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Millennium Development Goals

Make Poverty History © Peter Armstrong

Whatever the philosophical shortcomings of the Millennium Development Goals (MDGs), they do create a disciplined framework within which the global aid industry can be assessed. Pressure on the international donor community to focus on shared objectives related predominantly to poverty reduction has been particularly important for the World Bank and other multilateral institutions which have been criticised for their obsession with impersonal economic indicators at the expense of human development.

Estimates prepared by the Millennium Project for the 2005 UN “Millennium+5” summit in New York recommended that securing the MDGs would require additional aid of $48 billion in 2006 rising to $74 billion in 2015. Whilst less focused on the MDGs, the Commission for Africa set up by the UK government reported in the same year that aid to sub-Saharan countries should be doubled over 3-5 years, involving an additional $25 billion by 2010.
Aid Commitments

There is a long track record of rich government commitments to increase aid and an equally long record of backsliding. The most recent substantive commitment came at the G8 Edinburgh summit in 2005 when leaders announced the intention to increase aid by $50 billion pa in real terms between 2004 and 2010, with annual aid for sub-Saharan Africa doubling from its 2004 level of $25 billion. These figures were cautiously welcomed by campaigners as approaching MDG needs.

Yet within two months of the G8 meeting, delegates at the New York UN summit found themselves battling against US resolve to expunge from the final declaration any references either to the MDGs or to aid commitments. The G8 commitments were salvaged but with little conviction and indeed provisional figures published for 2006 show that aid to sub-Saharan Africa has barely increased since 2004 and that global aid is actually falling. The chairman of the key Development Assistance Committee (DAC) issued a warning in April 2007 that “aid will now have to increase very substantially in 2007 and 2008 if there is to be a realistic prospect of meeting the 2010 targets”.

Contributions of individual countries towards global commitments are assessed by reference to a UN Resolution passed as long ago as 1970 – and renewed recently in the Monterrey Consensus of 2002 – in which the richest countries agreed to increase aid budgets to 0.7% of national income. So far only five countries, led by Sweden, have exceeded this commitment, the remainder being so far behind that the average for 2006 was an embarrassing 0.30%, less than the equivalent figure for 1990. There are however some signs of greater determination - the European Union has agreed on a collective target of 0.56% by 2010, and 0.7% by 2015; with the UK issuing a fresh commitment to reach the target by 2012. By contrast the US at 0.17% lags behind all relevant countries apart from Greece.
Aid Statistics Unbundled

Queuing for food aid in Somalia © Derk Segaar/IRIN

Behind the simple statistic that total aid for 2006 amounted to $103.9 billion lies a hornets' nest of definitions and terminology. The complexity has enabled politicians to become adept at announcing new aid initiatives which on close examination turn out to be repackaging of existing commitments. For example, the cost of debt relief is included in aid figures, so that "good news" about debt can be duplicated as "good news" about aid. Over 15% of total aid relates to costs of debt relief.

There is an important distinction between emergency relief (known as “humanitarian aid”) which deals with short term expediency and aid for long term development programmes. The increasing incidence of extreme weather events driven by climate change and conflict-related emergencies together with natural disasters ensure that humanitarian aid is much in demand, accounting for about 8% of all aid in 2005.

West Kabul © Brandy Bauer

The cost of reconstruction of war zones is a rather more controversial inclusion in aid statistics, given the overlap with security issues, and given that its volume is currently on a similar scale to humanitarian aid. US reconstruction in Iraq and Afghanistan has created a tendency for misleading statements about “new” aid commitment.

What remains in aid statistics after these three special categories relates to genuine development programmes but the presumption that such programmes are rigorously targeted to help poor people in the poorest countries is false. Generous US aid to countries such as Colombia, Egypt and Pakistan has more to do with the maintenance of stable and friendly governments than concern for poverty. So-called national interest can be a far more powerful stimulant for aid budgets than the moral sentiment of the Millennium Declaration.

Aid for development of the poorest countries of sub-Saharan Africa (excluding debt relief) therefore accounts for less than 20% of total ODA. It is little surprise that international campaigners are energetic in monitoring the slippery politics of global aid. Demands to increase aid to promised levels are central to the Make Poverty History campaign and other international activism.
The Donors

About 95% of international aid comes from 22 OECD countries which organize themselves as the Development Assistance Committee (DAC). In 2005 about 23% of flows from these countries was “multilateral aid” channeled through International Financial Institutions (IFIs) such as the IMF and the World Bank; the balance was “bilateral aid” paid direct to individual countries. Most bilateral aid is in the form of grants whilst the multilateral agencies largely offer low-interest loans to countries whose poor economic performance renders them incapable of borrowing on reasonable terms in open international markets.

Hilary Benn, DFID © Peter Armstrong

Multilateral agencies pursue their programmes on a reasonably neutral country-by-country basis, whilst bilateral donors pursue selective strategies, for example to support former colonies. Bilateral grants may be paid as direct budgetary support permitting the recipient government unconditional control of expenditure, or directed to a specified sector programme, or channeled to individual projects which allows the donors close monitoring control.

