ModernGhanalogo

FEATURED: Ghana Back To Hipc Not True – Oppong Nkrumah...

body-container-line-1
16.11.2011 Feature Article

Rethinking Aid Effectiveness: The Imperative of Paradigm Shift in Policy Reforms

Listen to article

ABSTRACT
Up until the dawn of the 21st century the need for aid as policy response to low income countries has become the centerpiece of most development debates simply because aid seems not to have made any considerable impact in the lives of the poor and vulnerable group of recipient countries and their attainment of the Millennium Development Goals (MDGs). Easterly 2007 opines that, with over $500 billion dollars which flowed in to Africa within the past 42 years, the per capita growth of the median Africa is almost zero. It is therefore crucial to rethink the distribution and management of aid and as a matter of necessity restructure its channels and focus of administration, for aid to be effective and ensure the achievement of its primary purposes of development and poverty reduction.

Introduction
The issue of aid effectiveness has been of global concern and of contemporary prominence of recent time. What is commonly lamented is the inability of developed communities to redeem their pledge of the 0.7% Gross National Income to the Development Assistance Committee (DAC) as development assistance agreed in 1970. But the deserving question is will this have made any significant impact if it were honoured? The achievement of the Monterrey Consensus, the Paris Declaration at the Paris High Level Forum II in 2005 and the European Code of Conduct are for instance nod higher standards by the international community to bring the true reflection of aid on the lives of the poor. With futuristic administrative benchmarks established in almost every decade by the United Nations and the flow of foreign aid into developing countries increasing almost every year, empirical literature reveals that it has no reflection on the development of developing recipient countries and their attainment of the Millennium Development Goals (MDGs) (Boone 1996; Svensson 1999, 2000; Knack 2001; Brumn 2003; Ovaska 2003; Easterly et al. 2004; Djankov et al. 2006a; Easterly 2006a; Powell and Ryan 2006; Williamson 2008; in Williamson 2009). However, the stark reality is that aid, when blended with the right policy frameworks, favorable institutional environment, and positive governmental and administrative arrangements, can have a positive impact on poverty reduction and the development of developing recipient countries (Svensson 1999 and Burnside and Dollar 2000 in Williamson 2009). It is necessary to state that the ideas in this piece though conceptual are supported by anecdotal evidence available in current literature and concretized by several case studies and experiential empiricism.

Human Resource Development and the Future of Aid Effectiveness

Instead of giving cash aid to countries which normally get embezzled by leaders rendering it inconsequential in the lives of the poor, aid should be made more in industrial capacity building where capital assets are procured for recipient countries and the local people trained in that regard to help them earn income to take charge of their own lives (Smith 2002). If aid is therefore channeled mostly into developing the capacities of the youth especially, in the recipient countries, there would be enormous benefits to the recipient countries as compared to aid which is mostly in the form of cash transfers. When aid is in the form of skills development of the youth, the human resource base of the recipient countries are enhanced. Developing countries for instance, have always had difficulties in training some particular calibre of professionals due to high cost of training such professionals. In some cases recipient countries lack the requisite facilities to train competent professionals in certain fields. For instances most aid recipient countries lack the competence to train professionals in the field of medicine and in the sciences in general as well as other fields of study that are extremely important to the development of developing countries. If aid is given in a manner that goes directly into the development of the skills of the people especially the youth, recipient nations will stand to benefit more from this form of aid than cash transfers which are at times misappropriated by self seeking leaders. This will also ensure the sustainability of the impact of aid.

Aid should not worsen the recipient Country

Aid should be aimed at making the recipient country better rather than worsening it. Some aids have been in the form of goods that tend to kill local initiative and innovation. Donors have given aid to recipient countries that turn out to stifle local production. Food aid have contributed to demoralizing local producers since these food aids bring the prices of locally produced food down, thereby discouraging local producers to produce more. Such aids have done nothing but have succeeded in making the recipients of the aid to be perpetually dependent on the donor nations. Ironically, as these food aids succeed in making recipient countries dependent, the food items are sold to the hitherto aided nations in subsequent times. As a result, hard earned foreign exchange is used in importing food at exorbitant prices. This smacks of insincerity on the part of the donor nations that have succeeded in collapsing the food production capacity of recipient countries and clandestinely turns around to sell food to them when these countries needed their assistance the most. These aids that deceive the recipient countries into a trap should not be welcomed by developing country as they have long term negative ramifications for the recipient country's development.

