This document discusses perspectives on foreign aid and development policy. It outlines different types of aid and perspectives on its effectiveness. There are seen to be three main perspectives: radicals who reject aid as post-colonial guilt; sceptics who believe aid often does more harm than good by creating dependencies and hindering free markets; and optimists who believe aid can be effective if countries have ownership over projects and goals. The document also discusses the Paris Declaration which established principles to improve aid effectiveness through country ownership, donor coordination, and mutual accountability.

1. Aid and Development Policy
Behrooz Morvaridi

2. This Session Covers:
Types of Aid
Importance of Aid
Aid Projects and distribution
Three perspectives on Aid:
1. Radicals
2. Sceptics
3. Optimisits

3. A New Aid Paradigm
Since the late 1990s a new Aid paradigm has emerged
Donor agencies are now concerned with the question of how to
reduce poverty.
Central themes of growth but pro-poor and sustainable growth,
governance (and by implication greater empowerment for the poor)
and social development (leading to improved human capital).
The Millennium Development Goals (MDGs) reflect the aspirations of
the donor community to halve extreme poverty between 1990 and
2015. Symbolically this is the first goal.

4. MDG 8: Global Partnership for Development
 Since 2001 many aid donors have embarked on an expansionary
phase, proposing a scaling-up of aid volumes in support of the
Millennium Development Goals.
 ‘A global partnership for development’ (Goal 8) is considered essential
to achieve the MDGs.
 Effectively this means that rich nations have an obligation to transfer
resources to poor countries by way of fair trade regimes, debt relief,
transfer of technology, foreign direct investment and more importantly
enhanced development assistance or Official Development Assistant
(ODA) or Foreign aid.

5. MDG 8: Global Partnership for Development
Estimates of cost of reducing income poverty (Goal 1) ranges from
between US54 and US$62 billion. Other goals are likely to cost
between US$35 and US$76 billion a year (2000 prices) (UN 2002: 16).
When the G8 countries met at the Gleneagles summit in 2005, they
promised to raise this amount by increasing aid budgets to reach the
UN target of giving 0.7 per cent of GDP in aid by 2015.
Despite progress to fulfil this commitment, OECD 2006 report shows
that the total aid figure still falls well short of this

6. Source: OECD, 2010

7. Types of Aid
Grants (Transfers made in cash, goods or services for which no
repayment is required).
Cash Transfers
Loans (repayment required)
Training courses
Technical Assistance
Emergency Relief or humanitarian
Research Programmes
Budget or balance of payments support
Debt Relief
Funding of NGOs
Grants, loans and credits for military purposes are excluded

8. Aid projects
Physical infrastructure – roads, power plants, water supply, ports,
railways
Social infrastructure – schools, universities, hospitals, clinics, support
services
Social protection – micro-credit, conditional cash transfers, food
subsidies, employment guarantee schemes
Technical assistance

9. Review of Paris Declaration Aid Effectiveness 2011

10. Aid
ODA: 2010 approximately US $130 billion
Only 0.3% of donor countries GDP
Aid sums are relatively low on per capita basis
In some countries Aid is lower than remittances (eg Philippines,
Pakistan, India)
Colonial ties and trade links are influential eg UK and Chinese aid in
Africa
Aid for foreign policy agendas. E.g. The USA Millennium Challenge
Account is mostly channelled to good governance programmes or
‘pro-democracy programmes’.
Simple measure of Aid dependence = net Aid/national income

11. Aid/GNI: selected countries Aid
Eritrea 29.0%
Sierra Leon 28.7%
Malawi 22.7%
Mozambique 21.6%
Sierra Leone 19.1%
Ethiopia 12.8%
Uganda 11.7%
Tanzania 11.3%

12. Regional distribution
Sub-Saharan Africa 2008: average aid per capita $75 and share
of national income 10%
South Asia (excluding Afghanistan): average aid per capita $35
and share of national income 3%
Central Asia and Eastern Europe average aid per capita $83 and
share of national income 3%
Little correlation between aid per capita and GDP per capita
Strong negative correlation between share of net aid of national
income and GDP per capita
Poor countries are ‘aid dependent’

