Foreign Aid: The Wrong Road to
Take?
“If you want to kill a proud man, feed his every need and you
will make him a slave.”
Guelwaar, Ousmane Sembene
“…I’ve never seen a country develop itself through aid or
credit… Countries that have developed – in Europe, America, Japan, Asian
countries like Taiwan, Korea, and Singapore – have all believed in free markets.
There is no mystery there. Africa took the wrong road after independence.”
Senegalese President Abdoulaye Wade
Foreign aid has traditionally been seen as something temporary that can only
complement existing national resources and efforts of a struggling nation. But
after over forty years of existence, it seems more and more like aid has
acquired something of a permanent nature. In many African countries, it
has even become a considerable force in the national economy, making those
countries more or less completely dependent on foreign aid. Although its major
objective has been and continues to be the fighting of poverty by supporting
economic growth and development in the world’s least-developed countries, few
are the leaders like filmmaker Sembene and President Wade, African and
otherwise, who have realized that aid alone cannot ensure economic growth, and
that this dependence on outside sources of revenue can be only detrimental to
the goal of long term sustainable development. Yet, in recent years, studies
have begun to show that there is little positive connection between foreign aid,
and growth and development. The African region continues to fall behind the rest
of the world by virtually any measure despite prolonged aid efforts, but to what
extent are foreign aid and investment the source of this demise? Despite the
growing worldwide disillusionment with the performance of aid, rather than
trying to show that foreign aid is the source of this general economic
demise or to analyze the extent to which aid works (which would be impossible
when we cannot know how events would have unfolded had aid not been provided), I
will only seek to point out the key deficiencies in the way aid is provided and
implemented, and to offer recommendations as to how aid can be made more
effective, based on the leading studies in this area.
Impact of Aid
Africa’s need for aid remains high, given the
continent’s prevailing levels of poverty and inability to attract private
foreign capital. However, several events and changes have taken place in the
post Cold War world economy that have raised questions of motive and
justification for aid in Africa. First are the security motives for aid (by the
competing United States and Russia) that have
largely disappeared with the end of the Cold War. Second, as a result of the
dissolution of the Soviet Union, its controlled economy, and its influence in
Eastern Europe, the competition for available resources has increased among
the world’s developing economies. Third, Western European donor countries have
ran into economic difficulties as well, and have been concentrating their
funding on combating their own budget deficits. Finally,
continuing economic growth in the donor countries has sparked a new preference
for market forces over state-led growth. In Africa, this has translated into
donors who are more concerned with policies for achieving growth, rather than
maintaining high levels of aid flows, and who do not necessarily equate the two.
Although these budgetary trends and general disillusionment account for most of
the decline in aid in recent years (about 6% per year from 1995-1999), there has
also been identified a discrepancy between the amount of aid promised by donors
and the amount of aid actually disbursed. The OECD shows that promises of aid
actually increased between 1997 and 1999, but disbursement of funds remained the
same, and attributes this to a lack of administrative capacity of the
governments.
This is not to
undermine the impact of past aid on the continent. Historically, individual
donor efforts from governments and NGOs have helped to construct
infrastructure, systems of health and education, and new agricultural
technologies. Indicators of human welfare, such as the infant mortality rate and
the literacy rate, have shown improvement across Africa. At the same time, donor
efforts have not succeeded in fostering economic growth and poverty alleviation
in most African countries and from 1980 to 1993, Africa’s rate of economic
growth as a whole was negative. In addition, aid has had a disappointing
record of promoting institution building, such as a primary health system, that
is not highly dependant on resources outside the immediate donor and which does
not foster any appropriation of these institutions by national or local
governments.
There are, of
course, other factors to be considered in the big picture of African
development. Changes in terms of trade and the international environment help
explain the downward trends in specific periods and countries. For example,
fluctuating gas prices and the economic crises of the 1970s in the
oil-exporting nations might have reversed previous aid achievements, and the
economic specialization of Burkina Faso, Chad, Ethiopia, Mali, and
Uganda between 1950-1999 caused a drop in their share of total world exports
and their annual growth. However, Africa’s marginal involvement in globalization
means that its economy is less affected by events in the rest of the world; for
example, the trade slowdown following September 11 is not
expected to greatly change overall performance, except indirectly through a
further reduction in aid by the donor countries. Furthermore, one must not
underestimate the economic influence of the individual governments’ economic
policies, political instability and civil conflict, the endowment of
physical and human resources, and political systems. When taken together, these
factors suggest that aid has not directly led to sustained economic growth in
most African countries, and that only reform of aid policies coupled with
long-term domestic growth policies can reverse these trends.
