Category: Foreign Aid

In the current times, people have realized that foreign aid has not been working to the expected level. As a result, international aid conferences have been concentrating on different ways through which aid can be effective in attaining its objectives.

Third world countries have received trillions of dollars to spur economic growth, and yet it has not shown any substantial reform as a whole (Werlin 2009, 483). As a result, many have started questioning if aid is really helping poor countries in coming out of poverty or not. This research paper investigates the reasons as to why Foreign Aid doesnt work.

Economic development problems

The first issue that is making foreign aid to fail is the big push problem. For economic development to occur, countries have to move from agrarian economies to these dominated by manufacturing. For this economic development to occur, both human and physical capital has to be attracted to economic development process. In addition, it has to ensure that subsistence farming and small scale businesses have moved to more productive activities.

There is no way a country can move from poverty without increasing its agricultural production, unless such a country has never depended on it before. As a result, foreign aid is not working because its major aim is not to increase agricultural production and manufacturing. In general, foreign aid is not targeting at transformation of agriculture an increase in manufacturing share. Instead, it targets things like city development, housing, health services and education for developing countries.

In real sense, these are the facilities used in upgrading peoples standards of living. However, in case people can have their own income sources, then they can afford paying for these services and products. It has been argued that, in case people can afford them, then government could provide them itself, instead of relying on aid to subsidize the provision in a short-term, unsustainable way (Lars 2006, par 4).

In most cases, donors have been emphasizing on increasing academia along with recognition of economic structure transformation. As a result, they have assumed that all developing countries face similar problems and have similar economic structures. However, this is a wrong assumption as countries in Africa, South America and Asia are facing different challenges.

Since most developing countries faced capital and infrastructure imbalance, the original objective of Aid was to choke both capital and infrastructure imbalances facing developing countries, and promote smooth industrialization of such countries.

However, in 1990s, Aid was used in plugging trade as well as account deficits; which were not as a result of productive investment and accumulation but rather due to terms of trade or other external shocks (Lindsay 2009, 11). As an effect, the reason as to why Foreign aid has failed is because its main objective has been ignored, and it is not being assessed in light of industrialization and advancement in agricultural.

Poor Systems of Foreign Aid

Another factor which has also contributed to Aid failure in developing countries is micro-relations, dealing with how aid practices have been carried out. It is true that, There has been little public attention given to, and assessment of, how aid is actually provided and how aid agencies actually work (Lindsay 2009, 67). Studies like Nancy Birdsall (2004, 5) have documented the shortcomings in aid activities as well as systems. Some of these problems include aid quality, which has been considerably reducing the real value of transferred aid.

That is to say, aid has been conducted in a manner that, developing countries feel undermined, as their long term projects are usually not given the required weight.

Though the main objective of Paris Declaration was to either eradicate or minimize them, but in real sense, it has done nothing pertaining to it. As a result, there still exist donors projects that are uncoordinated; donors are still designing aid projects in their own countries instead of doing it in recipient countries, and still setting implementation units among other manipulations.

This is particularly to do with World Bank, which is still designing and setting its projects in Washington. This has made most developing countries to reject such aids. For instance, the Ghanaian government at first rejected agriculture loan produced by the World Bank in 1999; and later accepted it based on the fact that some changes were going to be made.

However, only a few things were done, but in real sense, only a few amounts were being channeled to agriculture sector. This is because there was no coordination and donors were much uncooperative (Werlin 2009, 482).

In addition, the issue of depending on aid to sustain productive areas in recipient countries has proved very problematic. This is because;

Donor projects have to be negotiated, so state elites driving support for particular sectors, such as horticulture export, cannot fully determine the content of projects or their implementation. How much they can determine varies with the donor agency, but beyond that, most if not all donor projects are characterized by certain features which make them not a good tool for supporting production (Lindsay 2009, 14)

Moreover, the process of producing aid proposals, take a very long time, it can take even more than four years. However, in case there is something to change in it after donors have approved it, it is very cumbersome. So, most projects have been failing because of these reasons.

For instance, if there is a problem in the document, such a problem is not changed, hence will have negative impacts after project completion. This has been majorly affected sectors dealing with production where conditions do change within a very short period of time. This is because, after taking longer time to prepare the proposal, the problem to be solved would have changed, but aid regulation and process are not flexible to respond to it (Snowdon 2009, 250).

Politics of Aid Relations

Both recipient and donors have failed to consider the development of aid relations since independence and their political consequences. It should be considered that, in late 1970s and early 1980s, there were global economy changes imbalance of payment and lots o debts in third world countries.

These changes made donors like IMF and World Bank to manipulate policies of third world countries. As an effect, donors placed lots of conditions on policy areas, imposed macroeconomic policies, and even went ahead to transform political and administrative of such nations. These forces have lead to serious consequences in recipient countries (Amsden par 3).

It is as a result of these forces that donors have been giving conditions which emphasizes on their preferences particularly in policy making, and managing funded projects. This has led to permanent negotiations which have overburdened the recipient countries systems of administration.

For instance, in case of disagreement between donors and the recipient government, the government ends up choosing donors preferences to ensure that it gets maximum aid. This means such projects will not be coordinated or even managed well as the initiative is not from the recipient country itself, but the imposed one (Moyo 2009 par 5). This has made most developing countries to spend most of their time aligning themselves to donors preferences by trying to incorporate their own priorities into donors demands.

On the other hand, there are also other countries which will wait till the implementation of aid project has started, then try to twist it in a manner that their preferences are also considered. These are just defensive strategies which at the end leaves the country with very little time and intellectual space to make its own independent policies, apart from developing its own frameworks that are coherent.

In most cases, recipient governments have been perceived as being weak in coordinating aid. As an effect, donors have created for policy dialogue arenas between the government and themselves (Moyo 2009, par 4), which have led to budgeting and policymaking processes which are fragmented. This fragmentation has lead to aid documents which are:

• Compromised; this is because in most cases such documents are neither supported fully by recipient governments or even the donors. Hence there are high chances that conflicts might occur during implementation, resulting to project failure.
• Lack enough confrontation; this is based on the fact that, the aid recipient government does not argue their position to the maximum as they fear donors. This is due to the fact that, since the government has to continue working in the fragmented process, intensify argument might make the process far much harder.
• Lack of effective authority; this is because, neither the recipient government nor donor government has complete authority in the fragmented process of policymaking as well as implementation.

Most aid recipient governments have been using aid with the aim of remaining in power. Such governments have used aids to ensure that goods and services they promise during campaigns have been delivered. As a result, they never take their strong positions during policy making, or even come up with a developmental strategy which opposes donors preferences.

This is because, they fear that in case they take such positions, donors might reduce or even stop the aid, hence undermining their re-election into power. It has been argued that, state capabilities are key to economic development, but that state capabilities are in turn determined by political configurations and the organization of power (Easterly 2006, 45).

However, in developing countries, the governments as well as the civil servants have not understood the effects of aid dependence, along with the donor engagement intensity in shaping domestic politics and their organization power. Ion real sense, foreign aid has not been working because it has affected countries internal powers as well as domestic politics (Easterly 2006, 45).

Conclusion

Although there have been many failures in foreign aid, there was much success between the periods of 1950 and 1975. There have been many reforms in the implementation of foreign aid programs, however there has yet to be a program to work continuously with numerous countries. The failures outweigh the successes, thus unless a new proposal of a plan is created, it can be concluded that the support of developed countries to developing countries is not beneficial, for either side.

Work Cited

Amsden, Alice. The Rise of The Rest: Challenges to the West from Late-Industrializing Economies. Oxford: Oxford University Press. 2001. Print.

Birdsall, Nancy. Seven Deadly Sins: Reflections on Donor Failings, Center for Global Development Working Paper. 2004. Web.

Easterly, William. The White Mans Burden: Why the Wests efforts to aid the rest have done so much ill and so little good. New York: Penguin Publishers. 2006. Print.

Lars, Smith. Why Foreign Aid Doesnt Work. 2006. Web.

Lindsay, Whitfield. The Politics of Aid. African Strategies for Dealing with Donors. Oxford: Oxford University Press. 2009. Print.

Moyo, Dambisa. Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa.. 2009. Web.

Snowdon, Brian. The Solow Model, Poverty Traps, and the Foreign Aid Debate. History of Political Economy. 2009. Web.

Werlin, Herbert. The Poverty of Nations: The Impact of Foreign Aid. The Journal of Social, Political, and Economic Studies. 34 (2009): 480-510.

Foreign aid is any kind of cooperation that one country voluntarily transfers to another, which can take the shape of gift, furnish or loan. Countries may furnish useful resource thru capital, food, supplies, and services such as humanitarian resource and army assistance. Developed nations may additionally grant developing international locations with foreign useful resource after a natural disaster, instances of conflict, or during an financial crisis. Despite present arguments for and against the have an impact on of foreign aid, it is undeniable that overseas aid is a necessary source of financial assets and holds the practicable to play an necessary function in the advertising of rule of law, democratic governance and in turn economic development. Foreign resource driven with clear improvement agendas have a high doable to enhance rule of law, create robust democratic institutions, improve policies and aid governments with law revenues that are committed to development. In addition, rule of law initiatives sustained via overseas aid can put an stop to violent conflicts, alleviate woes of post-conflict societies, boost economic development, promote and shield human rights.

Aids’ spending is focused at improving the lives of human beings round the community. Foreign aid is money, technical help and commodities that the United States presents to different nations in guide of a frequent pastime of the United States and that country. Typically guide goes both to a government entity or to communities in that country.

The records of foreign aid

The primitive system of foreign aid was military assistance designed to assist warring parties that have been in some way viewed strategically essential. Over a hundred years ago, overseas resource constructions that started out with European colonialism have became out certain to deviating economic and political interests, as well a growing humanitarian movement. The overseas help continued to focus on economic development, even after the colonies gained the independence. Ms. Eyben says ‘When the emphasis shifts to development being understood as increased human wellbeing, then donor have been spending greater cash on aiding the strengthening of civil society, assisting the attainment of gender equality, putting more cash into training and fitness and so on and so forth’ (ABC, 2013).

Types of overseas aid

There three primary forms of international aid, as properly as sub-types. The first most important type is private overseas direct funding from multinational or transactional corporations. These are usually equity holdings of overseas assets by means of non-residents of the recipient country. The 2nd essential is what human beings generally suppose of when they hear the term ‘foreign aid.’ These are authentic improvement equipment designed and funded via government groups or worldwide nonprofits to fight the hassle associated with poverty. Humanitarian efforts spearheaded through governments are almost completely completed by means of wealthier countries that are also members of the Organization for economic co-operation and development. The 13 principal type, overseas trade, is much large and a great deal much less intentional. By all accounts, openness to foreign change is the single main indicator for developmental growth among poor countries, perhaps due to the fact free-trade policies have a tendency to go hand-in-hand with financial freedom and political stability.

Military useful resource can be regarded a kind of bilateral aid, with one twist. Multilateral useful resource is like bilateral aid, except it is furnished through many governments as a substitute of one. A single international organization, such as the World Bank, often swimming pools dollars from various contributing international locations and executes the delivery of the aid. Humanitarian help can be thinking of as a targeted and shorter-term version of bilateral aid

The components of foreign aid in neighborhood development

Foreign aid helps with economic boom in the community. Providing aid arouse the boom of the neighborhood economy alongside with growing monetary improvement inside the community. The foreign aid additionally helps in addition enhancements in agriculture. It can be used to instruct farmers within the neighborhood how to strengthen their land and aid extra handily to produce greater crops. Foreign aid is additionally used to address transaction issues such as the production and export of unlawful capsules and the warfare against HIVAIDS. Foreign resource can also contain a switch of economic resources. Foreign resource may also be used to acquire a community’s strategic goals, permitting it to gain well mannered recognition, to extract support.

The effect of overseas resource on development

According to (al, 2005) there is a positive relationship between aid and growth. Aid does no longer have a direct effect on human improvement as aid has an insignificant relationship with the instructional sector. (Alemayehu, 2011), concluded that earnings per capita is the only tremendous thing in human development. Aid has a small, however positive effect on human development, relatively monetary boom is determined to respond quicker to overseas aid inflows. Aid that a direct and advantageous impact on increase when it allocates into a social-infrastructure sector which is covered health, education, provision of easy water, and sanitation.

