There is no doubt that today’s world is more affluent and has more advanced technology than ever before ,however, there are famine, pollution, water shortages and development problems in dozens of countries. In that case, many countries and organizations are supplying aid and supporting undeveloped countries. Ordinary people who live in rich countries also have greater awareness of helping their infrastructural development. Food, technological, educational aids have become an accepted policy of advanced countries to assist in furthering the development of the human and material resources of poor countries. Unfortunately, problems were misdiagnosed or not foreseen. It is no good taking over the aid of foreign countries uncritically. Moreover, foreign aid would make undeveloped countries lose their economy, market and other area’s independence. At the same time, as a kind of political exchange, undeveloped countries have to obey new rules which created by developed countries and further to be vassal states again. Nowadays, most countries in the world have not finished the progress of being industrialized.

1. FOREIGN AID
EFINATION
The internationaltransfer of capital, goods, or services from a
country or internationalorganizationfor thebenefit of therecipient
country or its population. Aid can be economic, military, or
emergency humanitarian (e.g., aid given following natural
disasters).
NTRODUCTION
Thereis no doubt that today’s world is more affluent and has more
advanced technologythan ever before,however, thereare famine,
pollution, water shortages and development problems in dozens of
countries. In that case, many countries and organizations are
supplying aid and supportingundeveloped countries. Ordinary
people who live in rich countries alsohave greater awareness of
helping their infrastructuraldevelopment. Food, technological,
educationalaids have become an accepted policy of advanced
countries toassist in furtheringthedevelopment of thehuman and
materialresources of poor countries.
Unfortunately,problems were misdiagnosed or not foreseen. It is no
good taking over theaid of foreign countries uncritically. Moreover,
foreign aid would make undeveloped countries losetheir economy,
market and other area’s independence. At thesame time, as a kind of

2. politicalexchange, undeveloped countries haveto obey new rules
which created by developed countries and furthertobe vassal states
again. Nowadays, most countries in theworld have not finished the
progress of being industrialized.
DVANTAGESOFFOREIGNAID
“Some people are going to have tostarve…we’re in the position of
family that owns a litter of puppies, we’re got to decide which ones to
drown.”(USSecretary of Agriculture, 1946)
1)LIBERATING PEOPLEFROM HUNGER WORLD
The food is necessary totheexistenceof man .Most developing countries have
more people than they can feed. Population and the demand for food are at a
parallel rate(Deverus, S, 1992). Hencea majority of themseems to have sunk
into poverty and people from a hungry world. For over 40 years, theU.N. World
Food Programme(WFP) has provided food to victims of wars and naturaldisaster
in many counties. Annually over 100 million people in 77 counties aretaken care
of. In 2008, thereare2.6 million grains of rice to curb hungeraroundtheworld.
Even so, we are still living in a world where every seventh person is hungry.
(Luescher, B, 2009)
According toLuescher, thenumber of people below the poverty line tends to drop
significantly. It is difficult toimaginethat what would happen if food aid were
reduced to poor nations.

3. a) Foreign aid can alleviate hunger in populations hit by naturaldisasters and
other crises and supply food to support people who live in poor countries
as they rebuild after a crisis.
b) “Foreign aid can also be a payment for community-organized work
projects, such as building farm-to-market roads, water catchments, and
terraced hillsides, improving managementof naturalresources and access
to services and markets for ruralcommunities.” (Thehistory of food aid,
2004)
2)MEETING EMERGENCIES
Foreign aid helps Pakistan in emergencies. Whenever thereis an earthquake,
flood or some other naturalcalamities, Food Aid programprovides Pakistan
different types of food items such as wheat, dry milk etc.
3)DEFENSE MODERNIZATION
Pakistan wants tomodernizeits defense capabilities, which can only be possible
provided foreign aid is available. Modern Fighter Planes, F-16 and other modern
warfaretechnology can only be secured with thehelp of foreign aid and loan, as
Pakistan donot have sufficient foreign exchangetofinancethis crucial
requirement of the country.
4)INCREASE IN TAX REVENUE
When foreign loan is utilized for established of industries and socialoverheads
then economic activities grow, goods and services are produced, foreign tradeis
increased, all thesefactors increaseGovt’s incomethrough differenttax sources.
5)ACCELERATING INDUSTRIALIZATION IN
UNDERDEVELOPED COUNTRIES