Deficiencies of Aid
As a leading scholar on the subject, Nicolas van de
Walle has identified three critical deficiencies that help explain the lack of
performance of aid in Africa. First, is a lack of recipient “ownership” of
development projects and programs. Donors dominate the aid process, paying
inadequate attention to the government’s preferences for how to use and
distribute the aid, and the governments, being weak and “cash-strapped,” tend to
defer to donor expertise. Thus, even projects identified by the donor as being
good and effective often fail because of a lack of appropriation and integration
on the part of the local governments who subsequently view them as donor
responsibility.
Second is the poor management and coordination of
aid from an ever-increasing number of donor agencies. Recipient governments
often end up exhausting their limited managerial capacities to track these
projects and integrate them into their own development strategies. Although
individual donors have attempted at times to establish mechanisms to facilitate
this coordination, this is another example of a project that must be undertaken
by the local governments that would be best placed to integrate the efforts of
the numerous donors into a national development strategy, rather than
unconditionally and indiscriminately accepting any form of aid.
Third, the achievements of aid-funded projects are
often undermined when donor funds end, because of an inability to cover
recurrent costs. This is yet another illustration of a management problem on the
part of the governments, who do not keep track of the incoming aid from donor
agencies themselves, and thus often fail to plan for the withdrawal of aid.
Finally, because of this resulting proliferation of stand-alone projects that
bypass local institutions, aid too rarely contributes to more permanent
institution building.
The Example of Senegal
These three points overlap in many respects and are best
illustrated by a case study of a number of government and NGO projects
undertaken in Senegal. Historically, Senegal, on the Westernmost point in
Africa, has been one of the most assisted countries in the world. Indeed, it
has, at one time or another, managed to be on almost every donor’s top recipient
list, even though this special status has began to erode in the past decade (aid
levels falling 22% from the high reached in 1990). Nevertheless, despite these
extraordinarily high levels of ODA (Official Development Assistance) and the
fact that it is politically one of the most stable countries in Africa with a
form of multiparty democracy since the mid-1970s, Senegal’s economic
performance has been largely disappointing. Its GDP per capita has hardly
grown in real terms since independence, fluctuating between 400 and 600 USD over
the course of the last decade (consistently about 200 USD under the average for
Africa as a whole). The proportionately high amount
of aid does not account for the drop in GDP (the devaluation of the CFA franc
in 1994 is to blame for that); rather, it shows that a high amount of aid does
not necessarily imply an economic improvement. It is necessary to further
analyze the breakdown, management, and coordination of the aid.
The most important donor to Senegal is France by a wide
margin, but Japan, the European Union, and the World Bank also constitute
a large percentage of aid. The sectional breakdown of this aid has remained much
the same since the 1980s, with budgetary assistance and the social sectors each
taking about a third of the total in 1994, followed by agriculture and the water
sanitation sector. However, a breakdown of this aid to the social sector would
show, for example that much of this aid has gone to tertiary education and
hospital care, rather than the more directly poverty-stricken basic education
and primary health care sub-sectors. This is an excellent example of
stand-alone projects that bypass local institution building, and thus do not
promote more permanent solutions.
Evidence suggests that Senegal’s capacity to manage aid is also
found to be wanting. Aid projects actually undertaken by Senegal are most often
not subject to government evaluation or systematic planning, and ministers and
donors use this weakness in the system to get their personal priorities and
projects adopted (rather than those that the government of Senegal put forth in
the development plan). On the other hand, the donors too can be accused to
different degrees of passively accepting bad aid management. For example, Canadian
aid policies tend to be driven from the top and, therefore, can be out of step
with recipient authorities who lack ownership of the issue at hand. The
partnership between donor and recipient often tends to break down during the
phase following the project identification level and at the implementation
phase. Illustrative of this are two Canadian projects in the forestry sector:
the government-executed project to protect farmland on the northern coast was
fully in line with the wishes of the people benefiting from it, while a forestry
protection project, operated jointly by a government department and a Canadian
firm, was seen as restricting access to an income generating resource without
providing alternatives.
Finally, aid coordination in Senegal has proven to be
particularly important given the especially large number of major donors
operating in the country. Although duplication and overlap of projects due to
poor coordination show that there is room for improvement (i.e. in the railway
sector, where the use of independent aid and coordination by France, Italy,
and Canada has resulted in the employment of incompatible technologies), this
is one area where Senegal has found that perfect aid coordination by sector is
not the most desirable thing. Having donors compete against one another has
allowed the government to play off donors against one another, to have a greater
variety of solutions, and to select the best project from its own perspective
(and thus achieve ownership of the project). Ideally, the government would use
the aid system to its advantage and would have a greater selection of available
financial and human capital resources, rather than passively accepting any
form of aid.
