The future of aid: new ways, new means

Introduction

Clearly the adoption of the United Nations Millennium Development Goals (MDGs) provided a unified and rallying reason for development actors to focus their efforts. Before then, there were too many activities termed as “development” but with no specific ‘universal’ objectives. The MDGs became the gold standard for both poor countries working towards development and rich countries assisting poorer countries. Non-governmental organizations, both local and international; civil society organizations; private sector players and of course everyone had these goals as the yardstick to measure development efforts.

At the time the MDGs were set and adopted, 2015 seemed far away. In some respects the goals articulated seemed modest, but some thought they were too ambitious. With about three years to 2015, time has shown that development outcomes are not easy to achieve, whether modest or ambitious.

Commitments to the MDGs have risen over the years. Five years into its adoption, further commitments were made in Rome, Marrakech and Paris to deepen aid effectiveness in the face of rising volumes of aid and development resources. The meeting in Accra in September 2008 reaffirmed commitments to the MDGs and the declarations made earlier by endorsing the Accra Agenda for Action (AAA). The Busan High Level Forum 4 presents the last opportunity before 2015 and should provide the forum to generate new and increased commitment to earlier principles. It should bring more development actors on board and clarify the future of aid and development.

Broadly speaking, the MDGs have made several impacts on the business of development. Development efforts have become more focused and enhanced based on these goals. Global poverty levels are declining, ways of providing aid have improved and many more benefits have accrued from this. The challenges faced while developed and developing countries worked to achieve the MDGs should provide the basis that will shape the future of aid and development.

It is important to note, however, that the goals envisioned in the MDGs as well as the actors in development have changed over the years. Moreover, changing times, issues such as climate change, the global financial crisis, rising inequality have emerged. This means that new challenges require new measures.

THE FUTURE OF AID

Eventually Less Aid

Robert Zoellick, World Bank President has recently said that “aid is not for life” and that is true. The future of effective aid should be to reduce developing countries’ dependence on aid. This vision is important and may sound ambitious too. But having such a vision will focus on strategies that would eventually wean countries from being dependent on aid. It will be a great idea to have Millennium Development Goal after 2015 to reduce the number of countries depending on aid by 2030. This would allow beneficiary countries to work at maximizing the aid they receive. Developing countries after several years of assistance should have built the capacity to generate and manage their resources Of course some developing countries could receive aid to mitigate natural disasters and economic shocks from time to time.

Different sources

There is currently an emerging trend and this will likely persist in the future that remittances will play in crucial role as a source of aid. Remittances have bridged the migration and development nexus and gives credence to the positive effects of globalization-easy flow of information and people across borders. Remittances are used by recipients to address basic needs such as food, clothing, shelter, healthcare and more, thereby contributing to poverty reduction. The World Bank estimated that worldwide remittances reached $404 billion at the end of 2010. Developing countries had close to 75% of these remittances. More revealing is the fact that remittances constituted about 25% of GDP of some developing countries.

The development of global financial architecture should facilitate more flow of remittances. Also as the cost of sending remittances reduce, most people who send remittances through informal channels will begin to use formal ones. This will be only one aspect of the solution though; there is the need to improve rural finance services and telecommunication infrastructure especially at the rural level to ensure that remittances reach beneficiaries in time.

 Another set of MDGs after 2015

The future of aid should be underlined by another international and broad based development agenda like the MDGs to provide a harmonized reference framework. Such an agenda should include the goals that will not be achieved by 2015. It should be widely adopted and monitoring mechanisms enhanced.

Productive Sectors to complement MDGs

Development is a complex phenomenon and a process rather than a destination. Some countries which were termed as developed or developing have become less developed over time, while others have made significant progress towards development. These complexities are highlighted by the fact that in spite of the additional resources committed to development, certain outcomes have been elusive. Climate change, natural disasters, wars etc have all impacted negatively on development efforts.

If the achievements of the MDGs are to be made sustainable, then, the focus of future aid should be to invest in as much social sectors as productive sectors such as infrastructure (road, energy, irrigation).