Rethinking the subject of 'Strings' on Aid: the issue of Scientific Monitory and Evaluation

One predicament militating against aid effectiveness following its historicity up till date is the accompanying conditionalities that are normally tied to aid by donor countries. Whilst giving aid, donor countries normally demand that recipient countries spend a high percentage of it on their companies' products. America is known to have always required that about 75% of its aid be spent on products from American companies with other donors having similar requirements (Easterly 2006a). If it is not requirement that aid be spent on their market, donor countries normally require that technical assistance come from their technicians, which leads to recipient countries handing back aid to consultants in donor countries who may have very limited understanding of the local problems at hand. Meanwhile donor countries have always argued that the 'Strings' or conditionalities attached to these aids are in the best interest of the recipient countries. And that it is to ensure that the aid really serves the purpose for which it was given. However, this have always turn out not to be the case. Indeed if the sole purpose of giving specific conditions to aid is really to ensure that the aid serves the purpose for which it was given, then there could be mechanisms through which recipient nations could be given the leeway to use the aid for their most pressing needs. And measures put in place to ensure that the aid is actually used for the purpose for which the recipient nation really said was their priority area. Anything apart from this could lead to the interpretation of Aid as merely initiated to rather multiply the benefits to the donor nations but to the detriment of the recipient nations. Available literature shows that aid ineffectiveness is partly due to the inadequacy of viable monitory and evaluation mechanisms that will ensure true accountability. Aid agencies normally under invest in enforcing conditions ensuring scientific evaluation machinery (Easterly 2003) which normally leads to the mismanagement of aid or its diversion in to personal interests of leaders of recipient countries. This calls for more enforcement mechanisms in monitoring the management of aid in recipient countries to guarantee accountability and probity and not necessarily conditionalities. This can be made possible by ensuring that recipient nations give evidence-based quarterly reports of how effective the aid is being used. The reports should not be taken as gospel truths but must be corroborated by allowing independent assessors to assess and confirm the reports given earlier.

Aid should have pro-poor components
Aids can be made more effective if targeted specifically at the under-privileged and down trodden in the recipient's country. Even if the entire aid is not totally dedicated towards the poor but a certain percentage should be earmarked to specifically cater for the needs of the poor and the vulnerable in society in general. Aids with such components have the propensity to transform the societies of recipient countries in a massive way. This is made on the backdrop that most aid recipient countries have alarming poverty levels. So, any aid that targets such major societal canker would have better impacts than generic aid that are at times left to the whims and caprices of untrustworthy leaders. The aid that targets the poor and the vulnerable should not just be doled out in cash to these underprivileged, but a scheme should be put in place that would provide jobs and soft micro loans to poor and the vulnerable that will enable them to engage in productive economic activity that generates them incomes. As this happens, the multiplier effect in the economy will be tremendous. To ensure that the pro-poor policy of aid is fruitful, there should be stringent measures put in place to ascertain whether the aid is really tailored towards the needs of the underprivileged, evidence-base monitoring and evaluation should be done to ensure that the targeted group really benefit. This will ensure poverty reduction in its true sense and hence the achievement of the MDGs.

Aid effectiveness: Governance and the Role of Civil Society Organizations (CSOs)

Governmental bureaucracies and the ill administration of aid by public institutions have proven to be some other reasons why aid does not always reach its targeted group and purpose. Most times corruption and embezzlement takes better parts of aid. Preble and Tupy (2005) are of the assertion that 80% of each donor money given to Africa are stolen and transferred into western accounts by corrupt African leaders. There is therefore the need for the involvement of CSOs both locally based and international, more directly in the form of collaboration with governments of both donor and recipient countries to ensure the effectiveness of aid (primer on development and aid effectiveness, 2007). The CSOs will play vital roles such as undertaking independent researches, monitory and evaluation, consultancy services and other watchdog roles to help ensure aid effectiveness.

Redefining the Institutional Arrangements for Aid Administration

The involvement of several multi-national agencies in the management of aid normally leads to several principles secluding the management of aid which sometimes abates the spur to achieve results (Easterly 2006c in Williams 2009). There is an instance where the World Bank, the IMF, Inter-American Development Bank, USAID, US Drug Enforcement Administration, British Department for International Development and several other agencies operating in Bolivia with each affecting the outcome of aid but with no one agency ultimately responsible, (Williams 2009). This therefore calls for the redefinition of the institutional channels along which aid will be distributed and managed and clear lines of operation of multi-national agencies on aid be established so that agencies would be directly held responsible for the failure of a particular aid. This will help whip up the zeal in agencies to achieve results and hence ensure the effectiveness of aid.