The high-quality influence of foreign aid

Foreign aid has a robust and favorable impact on economic boom and development. This develop long time period monetary growth and improvement through advertising investments in infrastructure and human capital. According to a find out about carried out among 36 sub-Saharan African countries in 2013, 27 out of these 36 countries have skilled strong and favorable effects, which is contrary to the consider that resource ineffective and does not lead to financial improvement in most African countries. Foreign resource is most really helpful to low earnings international locations because such nations use useful resource obtained for to grant and healthcare for citizens, which in the end improves economic boom in the long run. The foreign useful resource enables governments to improve their establishments with the aid of offering educational and technical assist aimed building sturdy legislative, executive, and judicial structures to give a boost to the effectiveness and efficiency of governance. This can greater improve governance and respect for the rule of regulation by means of diminishing corruption thru the management of a country’s expenditure and revenue creation in a professional manner.

The negative influence of foreign aid

Foreign resource can additionally pose a mission to rule of law and democratic reforms. Government professional and political elites to fight over for their egocentric and personal gains, which can also be inimical as it can also preclude the adoption of coverage reforms and stable policies. Individual, missing proper steady to use the money for reforms or development, will purpose to remain in strength to reap manipulate of the funds. Foreign resource will increase corruption as many African leaders alter overseas resource to fund projects specifically for the political elites. Others argue that useful resource has led to growing poverty and reducing monetary increase of negative countries. According to Dambisa Moyo ‘Aid does not lead to development, but rather creates troubles such as corruption, dependency, obstacles on exports and Dutch disease, which negative have an effect on the monetary boom and development of most African nations and other negative nations throughout the globe.

Advantages of overseas aid

The overseas resource improves the communities’ image. It also continues to build nice working relationships with different governments. It develops the prerequisites for peace and stability due to the fact many governments really believe we’ll be safer and happier when all people else is secure and happy. Foreign aid affords quintessential assets for nations to combat nearby problems that may have an effect on their nice of life. It can also create new job opportunities, trade agreements and even better security arrangements. Foreign aid permits growing nations to have get right of entry to to food, water, and shelter assets that they may normally now not have. Foreign aid is the first step toward the hope that can be observed for the duration of the process of starting over after a catastrophe hits.

Disadvantages of foreign aid

Although foreign resource is obliged received, it often fails to attain the human beings who want it the most. It reduces the quantity of accountability that is positioned on the leadership of the government. The leadership leans toward making sure the donor is thrilled with their motion so that the overseas continues to flow. It may additionally even purpose lower levels of saving and investments as reliance on the useful resource replaces the want to earn an ongoing income. Large-scale carriers are able to use these sources to improve the volume and nice of what they provide while small-scale carriers are left in an uncompetitive state. Although the initial handout of useful resource may also be free, once the state of affairs stabilizes, human beings may additionally be forced to pay extra for their primary needs than they did before the emergency passed off (Gaille, 2018)

Neocolonialism

Neocolonialism is the place a country is ‘in theory, unbiased and has all the outward trappings of global sovereignty. In truth its monetary machine and thus its political coverage is directed from outside.’ The political and economic affairs of a country below neocolonialism, is directly controlled via external powers and nations from the Global North , who provide resource or assistance to international locations in the Global South or growing countries. Neocolonialism is the new face of colonialism, which is made viable by using foreign aid. Donor countries provide overseas aid to terrible countries whilst bargaining for economic have an impact on of the bad or receiving countries, and policy requirements that permit donor nations to manage economic device of terrible countries, and policy requirements that enable donor international locations to control economic machine of poor countries, and policy requirements that enable donor countries monetary machine of negative countries, for the benefit of the donor countries.

Death of local industries

Foreign resource kills nearby industries in growing countries. Foreign resource in the structure of food resource that is given to poor international locations or underdeveloped countries is responsible for the dying of local farm industries in terrible countries. Local farmers end up going of business because they cannot compete with the abundance of low-cost imported useful resource food, that is added into terrible nations as a response to humanitarian disaster and natural disasters. Large inflows of cash that come into developing countries, from the developed world, in a foreign aid, will increase the price of locally produced goods and products. Due to their excessive prices, export of local goods reduces. As a result, neighborhood industries and producers are compelled to go out of business.

Corruption

While developmental resource is an important supply of investment for bad and regularly insecure societies, aid’s complexity and the ever-expanding budgets leave it susceptible to corruption, yet discussing it stays hard as for many it is a taboo subject. Foreign useful resource encourages rent-seeking , which is when government officials and leaders, use their function and authority to extend their private wealth except developing additional wealth, at the fee of the citizens. Most African leaders and reliable are capable amass a massive sums of private wealth for themselves and do no longer use the resource supplied for its supposed purpose.

Conclusion

This analyzed the impact of foreign aid on neighborhood development initiatives. Despite the donors ‘original intentions when distributing aid, high ranges of corruption within recipient government, terrible democratic institutions, onerous conditionality’s and fiscal imprudence have made overseas aid curse alternatively than a blessing for numerous African countries. Foreign aid by myself besides the presence of sturdy democratic establishments in a united states of america will lead to corruption, thereby, forfeiting the original intent for which the useful resource was given to nations without strong democratic institutions, there should be stipulations connected to it to create a fine impact.

In order for aid to be productive and for economic policy reform to be efficaciously implemented in Africa, the relationship between donors and authorities ought to change. Many econometric studies in recent years have supported the view that improvement has no effect on the velocity with which nations develop.

Modernization theories discovered that the only thing that was lacking in developing countries was capital, it was suggested that if private foreign investment in the third world these countries would be able to spend on capital goods such as infrastructure. Industries being established would provide employment for people, which lead to higher rates of capital formation and further economic growth. In community development aid is needed for it to fulfill the purpose, so I will discuss the effect that foreign aid has on community development initiatives’ positive and negative effects, what is foreign aid, its advantages and disadvantages and why is it needed for development.

What is foreign aid?

Foreign aid is any type of official development assistance granting loans or government-sponsored financial grants presumption to developing countries. Countries can provide aid through capital, food, and services such as humanitarian aid and military assistance (Frik de beer ) (htt2). It is the international transfer of capital, goods, and services from a country or international organization for the benefit of the recipient country or its population. Aid can be economic, military, or emergency humanitarian e.g. aid is given for natural disasters (Frik de beer ). It covers a wide spectrum from technical assistance to construction projects, from structural adjustment programs to food aid, and it excludes private transactions such as bank loans and direct private investment on a commercial basis.

There are two types of aid it can be multilateral and bilateral. Multilateral aid is when assistance is given by an organization consisting of more than one state such as the World Bank or the United nations. Bilateral aid is when one country such as Britain or France gives aid directly to another country. (Frik de beer ). Foreign aid is only given by governments or their development agencies, such as the World Bank or the United Nations on which most governments are represented. Non-governmental organizations are playing a huge role as aid agencies, their actions may be inspired by humanitarian concerns such as the anti-apartheid movement. Development practitioners are advocating channeling aid through NGOs, then through governments as NGOs have earned a reputation for being able to aid the poorest ( Madley 1991:109) . Examples of foreign aid are money, food, and supplies, healthcare, etc.

Disadvantages of foreign aid

Increase dependency-less economically developed countries (LEDCs) become more dependent on donor countries and become heavily dependent, which causes the economy the stay at equilibrium.

Risk of corruption-there is a probability of a specified outcome that foreign financial support does not reach its rightful recipients, but go the hands of corrupt political officials. Frankly, money from donor countries sometimes does not fulfill its purpose because some officials do corrupt and make fruitless spending.

The economic political pressure-donor country may place economic and political pressure on the receiving country, forcing them to return a favor. For example, America donated to South Africa money now they blackmail them by wanting Gold in demand but there was no agreement on that. (htt2)

The hidden agenda of a foreign-owned corporation usually hide that they have their own businesses aside that also need to benefit. Foreign aid is sometimes presumption to a country to benefit foreign-owned corporations and entities. So in that action, the help is not actually directed to the less fortunate but to its own people.

Benefit employers- most development may only benefit large corporations and wealthy employers, not the people it was directed to. Rich people exploit the poor for their long wealthy people who do not even have proper livelihood benefit nothing. (htt2)

Overlook small farmers-foreign support may only benefit large-scale agricultural projects and not less privileged, small farmers who help the most. With that done there is no change in the economy of the poor.

More expensive commodities-when there is the development and there is progress in it there is inflation which causes prices of commodities to increase, making the poor more deprived. Giving help to LEDCs is a good thing but the nations must monitor and manage the flow of foreign aid so that it reaches the people who really need it, it must not go to the pocket of greedy and corrupt people.

The negative effect of foreign aid on community development projects

A lot of corruption happens when it comes to development the officials are sometimes corrupt and greedy. Foreign aid can donate money to developing countries knowing that they need help only to find out that the government officials want to make fruitless spending, and fulfill their personal needs. The government gives a certain amount of money for development only to find out that thing is not even done the local officials used the money recklessly. Aids can create more dependency in countries that are donors and the political and economic discussion become disadvantageous. Sometimes the money donated to developing countries also affects them because they get into a lot of debt and they end up owing many countries and end up getting blackmailed by those rich countries for them to do their own dealings.

The aid from the government to the government only favors the rich people and the poor only have little effect, they use aid to consolidate their power (Frik de beer ). Aid benefits the political powerful groups in the recipient countries powerful people only cares about their wealth rather than helping the poor, people who are poor are usually oppressed by the rich and they exploit them in order for them to be richer. Government usually says that the aid is aimed at the poor so that their lives can improve but they know very well that the foreign aid is used for economic, political, and other reasons in maintaining the current character of world inequality rather than challenging it (Regan 1996:160). Developing countries as they are recipients become powerless as they always receive in order for them to develop their communities. In most cases, the aid does not reach the people they need the most, political corrupt aid a lot. (Frik de beer )

Foreign aid sometimes helps sometimes it does because in its help some people get exploited, for instance, rich people exploit the poor, and political official uses aid for their political or personal benefit. The community depends a lot on foreign aid so it is helpful to it. In South Africa foreign aid is the key to development as it is a developing country, for our economy to grow we need foreign but sometimes our political officials are greedy.

References

1. Book (Introduction to development studies) (Frik de Beer) (Hennie Swanepoel)
2. Journal of economic growth, 5 (1), 33-63
3. Ridell, R. (2008) Oxford University Press 2008

Introduction and Thesis –

All human beings require a set of resources such as food, shelter and clothing and it is necessary that any political leader takes care of that so to fulfill that we need other countries to help which directly leads to foreign aid which means assistance from rich, industrialized to poor developing countries (Copley, wood &Ehrhardt 2006).As we have discussed in class that foreign aid has brought both pros and cons to the recipient countries. However, this essay will revolve around the positive and negative aspects of foreign aid related to democracy and dictatorship and addition to it how it leads to corruption and ways to get rid out of it will also be discussed in the upcoming paragraphs on the basis of selectorate theory.

Detailed description of the topic-

In this modern era, foreign aid and development are hot potatoes in my country. It can be defined as the help or assistance provided in the form of goods, services and money by the rich countries like Canada to the poor nations. The authors Copley and wood says that the foreign aid has started growing its roots in post Second World War and the foreign aid is inspired from the marshall plan in distributing resources from developed countries to undeveloped countries. Canada has a good historical background in helping other countries due to which it has good relations and trade links with other countries which directly make it a multicultural country. In 2012 Canada has spent $5.6 billion among 80 countries across the world (Copley, wood &Ehrhardt 2006). Foreign aid does not only involve the distribution of cash, but it can be in the form of other services and goods. To support this Copley and wood says that Canada provides bilateral aid to many countries such as India, Pakistan and Sri lanka in the form of Canadian goods and services for example it provides fertilizers, hybrid seeds to develop agriculture but these things are not going to their right places like to poor farmers as I lived in India for 18 years only leaders are taking profit from such type of things and which leads to corruption which will further discussed in following paragraphs on the basis of selectorate theory.