Developing basic infrastructure will compliment the gains in for example education, hunger and health. For example a rural clinic can help prevent the incidence of communicable diseases. Also the availability of electricity in a village would help preserve vaccines, save a woman delivering her baby in the clinic or allow for 24 hour service delivery to the sick in the community. The same also goes for education. The construction of classrooms would improve learning conditions, motivate students to go to school and the benefits would be countless.

Deal with Corruption

But for corruption, the impact of aid and many development efforts could have been more. Corruption is defined by Transparency International as “the use of entrusted power for private gain”

The presence of aid has meant increased public expenditure. Public expenditure depends on public financial management systems; therefore a weak public financial management system increases the propensity for corruption which then impacts development outcomes. Moreover public funds have been the main source of procuring public goods and services, but in many developing countries, public funds have become the kitty of the people to whom it has been entrusted. Since many donors are adopting budget support and programme-based approaches to aid delivery many developing country systems especially budgeting and procurement are relied on. Weak public financial management systems have created opportunities for diversion of public funds and donor aid.

There is a high correlation between the level of corruption and the level of development in a country. Though available studies indicate an indirect effect of corruption on poverty, it is acknowledged that corruption has consequences that produce poverty. In the future countries that would have reduced poverty, improved living conditions and bridged inequality would have brought corruption to the minimum. Aid and other public resources will be applied to their intended purpose for the benefit of the wider population. This is the reason why aid must use and strengthen country systems to reduce corruption.

Strengthen recipient country accountability and transparency

So far aid accountability has been from donors to their home constituents. That is good.

The problem with such a focus however has been that donor country constituents seem to determine the where, how and when of their countries’ aid, rather than the countries that receive aid. A second most critical aspect of accountability is; recipient countries must be more accountable to their citizens too. Since the systems of governance in many developing countries are nascent, there should be a focus on institutional strengthening to foster accountability.

Mutual learning and development agency capacity

Looking ahead and even currently, the models for economic development have changed. A lot more southern hemisphere countries have emerged out of poor economic states into fledging economies with some even lending support to countries to develop. This is remarkable and must be encouraged. The future means increased south-south cooperation in almost every front. The reason for this type of cooperation is that several southern hemisphere countries have the same social and economic characteristics. They, providing peer review and models could be a major encouragement to countries in similar situations.

Already the one-size fits all approach to development adopted in the past has failed to provide the one-size solution. In light of this, developed countries in the north should be inclined to learn from developing countries and avoid the prescriptive approach. More southern hemisphere countries should join in providing development assistance especially those from Asia who have over the decades moved millions of their people out of poverty. This will not only provide motivation to other southern hemisphere countries coming out of poverty, but developed countries in the south would provide ready and useful lessons for development.

Participation of the private sector

More and more actors in development are emerging. No one should be left out. The private sector is one such actor. It is a very important actor with very strategic approaches. It has enormous resources and experience too which can be taken on in development assistance. In developing countries in particular, the private sector is termed the “engine of growth”. However this engine is very much challenged. Poor regulation, over-regulation, lack of access to capital and a myriad of challenges faces the private sector in developing countries. Meanwhile, foreign direct investment in developing countries makes a great difference too. The future of aid should draw private capital for investment in developing countries.

Conclusion

In the future, the gains of development achieved so far must be maintained and built on. No one should be left out. The world must continue to work together to tackle the common challenges it faces. Every resource private, public or otherwise should be marshaled; every country, rich, poor, underdeveloped, developing or developed has a role to play.

By Dode Seidu
Email: [email protected]

References:
1“Beyond Aid” – Speech by World Bank Group President Robert B. Zoellick delivered on 14 September 2011 at George Washington University.

2Is Aid Effective? By Mark  McGillivray (year not known)

3 Corruption and Poverty, a review of recent literature by Eric Chetwynd, Frances Chetwynd, Bertram Spector, Jan 2003 available here.