The role of foreign aid and multilateral development assistance

The role of foreign aid and multilateral development assistance

Foreign aid: money, food or resources given or lent by one country to another.

Offical development assistance: aid which is granted to economically less developed countries by governments is called.

Humanitarian aid: food aid, medical relief and emergency relief aid which is often provided by nongovernmental organisations (NGOs). NGOs are non-profit, citizen-based groups that are independent of government and aim to provide aid on a small scale to achieve development objectives. Examples of NGOs include Oxfam, Action Aid, Unicef, Amnesty and Greenpeace.

Tied aid: one country donates money or resources to another on the condition that the funds are used to buy imports from the donor country or linked to a specific project. For example, Britain granted aid to Malaysia for the Pergau Dam project in exchange for a major arms deal.

Project aid: aid which is given for a specific purpose, including support for schools and hospitals.

Programme aid: funding provided for specific programmes which is dependent on the recipient adhering to specific conditions. This includes support for sectors like the education sector and the financial sector.

Case study – Syria

In 2012, Syria recieved $1.5 billion in international humanitarian assistance and was therefore the largest recipient that year. Turkey, the United Kingdom and Germany were its largest donors. In terms of net official development assistance (ODA) per capita, Syria received $74.6 in 2012.

In 2011, Syria’s human development index (HID) was 0.662. This actually decreased to 0.658 by 2013, ranking it 118th in the world.

2013 Statistics:

Life expectancy at birth: 74.55

Mean years of schooling: 6.6

Population in multidimentional poverty (%): 6.36

Homeless population (% of population): 0.002

Case study – Pakistan

Pakistan recieved $529 million in international humanitarian assistance in 2012. The United States was its largest donor, followed by the the EU institutions and the United Kingdom. Pakistan received $11 ODA per capita in 2012.

Pakistan’s HDI was 0.531 in 2011 and increased to 0.537 in 2013, ranking it 146th in the world.

2013 Statistics:

Life expectancy at birth: 66.57

Mean years of schooling: 4.73

Population in multidimentional poverty (%): 45.59

Homeless population (% of population): 6.197

The statistics concerning humanitarian assistance are from the Global Humanitarian Assistance website, whilst all other data is from the World Bank website and the Human Development Reports website.

Effectiveness of aid

Aid is usually most effective when it is targeted to specific development projects and it does not require the recipient country to buy products from the donor countries. It is also important that the recipient government is not corrupt. However, aid is less effective when it replaces domestic investment and enables countries to postpone policies that would improve the macroeconomic environment. Ideally, the technologies introduced should be approapriate, usually labour intensive, in order to increase job opportunities.

Benefits of trade over aid:

  • Improves long-term international cooperation as their are mutual benefits. The economic relationships between countries can help to improve political relations as well.

  • Encourages private savings and investment by reducing dependence on foreign aid. Whereas countries that become overreliant on foreign aid which could be withdrawn by donors, leaving them in a worse situtaion as they become unable to sustain themselves and afford their expenditures. Therefore, they go into greater debt.

  • The benefits of aid are seriously undermined when corrupt governments are in charge as the additional income tends to remain within a small percentage of the population.

  • Encourages competition which leads to increased efficiency and innovation. This helps countries to support themselves.

Benefits of aid over trade:

  • Aid is necesary in crisis, such as during droughts and tsunamis. It is extremly difficult to trade in these circumstances as the infrastructure is often very poor.

  • Aid is allocated to areas most in need, whereas, trade can lead to wealth be confined within a small group of the population.

  • Developing countries do not only need money, but advice, knowledge and resources. Aid can be provided in these different forms, whereas trade requires good infrastructure.

  • It can be very destablilising to introduce a previously insular country to free trade over a short period of time.