TO DETERMINE THE INDEX ON AID EFFECTIVNESS.RESEARCH BASED ON AID EFFECTIVNESS AND HOW TO MEASURE AID EFFECTIVENSS SUCCESFULLY, POLICI-AGENT THEORY. DR. ELIJAH MUNYIA PROJECT SUBMITTED FOR THE SCHOOL OF SOCIAL SCIENCES AND HUMANITIES ?CONTENTSABSTRACT………………………………………………………………. 2CHAPTER 1INTRODUCTION TO FOREIGN AID……………………………….
.. 3BACKGROUND INFORMATION ON FOREIGN AID……………… 4PURPOSE OF STUDY………………………………………………….
. 6CHAPTER 2LITERATURE REVIEW………………………………………………. 7CHAPTER 3OBJECTIVES…………………………………………………………… 91. Objective 1What countries are leading aid effectiveness?2.
Objective 2What aid utilization practice is the most effective?CHAPTER 4METHODOLOGY……………………………………………………… 24CHAPTER 5ANALYSIS & CONCLUSION………………………………………… 25RECOMMENDATIONS……………………………………………….. 31REFERENCES………………………………………………………….. 33ABSTRACTForeign Aid can be defined as the types of assistance given from one country to another. Foreign aid has been considered the allocation of services, goods, or capital from a donor country or international organization, for the recipient country or its citizenry.
Aid comes in different forms it may be given as military assistance, humanitarian assistance, economic management, political policy advice or social construction. Foreign aid conducts the transfer of economic resources or supply of products such as medical equipment or information or food. This study is based on the aid effectiveness of foreign aid agencies in association to best aid practices based on the five dimensions; transparency, fragmentation, ineffective aid channels, absorptive capacity and over-head costs. CHAPTER ONE1.0 INTRODUCTION TO FOREIGN AIDThe idea that those who have should share with those who do not is inherent in most societies, when considering how controversial this topic is, it begs to wonder why aid is so complicated. Why are questions arising and issues arising when aid is considered? Is aid a bad thing or is it a good thing? Analyzing the functions of aid, aligns with the interests and aims of a state receiving aid, also some conditions do come aligned with the aid being given. This paper aims to justify that aid effectiveness index is very valuable especially when distinguishing whether it’s plausible.Understanding the concept that, because aid is being provided is it really doing the job it is specified to do? Discussing conditions that poor states are succumbed to, it’s essential to say that these said conditions could alter how aid is actually spent, conditions such as corruption, civil wars, inequality, famine, political instability, and social gaps.
These all play a role on what the interests of that state are; which some are determined as priority on a scale. It’s noted that poor countries have needs that have been caused by some of these conditions, these poor countries have attracted a significant amount of aid, and this considerably comes with sovereign instability. It’s noted that Western governments have attempted to work with the aid agencies of certain poor states, but hit strong limitations that were accompanied by the lack of capacity and seriousness of these poor states.Considering that aid is a huge part of the international system, analyzing the concept of aid allows us to manage and comprehend how aid really works. Keeping in mind that this paper is about the positive outcomes many developing states should achieve and how effective aid is when it is transcended from the international system, from multilateral organizations which include the World Bank, United Nations International Children’s Emergency Fund (UNICEF), World Food Program (WFP), and from Bilateral organizations which basically are relationships between states, usually regarded as more advantaged; economically, politically and socially.
In contrast, foreign aid comes in different fractions, which all seem to target different problems found within least developed countries (LDCs). Coming up with sustainable development goals has become a global initiative to making the global village livable for the foreseeable future. Understanding that there are generations still to come, it’s important to create an environment that caters to all who inhabit the world. Already issues have arisen on climate, on economy, and in politics.
Knowing that foreign aid plays a significant role in how developing states develop, begs to questions why funded poor countries are is still on the back burner.1.2 BACKGROUND INFORMATION ON FOREIGN AIDForeign aid has been considered the allocation of services, goods, or capital from a donor country or international organization, for the recipient country or its citizenry. Aid comes in different forms it may be given as military assistance, humanitarian assistance, economic management, political policy advice or social construction. Foreign aid conducts the transfer of economic resources or supply of products such as medical equipment or information or food.Official Development Assistance (ODA) represents a common type of foreign aid; it is associated with promoting development and diminishing poverty.
