Globalisation and Foreign Aid 2014

8/12/2019 Globalisation and Foreign Aid 2014

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Globalisation and Foreign Aid

Week 3


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Good news !!!

In 2012 Aid totalled $128 billion per year(falling from a peak of $137 billion per yearin 2010)

Tripled in real terms in last 50 years

ODA increased by 62% in those years


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Net ODA by region (Millions of US $) (OECD 2012)

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

2006 2007 2008 2009 2010

Sub-Saharan Africa Unspecified South & Central Asia Middle East and North Africa Other Asia and Oceania Latin America and Caribbean Europe


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Official Aid


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Official Aid


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What is Foreign aid?

The international transfer of capital,

goods, or serv ices from a coun try or

internat ional organisat ion for the

benef it of the recipient coun try or i ts

population.


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What is Foreign Aid?

Economic (development assistance)

Military

Emergency/ humanitarian (e.g. aidgiven following natural disasters)

Food Aid


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History of Aid

In 1945, the U.S. along with other countries, established the

International Monetary Fund (IMF)

International Bank for Reconstruction and Development (World Bank)

as the two main multilateral institutions that would help with debt relief and economic development.

The Marshall Plan was announced in June of 1947 by General George C. Marshall, then U.S.

Secretary of State. The plan sought to provide funds for rebuilding the countries in Europe.

Marshall had said that the real enemies of democracy were "hunger, poverty, desperation,and chaos."

With foreign aid, the U. S. hoped to not only help countries rebuild while containing the Sovietexpansion, but also to strengthen U. S. ties with the recipient countries.

By the early 1950s, Western and Central Europe, as well as Japan, had undergone a revitalization


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History of Aid

Because of the success of the Marshall Plan in 1949, President Harry Trumanannounced foreign aid as a component of U.S. foreign policy.

He called it a "bold new program" to provide assistance to developing countries.

Not until President John Kennedy established the U. S. Agency for InternationalDevelopment (USAID) in 1961 that the U. S. had an actual agency to administerforeign aid assistance.

President Kennedy also established the Peace Corps during his presidency toencourage young Americans to volunteer abroad to help improve life in the less-

developed countries of the world.


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History of Aid

During the 1960s and 1970s, foreign aid spending shifted from WesternEurope and Japan to the Middle East and Asia and to poor countries in sub-Saharan Africa and south Asia.

Again it was seen as a way to stop the spread of communism and to

promote peace in the Middle East.


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Types of Aid

Bilateral Aid

Multilateral Aid

NGOsPrivate individuals/organisations


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Types of Foreign Aid

Foreign aid can involve a transfer of financial resources or commodities(e.g., food or military equipment) or technical advice and training.

The resources can take the form of grants or concessional credits (e.g.,export credits).

The most common type of foreign aid is official development assistance(ODA), which is assistance given to promote development and to combatpoverty.

The primary source of ODA is bilateral grantsfrom one country to another,though some of the aid is in the form of loans, and sometimes channeledthrough international organisations and nongovernmental organisations(NGOs)

For example, the International Monetary Fund(IMF), the World Bank, andthe United Nations Childrens Fund(UNICEF) have provided significantamounts of aid to countries and to NGOs involved in assistance activities.
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Who spends the money?

40% channelled through donor countries

40% multilateral agencies (UN, EU)

13% through NGOs Private organisations


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Issues

The debate about whether foreign aid does more harmthan good is far from closed.

Many question its historic effectiveness, and claim that it

has frequently undermined economic growth andperpetuated political repression.

Yet governments of wealthy countries have committed

large and increasing sums of money to ODA, with a newemphasis on spending on health and education.


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Who does what?

The US has directed aid to regions where it hasconcerns related to its national security, e.g. MiddleEast, and in Cold War times in particular, Central

America and the Caribbean Sweden has targeted aid to progressive societies

France has sought to promote maintenance or preserveand spread of French culture, language, and influence,especially in West Africa, while disproportionately givingaid to those that have extensive commercial ties withFrance

Japan has also heavily skewed aid towards those in EastAsia with extensive commercial ties together withconditions of Japanese purchases


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Historical context

In 1970, the worlds rich countries agreed to give0.7% of their GNI (Gross National Income) asofficial international development aid, annually.

Since that time, despite billions given each year,rich nations have rarely met their actualpromised targets.

US is often the largest donor in dollar terms, butranks amongst the lowest in terms of meetingthe stated 0.7% target.


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Historical context

The deadline for reaching that target wasthe mid-1970s.

By 2015 (the year by when the MillenniumDevelopment Goals are hoped to beachieved) the target will be 45 years old.


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Aid as a % of GDP


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Shortfalls


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Historical context

Aid has often come with a price of its own for the developing nations

Aid is often wasted on conditions that the recipient must useoverpriced goods and services from donor countries

Most aid does not actually go to the poorest who would need it themost

Aid amounts are dwarfed by rich country protectionism that deniesmarket access for poor country products, while rich nations use aidas a lever to open poor country markets to their products (VIDEO)

Large projects or massive grand strategies often fail to help thevulnerable as money can often be embezzled away.


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Historical context

The vast majority of ODA comes from the countries ofthe Organisation fro Economic Cooperation andDevelopment (OECD) which was founded in 1961 to

stimulate economic progress and world trade. It is aforum of countries committed to democracy and themarket economy, providing a platform to compare policyexperiences, seek answers to common problems,identify good practices, and co-ordinate domestic and

international policies of its members(OECD)


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Historical Context

A number of countries make up the OECDsDevelopment Assistance Committee (DAC)including western European countries, theUnited States, Canada, Japan, Australia, and

New Zealand

Other providers of significant assistance includeBrazil, China, Iceland, India, Kuwait, Poland,Qatar, Saudia Arabia, South Asia, Korea,Taiwan, Turkey, and the United Arab Emirates.


