seeing the project to succeed and may revert to disassembling it to retain valuable source materials. Finally, villagers do not always maintain a project as they believe the original development workers or others in the surroundings will repair it when it fails (which is not always so).[14]
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.[15]
All of these problems have made that a very large part of the spend money on development aid is simply wasted uselessly. According to Gerbert van der Aa, for the Netherlands, only 33% of the development aid is successful, another 33% fails and of the remaining 33% the effect is unclear. This means that for example for the Netherlands, 1.33 to 2.66 billion is lost as it spends 4 billion in total of development aid (or 0,8% of the gross national product).[14]
For the Italian development aid for instance, we find that one of their successful projects (the Keita project) was constructed at the cost of 2/3 of 1 F-22 fighter jet (100 million $), and was able to reforest 1,876 square miles (4,900 km2) of broken, barren earth, hereby increasing the socio-economic wellbeing of the area.[16] However -like the Dutch development aid- again we find that, the Italian development aid too is still not performing up to standards.[17] This makes clear that there are great differences between the success of the projects and that budgetary follow-up may not be so strictly checked by independent third parties.
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[18] 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:
An inquiry into aid effectiveness by the UK All Party Parliamentary Group (APPG) for Debt, Aid and Trade featured evidence from Rosalind Eyben, a Fellow at the Institute of Development Studies. Her evidence to the inquiry stated that effective aid requires as much investing in relationships as in managing money. It suggests Development organisations need to change the way they work to manage better the multiple partnerships that the Accra Agenda for Action recognises is at the core of the aid business. In relation to this specific inquiry, Dr Eyben outlined the following points:[19]
The views above are of Dr Eyben. There were many other submissions to the All Party Parliamentary Group for Debt, Aid and Trade's inquiry into Aid Effectiveness. The final report gathered a vast amount of information from a wide range of sources to ensure a balanced perspective on the issues of aid effectiveness. The All Party Parliamentary Group for Debt, Aid and Trade's inquiry into Aid Effectiveness can be found online and the submissions of other contributors are available upon request. √ Foreign aid from western countries is developing and increasing in the past decade. But we are not supposed to just give African money and food but rather giving opportunities. The goal is to create more chances for African people to accept higher education and also is an effective way to save African from suffering from poverty. There is a program called “Five College African Scholars Program”. This program is basically dedicated to support the research of individual researchers in Africa, strengthening partnerships among scholars in Africa and the United States, and augmenting the study of Africa. Talking about the program each scholar will receive a payment of 1,000 dollars a month as a salary base. Also other goods such as airfare fee, laptop computer, housing, health insurance, library privileges, an office, and a modest research allowance are all subjected to US tax. The requirements to apply to “ Five College Africans Scholars Program” is only offered to people who must be a citizen of an African nation, employed full-time at an African university that offers a bachelor, a master or a PHD degree, and there is a limit to the age of 49. There are also limits of accepting people; these refer to the people who hold such as graduate assistants, tutorial assistants and non teaching researchers.
While development aid is an important source of investment for poor and often insecure societies, aid's complexity and the ever expanding budgets leave it vulnerable to corruption, yet discussing it remains difficult as for many it is a taboo subject.[20] Corruption is very hard to quantify as it is often hard to differentiate it from other problems, such as wastage, mismanagement and inefficiency, to illustrate the point, over US $8.75 billion was lost to waste, fraud, abuse and mismanagement in the Hurricane Katrina relief effort.[20] Often a lack of understanding of the process by those meant to be receiving aid leads to cynicism and belief that greed and corruption are the key failures. Non-governmental organizations have in recent years made great efforts to increase participation, accountability and transparency, humanitarian assistance remains a poorly understood process to those meant to be receiving it - much greater investment needs to be made into researching and investing in relevant and effective accountability systems.[20] However, there is little clear consensus on the trade-offs between speed and control, especially in emergency situations when the humanitarian imperative of saving lives and alleviating suffering may conflict with the time and resources required to minimise corruption risks.[20] Researchers at the Overseas Development Institute have highlighted the need to tackle corruption with, but not limited to, the following methods:[20]
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.[21]
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 totalled $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,[22] 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.[23]
The International Monetary Fund 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.[24]
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