Aid
Content
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/HAITIEXTN/0,,menuPK:338184~page PK:141159~piPK:141110~theSitePK:338165,00.html http://www.drtomoconnor.com/4090/4090lect08secure.htm http://articles.timesofindia.indiatimes.com/2011-02-27/patna/28638072_1_international-financialinstitutions-dfid-bihar-development-policy-loan http://www.piie.com/publications/chapters_preview/321/4iie2911.pdf http://www.piie.com/publications/chapters_preview/321/2iie2911.pdf http://books.google.com/books?id=ROMOAAAAQAAJ&pg=PA59&vq=%22member+countries+of+the+D evelopment+Assistance+Committee+(DAC)+of+the+Organization+for+Economic+Cooperation+and%22& source=gbs_quotes_r&cad=6#v=onepage&q=%22member%20countries%20of%20the%20Development %20Assistance%20Committee%20(DAC)%20of%20the%20Organization%20for%20Economic%20Cooper ation%20and%22&f=false http://www.h-net.org/reviews/showrev.php?id=30955 http://www.hurriyetdailynews.com/n.php?n=moon-calls-everybody-to-keep-their-promise-for-aid-andcooperation-2011-05-08 http://www.guardian.co.uk/global-development/poverty-matters/2011/may/23/un-oecd-aideffectiveness http://www.bizjournals.com/seattle/blog/2011/05/gates-touts-farming-aid-in-dc.html http://www.businessandeconomy.org/28122006/storyd.asp?sid=890&pageno=1 http://en.wikipedia.org/wiki/Development_aid
Aid:
It used to called foreign aid, but now it goes by fancier names such as official development assistance and concessional resource transfers. According to Lancaster (2000), the word "concessional" refers to the fact that foreign aid usually involves at least 25% of the money given away freely as a grant element (the usual amount being more like 60 or 70%) with the remainder a loan carrying steeply discounted interest rates and long repayment periods such as 40 years or more. That description, in fact, is as good a technical definition of foreign aid as any, and for tallying purposes, does NOT include military aid, trade financing,
intergovernmental loans, funding for anti-drug or anti-terrorism activities, voluntary disaster relief, or "forced contributions" to the UN (see below)
United Nations Development Programme (undp) United Nations International Children's Emergency Fund, UNICEF
No other nation on earth comes close to what the US pays in annual dues (Japan comes closest, followed by Germany, UK, France, Italy, Canada, China, and Spain). The US has long paid at least 25% of the total UN cost, and under the current assessment ("capacity to pay") formula, the US pays the ceiling of 22% of the UN budget (although some argue the US should pay more since it accounts for 34% of the global economy). Additionally, a significant part of the US military budget goes to support various UN resolutions and peacekeeping operations. The US is also a large supporter of many voluntary UN initiatives, such as "Feed the Children" UNICEF and UNDP programs. However, the US prefers to work alone much of the time, eschewing UN channels for its own USAID channels. Foreign aid serves as a tool of US policy in a dualistic way: for diplomacy and development purposes THE NATURE AND SCOPE OF FOREIGN AID Foreign aid is usually provided to countries in one of two ways: bilateral or multilateral.
Foreign aid can also be provided in kind rather than in cash or credits, such as in the form of food, medicine, or other commodities, but hard currency is the norm today
Historically, bilateral aid has dominated the foreign aid landscape, the major "givers" being former colonial powers and the United States. The top four "givers" inclusive of the U.S. have been Japan, France, and Germany.
Multilateral aid is distributed by multilateral organizations such as the IMF, the World Bank, the European Union, and the UNDP (United Nations Development Program).
Multilateral aid is typically focused on economic improvement only Multilateral aid can be said to have started in 1970 when the UN passed a resolution which called for 22 of the most high-income nations (members of the OECD or Organization for Economic Cooperation and Development, also known as the DAC or Development Assistance Committee) to pledge 0.7% of their GNP to global poverty reduction. Today, GNP (gross national product) is no longer used as a measure, but GNI (gross national income) instead. THE PURPOSES OF FOREIGN AID The best aid projects are those which improve the public sector, specifically the way the public sector does business. However, public aid has had many mixed purposes, and those purposes have changed over time. Lancaster's (2006) book is devoted to the study of this topic, and offers a good starting point. She argues that there have been no less than nine (9) purposes of aid, as follows:
y y y y y y y
diplomatic -- to manage the relationships between governments developmental -- to better the human condition by benefiting the poor humanitarian -- to provide relief from natural or manmade disasters commercial -- to expand exports and secure access to needed imports cultural -- to support a specific language or spread of a specific religion promoting transition -- to help former socialist countries reform promoting democracy -- to help former dictatorships reform
y y
addressing global issues -- to help block the spread of global problems mitigating conflicts -- to help countries recover from war
