Reinventing Foreign Aid: "Help Us Help Ourselves"
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26.01.2003
Annual Meeting 2003
Participants discussed how to improve aid allocation, increase its efficiency and reduce wastage. The goal is to deploy aid better to enhance the prospects for sustainable development, said Robert Klitgaard, Professor of International Development and Security and Dean, The RAND Graduate School, USA. Joaquim Alberto Chissano, President of Mozambique, agreed that the key issue is efficiency. He noted that often while donors and recipients might agree on principles and delivery terms, full implementation of aid programmes are often not smooth or timely. Problems arise sometimes for such simple reasons as the difference between when the fiscal year begins in developing countries and developed ones. The aid community must look at ways to solve problems and improve efficiency so that non performing countries become performing ones.
US foreign aid accounts for less than 1% of its total budget. While the US could do more, the key is to make assistance work better, said Jim Kolbe, Congressman from Arizona (Republican), USA. Aid is not the best solution to helping developing countries. A dollar of trade does more than a dollar of aid, he argued. Simon Maxwell, Director, Overseas Development Institute, United Kingdom, suggested that the world is in "a golden age of development" and that it has already reinvented aid. New aid programmes link aid to trade and aid to reform, as with the New Partnership for Africa s Development (NEPAD), an undertaking by African nations to improve governance in exchange for aid. Commitment to NEPAD is fragile, Maxwell said. He called for more strategic thinking about the aid agenda to take advantage of the new opportunities that have arisen.
Ian A. Goldin, Director, Development Policy, World Bank, Washington DC, argued that aid has never been more effective. It is twice as effective as it was ten years ago. This is particularly remarkable since the level of aid has dropped 20% over the past decade. Aid is still less than 2% of global investment flows. Absorption is not an issue since recipients are able to better manage the inflow of funds. But Shaukat Aziz, Finance Adviser to the Prime Minister of Pakistan, expressed some concern that recipient countries may not be doing enough to bolster their capacity to absorb aid. Governance has to be improved. And aid should not be used as a crutch. "Our motto should be: Help us help ourselves," he said.
Donors too have to improve their governance, Hilde Frafjord Johnson, Minister of International Development of Norway; Global Leader for Tomorrow 2002, said. "But I am not saying that we should not address the governance of [recipient] countries. We have to do better as donors. We have to get behind those countries that are willing to perform and strengthen their ability to deliver services to the poor."
Participants offered several proposals developed during the table discussions. These included: · Eliminate tied aid so that aid benefits recipient country contractors and businesses and is not in fact recycled back to the donor country. Of total US aid, 88% is recycled back to American contractors. · Improve the accountability of donors. · Educate the public in donor countries about the benefits of aid. Funding could come out of the aid budget. · Encourage recipients to take ownership of aid programmes. · Draw up performance based contracts between donors and recipients. · Make aid programmes, policies and management consistent. · Channel more aid to the private sector to boost private enterprise. · Set up more donor recipient joint missions. · Aid agencies must use the media better to inform the public about the benefits of aid. · Deliver aid directly to the end user. · Use benchmarking to enhance aid performance.
At the end of the session, Chissano assured participants that the African nations participating in the NEPAD were committed to the initiative. "We are building the peer review system," he said, though it will take time.
Reinventing Foreign Aid Help Us Help Ourselves - To learn more about this author, visit World Economic Forum's Website.
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