development aid

Back in 1970, the United Nations (UN) passed a resolution recommending that wealthy countries donate annually 0.7% Gross National Income (GNI) to developing 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 2010 (2009, 2000) which shows the aid contributions of the members of the Development Assistance Committee (DAC) of the OECD - 23 of the richest countries in the world.

WORLD 'PREMIER' LEAGUE

From the table it can be seen that total ODA in 2010 amounted to $128.8bn, up from $119.8bn in 2009 which in the light of difficult economic times is surely commendable. And this total just fails to reach the target of $130bn for 2010 promised at the G8 summit at Gleneagles in 2005. For the rest of this century the figures were $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 2010 now represents 0.32% of rich countries' combined Gross National Income against 0.31% in 2009. (Over the last 50 years developed countries are reckoned to have given a total of US$2.5 trillion in foreign aid.)

Norway has taken over top spot in the world 'premier' league table with 1.10% (GNI) just ahead of Luxembourg which has moved up to second place. In third place is Sweden, down from first in 2009, with 0.97% followed by Denmark with 0.90% and The Netherlands with 0.81%. Belgium is next with 0.64% and seems to be trying hard to reach the UN's target figure. Next comes the UK with 0.56% ahead of Finland with 0.55%, Ireland with 0.53% and France with 0.50%. At the other end of the table is South Korea, which only joined the DAC club in January, 2010, with 0.12% just below Italy with 0.15%, Greece with 0.17%, Japan with 0.20% and the US with 0.21%. (China is estimated to have given up to US$25bn or 0.42%GNI in foreign aid in 2010.)

Sweden, Norway, Luxembourg, 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 Norwegian contributes $1,022 annually to the developing world in aid whilst each American only hands over $100. 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 NGO's amounts to US$50bn annually.

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.

At the same time there is the continuing debate as to what can be officially counted in overseas aid to developing countries. And here a group of aid experts representing 1,500 NGO's has worked out that 10% of most country's total aid is all too often inflated through the inclusion of money spent on debt cancellation, and on foreign students and refugees in the donor country. It appears that only the first year of housing costs for refugees can be counted and all the costs of educating foreign students but surely debt cancellation needs be included too.

Aid transparency is also essential if ODA is truly to deliver. 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 Fund 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. 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 2010 only represents 0.32% 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 $153bn in 2010. However, overseas aid should also be seen in the wider context. For example, in Africa, total aid disbursements in 2010 came to US$40bn. However, the collective budgets of all African countries in the same year totalled over US$450bn (raised mainly through taxes and the sale of rights to exploit natural resources) which means that ODA only represented 9% of money available for governments in Africa to spend.

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 have agreed to reach 0.7% GNI by 2015 with an interim promise to reach 0.51% GNI by 2010. Within this group some countries have opted for a faster approach to reach 0.7% GNI - Belgium and Finland by 2010; France and Ireland by 2012 and the UK by 2013. The EU also laid down a minimum requirement of 0.51% to be reached by all members by 2010 (EU average in 2010 was 0.46%). Regrettably, however, US, Japan, Australia, Canada, New Zealand and Switzerland have yet to set a timetable to reach 0.7% GNI. Looking at the table above it can be seen that too many rich nations are already failing to meet their own individual commitments. The newest 10 members of the EU, which are less wealthy, have agreed to aim to reach 0.17% GNI by 2010 and 0.33% 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.

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*In the year 2010/11 the UK overseas aid spending amounted to £9.0bn, up from £7.8bn in 2009/10. This represents an increase of 16% year on year and makes the UK's DfID the 2nd largest donor of overseas aid.

In 2010/11 £4.3bn was given as bilateral aid (55%) and £3.2bn (42%) as multilateral assistance. The remaining £0.2bn (3%) represented administration costs. In 2010/11, DfID provided bilateral assistance to 78 countries, of which 37 countries received direct financial aid.

DfID'a bilateral assistance, excluding humanitarian assistance, was £3.9bn in 2010/11. 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).

UK bilateral aid to sub-Saharan Africa rose to £1.76bn in 2010/11 from £1.54bn in 2009/10. In 2010/11, it is estimated that £1.05bn of DfID's contributions to multilateral organisations were spent in sub-Saharan Africa. In 2010/11 £329m of bilateral assistance was channelled through UK Civil Society Organisations such as the British Red Cross, VSO and Oxfam

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 2010/11 were the health sector with £830m followed by the government/civil society sector with £787m and the economic sector with £750m.

(It has to be asked why the UK government gives Ethiopia such a large slice of its overseas aid when the government scores abysmally on human rights, corruption and economic development. Famine occurs regularly in this beautiful land yet the government refuses to allow the people to own land. 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.)

(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.)

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