Diplomatic and developmental purposes have long been the most prominent of aid's purposes, but humanitarianism has a long history too, and commercialism has typically had the strongest interest groups. Nowadays, it is common to see many purposes mixed together in the "ideas" that political elites put forth in terms of justifications for aid-giving. Such elites must take care in how they mix their justifications because the public will easily turn against aid (for any purpose) if they regard it as being wasted or used corruptly. Effectiveness is hard to measure, and ultimately, all that aid represents is a "promise." Knowing the precise purpose of aid helps with effectiveness evaluation. If the purpose is simply diplomatic, then all that aid may effect is a symbolic signal that the aidgiving country is powerful and potent. However, it may also demonstrate a willingness to stand behind the aid-receiving country in the face of pressure from hostile governments. Typically, aid effectiveness is hard to measure because aid serves several functions at once. Over the years, support for aid has waxed and waned, but interest in the subject has certainly seen a revival since the start of the 21st century. Development, poverty, and aid issues have topped the agendas at meetings of world leaders and UN summits. The increased interest may be because of a suspicion that such issues might have something to do with terrorism, conflict, and instability, and if that is the case, then foreign aid is sure to stay and its assessment takes on a vast new significance that goes far beyond previous assessments (e.g., Casson et al. 1985). THE EFFECTIVENESS OF FOREIGN AID Aid has been a spectacular success, Some successful cases where aid has produced rather rapid development include: Bolivia, Botswana, Germany, Ghana, Indonesia, South Korea and Vietnam. Most aid is intended to be spent as investment projects in particular sectors such as roads, water supply, or education where visible results might be expected In the literature on aid's effectiveness, two main reports stand out. The first was a 1992 World Bank internal document entitled Report of the World Bank Portfolio Management Task Force (aka the Wapenhans
Report). No copy is available online, but it is known the report found that about 25% of aid money was being wasted. The second was a 1998 publication called Assessing Aid: What Works, What Doesn't, and Why (available as the first Internet Resource below). It found, like the earlier report did, that aid was most ineffective where local management policies were poor. Lancaster (2006) recounts this finding as a "lack of ownership" problem among recipients. Apparently, aid is unsuccessful when the desires of local recipients are not taken into consideration; that is, when donor countries or agencies presume to know what is best for recipient countries. Also apparent is that a sudden influx of foreign aid into a poverty-stricken country greatly disrupts an already-overstretched local government's budgetary and management processes. Too many standalone projects create management overload, and far too often, aid projects never get coordinated with any overall strategy for poverty reduction or development. Four reforms have been proposed as ways to improve aid's effectiveness: (1) results-based management, or RBM; (2) selectivity; (3) poverty reduction strategy papers, or PRSP; and (4) sector-wide assistance programs, or SWAP. The first reform, RBM, is a favorite among private sector consultants and certain Western governments like Canada and the US. It tries to increase the transparency (visibility) of decision-making and accountability by establishing intermediate target objectives and collecting data to monitor implementation progress. The second reform, selectivity, basically involves giving aid only to those countries which share certain political orientations, such as commitment to democracy, good governance, or free markets. Certain European and Scandinavian countries, for example, are famous for only giving out aid when the recipient countries have certain orientations similar to their own. The third reform, PRSP, requires an aid country to produce a strategy document which shows they have consulted in some way with their people (a "national conversation" was carried out) and measurable goals and objectives have been developed. This approach is the most common one used for debt relief.
The fourth reform, SWAP, also requires recipient countries to write papers, but this time, for plans on how to improve a specific sector of the economy, like education or healthcare. Evaluations of these different reform approaches currently make up the contemporary research literature, and depending upon who's evaluation one reads last, it is too soon to say which reform is working best.
Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI)
Aid:
It used to called foreign aid, but now it goes by fancier names such as official development assistance and concessional resource transfers. According to Lancaster (2000), the word "concessional" refers to the fact that foreign aid usually involves at least 25% of the money given away freely as a grant element (the usual amount being more like 60 or 70%) with the remainder a loan carrying steeply discounted interest rates and long repayment periods such as 40 years or more. That description, in fact, is as good a technical definition of foreign aid as any, and for tallying purposes, does NOT include military aid, trade financing,
intergovernmental loans, funding for anti-drug or anti-terrorism activities, voluntary disaster relief, or "forced contributions" to the UN (see below)
United Nations Development Programme (undp) United Nations International Children's Emergency Fund, UNICEF
No other nation on earth comes close to what the US pays in annual dues (Japan comes closest, followed by Germany, UK, France, Italy, Canada, China, and Spain). The US has long paid at least 25% of the total UN cost, and under the current assessment ("capacity to pay") formula, the US pays the ceiling of 22% of the UN budget (although some argue the US should pay more since it accounts for 34% of the global economy). Additionally, a significant part of the US military budget goes to support various UN resolutions and peacekeeping operations. The US is also a large supporter of many voluntary UN initiatives, such as "Feed the Children" UNICEF and UNDP programs. However, the US prefers to work alone much of the time, eschewing UN channels for its own USAID channels. Foreign aid serves as a tool of US policy in a dualistic way: for diplomacy and development purposes THE NATURE AND SCOPE OF FOREIGN AID Foreign aid is usually provided to countries in one of two ways: bilateral or multilateral.
Foreign aid can also be provided in kind rather than in cash or credits, such as in the form of food, medicine, or other commodities, but hard currency is the norm today
Historically, bilateral aid has dominated the foreign aid landscape, the major "givers" being former colonial powers and the United States. The top four "givers" inclusive of the U.S. have been Japan, France, and Germany.
