Aid: shaping the mosaic
By Fonju Ndemesah
In the article, ‘Moving on Slippery Grounds: Aid Defined’, we already explained the difficulties one faces when trying to define aid. The lines below will endeavor to bring together the various concepts used by analysts and development practitioners. Bringing together the various aspect of the aid discourse will go a long way to free many from the simplistic reading of aid as a benevolent gesture from developed countries to ease the poverty in developing countries.
It is clear to any keen observer of the aid business that the line that separates the key forms of resource transfer: grants, loans, private investment etc., is blurred; It is not often very easy to separate a Bilateral from a Multilateral aid, a food aid from an aid to a friendly country, a military technical support from aid to push certain egoistic interests.
Hans W. Singer and Javed A. Ansari in Rich and Poor countries see the transfer of resources from rich to poor countries in the form of aid as a continuum. They posit that “at one extreme may be placed the government loan at 8 percent repayable in hard currency, which has a zero or negligible grant element. At the other extreme may be placed the unconditional gift by a rich government or Oxfam to the government of a Least Developed Country (LDC) without any obligation or strings attached; in this transaction the aid element, or ‘grant element’, is close to 100”. [i]
In between these extremes traced by Hans W. Singer and Javed A. Ansari, one can point an unlimited form of aid which are sometimes interconnected. Let’s look at some of these aspects that one discovers when one goes beyond the simplistic vision of aid.
Bilateral and multilateral aid
“Multilateral organizations are international institutions with governmental membership. They include organizations to which donors’ contributions may be reported, either in whole or in part, as multilateral ODA as well as organizations that serve only as channels for bilateral ODA” (OECD, 2010).
At first sight, the distinction between multilateral and bilateral aid seems very obvious: Multilateral aid comes from International institutions meanwhile bilateral aid are from one country to the other. Beyond the above simplistic definition, when one goes deep into understanding the distinction, thinks become more complicated. In fact, many bilateral aid are channeled through multilateral platforms (consortiums, consultative groups). Then we have some aid considered multilateral which are not extended by institutions such as the World Bank, or UN agencies, but by regional development banks.
Furthermore, when aid is from, for example, France to Cameroon, Senegal and Gabon, in this case, despite the fact that the recipients are more than one, it is still considered bilateral aid. Hans W. Singer and Javed A. Ansari in their analysis of the aid mechanism concluded that differences between ‘multilateral and bilateral aid arises in the criteria for allocating aid among different recipient”.[1] Most often, bilateral aid is influenced by the donor’s political interests; meanwhile the multilateral aid is oftentimes used by the superpowers to foster their political intentions.
Another dichotomy to put in mind when trying to understand aid is to know whether the so call aid is Hard or Soft. Being able to classify the transfer of resource in one of these categories will go a long way to clarify whether the latter can really be termed aid.
Soft aid can be regarded as aid allocated without payment obligation; it is often allocated based on needs. On the other hand, hard aid is one that most often comes with conditions, need is rarely the case – allocation is most often based on effectiveness and implicit political intentions. For example, the debt burden of most developing countries went crescendo partly as a result of hard aid. The latter was given to most countries without considering repayment capacities. Hans W. Singer and Javed A. Ansari (1992) posit that, “In the 1940s and 1950s, when underdevelopment was thought of merely as a state of capital scarcity, it was assumed that all money obtained as foreign assistance by a poor country would be spent entirely on investment and capital imports….Recently it has been claimed that foreign aid and investment contribute very little in the way of additional saving”.[ii]
The hegemonic development thinkers of this period were blinded by their econometric vision of development as growth – forgetting that growth without distribution coupled with the adjustments of social inequalities will produce limited or no concrete change. In fact, many African countries are still living under the burden of debts.
Another dichotomy that we need to look at is that of Programme Aid and Project Aid. Project Aid is aid tied to the execution of a specific project. According to the foreign policy glossary, Programme aid is financial assistance specifically to fund (i) a range of imports, or (ii) an integrated programme of support for a particular sector, or (iii) discrete elements of a recipient’s budgetary expenditure.[iii]
Tied and Untied Aid: Tied aid is assistance that is linked to a condition such as using the aid support to buy goods from the donor country only; and untied aid is freed from these obligation.
Talking about aid architecture, the OECD points at: Aid Fragmentation (Fragmentation occurs when there are too many donors giving too little aid to too many countries), aid darlings (where aid overlaps), aid orphans (where aid is lacking), Country Programmable Aid (CPA is the portion of aid donors programme for individual countries)
The above architecture clearly portrays the various concepts that come into play when we talk about aid. The aim is to help go beyond the simplistic reading of any resource transfer to a developing country as aid. Trying to know whether the aid is tied or untied, program or project aid, will go a long way to help understand what is really aid (100% grant) and what is not. In addition, it will help the reader to understand what resource transfer can really help if properly used.
