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 governments and other agencies to support the economic, social and political development of developing countries. It is distinguished from humanitarian aid as being aimed at alleviating poverty in the long term, rather than alleviating suffering in the short term. 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 knowldge 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 to 85 per cent of developmental aid comes from government sources. The remaining 15 to 20 per cent comes from private organisations such as "Non-governmental organisations" (NGOs) and other development charities (eg. Oxfam).^[3] This is not counting remittances by individuals in developed countries to family members in developing countries.

Some governments include military assistance in the notion "foreign aid", although many NGOs tend to disapprove of this.

Official Development Assistance is a measure of government-contributed aid that has been 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.

Contents 1 Background 2 Quantity 3 Quality 4 Effectiveness 5 Private aid 6 Remittances 7 See also 8 References 9 Further reading 10 External links

[edit] Background

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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.

[edit] Quantity

The EU (comprising the 27 Members States and the Europan Commission) is the world's biggest donor of development aid. The EU spent 48,6 billions in development aid in 2008. The European Commission, with more 12 billions, is the world's third largest donor.

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.^[4] 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 Sweden in the lead with 0.98%) achieve this.

Saudi Arabia’s ODA volume is second only to the USA.^[5] 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.^{[6][verification needed]}

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%.^[7] 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.^[8]

[edit] Quality

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 dresscode aswel as social interaction.^[9] 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.

[edit] 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.^[10]

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.^[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 (eg in the Darfur conflict). In 2008, the Worldbank 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; where this is a noble goal, most of these projects fail because of this intent.^[14]

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 in order 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).^[15]

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.^[16]

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 gros national product).^[17]

For the Italian development aid for instance, we find that one of their succeful 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 of broken, barren earth, hereby increasing the socio-economic wellbeing of the area.^[18] However -like the Dutch development aid- again we find that, the Italian development aid too is still not performing up to standards. ^[19] This makes clear that there are great differences between the success of the projects and that budgettary 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^[20] 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 in order to be spent on 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

[edit] 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.^[21]

[edit] 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,^[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 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. ^[24]

[edit] See also

• Timeline of events in humanitarian relief and development
• ACP-EU Development Cooperation
• International Development
• Millennium Development Goals
• Conditionality
• Aid effectiveness
• Debt relief
• Millennium Challenge Account
• List of development aid agencies
• Development charities
• Bretton Woods system
• Tied aid
• Development economics
• Inclusive business
• Development Assistance Committee
• European Centre for Development Policy Management (ECDPM)
• EuropeAid cooperation office

[edit] References

[edit] 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

[edit] External links

This article's external links may not follow Wikipedia's content policies or guidelines. Please improve this article by removing excessive or inappropriate external links. (September 2007)

• Aid and Development at the Open Directory Project
• Ideas for Development - blog of heads of International Development Agencies
• Failed Expectations, Or What Is Behind the Marshall Plan for Post-Socialist Reconstruction, by Tanya Narozhna
• Centre for International Development Nijmgen
• Centre for International Development at Harvard University
• Assortis.com 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 "Making Aid Work". MIT, 2003. (Full text).
• Abhijit Baerjee "Making Aid Work". Boston Review, March/April 2007.
• AidMarket
• AiDA: Accessible Information on Development Activities
• Development Gateway Aid Effectiveness Topic Page
• Special Report on Aid Harmonization
• Håkan Malmqvist (2000), "Development Aid, Humanitarian Assistance and Emergency Relief", Ministry for Foreign Affairs, Sweden [1]
• Andrew Rogerson with Adrian Hewitt and David Waldenberg (2004), "The International Aid System 2005–2010 Forces For and Against Change", ODI Working Paper 235 [2]
• Millions Saved A compilation of case studies of successful foreign assistance by the Center for Global Development.
• Aidharmonisation.org - working towards greater aid effectiveness
• The Development Executive Group. A source for international development tenders and procurements and foreign aid relief news from 80 major donor agencies.
• German Development Institute - the German think tank of development aid
• The US and Foreign Aid Assistance 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.
• European Network on Debt and Development brings together NGOs from across Europe to monitor aid's impacts on poverty, produce research and conduct advocacy.
• African Voices A project aimed at improving EC Development Aid to Africa, through bringing African civil society voices to policy makers in Europe.
• Euforic makes information on Europe's development cooperation more accessible
• Arab Aid
• understanding development in a new way
• Developmentportal The Independent European Development Portal
• DevelopmentAid A source for organizations and individuals involved in the international development. Publishes tenders and procurements from international donors, individual and organizational profiles.