This essay assess the utility of selectorate theory in democracy and dictatorship by using the concept of selectorate(s), winning coalition(W).As we have discussed in class that winning collection is the subset of S without whose support incumbment cannot stay in office whereas selectorate are the people who has a nominal say in choosing leaders. There are two different sizes of w and s, the large w and s describes the democracy while the small w and s describes the dictatorship. Moving further, as we learned during our lectures that there is more corruption on basis of resources or goods that are provided to the people because leaders are not answerable to the people. There are very less chances of getting punishment if you are on a higher post and leaders take advantage of these things and the needs of people are not fulfilled. In democracy it’s totally opposite to dictatorship people have right to punish their leaders and the system is more transparent as compared to dictatorship. Furthermore, Foreign aid is directly linked to the international relations and the actions of political leaders are determined how they affect their political framework for example democracy have option to go to war while autocrats can go to war whenever they want (from lecture slides). Sometimes, foreign aid can also include some bad policies and democracies have less chances of becoming their prey as compare to autocracy(Baush, 2014). The main reason behind this is that how much long leaders stay in their office and how much they care for their citizens. Foreign is greatly affected by the loyalty norm. It is the ratio of w/s in which wining coalition can be loyal or less loyal to the leader. Moreover, as we have read in class that King Jung’s income was 500 times more than average NK income, but the wining coalition does not say anything to him as they are rich in themselves and they don’t care about foreign policies. So the size of w/s shows that foreign policies can help us to raise our living standards but it depends on the form of government a particular country is having and how much the leaders are loyal to the people as distributing private goods shows more loyalty then distributing public goods (in autocracies). After researching from class notes we come to know that democracy has large base of support so they more public goods which shows more loyalty (Baush, 2014).

Empirical support –

Likewise, education also plays an important role in people’s life so there is hard need to develop the education sector in some countries. Education makes the man to stand by its own and make him or he is able to earn their livelihood. To further explain this, I will throw light on the case study of largest foreign aid receiver in the world known as sub- Saharan Africa. According to Yogo, the main aim of foreign aid is to fulfill the requirement of construction of schools and classrooms. To increase the enrollment in schools some nations of Africa started the primary education for free, but the national funds allocated for the education was unable to meet the the demands of infrastructure for education (Yogo, 2017). Countries like Nigeria and Zimbabwe which comes under sub-Saharan Africa have Autocracies and therefore have more corruption and they are not distributing public goods properly. So, the poor people who cannot afford money for higher education they are dropping off the schools which indirectly kill their future. So, according to me people living in autocracies should punish their leaders if they are not meeting their demands. Moreover, transparency should be increased between government and people for example in Canada there is less corruption and government are providing free care and education to the small children.

Conclusion –

We have so far studied that what foreign aid is, how it emerges and why some countries are unable to use it properly. All in all, we can say that if corruption will be continued the rate of poverty in the Autocratic countries will increase. So, there is hard need for people that they should take some steps so that democratization can increase more. Many people think that receiving money can never be harmful, but it is true only to a certain limit as it indirectly leads to corruption and complacency. So, in the end, we can say that leaders should be loyal towards their citizens and distribute the goods and services equally so that there can be more economic development of the nations. Foreign aid has now turned in to a business for the political leaders and they want the policies to fulfill their own interests only. There is no doubt that lessons learned from previous mistakes may to lead to some changes in politics and methods of working in the future (Yogo, 2017). Therefore, there is hard need of awareness among local people so that they can live properly and raise their livelihoods and standards of living.

Works Cited

1. Bausch, A. W. (2014). An Experimental Test of Selectorate Theory. International Interactions, 40(4), 533–553. https://doi-org.ezproxy.columbiacollege.bc.ca:2443/10.1080/03050629.2014.891997
2. Copley, B.,, & Wood, B.,, & Ehrhardt, R., Foreign Aid (2013). In The Canadian Encyclopedia. Retrieved from https://thecanadianencyclopedia.ca/en/article/foreign-aid
3. Yogo, T. U. (2017). Assessing the Effectiveness of Foreign Aid in the Education Sector in Africa: The Case of Primary Education. African Development Review, 29(3), 389–402. https://doi-org.ezproxy.columbiacollege.bc.ca:2443/10.1111/1467-8268.12276

Abstract

Purpose:

This paper seeks to examine the impact of foreign aid on poverty reduction in developing countries. It reviews the positive and negative impacts of aid in lessening poverty in evolving countries and the critical success factors that could serve as a blueprint for developing nations to adopt.

Methodology:

The paper employs a critical review of extant scholarship, where empirical evidence on the positive and negative effects of foreign aid carried out from various countries was provided to support the claims of the studies.

Findings:

The findings give insight into the viability of aid and identified some key critical success factors which comprised good governance, recipient domestic policies, stringent conditionality of aid, and interest of donor countries.

Research implication:

This paper provides a blueprint for critical success factors necessary for aid to be an effective tool for poverty reduction in developing countries.

Originality/Value:

This paper contributes to the existing article on the efficacy of aid in poverty reduction. It examines the positive and negative impacts of aid and identifies the critical success factors and proposes these must be in place to enable growing countries to reap the benefits of aid.

Keywords:

Foreign aid, Poverty reduction, Developing countries.

Introduction

The fact that even one individual does not have access to basic needs like good food, potable water, and proper shelter is an indictment on the entire human race and should be a wake-up call that more needs to be done. Sadly, according to World Poverty Clock, an estimated 600 million men, women and children are living in abject poverty, a huge percentage of which reside in growing countries (World Poverty Clock, 2018). The United Nations defines acute poverty as a condition characterized by severe deprivation of basic human ends, including food, safe potable water, sanitation facilities, health, shelter, education, and information (United Nations, 2018). To reiterate, these statistics mean that 600 million men, women, and children lack basic human needs.

One strategy being utilized for decades to assist in reducing poverty in growing countries has been foreign aid. In 1970, the world’s richest nations decided that they would all contribute 0.7% of the Gross National Income (GNI) as foreign aid to help developing nations overcome their developmental challenges, poverty being the foremost challenge (Organization for Economic Cooperation and Development, 2018). Since then, trillions of dollars of aid have been channeled to evolving countries, with $146.6 billion given in 2017 alone (OECD, 2018). An important question to ask is as follows: ‘to what extent did all these trillions in aid actually lead to the diminution of poverty in the beneficiary countries?’

Foreign aid has a history of being criticized bitterly by developing countries (Niyonkuru, 2016). Foreign aid is controversial in developmental economics. Despite the huge contributions aimed at aid to the tune of $4.7 trillion in 2013, politicians, scholars, and media are still locked in debates about the positive effect of aid in developing countries (Mahembe et al, 2017).

One camp believes that aid is inefficient and has harmed poor nations throughout the years, a different camp believes that the levels of foreign aid are minute to affect poverty diminution in developing nations, but a large increment of this foreign aid can impact poverty by reducing it (Edwards, 2014). Gates and Gates (2014) believe foreign aid is a great investment and does not end in saving people’s lives but also creates a platform for long-lasting economic empowerment.

There are arguments for and against foreign assistance capability to reduce poverty in growing countries. The first objective of this study is to discern which camp has stronger claims. The second objective is to identify critical success factors that must be in place to enable foreign aid effectiveness in lessening poverty in growing nations. To achieve the first objective, empirical evidence on arguments for and against foreign aid’s capability to diminish poverty in developing nations is analyzed. The arguments with solid claims are accepted as yardsticks for the study. To achieve the second objective, the critical success factors for stronger claims for foreign aid in reducing poverty are assessed to know which one must be in place for foreign aid to be effective.

The rest of the paper is structured as follows: firstly, a comprehensive review of literature on foreign aid and poverty reduction in evolving nations is provided, and main debates for and against are highlighted. Critical success factors that are key in the viability of foreign aid to reducing poverty and likely aid flow channels are identified. Secondly, the methods for adequate application of aid by beneficiary countries are described, and finally, a conclusion with a summary of findings.

Investigating the impact of foreign aid on global poverty reduction

As mentioned in the introduction part of this paper, there is a raving argument among scholars regarding the actual impact the billions of dollars of foreign aid have had on reducing the global scourge of poverty. In this part, the evidence provided by both sides of the debate is examined critically and a judgment is formed positioned on these pieces of evidence on which side has the strongest claim. Additionally, for scenarios where foreign aid has been found to actually lessen poverty, typical critical success factors for such scenarios are identified as these can serve as a viable blueprint for future aid initiatives.

The positive effect of foreign aid

The studies that found foreign aid had a positive impact on reducing poverty in evolving countries. (Tawiah et al. 2018; Hussein, 2018; Ardnt et al. 2015; Abouraia, 2014; Birchler and Michealowa, 2016; Riddel and Nino-Zarazua,2015; Gopalan and Rajan, 2016; Ndikumana and Pickbourne, 2016; Oskooee and Oyolola, 2009).

A study by Hussein (2018) was carried out to inspect the long-run effect of foreign aid on Jordan’s economic increase. The study employed a root unit test and the analysis was applied to 12 different models that incorporated, the different types and sources of foreign aid. The results showed that foreign aid in its aggregated form has a symbolic impact on the per capita growth rate during 1970-2014 in Jordan. The co-efficient on aggregate aid stood at 0.59 being positive and significant, indicating that foreign aid in cumulative form adds to long-run economic growth.

Another study was carried out by Tawiah et al. (2018) with the aim of examining the potency of foreign aid on the Ghanaian economy under different political regimes. The study used secondary data for the analysis. Annual time series covering a period from 1980-2016, that is 35 years gleaned from the IMF (International Monetary Fund); OECD (Organisation for Economic Cooperation and Development), and National account data files from World Bank databases were used. The result revealed that with capitalist political philosophy, foreign aid boosts private sector growth through infrastructure development while with socialist philosophy, foreign aid improves human capital through direct social interventions. Foreign aid to Ghana over these 35 years still shows a positive effect on the two political philosophies. The result revealed that for every dollar amount of aid given under a good policy environment, GDP per capita increases by $20.

Ardnt et al. (2015) studied the effect of aid on a range of developmental outcomes such as sources of growth (e.g. physical and human capital), pointers of social welfare (e.g. poverty and infant mortality), and measures of economic transformation (e.g. share of agriculture and industry in value-added) in growing nations whereby observational data was employed a detailed regression estimate for the effect of aid on average, real growth per capita from (1970-2007) was analyzed. Using the measure of aid, AID/GDP as well as (PPP adjusted) real aid per capita, the result showed that a 1% point rise in aid AID/GDP boosted the real GDP growth by 0.3% point.

In line with other studies on foreign assistance and economic growth, Abouraia (2014) studied the effect of foreign aid on the economic growth of the Philippines to decide whether foreign aid affects the Philippines’ economic growth positively. The research used data from the World Bank database on the number of Official Development assistants (ODA) gotten by the Philippines from the period of 2009-2012. To measure this effect, the study used Gross Domestic Product (GDP) as the latest universal ranking by World Bank. The latest GDP rating of the Philippines was $250,182 million. Also, the regression result confirms the positive impact of ODA on development such that a 1% increase in ODA increases the GDP growth to 0.0035.

Gopalan and Rajan (2016) and Ndikumana and Pickbourne (2016) studied the impact of foreign aid on the water supply and sanitation sector. Gopalan and Rajan (2016) analyzed the impact of aid expenditures on outcomes in Water Supply and Sanitation (WSS). The study computed a set for 139 countries comprising middle- and low-income nations from all the regions (defined on the bases of World Bank classification) during 2002-2012. The percentage of the population that enjoys water supply and sanitation was captured in Organisation for Economic Cooperation and Development (OECD) data on gross foreign aid disbursement to WSS to each nation.

The empirical results show that aid disbursement produces a strong and significant impact on enhanced access to water and sanitation facilities.