Sources
[i] Hans W. Singer and Javed A. Ansari (1992) Rich and Poor Countries, London: Routledge
[ii] Ibid
[iii] http://www.foreignpolicydigest.org/inside-fpd/glossary/
In the article, ‘Moving on Slippery Grounds: Aid Defined’, we already explained the difficulties one faces when trying to define aid. The lines below will endeavor to bring together the various concepts used by analysts and development practitioners. Bringing together the various aspect of the aid discourse will go a long way to free many from the simplistic reading of aid as a benevolent gesture from developed countries to ease the poverty in developing countries.
It is clear to any keen observer of the aid business that the line that separates the key forms of resource transfer: grants, loans, private investment etc., is blurred; It is not often very easy to separate a Bilateral from a Multilateral aid, a food aid from an aid to a friendly country, a military technical support from aid to push certain egoistic interests.
Hans W. Singer and Javed A. Ansari in Rich and Poor countries see the transfer of resources from rich to poor countries in the form of aid as a continuum. They posit that “at one extreme may be placed the government loan at 8 percent repayable in hard currency, which has a zero or negligible grant element. At the other extreme may be placed the unconditional gift by a rich government or Oxfam to the government of a Least Developed Country (LDC) without any obligation or strings attached; in this transaction the aid element, or ‘grant element’, is close to 100”. [i]
In between these extremes traced by Hans W. Singer and Javed A. Ansari, one can point an unlimited form of aid which are sometimes interconnected. Let’s look at some of these aspects that one discovers when one goes beyond the simplistic vision of aid.
Bilateral and multilateral aid
“Multilateral organizations are international institutions with governmental membership. They include organizations to which donors’ contributions may be reported, either in whole or in part, as multilateral ODA as well as organizations that serve only as channels for bilateral ODA” (OECD, 2010).
At first sight, the distinction between multilateral and bilateral aid seems very obvious: Multilateral aid comes from International institutions meanwhile bilateral aid are from one country to the other. Beyond the above simplistic definition, when one goes deep into understanding the distinction, thinks become more complicated. In fact, many bilateral aid are channeled through multilateral platforms (consortiums, consultative groups). Then we have some aid considered multilateral which are not extended by institutions such as the World Bank, or UN agencies, but by regional development banks.
Furthermore, when aid is from, for example, France to Cameroon, Senegal and Gabon, in this case, despite the fact that the recipients are more than one, it is still considered bilateral aid. Hans W. Singer and Javed A. Ansari in their analysis of the aid mechanism concluded that differences between ‘multilateral and bilateral aid arises in the criteria for allocating aid among different recipient”.[1] Most often, bilateral aid is influenced by the donor’s political interests; meanwhile the multilateral aid is oftentimes used by the superpowers to foster their political intentions.
Another dichotomy to put in mind when trying to understand aid is to know whether the so call aid is Hard or Soft. Being able to classify the transfer of resource in one of these categories will go a long way to clarify whether the latter can really be termed aid.
Soft aid can be regarded as aid allocated without payment obligation; it is often allocated based on needs. On the other hand, hard aid is one that most often comes with conditions, need is rarely the case – allocation is most often based on effectiveness and implicit political intentions. For example, the debt burden of most developing countries went crescendo partly as a result of hard aid. The latter was given to most countries without considering repayment capacities. Hans W. Singer and Javed A. Ansari (1992) posit that, “In the 1940s and 1950s, when underdevelopment was thought of merely as a state of capital scarcity, it was assumed that all money obtained as foreign assistance by a poor country would be spent entirely on investment and capital imports….Recently it has been claimed that foreign aid and investment contribute very little in the way of additional saving”.[ii]
The hegemonic development thinkers of this period were blinded by their econometric vision of development as growth – forgetting that growth without distribution coupled with the adjustments of social inequalities will produce limited or no concrete change. In fact, many African countries are still living under the burden of debts.
Another dichotomy that we need to look at is that of Programme Aid and Project Aid. Project Aid is aid tied to the execution of a specific project. According to the foreign policy glossary, Programme aid is financial assistance specifically to fund (i) a range of imports, or (ii) an integrated programme of support for a particular sector, or (iii) discrete elements of a recipient’s budgetary expenditure.[iii]
Tied and Untied Aid: Tied aid is assistance that is linked to a condition such as using the aid support to buy goods from the donor country only; and untied aid is freed from these obligation.
Talking about aid architecture, the OECD points at: Aid Fragmentation (Fragmentation occurs when there are too many donors giving too little aid to too many countries), aid darlings (where aid overlaps), aid orphans (where aid is lacking), Country Programmable Aid (CPA is the portion of aid donors programme for individual countries)
The above architecture clearly portrays the various concepts that come into play when we talk about aid. The aim is to help go beyond the simplistic reading of any resource transfer to a developing country as aid. Trying to know whether the aid is tied or untied, program or project aid, will go a long way to help understand what is really aid (100% grant) and what is not. In addition, it will help the reader to understand what resource transfer can really help if properly used.
Sources
[i] Hans W. Singer and Javed A. Ansari (1992) Rich and Poor Countries, London: Routledge
[ii] Ibid
[iii] http://www.foreignpolicydigest.org/inside-fpd/glossary/