4. Sincetheend of theSecond World War thegovernments and peoples in richer
countries of the world havebecome increasingly awareof economic problems of
their poorer neighbours. (Mounjoy, A, 2007) Foreign aid from developed
countries and internationalorganizations has becomean important solution to
thedevelopment of thehuman and materialresources of thesecountries as the
curefor theills of under-development, with its high degreeof success held to be
related to the high degreeof foreign capitalinvestment. Foreign aid has already
become a universalpanacea in industrialization.
Indeed, many developing countries havebenefited fromforeign aid. Thereare
different forms of aids being offered by foreign governments and firms. Most of
themwould createmillions of job opportunities and teach newtechnology or
management experiencetoundeveloped countries. It may be impossible to many
modern factories operating without foreigntechnology. Undeveloped countries’
governments aresupported by foreign financialaid like World Bank and tax
which is from foreign companies’ investment. In that case, governments would
have a constantlyfinancialresourcethoughindustrialization.
6)ESTABLISHMENT OF MODERN ECONOMICAND
SOCIALINFRASTRUCTURE
Economy of a country cannot growwithoutthepresenceof economic
infrastructurei.e., availability of gas, power, transport and communication.
Similarly social infrastructure(i.e., education, training and health facilities), is
also essential. These infrastructurefacilities requirelocaland foreign capital,
which is very limited in Pakistan. Foreign aid helps government toestablish these
infrastructures. When construction and other development activities arestarted
in thecountry, thesegenerateemployment opportunities for thepeople.
7)LEVEL OF TECHNOLOGICALINCREASES

5. With the help of foreign aid which is in the way of technicalcollaborationor
project aid, modern machines areused, which producesuper quality goods in
greater numbers. Henceby using goods of high quality consumers arebenefited.
8)IMPROVING INTERNATIONAL RELATIONS
The humanitarianresponseof internationalcommunity fromforeign aid has
improved internationalrelations dramatically.Foreign aid would give a clear
indication that developed countries considered closer ties with developing
countries in their economic and strategic interest. (Deverus, S, 1992) In February
1978, a long-termTechnologicaland financialaids’ plan lead to relations had a
great changed between Chinaand Japan. (Japan aid to China—Relationswith
China, 2009).Thoughthis plan, China could receiveequipment, technology,
constructionmaterials, and machineparts in returnfor coal and crudeoil by free
or low price.
In response, Japan and China adopted strikingly complementary foreign policies:
Before this plan, as a loyal ally of the United States, theJapanesegovernment was
committed to no recognition P.R.China government.(Japan aid to China—
relations with China, 2009)However, theplan of the agreement reflected the
wish on both sides to improve relations. In April 1978, Senkaku Islands’ problem
was developing momentumtoward a resumption of peace treaty talks. “Restraint
on both sides led to an amicable resolution. Talks on the peace treaty were
resumed in July. The Treaty of Peace and Friendship was signed on August 12 and
came intoeffect October 23, 1978” (Yuan, T, 2009).
9)FOREIGN LOANBRIDGES SAVING GAP AND
BALANCE OF PAYMENTS

6. In Pakistan duetolow nationalincomeand poverty, per capitalincomeis very
low hencerateof savings is very low. Low savings ratecannot help in capital
formation and economic development. Similarly imports are greater than exports
thereforethereis always deficit in balanceof payments. Foreign loan, aid not only
bridges domestic savings gap but also helps in overcoming balanceof payments
problem.
10) DEVELOPMENT REQUIREMENTSARE MET
Pakistan wants todevelop agriculture, industry,power and naturalresources of
thecountry but dueto lack of foreign exchange, requiredtechnology could not
be imported. Foreign aid and loan facilities help Govt. to import therequired
technology and basic rawmaterialwith which different sectors of economy can
develop and due to utilization of modern machines productivityis enhanced.
Thus productivityof various sectors of economy increases.
Casestudy: The relation between foreign aid and the Chinese famine
It has only recently emerged that China was devastated by an enormous famine
in theGreat Leap Forward period of 1958-61; in its scale certainly theworst
anywherein human history. Foreign aid from internationalorganizations and
developed countries arerefused dueto politicalfactors. Theleaders of Chinese
government considered thatif China received foreign aid, China would lose
independenceof food market and become politicalslave. However, this unwise
decision became an important reason of famine from 1958 to1961.
“Recently released demographic crisis of enormous proportions…about30
million prematuredeaths and about 33 million lost or postponed births” (Ashton,
1984, quoted in Deverus, S, 1992).Previous estimates of thenumber of ‘excess
death’ during this period ranged from16 million to 23 million. (Aird, 1982,
quoted in Deverus, S, 1992) Per capita grain supply fell down 307 kg/year in

