National Development Agencies & Bilateral Aid
The providers of development assistance are usually referred to as Donors
Bilateral aid refers to aid from government to government. Usually this type of aid is directed
towards developing nations
Multilateral aid refers to aid being funded to various multilateral organizations like the World
Bank, or UN agencies like UNICEF
Official Development Assistance refers to the flow of official financing administered with the
objective to promote the economic development and welfare of developing countries (by
ODA financing can be provided in the form of a grant (non reimbursable donation) or a loan
OVERVIEW OF AID DONORS
The Development Assistance Committee (DAC) is a club which is mostly joined by industrialized
countries who provide foreign aid
o These members meet regularly to breakdown their aid figures
This committee is a branch to the Organization for Economic Co-operation and Development
Not all OECD members belong to the DAC
Loans or investments do not generally qualify as ODA
The 24 member nations of the DAC account for 95% of global ODA
Absolute figures do not tell us how generous countries are when measured against their
capacity to provide assistance. Relative generosity is normally calculated by dividing ODA by
Gross National Income, GNP or GDP which provide almost the same numbers
In 1970, the UN general assembly passed a resolution where atleast donors would provide 0.7%
of their GNP in ODA by 1975, but failed. In 2008 they collectively contributed 0.31%
To help the less fortunate
Self interested motivation – “aid is primarily a means to pursue other foreign policy objectives,
including diplomatic, commercial, and security interests.”
Aid programs can also serve to raise the donor’s profile internationally, providing it with
prestige Tied Aid is a type of aid where the donor country also benefits economically from the aid. This
happens as the receiving country has to buy goods and services from the donor country to get
the aid in the first place.
Under some conditions, foreign aid can also be considered an obligation. For example, if a
developing country cannot afford to provide public schools to its citizens, then donors must
assume the obligation to ensure these rights.
The United States Agency for International Development (USAID) and the Millennium Challenge
Corporation (MCC) are the two main aid agencies in the US.
In Canada, the Canadian International Development Agency is responsible for distributing most
of Canada’s ODA
CIDA operates in more than 100 countries
The OECD maintains a list of countries and territories that qualify as recipients of ODA. Once
countries reach a certain economic stability, the can be removed from the list.
Geographically, sub-saharan Africa receives more foreign aid than any other region
Afghanistan and Iraq has had a increase in ODA since 2000.
The top recipients of foreign aid vary from year to year
Most ODA dependant countries: Liberia, Burundi, Federated states of Micronesia, Solomon
Civil wars can prevent foreign aid from translating into economic development
Current trends and controversies
Almost all donors are taking measures to greatly reduce or eliminate tied aid
Grants are more preferable than loans
Loans can lead to an extremely high rate of indebtedness in countries
Debate: Should one focus on fighting poverty or on promoting economic growth
“For a long time, (1950 and 60s) the argument was made that economic growth would
eventually trickle down to help the poor”. But then the pendulum swung the other
Millennium Development Goals briefly mentioned
Should resources go to the poorest countries since they need it the most of go to the
well governed countries where the aid would be used more effectively.
“increasingly, donors are coordinating their aid, channelling funds through joint
programs and working more closely with recipient governments - Bilateral Aid: aid that is given directly to developing countries by donors, also known as
government-to-government aid, that is channeled through multilateral organizations
like the WB or UN agencies like UNICEF (multilateral aid).
- Two important terms to remember are foreign aid and official development assistance
(ODA) –these two are NOT synonymous.
- ODA refers to flows of official financing administered with the promotion of the
economic development and welfare of developing countries as the main objective.
o Funding must be provided by governments and its main purpose must be
improving economic or social well-being in developing countries.
o Funds or donations from individuals or Northern NGOs, even military aid, or
export credits that are mainly meant to promote the sale of goods from the
donor country do not count as ODA.
o Aid to countries that are not classified as developing does not qualify as ODA and
is usually referred to as official assistance.
o ODA can be provided in the form of a grant (a non-reimbursable donation) or a
loan (to be repaid)
o Private investment or commercial loans are excluded because the interest rates
must be lower than those offered in the market etc.
o ODA DOES include administrative costs.
- Development Assistance Committee - Most countries that provide foreign aid belong to
a donor’s club known as the (DAC) of the OECD, whose headquarters are in Paris.
- Although absolute figures in US dollars immediately reveal who the most and the least
significant players are in the area of foreign aid, they tell us little about how generous
the countries actually are when measured against their capacity to provide assistance.
o Relative generosity is normally calculated by dividing ODA by GNI, or DGP, which
provide almost identical figures.
o In 1970, the UN General Assembly passed a resolution whereby donors would
provide at least 0.7 percent of their GNP in ODA by 1975 – donors as a whole
failed miserably to reach that target.
- Donor Motivations/ reasons why donors provide development assistance:
o A primary justification is that just as social programs provide assistance to poor
people at home, ODA should focus on helping poor people in other countries
have access to food, housing, health care, education, and other basic necessities
o A donor can be motivated by charity, often inspired by religious beliefs
(sometimes viewed as paternalism), or by solidarity, a more left-wing concept
that frames actors in the recipient country as equal partners. o A more self-interested motivation is widely shared, especially among
government officials not directly involved in aid delivery, including those working
in national defense, foreign affairs, and international trade – for them, aid is
primarily a means to pursue other foreign policy objectives, including diplomatic,
commercial, and security interests.
Under this log