overseas aid (ODA)

Back in 1970, the United Nations (UN) passed a resolution recommending that wealthy countries donate annually 0.7% Gross National Income (GNI) to poor countries in Official Development Assistance (ODA) in order to help the fight against poverty. This is still the target today and every year the club of wealthy nations, the Organisation for Economic Co-operation and Development (OECD), produces figures showing how much each rich country gives in ODA and what percentage of its GNI that figure represents.

Below is the ODA league table for 2012 (2011, 2000) which shows the aid contributions of the members of the Development Assistance Committee (DAC) of the OECD - 24 of the richest countries in the world.

WORLD 'PREMIER' LEAGUE

From the table it can be seen that total ODA in 2012 amounted to $125.6bn, down from $133.7bn in 2011 and $128.5bn in 2010 which in the light of difficult economic times is perhaps not surprising. For the rest of this century the figures were $119.8bn in 2009, $122.3bn in 2008, $103.7bn in 2007, $104.4bn for 2006, $106.8bn in 2005, $79.6bn in 2004, $69.1bn in 2003, $58.3 bn in 2002, $52.3bn in 2001 and $53.1bn in 2000. The total for 2012 represents 0.29% of rich countries' combined Gross National Income against 0.31% in 2011. (Over the last 50 years developed countries are reckoned to have given a total of US$2.7 trillion in foreign aid.)

Luxembourg has just squeezed ahead of Sweden this year at the top of the world 'premier' league table with 1.00% (GNI) against 0.99%. Not far behind, in third place, is Norway with 0.93%. These are followed by Denmark with 0.84% and The Netherlands with 0.71%. The UK is next up with 0.56% followed by Finland with 0.53%, Ireland with 0.48% and Belgium with 0.47%. At the other end of the table are Italy and Greece with 0.13% which is perhaps not surprising given the economic medicine their people are having to endure. Then comes South Korea with 0.14% and Spain with 0.15%. Other stragglers are Japan with 0.17% and US with 0.19% where aid is provided to more than 140 countries with Afghanistan and Iraq being major beneficiaries. And this year Iceland appears for the first time with 0.22%. (China is estimated to have given up to US$25bn or 0.42%GNI in foreign aid in 2010.)

Luxembourg, Sweden, Norway, Denmark and The Netherlands, then, are to be congratulated on continuing to more than meet their international obligations of giving 0.7% GNI annually in aid. Governments in these 5 nations, it seems, really do believe that their contributions help to make a lasting difference to the lives of people in the developing world.

Another way of looking at these figures could be to say that every Luxembourger contributes $861 annually to the developing world in aid whilst each American only hands over $98. But Official Development Assistance only shows each government's support for international development; it does not take into account donations from private individuals in each country. When these are taken into account the US comes out much more favourably. For example, Bill Gates, founder of Microsoft, through the Bill and Melinda Gates Foundation has invested heavily in, amongst other things, helping combat HIV/Aids in Africa and together with Warren Buffet, chair of Berkshire Hathaway, has promised to give away the bulk of his wealth in his lifetime mainly to help tackle suffering in the developing world. The Bill and Melinda Gates Foundation takes the giving of aid so seriously that it supposedly tracks every dollar to ensure it buys what it is intended to buy. Gates and Buffet have also, as part of the Giving Pledge, signed up 65 other American billionaires to do likewise. In the US philanthropy seems to be celebrated as part of the nation's culture with an estimated 98% of top taxpayers giving to charity whilst 35% of American workers give to charity through the tax-efficient payroll system. (Comparable figures for the UK show that only 27% of top taxpayers give to charity whilst 4% of workers give from their pay packets.) In total, in the West, it is estimated that overseas aid given privately through foundations or international NGOs amounts to US$50bn annually.

Overseas aid (ODA) donated by rich governments to poor countries can be given in 4 different ways:- bilateral aid is money given directly to the recipient government or spent on a project in that country; multilateral aid would be given through a third party i.e. World Bank, IMF, AfDB etc.; humanitarian aid would be given in an emergency most probably through an international NGO like Oxfam or Save the Children to provide food, clean water, shelter, medical supplies; debt relief cancels outstanding debts between the donor and recipient. (Research by Development Initiatives has found that interest repayments that OECD countries receive from developing countries from loans given to them are not subtracted from ODA totals. This means that net ODA for Japan, the main beneficiary here, is inflated by an estimated US2.6bn in 2012) In 2011 out of the total of US$133.5bn given as ODA, US$80.1bn comprised bilateral, US$39.3 multilateral, US$9.4bn as humanitarian and US$4.7bn as debt forgiveness.

Over recent years the World Bank has been monitoring aid distribution and is now encouraging countries to start to untie more of their ODA for the Bank maintains that tied aid is 25% less effective than untied aid. Several donors have already moved to completely untie their overseas aid including UK, Canada, Denmark, Australia, Norway and Switzerland. Chief culprits in still tying their aid to goods and services produced in their own country are Italy, US and Germany. At present it is estimated that just over 50% of aid is still tied.