7. 1956 to235 kg/year in 1961. Aclose inverse relationship is observed for China
over the 1955-65decadebetween totalper capita food energy and death rates.
(Ashton, 1984, quoted in Deverus, S, 1992) Thefailures of the government
received food aid until1961 result frompoliticalissues.
ISADVANTAGESOFFOREIGNAID
“Give a man a fish, and you feed him for a day; teach a man to fish,
and you got rid of feeding him for a lifetime.” (The Analects of
Confucius)
1)LOSING THEINDEPENDENCE OF ECONOMY
Although foreign aid would save a lot of lives and it would takea lot of poor
people out of poverty. Foreign aid would also changethewhole society, or that it
would changetheinstitutions, or that it would changethewhole direction of the
country. “Historically it is commonly believed that if a government has taxation,
governments havetomake sure that foreign aid would not affect the
development and independenceof state's market. Foreign aid can potentially
underminetaxation’s link between thepeople and thegovernment becauseit
would sever that link. Therefore, foreign aid may retard economy’s
development.”(Beynon, R, 1999)
The ideal that foreign aid may createfor exporting is dented becausewhen a
developing country gets millions of foreign money, thereis upward pressureon
theexchangerate, this country's economy will become less competitive. (Beynon,
R, 1999) Foreign aid when given in theform of loans can earn interest by
developed countries.It is generally believed that foreign aid would let
undeveloped countries bein debt. Where production self-sufficiency is

8. unrealistic, dependenceon theworld market is unavoidable. Furthermore, poor
countries tend torely on foreign aid and internationalexchange. In a long term,
it is not benefit to undeveloped countries’ sustainabledevelopment.
2)INCREASE IN FOREIGN AID’SDEBTSERVICING
Pakistan has already borrowed too much foreign loans and is still borrowing.
Now in order to pay interest Pakistan is under debt burden. Thus debt burden is
continuously increasing.
3) INCREASE IN PRODUCTION COST
In results in the increasein the cost of project becauseof interest, heavy
remunerationand other fringebenefits, which aregiven to foreign experts.
4)HABIT OF DEPENDENCE ON FOREIGN LOANAND MISUSE
OF AID
Aid receiving countries includingPakistandonot exert and do not make policies
to develop their economy with their own domestic resources. They do not pay
attention for development of technology. They just becomeentirely dependent on
others. Major portion of aid particularly commodity aid is misappropriated by the
concerned Government officials.
5)EXPLOITATION BY DONOR COUNTRIES
Sometimes loan giving countries interferein thedefenseand foreign affairs of
Pakistan. That’s why it is said that therearealways politicalstrings attached to
thebilateralloans.

9. 6)COMMODITYAID DISCOURAGESDOMESTIC
AGRICULTURE OUTPUT
When aid is in terms of commodity such as wheat etc, which many times is
provided at a very nominalprice, discourages localproductionof that commodity
becauseof higher cost of production within thecountry.This situation
discourages localagriculturalproduction.
7)PLUNDERING BY DEVELOPED COUNTRIES AND MISUSE
OF FOREIGN AID
Donor countries with selfish interests willgo and donateto countries especially
thenations with bountifulnaturalresources and try toexploit them. They would
provide funds to bring a particular country toget influenced and forcethemto
serve military interests and other interests tothe interest only of the donor nation.
Donors’ nations may do evil things likedump toxic wastes, dump e-wastes, harm
their environment, and destroy their localcultureand many other things.
Receiving countries could alsomisuse foreign aid. Foreign aid coming to feed the
hungryof thereceiving nation could usethe aid to fund illegal activities and the
strengtheningof their armed forces when actually they aresupposed to spend the
money for more important issues like hunger and combating poverty. Foreign aid
could not contributetofightingglobalpoverty, hungerand help get access to
medical careif it was received by dictators.
8)DEPENDENCE OF IMPORTED RAW MATERIAL FROM
DONOR COUNTRY
If donor country has assisted in establishing imported substitutionindustry then
raw materialfor theindustry willhave to be imported from loan given country

