Transcript Development Assistance - ECON 3510 – African Economic

Development Assistance:
the African Context
ECON 3510, Carleton University
June 10, 2014
Arch Ritter
Source: Class notes; Collier Chapter 9
Agenda
1. Definition: What is "Aid“
2. Historical Evolution
3. Donor Motives for Providing "ODA"
4. Ethical Justification
5. What Can "Aid" Accomplish? The Positives
6. Possible Negative Impacts
7. Magnitudes, and Patterns
8. Development Assistance to Africa
9. Problems of Aid Quality
10. How Can Development Assistance Be
Improved?
1. Definitions: “ What is Aid and ‘ODA’ ”
• “Development Assistance” or “Aid” would include
a) Multilateral or Governmental (i.e. “ODA”),
b) NGO, and Private Grants plus
c) the grant component of Highly Concessional
Loans
• “Official Development Assistance”: Net
disbursements of loans (on concessional terms) or grants
by governmental agencies for development purposes
All Aimed at Transferring Resources
– In Currency or In Kind;
All “ Pro-Developmental” or Emergency Relief, not
“Welfare” Oriented
• Non-Commercial from Donor Perspective
Where do the following fit in?
• Donations to and through NGOs or
Foundations (e.g. Gates Foundation, Oxfam,
CARE, Red Cross)
• “Faith-based” organizations (Caritas,
Mennonites, Vision, Aga Khan Foundation)
• “Private assistance” provided unofficially
and usually without much publicity and
perhaps without official awareness by
individuals or groups.
2.
Historical Evolution
Marshall Plan
Cold War impetus
Gradual expansion to 1990s, decline then
renewal
Citizen, “Faith-based” and NGO Initiatives
Millennium Development Goals
Current questioning of aid effectiveness:
Bill Easterly
Dambisa Moyo of Zambia
3. Donor Motives for Providing ODA
 Political and Historic
–e.g. Commonwealth & Francophone
connections
–Win friends & influence people
Strategic/military
–note the impact of the Cold War
Commercial
Humanitarian
Ethical
4. Ethical Justification:
Should High Income Countries Provide
Aid to Low-Income Countries?
“First step towards world fiscal
federalism”
5. What can Aid Accomplish?
Aims at “Development” not Welfare
The potential positives of aid
1. “ Gap-Filling Role”:
foreign exchange,
tax revenues,
technological,
managerial
entrepreneurial gaps
2. A “Catalytic Role”?
3. Capacity-Building Role
4. Direct Basic Human Needs or MDG
Filling Role
5. Emergency Relief & Reconstruction Role
– Promote Re-Construction of War-torn
Lands
– Regional flood, famine, military, and
political crisis relief
6. An Investment in Internationally Shared
Security as well as Shared Prosperity?
The Range of Types of Assistance Organization
Multilateral: World Bank
National
CIDA (Africa Program)
Major Foundations:
Bill and Melinda Gates Foundation
NGOs: “CanAssist”;
“Academics Without Borders Canada”
Faith-Based Programs:
Mennonite Central Committee
Aga Khan Foundation
Note: the above labels are hyper-linked to the organizations’
web sites
6. Possible Negative Impacts of ODA
1. May permit recipients to pursue counterproductive or foolish policies
•
May support an ineffective, counterdevelopmental and corrupt government
2. May Promote a “Dependency Welfare
Syndrome”?
•
Leadership & responsibility may be abdicated by
national governments and/or taken by foreign aid
agencies, NGOs …..