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Historical context

Since the early 2000s, foreign aid has undergone something of ashift, both in the quantities given and the way it is spent.

Aid in the 1980s emphasised structural adjustment

1990s favoured conditionality

The last decade has witnessed a decisive move towards donorfinancing of social services such as health and education.

This has been coupled with a significant increases in total flows of

ODA - IMPACT ? (video clip)


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Net ODA 2011


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Context

Donor and recipient countrieslinesblurred

Those who received not become donors(Koreain 2012 levels surpassed those ofFinland, Austria and Ireland after a 3 fold

increase in the last decades)


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Move to healthwhy?

The move towards financing of health andeducation is consonant with the newglobal priority to meet the MillenniumDevelopment Goals (MDGs)


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Aid for health: definition

The DAC definition of aid toHealthincludes both:

basic health

health, general.
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Basic Health

Basic health care

Basic health infrastructure

Basic nutrition Infectious disease control

Health education

Health personnel development


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Health, general

Health sector policy

Planning and programmes

Medical education

Training and research

Medical (non-basic) health services

Population policies/programmes andreproductive health comprise a separate sectorfrom 1996 onwards.


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Aid decline

In 2012, the OECD noted an almost 3% decline in aidover 2010s aid

Although this decline was expected because of the

financial problems in most wealthy nations, those sameproblems are rippling to the poorest nations, so a drop inaid (ignoring unhealthy reliance on it for the moment) issignificant for them.

It would also not be surprising if aid declines or stays

stagnant for a while, as things like global financialproblems not only take a while to ripple through, but ofcourse take a while to overcome.
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Declining Aid

During recent years, some developing countries havebeen advancing (China, India, Brazil). So if there wasdeclining aid due to many no longer needing it then thatwould be understandable.

However whether it has been recent years, or throughoutthe history of aid, the poorest countries have receivedonly a quarter of all aid.

Even during recent increases in aid, these allocations didnot change. In addition, as industrialized nationsattention will turn towards their own economies, aid willbe less of an issue


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Declining Aid

2006 onwards is typically regarded as years of high aidvolumes.

At around 0.3% of GNI, if all DAC countries had given

their full 0.7%, 2010s aid alone would have been almost$284 billion (at 2010 prices), or an increase of almost$159 billion.

Considering the typical aid amount at around 0.25 to0.4% of GNI for over 40 years, the total shortfall is asubstantial amount:just under $4.4 trillion aid shortfallat 2010 prices:


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New Aid:USA

International giving by US foundations: $1.5 billion per year

Charitable giving by US businesses: $2.8 billion annually

American NGOs: $6.6 billion in grants, goods and volunteers.

Religious overseas ministries: $3.4 billion, including healthcare, literacy training, relief and development.

US colleges scholarships to foreign students: $1.3 billion

Personal remittances from the US to developing countries: $18billion in 2000


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Issues

Quality of recipient governance as well aspoverty penalizing tying of aid

Handling reverse flows (debt service) in aconsistent way penalizes project proliferation(overloading recipient governments with theadministrative burden of many small aidprojects) and rewards tax policies thatencourage private charitable giving todeveloping countries.


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New Aid

Government aid, while fraught with problems reflects foreign policyobjectives of the donor government in power, which can differ fromthe generosity of the people of that nation.

It can also be less specialized than private contributions and targetsare internationally agreed to be measurable.

Private donations, especially large philanthropic donations andbusiness giving, can be subject to political/ideological or economicend-goals and/or subject to special interest. A vivid example of thisis in health issues around the world.

Large donations by foundations such as the Bill and Melinda GatesFoundation are impressive, but the underlying causes of theproblems are not addressed, which require political solutions.


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New Aid

Bill Gates announced in November 2002 amassive donation of $100 million to Indiaover ten years to fight AIDS there.


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New Aid

At the same time he made that donation, he was makinganother larger donation

over $400 million, over three years

to increase support for Microsofts software development

suite of applications and its platform

And being a monster MS [Microsoft] shareholderhimself, a Big Win in India will enrich him [Bill Gates]personally, perhaps well in excess of the $100 millionhes donating to the AIDS problem. Makes you wonderwho the realbeneficiary of charity is here. (ThomasGreen NYT)


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New Aid

India has potentially one tenth of the worlds softwaredevelopers, so capturing the market there of softwaredevelopment platforms is seen as crucial.

Is this just one amongst many examples of what appearsextremely welcome philanthropy and charity also havingother motives?

Would Bill Gates have donated that much had there notbeen additional interests for the company that he hadfounded?


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Success stories?

Success storiesPresidents EmergencyPlan for Aids Relief (PEPFAR)

Begun in 2003cut death rate from HIV/AIDS by more than 10% intargeted African countries although had no appreciable effect onprevalence (Bendavid et al 2009)

50-60% providing ARVIs

1/5 on prevention (of that 1/3 used ONLY for abstinence-onlyprogrammes)

No outcomes evaluation in first 5 years


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Success stories?

Aid for health directly linked with anincrease in life expectancy and decreasein child mortality in developing countries

Public and private programmes in 140countries

Those receiving more health aid witnessed

a more rapid rise in life expectancy andlarger declines in child mortality

(JAMA Internal Medicine April 2009


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But !! 2014

Recent announcement that less than onefifth of the UN plan for humanitarian aidhas been funded in Afghanistan

Donor fatigue Security fears

Lack of governance development

Corruption

Poor project management

Drug production (instability)


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What comes after the MDGs

A million voices: The world we wantAsustainable future with dignity for all (UN2013)

Documents

Globalisation and Foreign Aid 2014