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Development aid: how can it work?

August 31, 2008

Child sells bread on Angolan streetMinisters and officials from more than 100 countries, as well as representatives of multilateral development and financial agencies, are meeting in Accra, Ghana this week (Sept. 2-4) to discuss ways of making development aid more effective. 

At its best, development aid from rich countries to help the world’s most needy can really touch the poor, giving them the means and the know-how to transform their lives and future in self-sustaining projects that profitably plug their labour and activities into the globalised world.

A project I visited in Senegal is helping Senegalese peasant farmers to become international exporters of melons.

But horror stories abound in the international aid community about wasteful proliferation, confusion and overlap of aid projects — the so-called “Tower of Babel” syndrome in which aid projects sometimes go ahead without the full collaboration of host governments and may even compete with each other.

If badly conceived and applied, aid projects can squander hundreds of millions of aid dollars in costly “white elephants” that end up providing uncontrolled funds and expensive SUVs to a handful of corrupt officials, while leaving the intended recipients as poor as they were before. 

President Abdoulaye Wade of Senegal, the African country which has received one of the highest levels of aid per capita on the continent since independence, has criticised some aid NGOs as being “greedy gobblers of aid resources, absorbing the best part of this through all kinds of schemes, in administration, travel and luxury hotel costs for so-called experts — rather than spending on actions”.  He recommends innovative aid initiatives that “help people to stand up”.

Some might ask what Senegal really has to show for this aid influx over the years, when we see an exodus of many young Senegalese risking their lives every year in rickety, open boats to try to reach Europe to seek a better life.

Many economists believe the stress should very much be put on trade rather than aid.

What do you think a “good” aid project should consist of? Do you know any examples of failed aid projects and why do you think they failed? What changes should be made in the way the rich world delivers aid to the poor?

Comments

I work with the Afghan School Project, a Canadian development organization which helps to fund and operate the Afghan-Canadian Community Center, a vocational school in Kandahar.

When we began our project, we scanned the news to find a local partner with the necessary skills, motivation and experience, and asked him what he needed to make a difference in his community. We then gave him some of the resources he needed and assessed the project’s effectiveness as time went on.

Today, the ACCC is one of the most effective development projects in Kandahar, with more than 700 students attending at a cost of less than $15 per student per month. Our efforts were successful because we drew upon local expertise, invested in the future of the community, and made efficient use of time and money.

 

Tax, not aid, is the most sustainable, the biggest, the most appropriate and the most stable form of finance for development.

Taxation, and especially direct taxation, makes governments accountable to their people, not to donors, and the need to collect tax widely provides a strong impetus to governments to build stronger institutions. In dollar terms, tax is far, far, bigger than aid. And yet tax is all but forgotten in the development debates. At last, this is starting to change.

Aid can certainly provide much that is good, but it is saddled with these problems that make it much like oil, whose revenues (like aid) don’t make governments accountable to citizens. Like oil, aid causes “Dutch Disease” effects – and much more.

Historians looking at Europe and the United States have long known about the “no taxation without representation” argument and related ones; now development theorists are just waking up to this kind of thing. The IMF has just written a short paper about it (see the link provided below.) Tax is the next wave in the field of development. Christian Aid, Action Aid, the Tax Justice Network, and others are beginning to wake up to this. More are getting interested all the time.

Reuters needs to get on top of this. It’s one of those things where in a few years’ time people will be asking: “why was nobody working on this before?” Catch the wave early, I say, and start to look into it.

This link here “In Africa, pay more attention to tax – IMF” (http://taxjustice.blogspot.com/2008/08/ in-africa-pay-more-attention-to-tax-imf. html ) provides links to articles that you need to get more acquainted with this stuff.

Also see here (more links are provided at the bottom of the page once you click on it):
http://www.taxjustice.net/cms/front_cont ent.php?idcat=130

and it would be worth trying to get hold of theorists such as Mick Moore (quoted in the IMF paper you’ll link to from the blog and the web site), Deborah Brauetigam, and a few others. Reuters: pick up the phone and write the stories!

Best wishes

Nicholas Shaxson, (a former Reuters journalist. You might also find of interest an article I co-wrote in The American Interest recently, about why we’ve only got part of the way in understanding corruption: http://www.the-american-interest.com/ai2  /article-bd.cfm?Id=466&MId=21 which has a strong tax angle)

Posted by Nicholas Shaxson | Report as abusive
 

Africa doesn’t need aid as much as it needs investment. While there is certainly a place for disaster aid and programs that help lay the underpinnings for better health and education (the fights against malaria and HIV/AIDS come to mind), real long-term change is only going to come from private investment in projects that build infrastructure, create jobs, and give the participants an incentive to improve. Capital investment is for the long term; aid is a quick fix. Stable governments, legal systems that protect individual and property rights, and fair access to world markets are the ingredients that will draw investment capital to Africa.
Dave Donelson, author of Heart of Diamonds

 

Western aid is a scam that keeps Africa poor.

What African needs is free and fair trade and not “aid,” which are actually loans that generation after generation have to repay.

Posted by Vincent | Report as abusive
 

Both Dave and Ryan have excellent points.

Vincent as usual is only negative. I wish he would put his considerable skills to positive and productive works. I think he has a lot to contribute if only he could change his negative energies to positive ones. For example, Dave and Ryan excellent contributions have points on which to build.

Posted by buffalojump | Report as abusive
 

Development aid or development cooperation (also development assistance, technical assistance, international aid, overseas aid or foreign aid) is aid given by governmental and economic agencies to support the economic, social and political development of developing countries.

 

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