13. Private Aid
 Funds from NGOs and charities are also growing – estimated
$24 billion in 2010
 Remittances estimated $350 billion in 2010, 3 times amount of
Aid monies
 Between 10-15% of total financial flows to developing
countries depend on private flows (FDI, equity, loans)
 Remittances and contributions from non-state actors, such as
the mega-rich and large corporations, are transforming the
concept of foreign aid and gradually replacing it with a foreign
aid business model based.
 Suggestion that private aid is more effective than official
development assistance and that solving the problem of global
poverty requires a network of public-private, philanthropic and
civil society partnerships.

14. Key Questions
 How can you value foreign aid? Is it a vehicle for achieving the main
development objectives of economic growth and poverty reduction?
 Has aid been effective in achieving development objectives?
 Has aid been harmful?
 Has aid been constructed by the west to control others for their own
economic and political interest?

15. Different Perspectives on Aid
Three Perspectives on Aid:
1. Radicals: Rejection of aid, aid and power – rejection of aid as post-colonial
guilt.
2. Sceptics: Aid is harmful
3. Optimists: Aid effectiveness, ownership

16. Sceptics
Easterly in the White Men’s Burden (2008) and Moya’s Dead Aid
(2009) are critical of the way in which foreign aid is organised,
managed and delivered by aid agencies. They believe that Official
Foreign Aid:
has failed to realize its developmental objectives
creates a dependency culture
crowds out investment by hindering the operation of free markets
encourages corruption and fosters reliance on foreign benevolence
and philanthropy
sustains inefficient donor bureaucracies that contribute to the
overall lack of performance of the industry.
is anti-market and represses innovation and accountability.
Moya argues that there is a need to end the myth that aid is
effective. ODA and its modus operandi has been a kind of

17. Sceptics
Moya argues that there is a need to end the myth that aid is effective.
ODA and its modus operandi has been a kind of ‘authoritarian
paternalism’:
‘Scarcely does one see Africa’s (elected) officials or … African
policymakers… offer an opinion on what should be done, or what might
actually work to save the continent from its regression. This very
important responsibility has, for all intents and purposes, and to the
bewilderment of many an African, been left to musicians who reside
outside Africa’.
She complains ‘public discourse became a public disco’, when ‘pop and
movie stars’ took on Africa as a cause ‘to carve out niches for
themselves’. President George W. Bush consulted with Bono on Africa in
October 2005, and Bob Geldof (allegedly representing Africa’s interests)
practically had equal status to national leaders attending the 2005 G-8
summit.

18. What is the alternative to Aid?
Support an end to the Western aid industry, that has in Moya’s view,
been harmful and unproductive.
The alternative is to replace aid with development policy that focuses
on:
Market and market based policies that address the root causes of
poverty
Capital and remittances
Free Trade Policy and Openness that addresses inadequate
trading opportunities
Microfinance
Encourage investment and entrepreneurial activities

19. Paris Declaration 2005
The Declaration defines aid effectiveness in terms of five principles:
1. Ownership: Developing countries set their own strategies for
poverty reduction, improve their institutions and tackle corruption.
2. Alignment: Donor countries align behind these objectives and use
local systems.
3. Harmonisation: Donor countries coordinate, simplify procedures
and share information to avoid duplication.
4. Results: Developing countries and donors shift focus to
development results and results get measured.
5. Mutual accountability: Donors and partners are accountable for
development results.
Read recent Evaluation of Paris Declaration (2011) , available at
http://www.oecd.org/statisticsdata/0,3381,en_2649_34447_1_119656_1_1
_1,00.html

20. Conclusions
 Aid is complex
 Aid dependence undermines governments
 Well designed projects can make a difference
But it is unlikely that the ingenious ideas (ownership) that have
been proposed to improve aid effectiveness
 Recent successes of some Latin American countries, China and
India little to do with Aid
http://www.youtube.com/watch?v=inClCwsVwjY&feature=related