Foreign aid for development assistance

Q. Foreign aid for development assistance? Comment?

Ans. Foreign aid for development assistance is aid given by governments and other agencies to support the economic, environmental, social and political development of developing countries. It is distinguished from humanities aid by focusing on alleviating poverty in the long term, rather than a short term response.

Aid may be:

1. Bilateral : given from one country directly to another.
2. Multilateral : given by the donor country to an international organization such as the World Bank or the United Nations Agencies (UNDP, UNICEF, UNAIDS, etc.) which then distributes it among the developing countries.

• The proportion is currently about 70% bilateral 30% multilateral.
• About 80-85% of developmental aid comes from government sources as official development assistance (ODA). The remaining 15-20% comes from private organisations such as "Non Governmental Organizations" (NGOs).

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.

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.

Aid Sources and Statistics

· Total foreign aid, the voluntary transfer of funds from richer governments to assist less fortunate countries, was $128.7billion in 2010, up from $119.6 billion in 2009.

· Aid reported by DAC(Development Assistance Committee) is known as “Official Development Assistance” (ODA) and is believed to represent about 80% of all international aid.

· Non-DAC countries such as China, Brazil and South Africa are increasingly engaged in strategic "south-south" aid programmes. Being outside the ODA structure, these donors disclose little data but estimates suggest a total of up to $12 billion for 2010. In May 2011, India announced a $5 billion aid programme for Africa over three years.

· A final complication is that these aid statistics are “net” of any loans repaid to the donor countries. The total of “gross” aid in 2010 was $141.3 billion.

Aid Distribution

· 30% of ODA reported for 2009 was "multilateral aid" - funds made available to support the development programmes of UN agencies, the European Union, the World Bank and regional development banks.

· These multilateral banks generally offer low-interest loans to countries whose economic status prevents them from borrowing on reasonable terms in open international markets.

· “Bilateral aid" is paid direct to developing countries, usually in the form of grants. Its allocation also reflects the priorities of individual donor countries rather than a global strategic plan for poverty reduction.

Aid Effectiveness

• This criticism of aid has been the source of longstanding anxiety amongst the international donor community.
• Targets for 2010 encouraged donor agencies to pool their funds in direct government budget support for national sector programmes.
• In return for ownership of development strategies and priorities, developing countries have promised to “strengthen the capacity to perform and deliver services at all levels.”
• Accountability should also be improved if the beneficiaries themselves are fully aware of the services that aid is designed to deliver.

Bibliography

http://uk.oneworld.net/guides/aid?gclid=COXDwOa96KoCFUcb6wodf2lb8w

Submitted to :

Gurdeepak Singh

Submitted by :

Eti Priya

MBA (A)