When considering the ODA, its funding is usually generated through the Organization for Economic Cooperation and Development (OECD), which has the Development Assistance Committee (DAC); The DAC includes western European countries, the United States, Canada, Japan, Australia, and New Zealand. Other providers of significant assistance include Brazil, China, Iceland, India, Kuwait, Poland, Qatar, Saudi Arabia, South Korea, Taiwan, Turkey, and the United Arab Emirates. (Britannica)Aid comes in forms of grants, or loans (credits), ODA is direct assistance from one state to another, some of the time it is channeled through international organizations (IO) or Non-governmental organizations (NGO), to name a few these would include; the World Bank, International Monetary Fund (IMF), and the United Nations Children’s Fund (UNICEF).In deeper consideration foreign aid comes alongside the personal interests of a state, where states before they consider the aid being received they crucially go over the terms and conditions associated with accepting the aid. It could be the interests at hand involve (1) the security of the state where the state would donor aid so as to prevent approachable governments from plummeting under the influence of hostile governments or (2) achieving the states diplomatic goals, gaining recognition and support where necessary such as within international organizations to gain majority vote, or used to spread ones (i) language, (ii) culture or (iii) religious beliefs (3) the need to monitor elections aiming to create stable governments, (4) or the need to curb the production and export of illegal drugs, not only that aid facilitates the gap when (5) disasters happen and states are not fully equipped to handle such atrocities on their own these would include; (i) famine, (ii) disease (HIV), (iii) war (civil wars).Considerably, foreign aid dates back to the 18th , 19th, and 20th century, mostly what existed was military assistance, during a time when war was prevalent, so formulation of allies mattered greatly and encouraged states to share soldiers, equipment, and military strategy. European powers dominated during the time and colonized majority of the world, as so they provided large amounts of monies to improve infrastructure with an aim to strengthen the colony’s output. However, foreign aid comes from a long history of international compliance and regulation, the back bone of foreign aid is associated with benchmarks that began earlier in the century such as Marshall Plan formally the European Recovery Program, (April 1948-December 1951), basically sponsored by the United States aid to facilitate rehabilitation on the economies of 17 western and southern European countries to help mend and stabilize conditions in which democratic institutions have the ability to thrive or the United Nations that brings states together so as to discuss issues and solutions that occur within their territories, or the IMF and the World Bank.
These international organizations play a big role in encouraging states to develop and to do so in an efficient and sustainable way. The roles of these organizations facilitated the allocations of funds, qualifications of recipients, and the impact the aid makes considering humanitarian aid, usually the impact is almost immediate as this kind if aid provide relief for instances such as famine, or a natural disaster, which the damage is primarily visible; such aid comes with no self-interest attached.1.3 PURPOSE OF THIS STUDYThe purpose of this study is to show that foreign aid given to the developing states has considerable value. These countries are noted to have gone through major developmental achievements over the years. This study is to aid other known works on showing the extent to which foreign aid makes significant logic towards the LDCs and it facilitates the political, economic and social aspects of a number of developing countries.
These impacts have been criticized due to the limitations foreign aid faces when regarding aid effectiveness. This study chooses to emphasize on the extensiveness as to which foreign aid has reached, by looking at the four dimensions of aid; fragmentation, selectivity, ineffective aid channels, and over-head costs that aid agencies need to consider so achieve good index ratios to signify effective aid.CHAPTER TWO2.0 LITERATURE REVIEWThis paper chooses to study the necessity placed on foreign aid, and whether the foreign aid contributes to growth in LDCs. Roche (1999) According to Roche it’s apparent that something as extensive as foreign aid needs some level of inspection, so as to know and navigate around the particulars that involved donor countries and receiving countries. Under the reports made by UNDP and World Bank annual reports, do record an marked improvement in a number of indicators of human well-being, the scale of world poverty remains an evident scandal. Telling that in many parts of the world inequality, insecurity, and conflict keep growing at alarming rates. Over the recent years critiques have risen on the issue of bilateral development and NGOs.