10. otherwiseindustry willnot continueits productionbecauseparticular raw
materialis not available locally. This causes heavy foreign exchangeburdenon
economy.
9)PROJECTTIEDLOANS FOR LESS PRIORITY PROJECTS
Sometimes a donor country may give project tied loans for those projects which
for thetime being may not be on the priority list of borrower and may not be very
much feasible. In this way donor can burden theeconomy of borrower country
becauseprincipalamount as well as interest has to be paid while project is not
needed and is not worthwhile.
10) SAVINGS INVESTMENTAND BALANCEOF PAYMENTS
GAPS
Pakistan is obtaining foreign aid for bridging gap between domestic savings and
investment and also to improve balanceof payments position but till now it has
not been able to accomplish this task, rather both gaps arecontinuously
increasing.
11) PROPORTION OF TIED AID AND SEVERITY OF HARD
TERMS INCREASED
As thetime passes by, it is becoming difficult for Pakistan toobtain foreign aid.
The donor countries haveincreased terms of aid by raising rateof interest and
therepayment period has reduced. Too much sureties and guarantees arenot
demanded from Pakistan by donor countries.
12) BECOMINGPOLITICAL STAVES

11. As receiving countries, foreign aid always brings about politicalconditions’
exchange. Receiving countries havetoobey the politicalrules which are created
by donors’ nations. MarshallPlan becameprominent among examples of this
politicalexchange. This European reconstruction plan is designed by William L.
Clayton and GeorgeF. Kennan. It offered $13 billion in economic and technical
assistanceweregiven to help therecovery of theEuropean countries.(Yuan, T,
2009) MarshallPlan made a contribution tothemodernization of industrialand
agriculturalequipment, theresumptionof normal production, theraising of
productivity,and thefacilitatingof intra-Europeantrade.
Inversely, some people argued that American aid was American economic
imperialism, and that it was an attempt to gain controlover Western Europejust
as the Soviets controlled Eastern Europe. (Yuan, T, 2009) American aid is one of
important reasons that Europeannations took part in American military
operations in Asia from 1950s to1970s, suchas Korean War.
Case study: American aid to Japan after World War 2
After World War 2, Japan got a specialplan of aids which is from America. Most
of theseaids were food aid and military orders. Becauseof politicalreason and
healing wound from world, Japanesegovernment had toreceive this aids’ plan.
Meanwhile, Japaneseeconomic independencewas lost by this plan. Korean War
also became a good excuseto America controlling Japan. Superficially, Japanwas
a loyal ally of the United States. However, as a matter of fact, Japan could not
dominateits further by itself. After this plan, Japan would consider American
attitudewhen a new policy was dictated.
The immediate consequenceis financialcrisis which was happened in
1992.Japanis the nation with thegreatest economic vigor and nearly reach the
peak of world’s economy. Nevertheless, America began to reducefinancial

12. supporting at the meantime. Eventually, Japan’s economic weakness was being
kept several decades and thespeed of JapaneseGDP increasing is decelerated.
onclusion
In conclusion, thedeveloped countries haveachieved theprocess of
development and developing countries arein theprocess of development.
Normally, foreign aid happens so that developing nations do not have
enough ability in order to develop themselves. The aid they would require
could be for any major developmental project or reducepoverty in that country.
These developing countries ask for internationalaid in order to facilitatethe
implementation of theseprojects. Developed countries and organizations are
mainly supply foreign aid.
Foreign aid helps facilitatemany developmentalprograms in developing
countries. These could help in improving thosecountries position in the world.
Foreign aid can also reducethe number of hunger people and acceleratethe
industrializationof undeveloped countries. However, internationalaid can also
be a hindrance. Most poor tend to lose their independenceof economy.
Developing countries misuseand donors ’nations’politicalcontrols arecomplex
issues which urgentneed to be solved.
Thereare advantages as well as disadvantages of getting foreign aid. Foreign aid
should be given mainly in loans of whose allocation should be carefully
monitored. When given in theform of loans, thecountries, willstrive hard to
repay theloan and in the meantime, they will prosper. When foreign aid comes

13. in, thereis always a sign of progress. But foreign aid should be used very wisely
and judiciously, only then can we eliminatepoverty and hunger and other
problems in theworld.