Still on aid and its impact on WSS, Ndikumana, and Pickbourne (2016) in their study, examined whether targeted aid appropriation to the water and sanitation sector can achieve the goal of expanding access to water and sanitation in Sub-Saharan Africa. A panel set from a sample of 29 countries in Sub-Saharan Africa countries from (1990-2010) was used. Data from OECD/DAC in aid disbursement and aid disbursement from project level from OECD Creditor Reporting System (CRS) database was employed to examine the effect of targeted aid to WSS on both rural and urban populace. Due to the wide gap between rural and urban inequalities, the rural-urban gap is measured by the ratio of the population percentage of rural with access to water and sanitation to the percentage of the urban population with access to WSS. The econometric result showed that a 1% increase in aid to the sector (as a percentage of GDP) is associated with between a 0.1% and 0.5% increase in the share of the rural population that have access to improved sanitation. The authors concluded that an increase in foreign aid will have a positive impact on access to sanitation in Sub-Saharan Africa (SSA) generally.

Birchler and Michealowa (2016) studied the effect of education aid on primary education enrolment and education quality in evolving nations. They used the most recent data on aid disbursement and econometric specification from aid efficacy research, the evidence suggested that donor increase in funding contributed to a successful increase in enrolment. It showed a complementary relationship between aid for primary and secondary education. The results revealed that aid has been more relevant for enhanced enrolment (education quantity) than for increased achievement (education quality) based on the aid disbursement data for education for the past 15 years in developing nations. This was confirmed by Riddel and Nino-Zarazua,(2015) in their study of what has been learned over decades of aid to education They employed ODA/DAC data from 1995-2010. Total aid to education increased in real terms by 360 percent from USD 2.9bn (income constant 2010 USD). From this period total aid to primary education increased by 630 percent secondary education by 294 percent and post-secondary education by 244.268 percent. Whereas the break by subsector of aid to education in 1995 comprised 19 percent for basic education, 10 percent for secondary education and with post-graduate attracting 40 percent of the total aid to education. The analysis proved that aid has contributed immensely to education in all aspects.

The study carried out by Mcgillivray (2016), on the impact of aid was to examine the global trends of official aid over the period 1960-2002 on national economic growth per capita in growing nations. A panel data set of some sub-Saharan African nations were used. Econometric analysis used revealed that aid appeared to work in the sense that per capita economic development would have been lower in its absence. ODA rose for most years in the 1960s, 1970s, and 1980s. After ODA trends fell downwards from the 1990s. It peaked at USD58.3bn in 1991 and dropped to USD43.2bn in 1997. The trends in total ODA are almost totally driven by that in bilateral ODA, the 1990 falls in the former were driven by falls in the latter. In contrast, multilateral ODA has been much more stable, trending modestly upwards for the period 1960 to 2002.

Bahmani-Oskooee and Oyolola (2009), carried out a study on poverty reduction and aid: cross-country evidence. The aim of the study was to assess the impact of aid on poverty. The study cited cross-sectional data from 49 growing countries from 1981-2001, unlike other authors that focus on the link between aid and economic growth, this study focused on the direct link between aid and non-economic variables such as infant mortality. It showed that aid has an effect on infant mortality in aid-recipient nations.

The negative impact of foreign aid

Unlike studies discussed in the previous sub-section that found empirical support for the assertion that foreign aid assists to lessen global poverty, the studies reviewed in this section found the opposite: foreign aid actually worsens global poverty. (Ferreira and Simoes. 2013; Abdullahi and Amzat, 2011; Moyo and Mafuso, 2017; Elayah, 2016,; Sethi, 2016; Niyonkuru, 2016; Simplice, 2014)

Ferreira and Simoes, (2013), examined the link between aid and economic growth in Africa and Asia. The research employed a sample of 44 Sub-Saharan African countries and a sample of 31 Asian countries from 1972-2007. The total data set was 75 countries within the two regions. Aid was measured as net Official Development Assistance (ODA) relative to GDP. The result indicated a negative link between aid and economic growth in both regions.

Similarly, Moyo and Mafuso (2017) examined the impact of aid on the economic growth of Zimbabwe from (1980-2000). The research did not use any participants since it was a content analysis based on research that evaluated relevant information. The record showed aid inflow enjoyed by the Zimbabwe government from multilateral institutions (World bank International monetary fund (IMF), African development bank (ADB). IMF $522bn, world bank $1.3trillion, and ADB $524bn. Growth in GDP mounted to 11 percent in 1980 and 12% in 1981. The boom ended in 1982 with the economic crisis in Zimbabwe. From 1982 to 1983 the country’s balance of payment deficits was over 30 percent. Zimbabwe’s per capita income was estimated to have fallen by 9 percent over the period 1990-1996. Zimbabwe received high aid but experienced low growth.

In support of this adverse view of the impact of aid in growing countries is the study of Moosa Elayah (2016). The goal of the study was to investigate the reasons for the ineffectiveness of foreign aid interventions in developing nations using the examples of Yemen, Egypt, and Jordan. It employed two contradictory theories used to explain the ineffectiveness of foreign aid. The Public Interest Perspective (PIP) and Public Choice Perspective (PCP). This analysis revealed Yemen received foreign growth commitment and foreign aid equal to $18bn. Yemen completely relied on foreign aid. But Yemen’s central bank in 2014 recorded internal debt to reach about 300trllion. Egypt’s total internal debt reached a peak in 2015 to record 99% of GDP, exceeding the barrier of 2 trillion. Jordan got aid totaling 24 billion between 1970 and 2007. Total foreign aid constituted the highest proportion of fixed capital in 1975 at around 153% and retreated in 2003 to around 66% of fixed capital. This showed the dependency of Jordan on aid and the weakness in economic policies that work against developing the domestic resource of the country. The list of some best and some worst countries on per capita growth rates was shown as follows: Among the worst were: Nigeria – 1.6%, Niger- 1.7%, Togo – 1.8%. among the best were: South-Korea (5.9%), China (5.6%), and Taiwan (4.5%). All these nations have had their fair share of foreign aid or Official Development Assistance for decades.

Sethi (2016) confirmed aid ineffectiveness in his study of aid syndrome and effectiveness. The aim was to investigate the efficacy of aid in Pakistan. The review used data from the financial years 1973-2007. The analysis of the data used a model to appraise the link between GDP and some key economic indicators. The results showed that a 1% increase in aid will decrease GDP by 0.45%, which is significant and negative.

According to Abdullahi and Amzat (2011) in their study of difficulties and challenges of aid in growing countries, the purpose study was to examine the controversies embedded in foreign aid and to account for the socio-institutional factors responsible for aid failure. They employed the World Bank Report (2012), the data showed a contradiction around shared growth which recognizes economic growth as a major driver of poverty. But in reality, in different evolving nations in Africa, the data revealed some of them with economic growth still remain the poorest in the continent. Examples are South Africa with a Gross National Income (GNI) of $304.6 million with a population of 50 million, but a GDP per capita growth of 1.5%. Nigeria’s GNI at $197.9 million, the population of 84 million, and GDP per capita growth of 3.3% from 2000-2010 respectively. These scenarios have questioned the positive relationship between foreign aid and poverty reduction.

Niyonkuru (2016), from a historical view, inspected the failure of aid in poor countries. The aim was to examine the nature and importance of aid given to poor nations and to assess the level of impact of other options for development accessible on the continent. The researcher used the case of Ghana where IMF interference hindered the economic development of the country greatly. IMF dictates deferring payment to suppliers of goods and services accumulated the government debts to the tune of 855 million Ghana cedis in 2009 as against 830 Ghana cedis in 2008. This was a negative impact on the government as a result of stringent conditionalities of aid.

(Simplice, 2014), examined if foreign aid had an impact on GDP growth, GDP per capita growth, and human capital development indicators (literacy rates, unemployment rates, and infant mortality rates.) in 22 nations from 1996- 2009. The study revealed some main results, firstly, the impact of aid in economic prosperity (at the micro level) increases positively across the distribution, and also the positive link between aid and per capita economic growth displays non-linear patterns across distribution, the aid-human development nexus showed negatively across the distribution. This could be a result of mismanagement of aid funds destined for some specific sectors like health and education.

Making aid effective against poverty: critical success factors

This section assesses the effectiveness of aid in poverty reduction through the lens of critical success factors spotted in some nations that aid impacted positively in the preceding section. Recommendations are made to mitigate factors that hinder the impact of aid in reducing poverty in developing nations.

Today, about 600 million men, women, and children are living in abject poverty in growing countries (World Poverty Clock, 2018). Most developing countries have been recipients of foreign aid for decades. Foreign aid has a history of being criticized by developing countries as the result of aid being unable to achieve its objectives (Niyonkuru, 2016). But based on the evidence from the review, various countries have reaped the benefits of aid such as improving economic development, growth per capita, human capital development, and reduction of poverty.

Countries like Ghana, Zimbabwe, Philippines, Pakistan, and Sub-Saharan African countries.

There are some key critical success factors that are pertinent to the effectiveness of foreign aid in poverty reduction. Such factors are good governance, domestic policies, aid conditionality, donor countries’ interest, and channels of distribution of aid.

Good governance: Good governance has been identified as a fertile ground where aid could produce fruits (Niyonkuru, 2016). The influence of political regimes affects the effectiveness of aid greatly. The philosophy of the leader in government can impact foreign aid positively or negatively. Unproductive private government consumption of foreign aid will lead to the failure of aid to achieve its purpose. For aid to be successful, donors should encourage receiving countries to increase their savings by cutting down unproductive government consumption of aid and there must be coherence between donors’ plan of action and what the countries aspire to achieve as objectives (Abouraia, 2014).

Domestic Policies: Foreign aid thrives well in a condition of a good policy environment (Tawiah, et al. 2018). For example, Ghana experiences economic growth when there are sound economic policies to implement foreign aid. Developing policies for poor countries reveal the reason for the ineffectiveness of aid programs. Their policies hinder developmental efforts.

Aid conditionality: Stringent conditionality of aid can hinder the effectiveness of foreign aid (Moyo and Mafuso, 2017). Aid donors are to address some conditionalities to see the fruits of aid in poverty reduction in developing countries. According to Niyonkuru (2016), IMF-related fiscal targets always compel the recipient nations to adopt measures with harmful effects in the long run. The conditionality of aid is acclaimed to ensure effectiveness in resolving problems for which they were to resolve. As a result of this, aid can be withheld, removed, or canceled in times of failure to adhere to the conditionality. Moyo and Mafuso (2017) confirmed that foreign aid is beneficial though its effectiveness is prejudiced by donors’ control.

The interest of donor countries: For aid to be effective in achieving its purpose, the donor countries should be neutral toward the aid system. But unfortunately, aid is designed to serve the interest of the donor countries. The aid system should be based on the interest of the recipient countries for it to be effective. Too little aid reaches countries that need it most, aid is rather wasted on overpriced goods and services from donor countries. It is argued that the U.S.A exerts a lot of power in the World Bank and IMF and countries that receive aid from them also receive a disproportionate share of the World Bank and IMF loan. They found out that politics has more influence over global aid flow than economic needs. For example, Jordan’s aid was reduced as a result of its pro-Iraq stance in the Gulf war. But its re-alignment with the neo-liberal capitalist order repositioned it in the global economic order thereby attracting a write-off of U.S. debt of about $900 million and an increase in foreign aid. Jordan became the fourth largest recipient of U.S. assistance.

Channels of distribution of aid: There are several channels by which aid affects poverty in developing nations. The two major channels are: The traditional growth channel, which believes foreign aid will stimulate growth through increased investment, and the growth would lead to poverty reduction. Based on the evidence from the review, it is inconclusive if such growth translates to poverty reduction. The pro-poor public expenditure channel. This channel composes of expenditures that are likely to benefit the poor. This includes government expenditure on social sectors like healthcare, primary education, and water and sanitation (Gopalan and Rajan, 2016).

United Nations (2013), opined that for securing sustainable human development, reducing poverty, and achieving other developmental goals, access to social services such as education, healthcare, and portable water are prerequisites.