It is noted that there is increasing pressure on NGOs to demonstrate results and the impact of their work. Nonetheless, competition between NGOs is also increasing by the need to grow a large profile and gain valuable press coverage to raise funds to facilitate the advocacy work set ahead. It’s noticed that poor institutional learning and weak accountability mechanisms are characteristic of many NGOs, which leads to the absence of professional norms and standards.
A number of these elements come together creating a vicious cycle, where gaps a created between the rhetoric of agencies and the reality of what they achieve. Not only this, there tends to be a build-up on the skepticism on the value of aid, causing a mistrust between agencies. In major cases support for development aid depends on the public’s belief in its effectiveness, mainly on the fact that the aid achieves its objective, but the difficulty set forth on assessment creates public criticism and attack.Maurits (2011) Take up the white Man’s burden-The savage war of peace-Fill full the mouth of famine,And bid the sickness cease. Rudyard Kipling, 1899Why do countries give foreign aid? Some earnest idealists see aid as a modern form of Kipling’s “white man’s burden’: a worthy, noble, enterprise, aimed at lifting those worse off than ourselves out of poverty. Considerably, every industrialized nation has a foreign aid program, and each of these programs aims to facilitate the development of denizens of the poorest countries. In some donor states the aid program accounts for about 5 percent of the government budget. On the other end of the recipients, ODA accounts for a large share of international capital flowing into less developed countries (LDC).
There is an argument that ideas about the goal and purposes of aid policy shape its formulation and implementation. Different goals for aid result in different policy choices. Aid policy tends to raise questions because it’s not obvious ex ante what the goal of official development assistance ought to be: aid can serve goals from security (fight against terrorism), financial gain (promotion of exports) and humanitarianism (human right acts).Radelet (2003) Under the Bush regime assistance was considered and analyzed carefully to try and understand the variants that play a role in providing aid to developing countries. Noted, that Bush proposed the establishment of the Millennium Challenge Account (MCA), designed as a foreign aid program to provide substantial new foreign assistance to low-income countries that are “ruling justly, investing in their people, and encouraging economic freedom”. The success of the program would bring more fundamental changes to US foreign Assistance policy since the John F. Kennedy era when United States Agency for International Development was created.
The MCA is noted to bring with it the opportunity to improve significantly the allocation and delivery of US foreign assistance programs. The US bilateral assistance has been greatly criticized for its lack of focus and for achieving weak results in the receiving countries, regardless the aid given from the MCA is profound for recipient’s progress.CHAPTER THREE3.0 OBJECTIVES1. What countries are leading aid effectiveness?2. What aid utilization practice is the most effective?3.1: WHAT AID AGENCIES ARE LEADING IN AID EFFECTIVENESS?Table 1: List of aid agenciesBilateral Agencies Accronym Full MeaningAUSAID The Australian Government’s Overseas aid programADA Austrian Development AgencyDGDC Belgian Directorate General for Development CooperationBTC Belgian Technical CooperationCIDA Canadian International Development AgencyDANIDA Development Cooperation Agency of the Danish Ministry of Foreign AffairsGLOBAL.
FINLAND Development Cooperation Agency of the Finish Ministry of Foreign AffairsDgCiD French Dictorate General for International Development CooperationAFD French Development AgencyBMZ German Federal Ministry for Economic Cooperation and DevelopmentGTZ German Agency for Technical CooperationKfW German Development BankHellenic Aid Development Cooperation Agency of the Greece Ministry of Foreign Affairs Irish Aid Irish Development AgencyMOFA Italy Italian Ministry of Foreign AffairsMOFA Japan Japanese Ministry of Foreign AffairsJBIC Japan Bank for International CooperationJICA Japan International Cooperation AgencyLUX-Development Luxemburg Development AgencyMOFA Netherlands Dutch Ministry of Foreign AffairsNZAid New Zealand’s Development AgencyNORAD Norweigian Agency for Development CooperationIPAD Portuguese Institute for Development AidAECI Spanish Agency for International CooperationSECO Swiss State Secretariat for Economic AffairsSDC Swiss Agency for Development and CooperationSIDA Swedish International Development Cooperation AgencyDFID UK Department for International DevelopmentUSAID US Agency for International DevelopmentMCC Millennium Challenge CooperationEuropeAid Co-operation Office for International Aid of the European Commission MULTILATERAL AID AsDB Asian Development BankAfDB African Development BankCARDB Caribbean Development BankEBRD European Bank for Reconstruction and DevelopmentGEF Global Environment FacilityIMF International Monetary FundIBRD International Bank for Reconstruction and Development (World Bank)IDA International Development Association (World Bank)IDB Inter-American Development BankIFAD (UN) International Fund for Agricultural Development (UN)Nordic DF Nordic Development FundWFP (UN) World Food Program (UN)UNDP United Nations Development ProgramUNFPA United Nations Population FundUNHCR United Nations High Commissioner for RefugeesUNICEF United Nations Children’s FundUNRWA United Nations Relief and Work Agency for Palestine Refugees in the Near EastSource; where does the money go? (Easterly & Pfutze 2008)3.1.1 What is aid effectiveness? This chapter is based on understanding aid effectiveness, this is done so by considering the research conducted by important think tanks such as The Brookings Institute and the Center for Development. Think Tanks’ are organizations that facilitate to shape politics through provisions of independent research and managing advocacy in public policy issues.