3. May deform domestic policies to
accommodate priorities of donors
Possible Negative Impacts of ODA, cont’d
4. May permit donor to exercise
inappropriate influence on recipient
5. May permit recipient country to shift
resources to other undesirable areas
6. Volatility of aid flows may be hurtful to
recipient
Possible Negative Impacts of ODA,
continued
7. May lead to appreciation of exchange
rate with damage to export activities
(See Chart)
8. May provide discretionary funds for
governments where officials are
involved in corruption
9. May support dictatorial regimes that
violate human rights in major ways
Development Assistance to Selected Countries of Africa
Net Aid from All
Donors as %
of GDP, 2003
Net Aid per
Capita,
from All
Donors
2003
Net Aid as % of
Gross
Domestic
Investment,
2003
Burundi
Cabo Verde
Eritrea
Ghana
Guinea-Bissau
Malawi
Sao Tome
South Africa
Tanzania
37.6
18.0
40.9
12.1
60.8
29.3
63.2
0.4
16.2
31
306
70
44
98
45
239
14
47
246.1
89.2
182.5
52.4
490.7
260.6
210.0
2.2
87.9
Sub-Saharan Africa
Excluding South
Africa
Excl. S. Africa &
Nigeria
5.6
34
29.9
8.2
33
41.9
11.2
44
60.4
Selected Countries
Aid is not always given to the poorest countries
7. Magnitudes and
Patterns
Donor Efforts
Magnitudes and Patterns: Donor’s Efforts
But note:
Previous “ODA” numbers do not include
• Donations to and through NGOs or
Foundations (e.g. Gates Foundation,
Oxfam, CARE, Red Cross)
• Nor “faith-based” organizations (Caritas,
Mennonites, Vision, Aga Khan Foundation)
• Nor “private assistance” provided
unofficially and usually anonymously by
individuals.
8. Development Assistance to
Africa
Africa receives about 50 per cent of total aid
0.40
0.36
140
0.35
120
0.30
0.30
% of GNI
0.26
0.25
0.20
ODA as a %
of GNI
(left scale)
100
80
0.22
Total ODA
(right scale)
0.15
60
40
0.10
20
2010
0
2009
2008
2007
2006
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0.00
2005
Total ODA to
Africa
(right scale)
0.05
ODA (2004 $ billion)
0.33
Source: OECD/DAC Statistics (2006). DAC Members’ ODA: 1990-2004 and simulations to
2006 and 2010, based on Monterrey and subsequent commitments
ODA increases have been driven by debt
relief and emergency assistance
2003 US$ billion
28
26
24
22
20
18
16
14
12
10
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
other ODA
Bilateral debt forgiveness
Emergency aid
Total net official development assistance (ODA), non-aid official
flows and private flows in Africa, 1993-2004. (Source: OECD/DAC)
Development Assistance to Selected African Countries
Selected Countries
Net Aid from
All Donors
as % of
GDP, 2003
Net Aid per
Capita, from
All Donors
2003
Net Aid as % of
Gross
Domestic
Investment,
2003
Burundi
Cabo Verde
Eritrea
Ghana
Guinea-Bissau
Kenya
Malawi
Nigeria
Sao Tome
South Africa
Tanzania
37.6
18.0
40.9
12.1
60.8
3.4
29.3
0.6
63.2
0.4
16.2
31
306
70
44
98
15
45
2
239
14
47
246.1
89.2
182.5
52.4
490.7
26.0
260.6
2.4
210.0
2.2
87.9
Sub-Saharan Africa
5.6
34
29.9
Macroeconomic Indicators, Some African Countries
Liberia
Gross Investment
Kenya Ethiopia Tanzania Sierra
Leone
16.4%
19.4%
10,2%
16.4%
14.7%
17.1%
0.3%
0.4%
3.6%
-o.2%
Development
Assistance Per capita
$329
$35
$41
$54
$66
Remittances % of GDP
Per capita, $
6.9%
$15
5.1%
$44
1.5%
$5.
0.1%
$0.0
7.7%
$27
Tax Revenues,
n.a.
18.9
10.2%
n.a.
10.8%
% of GDP
Foreign Direct Invest ‘t
% of GDP
% of GDP
UNDP. HDR, 2010
DFAIT-Development (formerly CIDA) Countries of Focus in SubSaharan Africa
2007-2008
DFAIT-Development (ex-CIDA)’s Mission and Mandate
Mission:
Lead Canada's international effort to help people
living in poverty.
Mandate:
Manage Canada's support and resources effectively
and accountably to achieve meaningful, sustainable
results and engage in policy development in Canada
and internationally, enabling Canada's effort to realize
its development objectives.
Comment re accountability and effectiveness
Example of Canadian Assistance: Ethiopia
Achievements 2011-2012
Children and youth
 Contributed to 7.1 million children receiving essential vitamins and
minerals.
 Increased, by 55 percent, the detection of tuberculosis and successfully
treated 85 percent of all cases reported in 314 remote villages.
 Trained more than 20,000 health workers to treat childhood diseases from
2007 to 2012.
 Contributed to an increase in the proportion of children vaccinated against
diphtheria, whooping cough and tetanus to 88 percent and against measles to
86 percent.
 Helped increase the proportion of births attended by health workers by 5
percent (to 34 percent).