Conclusion

Developing countries have over the years been relying on foreign aid for economic growth and poverty reduction. But many of them particularly the Sub-Saharan African nations are still wallowing in abject poverty. Therefore, they criticized aid as being ineffective in poverty reduction. The evidence from the review has revealed pertinent critical success factors such as good governance, domestic policy, aid conditionality, and donor countries’ interest to be adopted for aid to be effective in reducing poverty as mentioned in the discussion section of this paper.

These critical success factors should serve as a blueprint for developing countries including Nigeria to adopt for aid to be effective for economic growth and poverty reduction. Further studies can explore more critical success factors that can make foreign aid effective in poverty reduction in developing countries.

References

1. Abdullahi, A.A., and Amzat, J. (2011), “The Problems and Challenges of Foreign Aid in Developing Countries”, Bayero Journal of Social and Management Studies (BAJOSAMS), Vol.14 No.1, pp.108-119.
2. Abouraia, M.K. (2014), “Impact of Foreign Aid in Economic Development of Developing Countries: A Case of Philippines”, European Journal of Business and Social Sciences, Vol.3 No.4, pp.160-180.
3. Ardnt, C., Jones, S. and Tarp, F. (2015), “Assessing Foreign Aid’s Long-Run Contribution to Growth and Development”, World Development, Vol.69, pp.6-18.
4. Bahmani-Oskooee, M. and Oyolola, M. (2009), “Poverty Reduction and Aid Cross Country Evidence”, International Journal of Sociology and Policy, Vol.29 No.5/6, pp.264-273.
5. Birchler, K. and Michealowa, K. (2016), “Making aid work for Education in Developing Nations: An Analysis of Aid Effectiveness for Primary Education Coverage and Quality”, International Journal Education Development, Vol.48, pp.37-52.
6. Edwards, D., and Altinyelken, H. (2014), “Learning from all? The World Bank, Aid Agencies and the Construction of Hegemony in Education for Development”, Comparative Education, Vol.50 No.4, pp.381-399.
7. Elayah, M. (2016), “Lack of Foreign Aid Effectiveness in Developing Countries between Hammer and an Anvil”, Contemporary Arab Affairs, Vol.9 No.1, pp.82-99.
8. Ferreira, Ines, A.R., Simoes, and Matac, N. (2013), “Aid and Growth: A Comparative Study between Sub-Saharan Africa and Asia”, Applied Econometrics and Internal Development, Vol.13 No.1, pp.114-132.
9. Gates, B. and Gates, M. (2014), “Three Myths on World’s poor”, Wall Street Journal, Vol.17.
10. Gopalan, S. and Rajan, R. (2016), “Has Foreign Aid been Effective in Water Supply and Sanitation Sector? Evidence from Panel Data”, World Development, Vol.20, pp.20-30.
11. Hussein, J.M. (2018), “Foreign Aid Workers’ Remittances and Economic Growth in Jordan”, International Journal of Social Economics, https://doi.org/10.1108/IJSE-06-2018-0293.
12. Mahembe, E., Odhiambo, M. (2017), “On the Link Between Foreign Aid and Poverty Reduction in Developing Countries”, Revista Galega de Economia, Vol.26 No.2, PP.113-132.
13. McGillivray, M. (2009), “Aid Economic Reform and Public Sector Fiscal Behaviour in Developing Countries”, Review of Development Economics, Vol.13 No.3, pp.526-542.
14. Moyo, L. and Mafuso, T. (2017), “The Effectiveness of Foreign Aid on Economic Developing Countries: A Case of Zimbabwe”, Journal of Social Science, Vol.52 No.1-5, pp.173-187.
15. Ndikumana, L. and Pickbourne, L. (2016), “The Impact of Foreign Aid Allocation on Access to Social Services in Sub-Saharan Africa: The case of Water and Sanitation”, World Development, Vol.20, p.30.
16. Niyonkuru, F. (2016), “Failure of Foreign Aid in Developing Countries: A Quest for Alternatives”, Business and Economic Journal, Vol.17 No.3, pp.1-9.
17. OECD (2017), Aid (ODA) by Sector and Donor (DACS). (online) https://stats.oecd.org/index.aspx?DataSetCode-TABLES (Accessed 22 December 2018).
18. Riddel, A. and Nino-Zarazua, M. (2015), “The Effectiveness of Foreign Aid to Education What Can be Learned?”, International Journal of Educational Development, Vol.48, pp.23-36.
19. Sethi, M.S. (2016), “Foreign Aid Syndrome and Aid Effectiveness: A Case of Pakistan”, NDU Journal, Vol.11, pp.131-140.
20. Simplice, A. (2014), “Development Thresholds of Foreign Aid Effectiveness in Africa”, International Journal of Social Economics, Vol.41 no.11, pp.1131-1155.
21. Tawiah, V.K., Barnes, E.J., Acheapong and Yaw, O. (2018), “Political Regimes and Foreign Aid Effectiveness in Ghana”, International Journal of Development Issues, https://doi.org/10.1108/IJDI-02-2018-0029
22. United Nations (2018), “Sustainable Development Goals”. Retrieved from https://www.un.org/sustainabledevelopment/poverty
23. World Poverty Clock (2018). Retrieved from https://worldpoverty.oi/

Introduction

There are 197 countries in the world[footnoteRef:1] in 2019, out of which 126 countries are classified as developing countries[footnoteRef:2]. These countries are characterized by being less developed industrially and having a lower Human Development Index when compared to other countries[footnoteRef:3]. However, developing countries do have the potential for high growth and security when evaluating factors including the standard of living, gross domestic product, and per capita income[footnoteRef:4]. Foreign aid, which is the international transfer of capital, goods, or services, is provided to developing countries to combat issues like poverty, terrorism, natural disasters, and the destruction of the environment[footnoteRef:5]. Foreign aid provision began in 1947 when the US funded over 13 billion dollars to assist in the reconstruction of Europe after World War II, according to the Marshall Plan[footnoteRef:6]. After this, during the Cold War, both the Soviet Union and the US used foreign aid as a tactic to gain support at home[footnoteRef:7], and within other countries. Even today, foreign aid is provided to developing countries by other countries, or organizations such as IMF[footnoteRef:8] and World Bank[footnoteRef:9] to help in the development of these countries. However, there is great debate about whether foreign aid actually fulfills its purpose or whether is it used by developed countries to improve their diplomatic relations and actually harms developing countries. Advocates of foreign aid argue that foreign aid can save lives and ameliorate suffering, not just in the short term but in the long term[footnoteRef:10]. However, those against foreign aid argue that an influx of foreign aid did not seem to produce economic growth in countries around the world. Rather, lots of foreign aid flowing into a country tended to be correlated with lower economic growth

Thesis

In order to discuss the first perspective i.e. that the harms of foreign aid to developing countries outweigh its benefits, let’s look at an article published in the Economist. com[footnoteRef:12], a London-based independent newspaper with no political affiliations, therefore, an impartial source. The source has been written as a weekly column in The Economist’s Free Exchange section, which discusses issues related to fluctuations in the world economy. Since the economist has a policy of keeping the author’s names anonymous, judging the credibility of the newspaper itself, the article; Cash for Conflicts[footnoteRef:13], can be seen as a reasonable source to prove the thesis i.e. the harms of foreign aid to developing countries outweighs its benefits.

The writer starts off the discussion of the harms of foreign aid to developing countries by establishing that benefits of foreign aid do exist, but it is important to do a cost-benefit analysis before reaching a conclusion. This shows that the author recognizes the importance of the counter-narrative as well; therefore, he/she is not biased toward the argument.

Moving on to the evidence presented in the article, the writer has used two research based on two types of aid; monetary and non-pecuniary (food aid), to reach a more well-rounded conclusion about foreign aid, since foreign aid consists of a variety of monetary and non-monetary transfer of resources.

The first research has been conducted by the University of Colorado, regarding the development projects and civil-conflict deaths in the Philippines, a developing country. The research studied the impact of Community Driven Development (CCD)[footnoteRef:14]. The conclusion of the research was that due to insurgents trying to sabotage the community-driven programs, deaths were caused, ultimately leading to the conclusion that foreign aid caused these deaths. The writer of the article has provided detailed insights into this research, such as the background knowledge, as well as how the research process was conducted such as, ‘In 2012, the World Bank supported some 400 CDD programs in about 100 countries amounting to $30 billion’[footnoteRef:15] and ‘This makes the researchers’ inquiry akin to a randomized controlled trial where some municipalities basically were “treated” with the CDD program and others were not’[footnoteRef:16]. This shows that the writer has used strong evidence to strengthen his argument about how foreign aid increases civil conflict in developing countries.

The second research is related to the impact of food aid on civil conflict in 125 developing countries. Similar to the previous research, the writer has provided the specific details of the research such as ‘The results suggest that a 10% increase in American food-aid shipments to an average recipient country increases the incidence of conflict by about 4%’[footnoteRef:17]. These statistics help in strengthening the argument, by making the article more credible in terms of logical reasoning, to convince the readers.

However, apart from using this research to corroborate the author’s argument, the article also has instances where the writer is not just inclined toward his/her own argument. For example, ‘increases in food aid can be attributed solely to favorable weather conditions (which have nothing to do with civil conflicts in developing countries)’[footnoteRef:18] shows that the writer does not have a bias or vested interest in proving that foreign aid is harmful to developing countries.

Evaluating the source along the lines of language and tone, the writer has used a formal tone and made use of academic terms and statistics, thereby showing that the article is not intended for layman readers, but for professionals related to the issue of foreign aid. Moreover, since The Economist is a magazine dedicated to the field of economics and policies, it can be verified that the article has been written for people who have knowledge and interest in the field of foreign aid.

Another article that corroborates the thesis point-of-view, and the main argument of the first source; that the harms of foreign aid to developing countries outweigh its benefits is ‘The Dark Side of Foreign Aid’[footnoteRef:19], published in The Diplomat[footnoteRef:20], an online magazine, covering current-affairs in the Asia-pacific region, with no apparent political affiliations. The article has been written by Peter Kan Teo, an independent analyst, who does research on post-conflict reconstruction, therefore, he is a credible author, and the article can be deemed as credible and relevant.

This source also uses research to explain how foreign aid harms developing countries. The research has been conducted by Sophal Ear, an assistant professor of national security affairs at the U.S. Naval Postgraduate School, on the effect of foreign aid on Cambodia. The research concludes that foreign aid has led to bad governance and stunting development in Cambodia, therefore corroborating and adding to the point-of-view of the first source.

Throughout the article, Peter Kan Teo has used the research conducted by Sophal Ear to support his argument and also gives statistics on US aid and Chinese aid to developing countries. Therefore, this article is credible and corroborates the thesis i.e. harms of foreign aid in developing countries outweigh its benefits, and further adds to the first source by explaining more harmful effects of foreign aid other than an increase in foreign aid, such as bad governance.

Antithesis

In order to discuss the contrasting perspective i.e. the benefits of foreign aid to developing countries outweighs its harms, let’s look at an article published in The Guardian[footnoteRef:21], an impartial British daily newspaper. ‘Foreign assistance, even in tough times, is a good investment’ has been written by Daniel Yohannes and Samuel Worthington. Daniel is the CEO of the US government’s Millenium Change Corporation, while Samuel is the CEO of Interaction, an alliance of NGOs in the US. The authors can be considered to have authentic knowledge on the issue, since they are handling organizations working directly, or indirectly, with foreign aid, however, for the same reason, they could have vested interests in writing the article i.e. highlighting the importance and advantages of foreign aid to developing countries, therefore, the article can be seen as biased and one-sided.

However, moving to the content of the article, the main argument established is that foreign aid has many benefits to developing countries and has given the example of Ghana, an agro-based economy that has greatly benefitted from foreign aid.

The writers have provided useful background information regarding Ghana’s economic conditions, for example, ‘In 2000, Ghana recognized that growing its economy depended on increasing agricultural productivity. The challenges were immense. In many rural areas, nine out of 10 people were living in poverty. Use of modern farming techniques was rare, and infrastructure to expand agricultural exports was inadequate.’[footnoteRef:22] The writer has cited the World Bank[footnoteRef:23], therefore backing their arguments with credible sources. Moreover, the writers have made use of statistical facts and figures to prove how economic growth increased in Ghana due to foreign aid provision. The use of this logical reasoning has strengthened the argument of the writers.