The research contains expert data and recommendations in the areas that focus on political tactics, the efficiency of the economy, technology and scientific problems, and policy in the social area and legal affairs. Think Tanks are known to be non-profit and others get direct funding from the government as assistance and or from private or corporate donations. They have their reliability secured as they employ highly educated individuals that have the expertise in their fields of study that allows them to write reports, give presentations, create social policies, organize events, and make testimonials to different government committees.This study is set to understand that aid effectiveness is perceived and analyzed in a certain manner, which should show the criteria set to understand aid and its function in the globe.
This angle has been studied before and this objective is set forth to help see how aid should be monitored, at the current moment aid has many aspects and this point of view is aimed at forming at standard criteria on ranking aid. By having a standard ranking it aids us at understanding how effective aid ought to be. So the marking scheme will compose of a number of aspects that this paper is hoping to underline, and these cover what an ideal aid agency would seek to attain such as; transparency which is considered a good aspect as aid agencies are continuously recommending transparency towards recipient governments. To achieve a clear transparent image as an agency it’s noted that this should be aligned with the five dimensions of best aid agency practice; 1) FRAGMENTATION; this determines the degree to which aid is divided among too many donors from and a single sector or country and/or too many projects for a single donor 2) SELECTIVITY; this determines the gradation aid avoids corrupt autocrats, and funds actually reaching poorest countries3) INEFFECTIVE AID CHANNELS; this deliberates the extent aid is tied to political affiliations or ends up in food aid or technical assistance.4) OVER-HEAD COSTS; this contributes to the measurement of agencies administrative costs related to the total aid they disburse.5) ABSORPTIVE CAPACITY; it considers that aid is an investment, whereas development assistance should be distributed in a way that generates optimum returns towards capital aid.From the study it was noted that the three types of aids that were considered less effective was tied aid where it requires the recipient country to purchase goods from the donor country, food aid where food is donated to the recipient country which could have otherwise been purchased at a cheaper price locally, and technical assistance that requires information to be taught to citizens in recipient state at high costs and no employment environment afterwards due to saturationIf in any cases that the consensus is satisfied, the question remains in effect if aid agencies maneuver the way they themselves state, why are these criteria widely considered as important?3.1.
2 PRINCI-PAL-AGENT THEORYThe underlying issues can be irradiated with the princi-pal agent theory of organizations (agency theory) it encapsulates the notion that the public sector enactment can be developed if incentive-based agreements between actors are implemented. Principals will be more likely to accomplish their desired goals, while agents will have transparency around work programs and objectives. In simpler terms the survival of domestic government bureaucracies in democratic countries are more likely to push their agenda as these influence their budgets through electoral committees. An insight of agency theory is that incentives are damaged if the bureaucracy has to respond to too many different principals, or aim to achieve too many different objectives. The need to improve incentives and accountability, politicians in a democracy form bureaucracies to cater to different departments in the country so to reduce the mandate having too many outcomes caused by too many objectives. Also noted is that these bureaucracies have intended beneficiaries which are the world’s poor, but a major setback is that the poor are usually marginalized from having any feedback or access to information as they have no political voice to influence the behavior of said bureaucracy, this is usually caused by poverty and underdevelopment and sometimes comes as unclear for which problems bureaucracies should tackle first. It’s important to an agency to keep in mind that answering problems associated with zero feedback and vague objectives allows for answers to be assimilated and then acted upon so to agree upon the best practices for aid agencies to be acknowledged and at times replicated.