The five largest donors by volume in 2006 were US, UK, Japan, France and Germany. Together they constitute nearly 70% of all bilateral aid flows. Countries such as China, India, Brazil and Thailand which over the years have been major recipients of aid are themselves now developing strategic aid programmes.
Conditionality

The inherent imbalance of aid contracts encourages the imposition of conditions which reflect the donor’s prejudices for appropriate social, political and economic management. The most notorious conditionality has been “structural adjustment”, a set of neo-liberal economic measures such as free trade and privatisation favoured by the multilateral agencies, and often imitated by the bilaterals. In the wake of structural adjustment has been the demand for “good governance”, a political template involving free and fair elections, an assault on corruption and human rights violations, and an unencumbered press, judiciary and civil society.

Elections in Rwanda

Critics have been concerned that such conditions infringe on the sovereignty of the recipient country and impose one culture’s set of values on another. The presumptions that western democracy is “right” and that human rights are universal are not immune from challenge, especially when dominant donor countries such as the US and UK infringe their own principles, or when the international community proves reluctant to accept the results of elections, as happened in Palestine.

Bilateral aid opens up a large window of opportunity for imposing conditions, often involving inappropriate or overpriced contracts with donor country corporations, a process known as “tied aid”. A 2005 Oxfam/ActionAid report suggested that 40% of ODA remains “tied”. One extreme example is US insistence that food aid be awarded in the form of subsidized US produce rather than cash or farm inputs, thereby aggravating the injustice of the world trading system for agriculture which typically contributes to aid dependency. Such circularity draws attention to the potential for aid to turn in on itself and generate greater benefit to the donor than the recipient.

Other conditions are more insidious; it is believed that the US has obliged over 100 countries to grant immunity to US nationals from prosecution by the International Criminal Court. Countries resisting this arm-twisting have lost aid or other benefits. Likewise, the US government’s view about family planning is imposed on aid policy through the global gag rule which blocks funds to any agency

Chinese President Hu Jintao visiting Kenya

whose policy is thought to condone abortion. In many countries the sudden development of a sports stadium or government building as a “gift” from a richer neighbour may have more to do with promises of support in a crucial UN vote than altruism. Such are the vicissitudes of converting the human concept of charity into the international domain.

Ironically the most recent dramatic change in aid flows threatens to undermine the whole panoply of aid conditionality. The massive investment of China in Africa is overtly unconditional beyond its commercial interest in natural resources. This lack of small print has alarmed the international aid establishment which has spent years exchanging debt relief and aid commitments in return for promises of good governance and budget prudence.
Aid Effectiveness

Polio vaccine © United Nations Children's Fund

There are plenty of success stories for international development in recent decades which at least in part can be attributed to the effectiveness of aid strategies. The Commission for Africa Report provided detailed evidence of the high returns available from aid funding. But poverty stubbornly remains a global problem and the international community is in a state of constant anxiety about the effectiveness of aid. High-level forums issue regular statements of resolve.

Flurries of evaluation programmes by both multilateral and bilateral donors have led to the conclusion that aid works best in countries which pursue sound economic policies backed by transparent institutions of government. Donors

Hambantota house destroyed by tsunami © Peter Armstrong

are therefore faced with the dilemma that awarding the direct budgetary support that developing countries prefer may involve a degree of political and economic risk.

Humanitarian and reconstruction aid is notoriously prone to inefficient results. The outpouring of public sympathy for the victims of the 2004 tsunami has not been rewarded with cost-effective returns on donations. And the inefficiency and corruption associated with reconstruction programmes has been brutally exposed by events in Iraq and Afghanistan.
Role of Civil Society

Where donors are reluctant to offer direct budgetary support, the option exists to channel funds through civil society organizations. Inevitable tensions with governments will become even more acute in countries in a state of crisis – in Eritrea and Zimbabwe, for example, international aid agencies are struggling to maintain their presence just at a time when their services are most needed.

Even in countries which enjoy the full confidence of donors, non-governmental organizations are likely to be involved as intermediaries with the ultimate beneficiaries of aid programmes, managing the complexity of the wide range of stakeholders involved. As a result, international "non-governmental" organisations such as Oxfam, Christian Aid and ActionAid receive increasingly substantial tranches of bilateral aid, believed to amount to around 3% of all international aid and representing a significant proportion of their total income.
New Sources of Aid

James Tobin

With the continued reluctance of rich countries to commit to more decisive aid programmes, there is a constant stream of alternative ideas for generating funds of which the best known is the 'Tobin tax' on currency transactions. Rarely do such proposals gain support at the highest level – initiatives such as the International Finance Facility, a creative UK proposal to front load future aid payments, and French advocacy for an airline travel tax idea have been allowed only token pilot implementation.

New sources of aid together with new countries entering the bilateral aid domain may not be the panacea they seem. A recent DAC survey reported that “in 2005, the 34 developing countries covered by the survey received 10,507 donor missions, more than one for each working day”. Aid is a troubled and imperfect science.



This Guide has been compiled primarily by reference to the OneWorld archive of aid-related articles and to an earlier version of the OneWorld Aid Guide first published in 2004 with material provided by Volunteer Editor Saumik De.

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