Furthermore, the writer has presented other benefits of foreign aid such as ‘Sustainable development creates stronger economies, with more consumers to trade and do business within our interconnected global marketplace. This, in turn, creates growth opportunities at home and abroad. Effective development directly improves the lives of the world’s poor and contributes toward a thriving international economy that serves our shared economic interests’[footnoteRef:24]. Even though there is no backing of evidence to support the claims made by the author, the author’s hands-on experience of working with foreign aid and developing countries makes the claims credible.

Moving on to the tone and language of the article, the writer has made use of a fairly optimistic tone, highlighting only the benefits and importance of foreign aid and no mention of possible harmful effects, probably due to the writer’s vested interests in the topic.

In order to corroborate the credibility and validity of the first source, let’s look at another article published in The Guardian[footnoteRef:25], written by Jeffrey Sachs, who is a professor at Columbia University. The writer has written several articles[footnoteRef:26] criticizing governments of developed countries for exploiting regions such as Africa and does not have a vested interest in the topic of foreign aid, therefore, this article and its author can be deemed as credible.

This article looks at the aid provided to combat diseases in developing countries. The writer has used a specific example of malaria-control measures carried out in sub-Saharan countries, mainly Kenya. Research conducted by Gabriel Demombynes and Sofia Trommlerova has been used to establish the need for foreign aid in the spread of malaria in Africa, after which the writer has made use of statistics as to how much aid was provided by the World Health Organization[footnoteRef:27], and the United States to prevent and treat malaria. Therefore, the writer has used relevant and authentic examples and sources to strengthen his argument that foreign aid has greatly benefitted countries. This corroborates the main idea of the first article and shows that despite its writer’s being biased toward the topic, the argument still holds value and is accepted by other people, with no vested interests as well.

Moreover, Jeffrey Sachs has also mentioned the counterargument, thereby maintaining a relatively neutral stance. An example of this is ‘The opponents of aid are not merely wrong. Their vocal antagonism still threatens the funding that is needed to get the job done, to cut child and maternal deaths by enough to meet the MDGs by 2015 in the poorest countries, and to continue after that to ensure that all people everywhere finally have access to basic health services.’

In the current times, people have realized that foreign aid has not been working to the expected level. As a result, international aid conferences have been concentrating on different ways through which aid can be effective in attaining its objectives.

Third world countries have received trillions of dollars to spur economic growth, and yet it has not shown any substantial reform as a whole (Werlin 2009, 483). As a result, many have started questioning if aid is really helping poor countries in coming out of poverty or not. This research paper investigates the reasons as to why Foreign Aid doesn’t work.

Economic development problems

The first issue that is making foreign aid to fail is the big push problem. For economic development to occur, countries have to move from agrarian economies to these dominated by manufacturing. For this economic development to occur, both human and physical capital has to be attracted to economic development process. In addition, it has to ensure that subsistence farming and small scale businesses have moved to more productive activities.

There is no way a country can move from poverty without increasing its agricultural production, unless such a country has never depended on it before. As a result, foreign aid is not working because its major aim is not to increase agricultural production and manufacturing. In general, foreign aid is not targeting at transformation of agriculture an increase in manufacturing share. Instead, it targets things like city development, housing, health services and education for developing countries.

In real sense, these are the facilities used in upgrading peoples’ standards of living. However, in case people can have their own income sources, then they can afford paying for these services and products. It has been argued that, in case people can afford them, then “government could provide them itself, instead of relying on aid to subsidize the provision in a short-term, unsustainable way” (Lars 2006, par 4).

In most cases, donors have been emphasizing on increasing academia along with recognition of economic structure transformation. As a result, they have assumed that all developing countries face similar problems and have similar economic structures. However, this is a wrong assumption as countries in Africa, South America and Asia are facing different challenges.

Since most developing countries faced capital and infrastructure imbalance, the original objective of Aid was to choke both capital and infrastructure imbalances facing developing countries, and promote smooth industrialization of such countries.

However, in 1990s, Aid was used in plugging trade as well as account deficits; which were not as a result of “productive investment and accumulation but rather due to terms of trade or other external shocks” (Lindsay 2009, 11). As an effect, the reason as to why Foreign aid has failed is because its main objective has been ignored, and it is not being assessed in light of industrialization and advancement in agricultural.

Poor Systems of Foreign Aid

Another factor which has also contributed to Aid failure in developing countries is micro-relations, dealing with how aid practices have been carried out. It is true that, “There has been little public attention given to, and assessment of, how aid is actually provided and how aid agencies actually work” (Lindsay 2009, 67). Studies like Nancy Birdsall (2004, 5) have documented the shortcomings in aid activities as well as systems. Some of these problems include aid quality, which has been considerably reducing the real value of transferred aid.

That is to say, aid has been conducted in a manner that, developing countries feel undermined, as their long term projects are usually not given the required weight.

Though the main objective of Paris Declaration was to either eradicate or minimize them, but in real sense, it has done nothing pertaining to it. As a result, there still exist donors’ projects that are uncoordinated; donors are still designing aid projects in their own countries instead of doing it in recipient countries, and still setting implementation units among other manipulations.

This is particularly to do with World Bank, which is still designing and setting its projects in Washington. This has made most developing countries to reject such aids. For instance, the Ghanaian government at first rejected agriculture loan produced by the World Bank in 1999; and later accepted it based on the fact that some changes were going to be made.

However, only a few things were done, but in real sense, only a few amounts were being channeled to agriculture sector. This is because there was no coordination and donors were much uncooperative (Werlin 2009, 482).

In addition, the issue of depending on aid to sustain productive areas in recipient countries has proved very problematic. This is because;

“Donor projects have to be negotiated, so state elites driving support for particular sectors, such as horticulture export, cannot fully determine the content of projects or their implementation. How much they can determine varies with the donor agency, but beyond that, most if not all donor projects are characterized by certain features which make them not a good tool for supporting production” (Lindsay 2009, 14)

Moreover, the process of producing aid proposals, take a very long time, it can take even more than four years. However, in case there is something to change in it after donors have approved it, it is very cumbersome. So, most projects have been failing because of these reasons.

For instance, if there is a problem in the document, such a problem is not changed, hence will have negative impacts after project completion. This has been majorly affected sectors dealing with production where conditions do change within a very short period of time. This is because, after taking longer time to prepare the proposal, the problem to be solved would have changed, but aid regulation and process are not flexible to respond to it (Snowdon 2009, 250).

Politics of Aid Relations

Both recipient and donors have failed to consider the development of aid relations since independence and their political consequences. It should be considered that, in late 1970s and early 1980s, there were global economy changes imbalance of payment and lots o debts in third world countries.

These changes made donors like IMF and World Bank to manipulate policies of third world countries. As an effect, donors placed lots of conditions on policy areas, imposed macroeconomic policies, and even went ahead to transform political and administrative of such nations. These forces have lead to serious consequences in recipient countries (Amsden par 3).

It is as a result of these forces that donors have been giving conditions which emphasizes on their preferences particularly in policy making, and managing funded projects. This has led to permanent negotiations which have overburdened the recipient countries’ systems of administration.

For instance, in case of disagreement between donors and the recipient government, the government ends up choosing donor’s preferences to ensure that it gets maximum aid. This means such projects will not be coordinated or even managed well as the initiative is not from the recipient country itself, but the imposed one (Moyo 2009 par 5). This has made most developing countries to spend most of their time aligning themselves to donors’ preferences by trying to incorporate their own priorities into donors’ demands.

On the other hand, there are also other countries which will wait till the implementation of aid project has started, then try to twist it in a manner that their preferences are also considered. These are just defensive strategies which at the end leaves the country with very little time and intellectual space to make its own independent policies, apart from developing its own frameworks that are coherent.

In most cases, recipient governments have been perceived as being weak in coordinating aid. As an effect, “donors have created for ‘policy dialogue’ arenas between the government and themselves” (Moyo 2009, par 4), which have led to budgeting and policymaking processes which are fragmented. This fragmentation has lead to aid documents which are:

• Compromised; this is because in most cases such documents are neither supported fully by recipient governments or even the donors. Hence there are high chances that conflicts might occur during implementation, resulting to project failure.
• Lack enough confrontation; this is based on the fact that, the aid recipient government does not argue their position to the maximum as they fear donors. This is due to the fact that, since the government has to continue working in the fragmented process, intensify argument might make the process far much harder.
• Lack of effective authority; this is because, neither the recipient government nor donor government has complete authority in the fragmented process of policymaking as well as implementation.

Most aid recipient governments have been using aid with the aim of remaining in power. Such governments have used aids to ensure that goods and services they promise during campaigns have been delivered. As a result, they never take their strong positions during policy making, or even come up with a developmental strategy which opposes donors’ preferences.

This is because, they fear that in case they take such positions, donors might reduce or even stop the aid, hence undermining their re-election into power. It has been argued that, “state capabilities are key to economic development, but that state capabilities are in turn determined by political configurations and the organization of power” (Easterly 2006, 45).

However, in developing countries, the governments as well as the civil servants have not understood the effects of aid dependence, along with the donor engagement intensity in shaping domestic politics and their organization power. Ion real sense, foreign aid has not been working because it has affected countries’ internal powers as well as domestic politics (Easterly 2006, 45).

Conclusion

Although there have been many failures in foreign aid, there was much success between the periods of 1950 and 1975. There have been many reforms in the implementation of foreign aid programs, however there has yet to be a program to work continuously with numerous countries. The failures outweigh the successes, thus unless a new proposal of a plan is created, it can be concluded that the support of developed countries to developing countries is not beneficial, for either side.

Work Cited

Amsden, Alice. The Rise of “The Rest”: Challenges to the West from Late-Industrializing Economies. Oxford: Oxford University Press. 2001. Print.

Birdsall, Nancy. ‘Seven Deadly Sins: Reflections on Donor Failings’, Center for Global Development Working Paper. 2004. Web.

Easterly, William. The White Man’s Burden: Why the West’s efforts to aid the rest have done so much ill and so little good. New York: Penguin Publishers. 2006. Print.

Lars, Smith. Why Foreign Aid Doesn’t Work. 2006. Web.

Lindsay, Whitfield. The Politics of Aid. African Strategies for Dealing with Donors. Oxford: Oxford University Press. 2009. Print.

Moyo, Dambisa. “Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa.”. 2009. Web.

Snowdon, Brian. “The Solow Model, Poverty Traps, and the Foreign Aid Debate.” History of Political Economy. 2009. Web.

Werlin, Herbert. “The Poverty of Nations: The Impact of Foreign Aid.” The Journal of Social, Political, and Economic Studies. 34 (2009): 480-510.

The United States of America and other members of the Development Assistance Committee (DAC) recognize foreign aid as any allocation of part of a country’s resources to another under control of its willingness to do so. This type of giving unlike lending does not require the receiving country to pay back for what is given to it. Foreign aid can take the form of a variety of resources ranging from money, expertise, and material goods food included. Majority of the countries offered foreign aid are recognized as least developed compared to the member states of the Development Assistance Committee, a delegation of about 22 countries. The US government unlike any other country is the giant initiator and giver of foreign aid a factor related to its many resources and large influence it has the World Bank, the United Nations and the International Monetary Fund. Like any form of legendary giving and receiving, foreign aid has a number of advantages and disadvantages to both the giver and the receiver. This paper highlights the positive and negative implications of foreign aid.

Foreign aid of any kind is offered for the benefit of the receiving country but the donor country may equally benefit indirectly or directly in the event that it wishes to attain any of the following; establish strong influence of its culture over the receiving country, attain a framework for it to reap certain resources from the receiving country, and in the event that it wishes to create a strong military friendship. Other reasons explaining the need to offer foreign aid are related to the satisfaction of a diplomatic approval and a donor’s gratification for the receiving country’s conduct in accordance with its expectations. Most countries in Africa operate on foreign aid owing to the economic and political instability coupled with the increased occurrences of natural calamities. Foreign aid currently is offered in two perspectives either as bilateral or multilateral. Bilateral foreign aid is offered when a country directly gives its support in any form to another while multilateral aid is when a country does not contribute directly to a needy country but instead contributes to an international organization like the World Bank, the United Nations and the International Monetary Fund (Lancaster, 84).