To truly deliver ODA needs to be transparent. According to Publish What You Fund, the global campaign for aid transparency, there is currently too little readily available information about aid which undermines the efforts of donors, recipients and civil society to promote development and accountable governance. In its 2011 Pilot Transparency Index, out of 58 donors, best practice, with an assessment of fair, came from the World Bank and Global Alliance for Vaccines and Immunisation (GAVI) followed by the African Development Bank, Netherlands, UK, Sweden, US, Denmark and the European Community. Donors classed as very poor include Spain, Portugal, Italy, China, Greece, Cyprus and Malta with the last two nations scoring a quite remarkable 0 out of 100.

Since 2003 an OECD initiative known as the Paris Agenda for Aid Effectiveness has started to gain support from EU members as a way to deliver more productive results through the co-ordination and continuity of ODA delivery. This should have several advantages - poor countries would be able to plan ahead more confidently, there would be fewer donor missions to recipient countries (currently there are on average 250 to each recipient country each year), there should be less waste, duplication will be avoided and, eventually, it should lead to most ODA being untied. The success of this idea, however, will depend on the ability of EU member states working together on development to ensure a coherent and effective approach. This suggestion is certainly a constructive way forward in maximising ODA but the EU could and should have been bolder.

As UK prime minister Tony Blair's Commission for Africa report in 2005 highlighted, many countries in Africa suffer from a lack of expertise not just in organisation and administration but in many technical fields as well. As a result new ideas and projects are often instigated but then when difficulties are incurred things fizzle out. This is underlined by the staggering fact that only 1 in 6 World Bank projects set up in Africa continued after funding ceased. Rich countries abound with people with a great number of skills desperately needed in Africa. As a further approach to using ODA more effectively then rich countries could send experts to work with individual governments to help implement future development plans throughout the country. This could involve helping to secure food supplies by advising on different seed varieties/ fertilisers, searching and securing sources of water, exploiting solar power, helping to improve the physical infrastructure of the country and developing telecommunications. Assistance with the provision of health and education could also be given. The value of this kind of technical assistance is further underlined by Paul Collier, Director of the Centre for the Study of African Economies at Oxford University who argues, in his book The Bottom Billion, that 'demand driven technical assistance adds US$15 for every US$1 spent.' At the same time nationals of each country could be trained in numerous relevant skills on the job. (China is already doing many of these things).

This co-ordination and the targeting of regular payments of ODA to responsible governments along with the promise of the provision of experts to work at length on various projects would go a long way to ensuring that development aid was used to good effect in Africa. And this combination should soon lead to fast-track advances in attacking poverty in each progressive country leading in turn to more accountable government.

On the other side of the coin though not everyone agrees that ODA is a good thing. Many people view aid as wasteful, often going to criminal, corrupt and complacent regimes and seldom finding its way to those who need it most. For some people like Lord Bauer, it is 'the transfer of money from poor people in rich countries to rich people in poor countries.'

However, the Meltzer Commission set up by the Clinton administration in the US concluded that foreign aid can be properly targeted to where it can be used best. To this end it recognised that aid fosters development only if officials in recipient countries willingly promote and sustain reforms. This is backed up by the World Bank in a report which concluded that an annual increase in aid of $10 bn would take an extra 25m people a year out of poverty if it was targeted at poor countries with good governments adopting sensible policies. Spread across the board, the same amount would lift only 7m people out of poverty.

There should, then, be a new ideal in the giving of bilateral overseas aid in future. It should only be given to nations where the government is progressive and actively laying the foundations for tackling poverty (see "RECOMMENDATIONS") and to any nation as help in an emergency. Tough love this may be but it will help guarantee maximum value for money whilst at the same time, indirectly, forcing poorly performing governments to mend their ways.

As can be seen from our World 'Premier' League table above, the total collective giving of all DAC countries in 2012 only represents 0.29% GNI, and is still less than half way to the 0.7% target set by the UN in 1970. This means that developing countries lost out by $178bn in 2012.

However, overseas aid should also be seen in the wider context. In 2012, for all of sub-Saharan Africa, total ODA support probably came in around US$47.1bn comprising US$26.2bn in bilateral ODA, US$13.8bn in multilateral support, US$4.7 in humanitarian aid and US$2.4bn in debt relief. Of this total about US$20bn would probably represent direct budget support to governments. At the same time the collective budgets of all sub-Saharan African countries in 2012 totalled around US$290bn raised mainly through taxes and the sale of rights to exploit natural resources. This means that around 6% of government budgets in countries in sub-Saharan Africa comes from western support. And here what also needs to be borne in mind is that an estimated US$120bn is siphoned out of sub-Saharan Africa each year through corruption according to a suppressed African Union report in 2007.