Reform of Aid Giving
Taken as a whole, we notice that
the failure to integrate aid into the government’s own development management
efforts is typically a root cause of many of the common problems that undermine
the effectiveness of foreign aid. In order to improve the effectiveness of
reform, the ability of African states to manage aid resources must also improve,
and aid must be better integrated into the government’s overall development
planning and budgeting. There are three main ideas for reform of
aid-giving that van de Walle proposes.
Governments must first of all restore macroeconomic
stability, as a prerequisite to effective aid management. As long as African
governments remain in fiscal disequilibria, their governments will not be able
to undertake long-term planning and institution building. Second, governments
can undertake measures to increase their capacity to manage aid resources
effectively. They can do this by reforming and strengthening the civil service
that will manage aid and the government; by changing the relationship between
donor and recipient to where the governments play a more proactive role; by
implementing greater accountability and transparency to improve the performance
of African public administrators and increase their level of international
trust; and, finally, by instigating broader public discussion (through local
press and various professional and civic associations) regarding the
management, evaluation, and hidden costs of aid, in order to make them more
accountable for their use of aid resources.
Third is the lessening of the managerial burden of
aid on governments. This can be done by an increased coordination between recipient governments, by an expansion of program
aid only upon the implementation of sound economic policies, and only then by a
decreased reliance on NGOs (who may lose funding at any point) to design and
implement aid projects.
Conclusion
Then is a country unable to develop through the use of foreign
aid? I have tried to prove that the answer to that question is highly dependant
on the country receiving the aid and the way it manages this funding. It is
perhaps true that to kill a proud man, one must only feed his every need, and
that Africa took the wrong road after independence in assuming this position
of dependence. However, aid alone has been shown to be unable to significantly
contribute to growth and development – it must be accompanied by good management
techniques on the part of the governments. Furthermore, this will result in the
“ownership” and appropriation of the project by the local community, and thus
make it independent of uncertain individual donors, and more likely to become a
permanent and self-sustainable institution. The donor countries are far from
feeding Africa’s every need, and in many cases worsen and complicate the
situation despite their best intentions. It is then up to the African leaders
and governments to work with the aid offered to them and figure out ways of
using it to their advantage. Once they have the managerial and government
institutions present to sustain this system, they will not be far off from using
this system to their advantage to distance themselves, and eventually become completely
independent of foreign aid.
Node your research papers
Bibliography
- African Economic Outlook – 2001/2002. Paris: OECD, 2002. (Joint
project of the African Development Bank and the Development Center of the
Organization for Economic Cooperation and Development.)
- Carlsson, Jeker; Somolekae, Gloria; van de Walle, Nicolas,
eds. Foreign Aid in Africa: Learning from country experiences.
Uppsala: Nordiska Afrikainstitutet, 1997.
- Gordinker, Leon; Weiss, Thomas G. “Devolving Responsibilities: A Framework
for Analyzing NGOs and Services.” Third World Quarterly, 1997, Vol.18,
Issue 3: 443-456.
- Iheduru, Obioma M. “Conflicts and Convergence in African Development
Thinking.” Contending Issues in African Development: Advances, Challenges,
and the Future. Westport, CT: Greenport Press, 2001: 3-17.
- Johnston, Timothy A., and van de Walle, Nicolas. Improving Aid to
Africa. Washington, D.C.: Johns Hopkins University Press, 1996.
- Joseph, Richard. “Smart Partnerships for African Development: A New
Strategic Framework.” Special Report of the United States Institute of Peace.
March 15, 2002. <http://www.usip.org.>
- Louvel, Roland. Quelle Afrique Pour Quelle Coopération?
Mythologie de l’aide française. Paris: Editions l’Harmattan, 1994.
- Makhan, Vijay S. Economic Recovery in Africa: The Paradox of Financial
Flows. New York: Palgrave MacMillan, 2002.
- “The New Partnership for Arcia’s Development (NEPAD).” October 2001,
Abuja, Nigeria. <www.nepad.com >
- “OAU Assessement of the Implementation of the United
Nations New Agenda for the Development of Africa (UN-NADAF).”
1996.
- Onishi, Norimitsu. “Senegalese
Loner Works to Build Africa, His Way,” New York Times, April 10, 2002:
A3.
- Postel, Danny. “Out of Africa.” The Chronicle of
Higher Education, March 28, 2003. <http://chronicle.com/weekly/v49/i29/29a01601.htm
>
- “Relaunching Africa’s Economic and Social Development: The Cairo Agenda
for Action.” Adopted by the Thirty-First Ordinary Session of the Assembly of
Heads of State and Government of the Organization of African Unity, 26-28
June, 1995. Addis Ababa, Ethiopia.