Funding for Women: Trends & Mobilization + Foreign Aid for Development

By Anup Shah - Updated April 8, 2012

Foreign aid or (development assistance) is often regarded as being too much, or wasted on corrupt recipient governments despite any good intentions from donor countries. In reality, both the quantity and quality of aid have been poor and donor nations have not been held to account.

There are numerous forms of aid, from humanitarian emergency assistance, to food aid, military assistance, etc. Development aid has long been recognized as crucial to help poor developing nations grow out of poverty.

In 1970, the world’s rich countries agreed to give 0.7% of their GNI (Gross National Income) as official international development aid, annually. Since that time, despite billions given each year, rich nations have rarely met their actual promised targets. For example, the US is often the largest donor in dollar terms, but ranks amongst the lowest in terms of meeting the stated 0.7% target.

Furthermore, aid has often come with a price of its own for the developing nations:

Aid is often wasted on conditions that the recipient must use overpriced goods and services from donor countries
Most aid does not actually go to the poorest who would need it the most
Aid amounts are dwarfed by rich country protectionism that denies market access for poor country products, while rich nations use aid as a lever to open poor country markets to their products
Large projects or massive grand strategies often fail to help the vulnerable as money can often be embezzled away.

This article explores who has benefited most from this aid, the recipients or the donors.

This web page has the following sub-sections:

Governments Cutting Back on Promised Responsibilities

Foreign Aid Numbers in Charts and Graphs

Are numbers the only issue?

Aid as a foreign policy tool to aid the donor not the recipient

Governments Cutting Back on Promised Responsibilities

“Trade, not aid” is regarded as an important part of development promoted by some nations. But in the context of international obligations, it is also criticized by many as an excuse for rich countries to cut back aid that has been agreed and promised at the United Nations.

Rich Nations Agreed at UN to 0.7% of GNP To Aid

Recently, there was an EU pledge to spend 0.56% of GNI on poverty reduction by 2010, and 0.7% by 2015.

However,

The donor governments promised to spend 0.7% of GNP on ODA (Official Development Assistance) at the UN General Assembly in 1970—some 40 years ago
The deadline for reaching that target was the mid-1970s.
By 2015 (the year by when the Millennium Development Goals are hoped to be achieved) the target will be 45 years old.

This target was codified in a United Nations General Assembly Resolution, and a key paragraph says:

In recognition of the special importance of the role which can be fulfilled only by official development assistance, a major part of financial resource transfers to the developing countries should be provided in the form of official development assistance. Each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7 per cent of its gross national product at market prices by the middle of the Decade.

— International Development Strategy for the Second United Nations Development Decade, UN General Assembly Resolution 2626 (XXV), October 24, 1970, para. 43

What was to be the form of aid?

Financial aid will, in principle, be untied. While it may not be possible to untie assistance in all cases, developed countries will rapidly and progressively take what measures they can … to reduce the extent of tying of assistance and to mitigate any harmful effects [and make loans tied to particular sources] available for utilization by the recipient countries for the purpose of buying goods and services from other developing countries.

… Financial and technical assistance should be aimed exclusively at promoting the economic and social progress of developing countries and should not in any way be used by the developed countries to the detriment of the national sovereignty of recipient countries.

Developed countries will provide, to the greatest extent possible, an increased flow of aid on a long-term and continuing basis.

— International Development Strategy for the Second United Nations Development Decade, UN General Assembly Resolution 2626 (XXV), October 24, 1970, para. 45-47

The aid is to come from the roughly 22 members of the OECD, known as the Development Assistance Committee (DAC). [Note that terminology is changing. GNP, which the OECD used up to 2000 is now replaced with the similar GNI, Gross National Income which includes a terms of trade adjustment. Some quoted articles and older parts of this site may still use GNP or GDP.]

ODA is basically aid from the governments of the wealthy nations, but doesn’t include private contributions or private capital flows and investments. The main objective of ODA is to promote development. It is therefore a kind of measure on the priorities that governments themselves put on such matters. (Whether that necessarily reflects their citizen’s wishes and priorities is a different matter!)

Almost all rich nations fail this obligation

Even though these targets and agendas have been set, year after year almost all rich nations have constantly failed to reach their agreed obligations of the 0.7% target. Instead of 0.7%, the amount of aid has been around 0.2 to 0.4%, some $150 billion short each year.

Furthermore, the quality of the aid has been poor. As Pekka Hirvonen from the Global Policy Forum summarizes:

Recent increases [in foreign aid] do not tell the whole truth about rich countries’ generosity, or the lack of it. Measured as a proportion of gross national income (GNI), aid lags far behind the 0.7 percent target the United Nations set 35 years ago. Moreover, development assistance is often of dubious quality. In many cases,

Aid is primarily designed to serve the strategic and economic interests of the donor countries;

Or [aid is primarily designed] to benefit powerful domestic interest groups;

Aid systems based on the interests of donors instead of the needs of recipients’ make development assistance inefficient;

Too little aid reaches countries that most desperately need it; and,

All too often, aid is wasted on overpriced goods and services from donor countries.

— Pekka Hirvonen, Stingy Samaritans; Why Recent Increases in Development Aid Fail to Help the Poor