A plausible solution tied with transparency of aid comes with the need to pass verdict on what aid agencies do, this will show transparency on share of aid that go to corrupt or autocratic leaders, or what share of aid is lost through ineffective channels such as food aid, tied aid and technical assistance (consultant funding). On the other hand open-field spectrum is a good angle when it comes to producing the benefits gained when these problems are solved in the beneficiaries favor, having an open-ended search on the good outcomes poses as an advantage as compared to having close-ended searches on outcomes, this creates experience in areas that the aid agencies can also implement in their different locations, rather than causing overlap of agencies setting the same objectives.When this perspective is considered from Easterly (2008) “produce as much benefit for as many poor people as possible given our budget, and our particular sectoral and country comparative advantage.” He denotes that the scenario does imply that an agency will soon develop a high degree of specialization by country, by sector developing their use of expertise in that area. Not to mention that by fixing overhead costs at both levels of beneficiaries and donors, the argument leans towards specialization by donors.3.1.
3 TRANSPARENCY IN AIDTo technically follow up on aid transparency it’s needed that certain information comes to view, this information is data that has to do with what the agencies provided for evaluation. The International Development Statistics provided by the Organization for Economic Cooperation and Development (OECD) contain two different data bases that hold the necessary details on aid activities; The Development Assistance Committee (DAC) database, and the Credit Reporting System database(CRS).The data collected by Easterly and Pfutze (2008) is on the issue that not all aid agencies implement projects, and the statistics attained have an error of not being 100 percent bulletproof. Accepting that a certain minimum that the formula indicative is that a score below 0.5 is indicative of serious deficiencies in aid transparency. Noted from Table 2.
A number of 10 out of the given 31 agencies passed the transparency test, with a large number on the lower end of the scale. Also a useful angle is bearing in mind the transparency of bilateral aid by country, rather than by the agency is better suitable for the fact that bilateral aid agencies are run by their respective countries. The research assumed that the overall average for each country, was weighted average of the individual indices for each agency, weighted by the amount of development assistance dispersed, for the ones with more than one agency Table 1.TABLE 2: TRANSPARENCY INDICES FOR BILATERAL AND MULTILATERAL AGENCIES DONOR EASTERLY AND PFUTZE FINDINGS OECD DATA RANK AVERAGE Personal OpinionBILATERALS Australia 0.
56 1 7 0.78 Austria 0.5 0.8 14 0.
65 Belgium 0.49 1 11 0.75 Canada 0.5 1 10 0.75 Denmark 0.22 1 18 0.61 Finland 0.
5 0.6 25 0.55 France 0.51 1 9 0.75 Germany 0.
27 1 17 0.63 Greece 0.11 1 22 0.
56 Ireland 0.11 1 22 0.56 Italy 0.39 0.8 21 0.59 Japan 0.27 1 16 0.
64 Luxemburg 0.22 0.6 36 0.41 Netherlands 0.28 1 15 0.
64 New Zealand 0 1 27 0.5 Norway 0.39 1 13 0.69 Portugal 0.11 0.8 31 0.46 Spain 0.
11 1 22 0.56 Sweden 0.67 1 4 0.
83 Switzerland 0.41 0.8 20 0.6 UK 0.72 1 2 0.
86 USA 0.78 0.8 6 0.
79 EC 0.22 0.8 26 0.
51 MULTILATERALS AfDB 0.67 1 4 0.83 AsDB 0.72 1 2 0.86 CariBank 0.
56 0.33 32 0.44 EBRD 0.56 0.33 32 0.44 GEF 0.11 0.
33 40 0.22 IBRD 0.89 0.
33 18 0.61 IDA 0.89 1 1 0.94 IDB 0.
56 1 1 0.78 IFAD (UN) 0.44 0.33 0.33 0.39 IMF 0.67 0.