Both bilateral and multilateral aids have disadvantages and advantages. Research indicates that giving aid of any form to a needy country not only uplifts the state of the situation in crisis but is feared to free the needy country’s funds meant for the same into other prospects in the same country that may not be supported by the donor country. A country in need of food aid may on getting aid reallocates its own finances meant for the same into weaponry (Easterly). This does not imply that it’s wrong for any country to reinforce its security by obtaining more weapons, but the same should be done in order of priority. To acknowledge aid as helpful or destructive depends on both the needy and the donor country’s justification. Superpowers that offer aid to third world countries with the goal of attaining great political influence over the receiving countries may be judged on the impact of their influence on the receiving country as a whole in a battle to support communism by the Soviet Union and capitalism by the United States. Foreign aid was used to lure the receiving country to support either of the slogans. This saw the victory of the United States’ influence over the European countries with the creation of the marshal law, such a case where the donor country stands to benefit much more than the needy country can be interpreted as an act of neocolonialism (Easterly).

Humanitarian aid offered in the event of natural calamities is of great help to the victims in need but studies indicate cases where the aid is related to other social and cultural vices. The human race is diverse as the many cultures that there are. Good aid should not only uplift status of the victim of circumstances but also uphold his right in relation to his religion and culture. Most western countries embrace a culture that is very different from what is in many third-world countries. A case is implicated in the Middle East where in the process of helping themselves to relieve food, Muslims were left with no choice but to eat pork products yet their religion forbids this. This may not be a wrong doing on the part of the giver as it’s offered in the form of solving a crisis and due to cultural limitations the donor country may not be in a position to give as per the needs of the receiver in this perspective. In an effort to meet the needs of the receiver in this perspective, a case is implicated in USAID, wherein feeding the war afflicted people of Southern Sudan, food purchases made in the North owing to similarities in diet mannerisms not only fed the hungry in the South but also enriched the North enabling it to buy more weapons to further destroy the South (Shah).

The case in Sudan in Africa was at some point interpreted as the US indirectly attacking the victims it claimed to be feeding. Foreign aid has spearheaded various economic development in most third-world countries.Critics however argue that most of this aid is offered under stipulated conditions by the giver making the receiving country subject itself in a submissive manner to the donor. This has been implicated in both bilateral and multilateral aid. Aid offered by both the United Nations and the World bank not forgetting the International Monetary Fund is under influence of the major contributors to the kit and it’s feared to be an indirect way in which the capitalism of such superpowers can be channeled to the receiving country. Studies indicate that most countries aided by the World Bank, the united nations and the International Monetary Fund have had to remit back to the rich countries that supply them with what is not locally produced in these countries. Critics argue that most of the foreign aid is channeled back to the rich countries that end up overpricing most of their commodities sold to the poor countries a situation that seems to be a way of claiming all that had been offered in the aid (Lancaster, 456).

Other than issues related to the donor of the aid, the receiving countries are bound to suffer from a number of fraud-related issues bearing in mind that most political systems in most of the third world countries are not well structured with corruption emerging among many top politicians. Food aid for instance has been severally abused by many politicians who use their position to influence the distribution with majority preferring their own tribes while some diverting the allocations into black markets. The needy that are meant to get the food aid at no cost will in this situation end up being exploited by paying heavily for the same.

A similar problem with the continued supply of foreign aid in the receiving country is that the home industries in these countries risk losing value with regard that most of what could have been sold on the home market is not sold as the people who are meant to buy are offered an alternative at no cost. For instance; with the increase in the circulation of second-hand clothes from rich countries, most industries in poor countries risk closing down as a result of lack of demand for their produce that may be relatively expensive even if of good quality. Majority of the local people will prefer going for second-hand clothes owing to their cheap costs.

The United Nations recommendations are that all rich countries should offer aid to the developing countries, the figure approved by the United Nations for the last 35 years stands at 0.7 % of the wealthy country’s Global national income. However many wealthy countries do not abide by this rule and most of the aid currently offered is said to be far below the expected figure irrespective of their bountiful resources.Critics argue that most wealthy countries at the moment give substandard aid with the goal of faking the image of giving and at the same time attaining their own interests in the receiving countries. It is equally surprising to note that some of the donor countries may not behave as many resources as the receiving country yet they still stand to offer aid. In around 2001 when Japan was leading in the giving of foreign aid, studies indicated that Japan at the same time did not have enough raw materials for most of its industries. A comparison with the US at the same time indicated that the US was better placed in terms of raw materials than Japan. The ability and willingness to give is such an issue as far as how much and how often foreign aid should be given (Rogerson, 235)

With the increasing world economic crisis many developing countries are bound to regret their over-dependence on foreign aid as most of their donors struggle to bring back their country’s economies into shape. It is evident that the economic situation in the world at the moment is hitting hard on developing countries even if they are not to blame for the economic downfall. A handful of countries that once relied heavily on foreign aid are now strategizing to shift from foreign aid. A case is implicated in the Brazilian economy that previously relied heavily on funding from the international monetary fund. In an effort to distinguish itself from the tradition of relying on foreign aid, the Brazilian government has now managed to loan the International Monetary Fund. This will mean that Brazil will also have influence on the expenditure of the kit whose structures once controlled it when it used to borrow from the kit. It is thus not advisable for developing countries to vest all their hopes on donor countries as this puts them at the risk of suffering further in the event that foreign aid is frozen, it may be wise not to rely on the same but rather use what has been offered alongside what is readily available to plan for the future and attain self-sufficiency as in the case of Brazil (Shah)

At the moment foreign aid is changing from what it should be to a different perspective. In an effort to camouflage in the name of giving many rich countries are geared towards using foreign aid to strategize for their own economic growth and development, this has in turn seen the worst of products and services are given to developing countries. Critics argue that some donors use the situation to get rid of their surplus production and thus get more of the subsidies to produce further. A case is implicated in food aid from western countries known to be embracing agriculture through genetic modification. Due to the excess and unwanted harvest, most of it finds its way into developing countries with some not having any hint of the contents of the food they are receiving. Research indicates that most developing countries especially in Africa have not yet accepted genetically modified organisms yet their donors will still feed them on the same without their consent (Rogerson, 345).

Other than bilateral and multilateral aid, private aid from privately-owned companies in rich countries has also been associated with wrong motives. Just like in the case implicated above where foreign aid is offered with the sole goal of creating room for more production, a case is implicated where a private donation to India was geared at winning its large market for a product that was just about to be released into the market hence the efforts of the private donor were interpreted as geared towards winning the competitive market over other producers of similar products. This was the case implicated in Bill Gates’s donation to the Indian Aids program. Aids is an issue of great concern but critics interpreted Bill Gates’s envy for the Indian market for one of Microsoft’s new releases. Seemingly the aid would not have been offered had it not been for the launch of the new software in the market owing to the fact that India is such a rich market for software. This was interpreted as an attempt to enhance private philanthropy (Easterly, 234).

Private philanthropy has been expounded further on the regulations by the World Trade and the Trade Regulated Intellectual Property Rights (TRIPS). Many rich countries forbid developing countries from manufacturing most of the products on their own with their little capacity by obtaining patents over them. Most foreign aid especially for drugs could have been canceled if developing countries were in a position to attempt producing similar models had it not been for the patents. The food insecurity in most developing countries can be blamed on the existing patents and breeders’ rights that forbid the poor farmers to use produce from their own harvest as seed for the next planting but instead buy and thus enrich the breeder and the country of origin. Countries in which the seeds are produced are bound to use Foreign aid as a marketing strategy so that the receiving country can strategize towards buying from them (Easterly, 346).

The abuse of foreign aid can be blamed on the so-called planners who only enrich themselves in the name of planning for the poor countries. Foreign aid has seen the emergence of very many aid agencies both in the donor countries and the receiving countries. Aid allocations are made whenever a situation is reported but research findings from 1999-2007 indicate that only a quarter of the allocated funds get to the needy with the rest being unaccounted for. Bureaucracy has been cited as a major vice associated with the distribution of foreign aid.In the name of working for the needy, many aid officials have pocketed large portions of the aid and enjoyed prestigious job positions. This does not imply that all aid agencies are malicious but calls for emphasis to be laid on the distribution and accountability of foreign aid. Countries that have a long history of receiving foreign aid are agued to implement strategies geared towards reducing poverty and over-dependence on foreign aid (Rogerson, 356).

The debate on the need and abuse of foreign aid does not in any way imply that aid is awful especially for very poor countries. Any aid can be appreciated if an assessment is followed and proved to be beneficial. Their cases where donors have paid for aid like in the provision of education for refugees inhabited in another country yet the money is not spent on education but other life-related luxuries. There are also countries where notable development has been reported with the proper use and management of foreign aid, such countries stand to be rewarded by their donors. A critical evaluation in the acquisition, use and management of foreign aid will reveal high levels of responsibility, transparency alongside accountability for most of the Aid allocated.

Most critics point fingers at the implications of the US aid in an effort to fight terrorism. Most of the US aid is limited to countries that are bound to support its fight against terrorism especially with reference to the Sept 11^th attack on the World Trade Center. The American citizens are quick to point that most of the foreign aid offered is a burden on their economic resources especially with reference to countries that currently indicate no positive index on development. With the US aid geared towards poor countries that are bound or known to be allies to the American government especially with the fight against terrorism , most aid agencies and employees have been targeted by various terrorist groups a situation that puts their work and life in danger. Terrorist groups are now out to make a fortune on foreign aid in transit and this has in turn led to the emergence of a number of pirates along with major transits networks especially the water transport system that happens to be a preferred mode of transport for most material aid. Countries that are sidelined are out to destroy neighboring countries that are favored in the acquisition of foreign aid (Easterly).

The favoritism implicated by donors may be a measure to punish a certain sidelined country for its misconduct but the same has put the lives of very many desperate people at stake for wrongs committed by their administration. For countries that are poor yet have unexploited resources, donor countries have occasionally reaped these resources for their own countries and have offered foreign aid not as compensation but as an enticement.This does the poor countries more harm as they end up losing most of their natural resources that may have been used to uplift their economic status if traded (Shah).

Foreign aid is equally a solution and a problem for both the receiving country and the donor. A situation that calls for international intervention would have been more effectively managed if stringent measures were used to assess the distribution and the condition in order that foreign aid is not abused or used for wrong deliberations as in the cases implicated in the purchase of weapons with the sums initially meant for the crisis laid off by foreign aid. Accountability should be reinforced and for countries with wrangled political systems that may not be held responsible for the lives of the common citizens, intervention measures should be put in place such that the affected human beings are not forsaken because of crimes committed by their political bosses. Foreign aid should be geared toward benefiting the poor developing countries and not exploiting them indirectly. In order that the aid is not abused, the donor country should make an assessment follow-up and encourage more responsibility for the aid allocated by rewarding countries that properly utilize the aid and at the same time questioning situations where no expected development is accrued.

It is good for wealthy countries to reach out and help in the development of poor countries.Giving is a virtue and should be done in good spirit. For cases where the receiving country has plenty of untapped resources that may be envied by its donors, it would be more appealing for it to be assisted in the utilization of these resources and thus foreign aid be offered in the form of expertise to help in the recovery of the resources and not as a form of enticement so that the donor country can secretly reap off these resources without being questioned.

Donor countries should not offer foreign aid to needy countries in the spirit of diplomatic approval. With reference that most aid is a United Nations recommendation, donor countries should not abuse the recommendations and give substandard aid as a way of meeting the obligation. Self-sufficiency should be every country’s struggle.Though donor countries may be blamed for not meeting the obligation; it is equally a burden to them. The world at the moment is facing the worst economic crisis and most wealthy countries are struggling to put their own economic position in shape and with the obligation from the United Nations it is hard to fully meet what is expected of them. It is thus not proper for the world to criticize the little that is offered as this may in turn send negative implications to the giver who may be compelled to give substandard products in bulk to meet the goal.Pressure on the donor countries has seen them meeting their obligation with crude measures that may not be blamed on them.