Conclusion
The subject of aid effectiveness has become a complex matter and has therefore called for a more locally-owned policy reforms than donor-driven agenda. Donor countries and agencies must obtain necessary information about recipient countries to inform their decision of where, how and how much aid should be given. Recipient countries must also obtain and deliver relevant information about their own economy based on which aid will be given by donor countries. This will ensure the effectiveness of aid in the sense that if relevant information is available, aid will most likely meet its purpose. Issues such as human resource development and capacity building, tied aid, scientific monitory and evaluation mechanisms and dumping in the name of aid are very critical to enhancing the effectiveness of aid and ensuring poverty reduction and the attainment of the MDGs by recipient countries.

References
Claudia R. Williamson (2009). Exploring the failure of foreign aid: The role of incentives and information. Springer Science + Business Media, LLC 2009 Williamson, C. R. (2008). Foreign aid and human development: The impact of foreign aid to the health sector. Southern Economic Journal, 75(1), 188–207.

Paris Declaration on Aid Effectiveness. Ownership, Harmonization, Alignment, Results and Mutual Accountability. High Level forum on Aid effectiveness: Paris, February 28¬March 2 2005

Brumm, H. J. (2003). Aid, policies and growth: Bauer was right. Cato Journal, 23, 167–74 Easterly, W. (2001). The elusive quest for growth: Economists' adventures and misadventures in the tropics. Cambridge: MIT.

Easterly, W. (2002). How did the heavily indebted poor countries become heavily indebted? Reviewing 2 decades of debt relief. World Development, 30(10), 1677–1696.

Easterly, W. (2003). The cartel of good intentions. Journal of Policy Reform, 1–28. Easterly, W. (2006a). The white man's burden: Why the west's efforts to aid the rest have done so much ill and so little good. New York: Penguin. Easterly, W. (2006b). Chapter 2: Freedom versus collectivism in foreign aid. In Economic Freedom of the World: 2006 Annual Report. Vancouver, Fraser Institute. Easterly, W. (2006c). Planners versus searchers in foreign aid. Asian Development Review, 23(1), 1–35. Easterly, W. (2007a). Are aid agencies improving? Economic Policy, 22(52), 633–678. Easterly, W. (2007b). Was development assistance a mistake? American Economic Review, 97(2), 328–332. Easterly, W., Levine, R., & Roodman, D. (2004). New data, new doubts: A comment on burnside and dollar's 'aid, policies, and growth. American Economic Review, 94, 774–780. Easterly, W., & Pfutze, T. (2008). Where does the money go? Best and worst practices in foreign aid. Journal of Economic Perspectives, 22(2), 29–52. Powell, B., & Ryan, M. (2006). Does development aid lead to economic freedom? Journal of Private Enterprise, 22(1). Svensson, J. (1999). Aid and growth: Does democracy matter? Economics & Politics, 11(3).

Svensson, J. (2000). Foreign aid and rent-seeking. Journal of International Economics, 51, 437–

461. Burnside, C., & Dollar, D. (2000). Aid, policies, and growth. American Economic Review, 90, 847–868. Coyne, C. J., & Ryan, M. E. (2009). With friends like these, who needs enemies? Aiding the world's worst dictators. The Independent Review, 14(1), 26–44. Djankov, S., Montalvo, J. G., & Reynal-Querol, M. (2006a). Does foreign aid help? Cato Journal, 26(1), 1–28. Djankov, S., Montalvo, J. G., & Reynal-Querol, M. (2006b). The curse of aid. Working Paper, Universitat Popmeu Fabra

ODI briefing paper governance; development and aid effectiveness: a quick guide to complex relationships, march 2006, www.odi.org.uk IBON International, 2007 primer on development and aid effectiveness Website: http://international.ibon.org Smith, J. W. (2002) “Economic Democracy: The Political Struggle for the 21st Century”. NY: The Institute for Democracy. 2nd Edition. Preble, C. and Tupy, M. L. (2005) “Trade not Aid” CATO Institute. Ijaiya, Tand Ijaiya, M. (2004) “Foreign Aid and Poverty Reduction in Sub-Saharan Africa: A Cross Country Investigation”. South African Journal of Economics and Management Sciences. 7(3) Juta and Co.

Boone, P. (1996). Politics and the effectiveness of foreign aid. European Economic Review, 40, 289–329.

By SOLOMON ANZAGRA
Email Address: [email protected]
KNUST-KUMASI

Solomon Anzagra
Solomon Anzagra, © 2011

The author has 7 publications published on Modern Ghana.Column: SolomonAnzagra

Disclaimer: "The views/contents expressed in this article are the sole responsibility of the author(s) and do not necessarily reflect those of Modern Ghana. Modern Ghana will not be responsible or liable for any inaccurate or incorrect statements contained in this article."

Powered By Modern Ghana
body-container-line