Multilateral aid is distributed by multilateral organizations such as the IMF, the World Bank, the European Union, and the UNDP (United Nations Development Program).
Multilateral aid is typically focused on economic improvement only Multilateral aid can be said to have started in 1970 when the UN passed a resolution which called for 22 of the most high-income nations (members of the OECD or Organization for Economic Cooperation and Development, also known as the DAC or Development Assistance Committee) to pledge 0.7% of their GNP to global poverty reduction. Today, GNP (gross national product) is no longer used as a measure, but GNI (gross national income) instead. THE PURPOSES OF FOREIGN AID The best aid projects are those which improve the public sector, specifically the way the public sector does business. However, public aid has had many mixed purposes, and those purposes have changed over time. Lancaster's (2006) book is devoted to the study of this topic, and offers a good starting point. She argues that there have been no less than nine (9) purposes of aid, as follows:
y y y y y y y
diplomatic -- to manage the relationships between governments developmental -- to better the human condition by benefiting the poor humanitarian -- to provide relief from natural or manmade disasters commercial -- to expand exports and secure access to needed imports cultural -- to support a specific language or spread of a specific religion promoting transition -- to help former socialist countries reform promoting democracy -- to help former dictatorships reform
y y
addressing global issues -- to help block the spread of global problems mitigating conflicts -- to help countries recover from war
Diplomatic and developmental purposes have long been the most prominent of aid's purposes, but humanitarianism has a long history too, and commercialism has typically had the strongest interest groups. Nowadays, it is common to see many purposes mixed together in the "ideas" that political elites put forth in terms of justifications for aid-giving. Such elites must take care in how they mix their justifications because the public will easily turn against aid (for any purpose) if they regard it as being wasted or used corruptly. Effectiveness is hard to measure, and ultimately, all that aid represents is a "promise." Knowing the precise purpose of aid helps with effectiveness evaluation. If the purpose is simply diplomatic, then all that aid may effect is a symbolic signal that the aidgiving country is powerful and potent. However, it may also demonstrate a willingness to stand behind the aid-receiving country in the face of pressure from hostile governments. Typically, aid effectiveness is hard to measure because aid serves several functions at once. Over the years, support for aid has waxed and waned, but interest in the subject has certainly seen a revival since the start of the 21st century. Development, poverty, and aid issues have topped the agendas at meetings of world leaders and UN summits. The increased interest may be because of a suspicion that such issues might have something to do with terrorism, conflict, and instability, and if that is the case, then foreign aid is sure to stay and its assessment takes on a vast new significance that goes far beyond previous assessments (e.g., Casson et al. 1985). THE EFFECTIVENESS OF FOREIGN AID Aid has been a spectacular success, Some successful cases where aid has produced rather rapid development include: Bolivia, Botswana, Germany, Ghana, Indonesia, South Korea and Vietnam. Most aid is intended to be spent as investment projects in particular sectors such as roads, water supply, or education where visible results might be expected In the literature on aid's effectiveness, two main reports stand out. The first was a 1992 World Bank internal document entitled Report of the World Bank Portfolio Management Task Force (aka the Wapenhans
Report). No copy is available online, but it is known the report found that about 25% of aid money was being wasted. The second was a 1998 publication called Assessing Aid: What Works, What Doesn't, and Why (available as the first Internet Resource below). It found, like the earlier report did, that aid was most ineffective where local management policies were poor. Lancaster (2006) recounts this finding as a "lack of ownership" problem among recipients. Apparently, aid is unsuccessful when the desires of local recipients are not taken into consideration; that is, when donor countries or agencies presume to know what is best for recipient countries. Also apparent is that a sudden influx of foreign aid into a poverty-stricken country greatly disrupts an already-overstretched local government's budgetary and management processes. Too many standalone projects create management overload, and far too often, aid projects never get coordinated with any overall strategy for poverty reduction or development. Four reforms have been proposed as ways to improve aid's effectiveness: (1) results-based management, or RBM; (2) selectivity; (3) poverty reduction strategy papers, or PRSP; and (4) sector-wide assistance programs, or SWAP. The first reform, RBM, is a favorite among private sector consultants and certain Western governments like Canada and the US. It tries to increase the transparency (visibility) of decision-making and accountability by establishing intermediate target objectives and collecting data to monitor implementation progress. The second reform, selectivity, basically involves giving aid only to those countries which share certain political orientations, such as commitment to democracy, good governance, or free markets. Certain European and Scandinavian countries, for example, are famous for only giving out aid when the recipient countries have certain orientations similar to their own. The third reform, PRSP, requires an aid country to produce a strategy document which shows they have consulted in some way with their people (a "national conversation" was carried out) and measurable goals and objectives have been developed. This approach is the most common one used for debt relief.
The fourth reform, SWAP, also requires recipient countries to write papers, but this time, for plans on how to improve a specific sector of the economy, like education or healthcare. Evaluations of these different reform approaches currently make up the contemporary research literature, and depending upon who's evaluation one reads last, it is too soon to say which reform is working best.
Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI)