Works cited

Easterly, William. The Effectiveness if Foreign Aid, 2006, Web.

Lancaster, Carol. Foreign Aid: Diplomacy, Development, and Domestic Politics, university of Chicago press, 2007.

Shah, Anup. The Effectiveness of Foreign Aid, 1998, Web.

Rogerson et al. The International Aid System 2005-2010 forces for and against change, 2004.

Easterly William, The White Man’s Burden: Why the West’s Effort to Aid the Rest Have Done So Much Ill and So Little Good. USA: Penguin, 2006.

The purpose of foreign aid is to provide development and alleviate poverty in poor and underdeveloped countries. Foreign aid aught to be a source of development and investment for the people in poor countries to support local projects. The intention is good but translating that intention to reach the target has been a nightmare to recipient countries. Instead of improving living standards of African people, foreign aid has ended up contributing to poverty and underdevelopment in the sub Saharan African countries (Rise and Cooper 304).

Aid as an award to government

To begin with, foreign aid has not helped sub Saharan African countries because it is given from government to government. Foreign aid is not given in good faith but motivated by connection between the leader of receiving country and the donating country. Such aid is spent wastefully as the project supported may not be important but only beneficial to the head of state or elites in those countries.

It is through such projects that presidents and close allies get rich. Corruption results from wastage, mismanagement and inefficiency. This occurs due to lack of transparency on the side of sub Saharan African countries on the purpose of the foreign aid leading to cynicisms. The project fails because it may not be viable, employing unqualified people or escalating the construction prices that projects are not completed (Joseph 212).

Aid as bait

In addition, foreign aid acts like a bait to bring on board countries that are not supporting their policies. Donor countries propel their own interests and needs. They use foreign aid as a solution to get the countries in their fold. Such projects fail because of a wrong motive on the side of the donor. The intent is not correct and its importance is not realized by the people.

Dependency

Thirdly, foreign aid has not helped the sub Saharan African countries because it has created dependency. The sub Saharan countries of Africa have depended on foreign aid and this has led to choking of local production. Due to dependency by the sub Saharan countries on foreign aid the result has been dead local industries, lack of local mechanism of production, farming and reduced zeal of hard work among the locals.

Due to dependency by sub Saharan countries on foreign aid, surplus in agricultural sector from the donors are always dumped in the recipient countries and this has also wiped out local production in agriculture. This surplus are dumped at cheaper prices than the local products and this causes people to go for the cheaper products, leaving their own products without knowing that this is killing their local industries. This is like transferring the wealth from poor people to the rich in developed countries (Riddic 113).

Inferior technology

Fourthly, most of foreign aid goes to projects which require advanced technology and this kind of skills are not available among the locals. Whenever such projects break down or require maintenance it’s difficult to sort out the mess until a foreigner is sought to repair. This has led to many projects funded by foreign aid to only end up as white elephants.

Unfair contractual terms

Finally, whenever donor countries give aid there is always a clause attached on the contract forcing the recipient country do to all sourcing of the material or expertise from the donor country. This has made sub Saharan African countries to procure equipment and material at higher prices than they could have gotten from another country cheaply. It has killed the spirit of competition and donor countries continue to dictate the use of the donated funds as a way of transferring wealth back to them.

Support of argument

However, there are still some benefits that foreign aid has brought to the sub Saharan countries. One of the proponents of foreign aid argues that in case of low production in agricultural sector, sub Saharan people have received food for alleviating hunger. The argument holds water as most of the sub Saharan countries have been struck by prolonged drought. Foreign aid has saved such people from starvation (Calderisi 120).

Moreover, foreign aid has increased the level of knowledge among locals by creating job opportunities and wealth in the countries. Locals are trained and deployed in the program to maintain and continue to produce. Locals of sub Saharan countries are now technologically savvy which assists them to run the project independently (Hundson and Linna 248).

Conclusion

In conclusion, foreign aid has not reached its target in the sub Saharan African countries. It is foreign to the people of sub Saharan because the benefits only goes to elites in Africa. In order to realize the importance of foreign aid then donor countries must ensure that transparency, accountability and people participation is guaranteed before releasing it.

This will reduce the white elephant projects that are wasteful and beneficial to a few individuals in government. Donor countries could use civil society to implement their projects whenever the government proves untrustworthy.

Works Cited

Hundson, Alan and J. Linna. Beyond Aid for Sustainable Development, London: Macmillan Publishers, 2009. Print.

Calderisi, Robert. The Trouble With Africa: Why Foreign Aid Isn’t Working, London: Macmillan Publishers, 2006. Print.

Riddic, Roger. Does Foreign Aid Work, Oxford: Oxford University Press, 2008. Print.

Rise, Axerlrod and C. Cooper, The St Martin Guide to Writing, New York, NY: St Martin Publisher, 2010. Print.

Joseph, Williams. Styles: Lesions In Clarity and Grace, New York: Pearson Longman, 2007. Print.

Impact of foreign aid on education in Bosnia

Through financial support by international bodies such as the World Bank, Bosnia has been able to rehabilitate two of its main projects. These include the FY96-Emergency Education Project (ERP) and FY98 –Second Education Reconstruction Project (ERP II).The rehabilitation process entailed repairing schools which had been damaged during the war (Laurie & ‘Brien 14). In order to fully re-establish the school, new stationeries, text books and other learning materials such as models were purchased. The stationeries and learning materials were allocated to schools depending on their student capacity. In addition to the rehabilitation of schools, buildings within the Ministry of Education were also reconstructed. This was undertaken with the aid of the Emergency Education Project.

During the second Education Reconstruction Project, equality funding was undertaken. This was implemented through the quality fund which entailed conducting a comprehensive analysis of inequalities available in schools. The analysis contributed towards an improvement of the quality of education. In addition, this reconstruction project ensured that education was accessible to all. This contributed towards attainment of the Ministry of Educational goal which entailed provision of universal education to everyone (Diane 98). As a result, children from diverse social settings had an equal chance of accessing quality education. In addition, the high quality of education ensured that students who graduated from various educational institutions had equal access to job opportunities (Laurie and O’Brien 14).

Currently, the FY00 Project (Education Development Project) is being implemented as a strategy to institute the education reforms. The project has been instrumental in improving management of schools and other educational sectors through establishment of various institutions and other tools such as Standard and Assessment Agency and the Education Information Systems. Effective management of schools has led to improvement of performance in educational institutions. As a result, the education sector has undergone through total reforms. For example, new secondary schools have been established (Gerrit 152). Statistics show that the education sector in Bosnia has consumed approximately 3% of the total amount of money granted by World Bank and other donors. This translates to approximately $ 29 Million (Kimberly & Gale 19).

Impact of foreign aid on health in Bosnia

FY97-Essential Hospital Service Project was the first project to be funded by World Bank within Bosnia’s health sector. The project entailed reconstruction and reformation of all health facilities. This contributed towards achievement of sustainable and equitable health care provision in the country (Laurie & O’Brien 15). One of the ways through which the reforms were undertaken entailed construction of new hospitals and clinical centers. In addition, the newly constructed health institutions were equipped with the necessary supplies.

In order to improve efficiency of operation, the clinical skills of personnel working within the health sector were upgraded through training. This ensured that individuals seeking health services received better health care. In addition, a new model of health care provision has also been developed and introduced in Bosnia. The model ensures effective delivery of primary health care through the current project on health, that is, the FY99 health project. As a result, the quality of Health Service has also improved. For example, child mortality rates have significantly been reduced while maternal health has improved. In addition, individuals within the low income class can now easily access essential health care services such as child immunization. Creation of health insurance fund has enabled people to receive compensation thus increasing their ability to pay their medical bill in case of falling sick. This is applicable within the entire period they are entitled to the insurance benefits.

Through the reforms within the health sector, it has become possible for health institutions to prevent and control some epidemics and communicable diseases. For example, individuals suffering from physical or mental disability or those who are psychologically traumatized can now undergo through a rehabilitation program at community based rehabilitation centers located either within or near existing health centers (De Vries & Kzalinga 246-251). Grants and financial aid from donors and the World Bank has enabled the Bosnian government to be able to meet its current expenditure such as paying salaries to civil servants working within the health sector and buying essential drugs necessary in administering treatment. This further aids in relieving financial burden on the citizens through taxation. Family health care systems have also been established to enable all members of a family to attain their health care needs. Since 1991, the heath sector, along other social services sector, has consumed approximately 11% of all the financial foreign aid advanced to Bosnia by the World Bank and other donors. This translates to approximately US $ 89 Million (Kimberly & Gale 19).

Impact of foreign aid on infrastructure in Bosnia

Bosnia’s infrastructure is the largest recipient of financial aid advanced by the World Bank. For instance, during the financial years ranging from 1996 to 2003, the sector received more than 35% of the total financial aid received from International Development Association (IDA). The money was utilized in funding 14 infrastructural projects. Since 1991, the sector has continually received approximately 9% of the total financial commitments by International Development Association (IDA) to Bosnia. This translates to approximately US $ 71 million. The projects in undertaken within the country’s infrastructure related to water, energy and sanitation and transportation systems.

The initial reconstruction phase entailed reconstruction of the country’s infrastructure since they had greatly been damaged during the war (Laurie and O’Brien 17). Some of the infrastructures that had been greatly destroyed and required reconstruction included telecommunication, transport and energy. As a result of the foreign aid advanced by the World Bank, the government has been able to reconstruct the country’s transportation system such as roads in both rural and urban areas (Common Wealth Bureau of Agricultural Economics and Common Wealth Agricultural Bureau 1).Other links within the transport system such as bridges, railways, tunnels and the Sarajevo airport that had been destroyed during the war have also been repaired. In addition, natural gas, the coal industry and energy district heating have also been developed to generate power. In addition the public transport system within the city has also been restored through the importation of buses. The country’s civil aviation infrastructure has also been repaired. This has improved efficiency in movement of people and goods between Bosnia and other countries. Water, sewerage and electricity systems which were destroyed during the war have been restored in most parts of the country. In addition, the financial aid has also enabled construction of these infrastructures in areas that did not have (World Bank et al 84). This has made Bosnia a better place to live in. In addition, availability of infrastructure has contributed towards investors considering Bosnia a viable investment destination. This has significantly contributed towards the country’s economic growth.

From the above analysis, it is evident that the foreign aid advanced by the World Bank and other donors to Bosnia has significantly contributed towards its economic growth. The financial aid has enabled reconstruction of various economic sectors such as education, health and infrastructure.

Works Cited

Common Wealth Bureau of Agricultural Economics and Common Wealth Agricultural Bureau. Rural development abstracts: Volume 22. New City: The Bureau, 1999. Print.

De Vries, Albert and Klazinga, Niek. Mental health reform in post-conflict areas: a policy analysis based on experiences in Bosnia Herzegovina and Kosovo. The European Journal of Public Health, 16.3(2006):246-25.

Diane, Johnstones. Bosnia peace operation progress toward achieving the Dayton Agreement’s goals: report to the Chairman, Committee on Foreign Relations. New York: U.S. Senate Publisher, 2010. Print.

Gerrit, Stratmann. Donor coordination of economic assistance to Eastern Europe: Mechanisms and origins of sectoral governance in international relations. London, NJ: Lit Verlag Munster, 2000. Print.

Kimberly, Hunt. Encyclopedia of Associations: pts. 1-2. National Organizations of the U.S. New York: Gale Group, 2004. Print.

Laurie, Effron and O’Brien, Stephen. Bosnia and Herzegovina: post-conflict Reconstruction and the transition to a market economy: an OED evaluation of World Bank support. New York: World Bank Publications, 2004. Print.

World Bank, Wei Ding and Wallich, Christine. Bosnia and Herzegovina: toward Economic recovery. New Mexico: World Bank Publications, 1996. Print.