 Distributed anti-malarial bed nets to households in malaria-prone areas,
maintaining a rate of 100 percent coverage.
Food security
 Supported the Productive Safety Net Program, a cash-for-work program that
helped feed 7.6 million people while at the same time addressing underlying
causes of food insecurity with construction of soil conservation structures
and tree planting.
 Trained 3,274 health workers who contributed to improving the health and
nutritional status of pregnant and breastfeeding women and of 1.5 million
under-five children.
CIDA-Funded Projects in Sub-Saharan Africa – by
Country and in Aggregate:
See “ Project Browser” CIDA Projects in Africa
Recent shift by Canada away from Africa in
Aid Allocation and towards Latin America?
- With lots of rhetoric but not much action;
Rationale?
Unclear
9. Problems of Aid “Quality”
• Predictability and volatility
– During 2001-03 the gap between commitments
and disbursements exceeded 2% of GNI for 35
countries
• Conditionality
• Coordination: a problem
– On average, a country in SSA dealt with more than 30
donors in 2002
– In 2002 Senegal hosted over 50 World Bank missions
– In 2003 Zambia hosted 120 donor missions
7. Some Specific Issues:
•
Allocation of Burden among Donors
•
Allocation of Aid among Recipients
•
Executing Agencies: IFIs, Bilateral, Civil
Society Organizations?
• Food Aid: Impact on Domestic
Agriculture
• Co-ordination of Aid Programs
• Aid, Human Rights and "Bad" Political
Regimes
• The tying of aid:
– Why “Tie” Aid?
– Effects of “Tying”
– Positive Effects of “Tying” ?
– Solutions?
What can we realistically expect development assistance to
accomplish?
Recall what can go wrong:
1. Aid may “ratify” counter-productive policies
2. “Dependency Welfare Syndrome”: Recipient country effort
may be reduced
3. Donors priorities may dominate
4. Inappropriate donor influence
5. May permit recipient country to shift resources to other
undesirable areas
6. Aid volatility may damage recipient
7. Appreciation of exchange rate may block exports, increase
imports, & economic diversification
8. Discretionary & unearned funds for government may
encourage & facilitate corrupt practices
9. May support dictatorships and human rights violations
Conclude:
• Aid alone can not achieve sustainable
development
• A useful support for domestic or national
efforts.
• Responsibility rests with developing countries
themselves, not aid donors
• Perhaps neither “sufficient” nor
“necessary” but useful.
Other factors are vital:
• Governmental commitment to development
•
•
•
•
objectives;
Reasonably incorrupt government
Equity orientation of public policy
Sound economic policies to strengthen and
sustain an indigenous economic foundation
An “enabling environment” so that people can
improve their own situations for themselves
(e.g. re the informal sector, micro-credit ….”
Question: Is representative democracy a
necessary precondition or element?
10. How Can Development Assistance Be
Improved?
1. Increase the Quantity of Development
Assistance?
2. More grants & fewer loans
3. Link Aid More Directly to Need?
4. Further Debt Service Reductions?
5. Donor co-ordination via “consortium
technique
But recall that aid is no panacea and also
creates additional problems and stresses
Can More Aid be “Absorbed” or
Used Effectively?
 Would it lead to a collapse of domestic effort
(e.g. taxation; F. Xch. earnings etc.)?
 Would it promote “Dutch Disease”
 Would it sap indigenous efforts and initiatives
 Could it be used effectively?
 Would it permit increased corruption?
 Would donor priorities take over?
 Would high levels of aid institutionalize
dependence?
10. How Can Development Assistance Be
Improved? Continued:
For the Donors: Improve the “Quality” of Aid
1. A “Partnership” philosophy and approach
2. Orchestrate programs to avoid chaos,
Use a “consortium” approach
3. Reduce administrative burdens placed on recipient
governments
4. Minimize aid volatility & unpredictability
5. Reduce the tying of aid to donor suppliers
6. Increase untied budget support? Increased
“Program Aid not Project Aid”
7. Emphasize capacity building
How Can Development Assistance Be
Improved? Continued:
(b)
for the Recipients:
– Pursue wise, equitable and effective
development strategies
– Make a major domestic effort
– “Take Charge” & “Own” the Program
– Improve budget management and accountability;
combat corruption;
– Ensure effective management;
– Avoid currency appreciation due to aid inflows
(“Dutch Disease”)