Development Assistance: the African Context

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Development Assistance the African Context

• ECON 3510, Carleton University
• June 10, 2014
• Arch Ritter
• Source Class notes Collier Chapter 9

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• Agenda
• Definition What is "Aid
• Historical Evolution
• Donor Motives for Providing "ODA"
• Ethical Justification
• What Can "Aid" Accomplish? The Positives
• Possible Negative Impacts
• Magnitudes, and Patterns
• Development Assistance to Africa
• Problems of Aid Quality
• How Can Development Assistance Be Improved?

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• 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

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• 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.

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• 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

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• 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

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• 4. Ethical Justification
• Should High Income Countries Provide Aid to
  Low-Income Countries?
• First step towards world fiscal federalism

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• 5. What can Aid Accomplish?
• Aims at Development not Welfare
• The potential positives of aid
• Gap-Filling Role
• foreign exchange,
• tax revenues,
• technological,
• managerial
• entrepreneurial gaps
• 2. A Catalytic Role?

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• 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?

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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

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• 6. Possible Negative Impacts of ODA
• May permit recipients to pursue
  counter-productive or foolish policies
• May support an ineffective, counter-developmental
  and corrupt government
• May Promote a Dependency Welfare Syndrome?
• Leadership responsibility may be abdicated by
  national governments and/or taken by foreign aid
  agencies, NGOs ..
• May deform domestic policies to accommodate
  priorities of donors

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• Possible Negative Impacts of ODA, contd
• 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

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• 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

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Development Assistance to Selected Countries
of Africa
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 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 8.2 11.2 34 33 44 29.9 41.9 60.4
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Aid is not always given to the poorest countries
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7. Magnitudes and Patterns Donor Efforts
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Magnitudes and Patterns Donors Efforts
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• 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.

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• 8. Development Assistance to Africa

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Africa receives about 50 per cent of total aid
0.40
0.36
140
0.35
0.33
120
0.30
0.30
0.26
100
ODA as a
0.25
of GNI
80
(left scale)
of GNI
ODA (2004 billion)
0.22
0.20
Total ODA
60
(right scale)
0.15
40
0.10
Total ODA to
20
0.05
Africa
(right scale)
0.00
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source OECD/DAC Statistics (2006). DAC Members
ODA 1990-2004 and simulations to 2006 and 2010,
based on Monterrey and subsequent commitments
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ODA increases have been driven by debt relief and
emergency assistance
Total net official development assistance (ODA),
non-aid official flows and private flows in
Africa, 1993-2004. (Source OECD/DAC)
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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
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Macroeconomic Indicators, Some African Countries
Liberia Kenya Ethiopia Tanzania Sierra Leone
Gross Investment of GDP 16.4 19.4 10,2 16.4 14.7
Foreign Direct Invest t of GDP 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, of GDP n.a. 18.9 10.2 n.a. 10.8
UNDP. HDR, 2010
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DFAIT-Development (formerly CIDA) Countries of
Focus in Sub-Saharan Africa
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2007-2008
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• 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

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• 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.

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• CIDA-Funded Projects in Sub-Saharan Africa by
  Country and in Aggregate
• See Project Browser CIDA Projects in Africa

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Recent shift by Canada away from Africa in Aid
Allocation and towards Latin America? - With
lots of rhetoric but not much action Rationale?
Unclear
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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

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• 7. Some Specific Issues
• Allocation of Burden among Donors
• Allocation of Aid among Recipients
• Executing Agencies IFIs, Bilateral, Civil
  Society Organizations?

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• Food Aid Impact on Domestic Agriculture
• Co-ordination of Aid Programs
• Aid, Human Rights and "Bad" Political Regimes

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• The tying of aid
• Why Tie Aid?
• Effects of Tying
• Positive Effects of Tying ?
• Solutions?

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What can we realistically expect development
assistance to accomplish?

• Recall what can go wrong
• Aid may ratify counter-productive policies
• Dependency Welfare Syndrome Recipient country
  effort may be reduced
• Donors priorities may dominate
• Inappropriate donor influence
• 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
• May support dictatorships and human rights
  violations

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• 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.

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• 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?

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• How Can Development Assistance Be Improved?
• Increase the Quantity of Development Assistance?
• More grants fewer loans
• Link Aid More Directly to Need?
• Further Debt Service Reductions?
• Donor co-ordination via consortium technique
• But recall that aid is no panacea and also
  creates additional problems and stresses

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• 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?

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• 10. How Can Development Assistance Be Improved?
  Continued
• For the Donors Improve the Quality of Aid
• A Partnership philosophy and approach
• 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

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• 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)