Development Aid_Reading Memo

Foreign aid has been an evergreen issue in most of the developed countries, preceding important international summits like the G20 or Davos, raising questions of aid effectiveness and strategies, which for one reason or the other have not been solved up until today. While it is very easy to be skeptical when considering the magnitude of multilateral and bilateral institutions, trust funds and INGOs and the respective “ineffectiveness” of their work, I argue that one should try look at the issue of international aid through new, unbiased glasses that are not inflicted with the decades long political and economical burden, that lies on the reputation of these institutions. Firstly, I argue that the historical process of foreign aid that has tied the lowdeveloped countries to the west by indebting their national economies can be considered as a clear result of a very transparent policies of the economic hegemons, that shall be not considered as a clandestine conspirator theory, but as a political process led by national interests and greed for capital accumulation that governs every aspect of international relations, not only foreign aid. The articles actually point that out, that the same process was applied in the war torn Europe, and I will add that the same motivations were driving the US coup operations in Latin America, the US loans to Japan, or the US presence in the Gulf. While not defending these policies as “ethical” or “moral”, I disagree with the clichéd rhetoric of western aid, as presented in some of the articles. Secondly, while the articles follow the detailed history of foreign aid and how it transformed from one unsuccessful strategy to the other, only the article by Joseph Hanlon, the Mozambique “success” story, is dealing with the modern strategies of foreign aid. Since the Paris Conference, many international and national institutions realized that a radical change must occur, if they want to prevent further political drawbacks stemming from wasted tax payers money in programs in developing countries which were not needed, unsuccessful, badly managed, duplicated or in some cases even counterproductive (closure of mines in DRK resulting in unemployment and further need for aid). The DAC countries realized the enormous failure of the Millennium Development Goals, where millions of dollars was spent on tied aid, providing food that was not spent and building infrastructure that was not needed. The DAC countries are much aware of the problems they face in the foreign aid issue. Therefore OECD together with the UN introduced the new strategy of Sustainable Development Goals, that, even though sounding almost identical, recognized that the structure of current foreign and had to be changed. The largest component of the change was the introduction of the private sector as a main actor in development. They agreed, that tied aid, being drafted in the donors HQ does not have to reflect the actual needs of the beneficiary country. Furthermore they agreed that the citizens in the developing countries have the capacity (ratio of workforce) to accelerate the nation’s economy, if investments by private companies are made, providing new employment and itinerating the local producers in the shared value chains therefore boosting local entrepreneurs. They will than, together with the assistance of the private donors, be an equal bargaining partner to national governments, calling for an enabling business environment which includes good governance, access to resources and friendly investment climate. I do not advocate for an assured success of this strategy, but the reason I point this out is, that the DAC countries and International institutions are well aware of the problems they caused, mostly due to their own doing in the past, and do not want to provide ineffective aid. However one must consider the complexity of these intertwined institutions that are not able to restructure from one day to another. As mentioned in the article of Mozambique, General Budget Support has also become a major tool for delivering of aid. While it still faces many obstacles, truth is, that it is bureaucratic friendly for the donors’ institutions, furthermore distancing itself from tied aid, “letting” the beneficiary government decide how to spend it, for economic or political rewards. This brings me back to my first raised argument, that even though it might not seem right, even tools like GBS or the private sector support are much connected to the aims and interests of major donors. While it is easy to point out the inflexibility of the large donor institutions, the failures done in past decades, the scandals reported on and the amount of money probably lost in corrupt government officials pockets, the story of the HALO mine free project in Mozambique is a clear example of how foreign aid can directly positively influence the beneficiaries country, increasing safety and good governance. Looking at the list of HALO donors, one can see bilateral partners such as SIDA, GIZ or UKaid together with the UN and EU Commission. So, while in many cases, donor competitiveness, uncoordination and strategic incoherence plagues many regions of Africa, projects like this show that once in a while cooperation led to actual improvement. It is in the national interests of these donors to develop the situation in African countries to unlock the market potential for their products, therefore only a reasonable strategy for this goal has to be found, so in the end both sides will benefit from it.