The most effective steps in efforts to increase ODA were taken at a conference on Development Finance held in Monterrey in Mexico in April, 2002 when donor countries committed themselves collectively to increasing ODA contributions. And since then in a series of statements, rich countries have fleshed out these promises on ODA. Norway and Sweden pledged to aim for 1.0% GNI from 2006 onwards and Luxembourg by 2009. All DAC members of the EU agreed to reach 0.7% GNI by 2015 with an interim promise to reach 0.51% GNI by 2010 but these promises appear to have been left far behind in most cases. However, the UK appears to be on track to reach its promise of 0.7% GNI by 2013. And more recently Switzerland has promised to reach 0.5% GNI by 2015 whilst Australia has made the same promise by 2017. Meantime South Korea has also promised to reach 0.25% GNI by 2015.

Somewhat surprisingly perhaps, the country in sub-Saharan Africa receiving most ODA is Cape Verde with US$438 per capita; the country in receipt of the least is Nigeria with US$10 per capita. This could perhaps be down to rich countries underestimating the size of the population of Nigeria at 151.3 million, but equally, it could be down to the fact that Cape Verde is much better governed.

The Commitment to Development Index produced each year by The Center for Global Development based in Washington DC takes the commitment of rich countries to helping poor countries a stage further. Taking the average of 7 different categories - aid, trade, investment, migration, environment, security and technology - the Center calculates the effectiveness of each OECD country's contributions to supporting poor nations.

Under this method Sweden comes top with 7.0/10.0 followed by Denmark 6.8, Netherlands 6.7, Norway 6.4 and New Zealand 6.1. Ireland and Finland come next with 5.8 followed by Portugal 5.6, Canada and Spain 5.5, US, Austria and Australia with 5.4, Germany and Belgium 5.1 and UK with 5.0. All other OECD countries score less than half. (There are no figures produced for Luxembourg)
see www.cgdev.org and scroll down to Commitment to Development Index.

==================================================

*In the year 2012 the UK overseas aid spending amounted to £8.62bn (0.56%GNI) compared to £8.63bn in 2011 (0.56%GNI) and £8.45bn (0.57%GNI) in 2010. (These percentages are the highest ever recorded for UK ODA since 1970) This also makes the UK's DfID the 2nd largest donor of overseas aid after the U.S.

In 2012 £5.6bn was given as bilateral aid (65%) and £3bn (35%) as multilateral assistance. In 2011, the latest figures published, DfID provided assistance to 78 countries, of which 37 countries received direct financial aid. (Following the Bilateral Aid Review in 2010 the number of countries receiving bilateral aid in future will be reduced to 28)

In 2012 bilateral ODA to sub-Saharan African nations reached £1.93bn slightly down from £1.99 in 2011.

In 2011, India (£279m), Ethiopia (£245m) and Bangladesh (£171m) received the largest amounts of bilateral aid excluding humanitarian assistance. Completing the top ten countries here were Tanzania (£144m), Nigeria (£142m), Pakistan (£120m), Afghanistan (£97m), Uganda (£94m), Mozambique (£94m) and Rwanda (£90m). UK bilateral humanitarian assistance totalled £350m and the top ten recipients here were Sudan (£84m), Pakistan (£83m), Democratic Republic of Congo (£47m), Somalia (£30m), Yemen (£7m), Haiti (£7m), Ethiopia (£6m), Kenya (£6m), Burma (£5m) and Eritrea (£4m).

The European Commission's development programme received the largest amount of UK multilateral assistance (£1.3bn), followed by the World Bank (£927m) and the United Nations (£355m).

The sectors receiving the highest share of DfID bilateral aid in 2011 were the health sector with £830m followed by the government/civil society sector with £787m and the economic sector with £750m.

There are perhaps two questions that should be asked about DfID's present ODA strategy:-

1. Why does the UK government give Ethiopia such a large slice of its overseas aid when the government scores abysmally on human rights, corruption and economic development? Although impressive advances have been made in health care over the last decade, too many families still do not have enough food to eat as the government refuses to give up its ownership of all land whilst levying extortionate rents payble in advance of harvest. In the Ethiopian Highlands lie huge untapped water resources yet two-thirds of the population cannot access clean water. As for the opposition, their leaders are in prison for daring to protest against unfair elections where the ruling party secured 545/547 seats in Parliament in the last election in 2010.

2. In 2011, DfID donated £69 million to Malawi which was spent in the following areas:- wealth creation 25%, education 25%, humanitarian 15%, governance/security 9%, HIV/Aids 8%, poverty/hunger 7%, maternal health 5%, climate change 4%, water/sanitation 2% representing 9 different areas of support.

At the same time, DfID states that 35% of water points in Malawi do not function. As clean water/proper sanitation is fundamental not just for life but also for agriculture, health and freeing up children to go to school why doesn't DfID concentrate on just water and gather all the expertise needed to get all those water points back into operation whilst, at the same time, seeking and securing new water supplies? And then move on to the vital need to improve sanitation. That way DfID would not only making life tolerably easier for tens of thousands of people it would also mean there was only one area of development (water) to monitor to show that ODA money is being well spent.

(According to the UK Taxpayers Alliance, £730m (9%) of UK overseas aid never made it to the communities for whom it was intended in 2009.)

just1world@just1world.org
© 2001, 2002 Just 1 World - All rights reserved - Legal
Site Designed by IWS
Hosted on the IWSNET network