development aid

Way 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 2009 (2008, 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 2009 amounted to $119.5bn, down from $122.3bn in 2008. This slight set back in difficult economic times is understandable and in many ways commendable. And rich countries are still within striking distance of reaching the target of $130bn in overseas aid by 2010 promised at the G8 summit at Gleneagles in 2005. For the rest of this century the figures were $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 2009 now represents 0.31% of rich countries' combined Gross National Income against 0.30% in 2008.

Sweden with 1.12% (GNI) has retained top spot in the world 'premier' league table ahead of Norway in second place with 1.06%. Next comes Luxembourg with 1.01% followed by Denmark with 0.88% and The Netherlands with 0.82%. All of the top 5 exceeded by some distance the UN recommended target figure of 0.7%. Belgium is next with 0.55% ahead of Finland and Ireland with 0.54% and the UK with 0.52%. At the other end of the table is South Korea, which only joined the DAC club in January, 2010, with 0.10% just below Italy with 0.16%, Japan with 0.18% and Greece with 0.19%.

Another way of looking at these figures could be to say that every Swede contributes $489 annually to the developing world in aid whilst each American only hands over $94. But, stating it this way is a little unfair to the US as private individuals are also major ODA contributors. For example, Bill Gates, the founder of Microsoft and Warren Buffet, chair of Berkshire Hathaway, the two richest men in the US, have promised to give the vast majority of their assets to charity during their lifetime.

However, Sweden, Norway, Luxembourg, Denmark and The Netherlands 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.

Over recent years the World Bank has been monitoring aid distribution and is now encouraging countries to start to untie more of their ODA. At present only 6 DAC countries allow recipients to use their money to best advantage but still over 20% of aid is tied. Chief culprit here is the US which insists that 70% of its aid is used to purchase goods and/or services from US companies/government departments. According to the World Bank tied aid is 25% less effective than untied aid.

At the same time, in a new strategy paper put forward by the European Union, it suggests that ODA would deliver more productive results through continuity and co-ordination of delivery. This would have several advantages - poor countries could plan ahead more confidently, there would be less waste, duplication would 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.

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 dual purpose in giving bilateral overseas aid in future. It should not only be given to alleviate poverty, it should also only be given to nations where the government is progressive and actively laying the foundations for tackling poverty (see "In search of 'tigers' in sub-Saharan Africa") 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.

The OECD total for collective giving in 2009 only represents 0.31% GNI and is still less than half way to the 0.7% target set by the UN in 1970. This means that developing countries in 2009 lost out by $15.40bn. However, recent events have focussed more attention on overseas aid thanks mainly to African leaders being invited to annual G8 meetings, more public awareness and international aid agencies campaigning on the depth of poverty in poor countries.

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 2009 was 0.44%). Regrettably, however, US, Japan, Australia, Canada, New Zealand and Switzerland have yet to set a timetable to reach 0.7% GNI. 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.

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*In the year 2008/9 the UK aid programme amounted to £5.8bn. This was made up as follows:-

£3.3bn bilateral aid (57%)
£2.3bn multilateral aid (39%)

The remaining 4% was spent on administration costs.

India (£297m), Ethiopia (£166m) and Afghanistan (£147m) received the largest amounts of bilateral aid excluding humanitarian assistance. The UK bilateral humanitarian assistance totalled £449m and the top three recipients were Sudan (£53m), Burma (£46m) and Ethiopia (£34m).

(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.)

UK bilateral aid to sub-Saharan Africa rose to £1.466bn in 2008/9 from £1.302bn in 2007/8.

£337m 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 (£1.2bn), followed by the World Bank (£574m) and the United Nations (£252m).

The top 10 recipients of UK bilateral aid (excl. humanitarian aid) (£m) were:-

India 297, Ethiopia 165, Afghanistan 147, Tanzania 132, Bangladesh 132, Pakistan 119, Nigeria 110, Sudan 105, Kenya 102 and Ghana 99.

The top 10 countries receiving UK humanitarian aid were :-

Sudan 50, Burma 46, Ethiopia 34, Democratic Republic of Congo 30, Zimbabwe 21, Afghanistan 20, Somalia 18, Iraq 16, Kenya 16, Uganda 16.

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