33 0.33 0.5 Nordic 0.44 0.33 0.33 0.
39 UNDP 0.44 1 1 0.72 UNFPA 0.28 0.33 0.
33 0.31 UNHCR 0.56 0.33 0.
33 0.44 UNICEF 0.33 0.67 0.
67 0.5 UNRWA 0.56 0.33 0.
33 0.44 WFP (UN) 0.67 0.33 0.33 0.5 Source; Easterly & Pftuze (2008)The data discovered that aid agencies lack in the fulfillment necessary to achieve aid transparency, where of the 41 that were sought five showed no report data on their employment and budget, these included Hellenic Aid, Japan’s Ministry of Foreign Affairs, New Zealand Aid, Irish Aid, the Spanish Agency for International Cooperation (AECI) and the German Development Bank. Accordingly, four other agencies did not contain data on their administrative and salary budgets: Development Corporation Agency of the Danish Ministry of Foreign Affairs (DANIDA), the German Agency for Technical Cooperation (GTZ), Lux Development, and the Portuguese Institute fir Development Aid (IPAD), the research inspected why these democratically liable governments have no urgency on the need to release administrative and employment costs for foreign aid, the agencies noted to stand out are of the like: United Kingdom, Department for International Development (DFID) and the United States Agency for International Development (USAID).Comparably, when looking at the multilateral aspect the research upheld that they were more transparent, eleven out of the seventeen identified passed the 0.
5 benchmark on their operating costs, as compared to the large number of bilateral agencies with low scores. The research also clarified that big agencies such as the United Nations (UN), United Nations Population Fund (UNFPA) and the World Food Program (WFP) had no data regarding their administrative and salary budgets. Other agencies that were notably not up to standard of providing total employment and salary budgets are the likes of: United Nations High Commissioner for Refugees (UNHCR), while the United Nations Children’s Fund (UNICEF), worst of all is United Nations Development Program (UNDP) which contains minimal to no data. Accordingly, the third column of Table 2. Shows OECD averages and Easterly & Pfutze’s averages, getting to the forth column, they ranked the agencies by the calculated average score. This score determined that the agencies that ranked the best were of the likes of: IDA, AsDB, AfDB, the UK, and Sweden, the worst agencies recognized through the averaging were: Global Environment Facility (GEF), the Nordic Development Fund, Portugal, Luxemburg, UNFPA, and the UN agencies respectively.3.
2.0 WHAT AID UTILIZATION IS MOST EFFECTIVE?Aid utilization is only effective when aid is being distributed to the appropriate states, and this appropriation is based on the facts of whether a state can handle the aid it is given. Handling the aid is based on the states policies, the economy, their developmental initiatives, and the states seriousness to achieve its maximum potential, this chapter studies on aid and its practice effectively through the five dimensions mentioned earlier in this writing.
3.2.1 AID AND ITS PRACTICEThis part, the review is based on the top aid practices based on the five dimensions; fragmentation, selectivity, ineffective aid channels, over-head costs and absorptive capacity. The four dimensions will be examined individually to get the best elaboration. The comprehensive index will demonstrate by agency the “aid best practice”.
3.2.2 FRAGMENTATIONSpecialization is noticed to exist among bureaucracies and private corporations in high-income states. The bigger picture illustrates, that aid agencies divide their assistance, among too many donors, countries, and sector for each donor, showing that “too many” reveals the aspect that multiple donors against multiple projects lose the advantages of specialization and mean higher than supposed overhead costs for both donors and beneficiaries.
(Draw the agencies against donor diagram)Over the decades the multiplication on a number of small players within international aid efforts is greatly modest, because it is noticed that a number of bilateral donors have more than one agency disbursing aid. For instance, the US and Japan have two aid agencies that give aid. The US especially is blacklisted as it has parts of their foreign assistance budget implemented by bureaucracies that do not necessarily have the purpose or initiative of giving aid.
This has inevitably led to lack of specialization and causes a misconstrued analysis around aid coming from the same agency to the same state towards the same sector gives of a probability of 1 in 2658.5 this is just based on the probability that fragmentation being so great it leaves but to wonder if that chance is actually possible and on-going. What happens to the real world caused by fragmentation is recipients now need to struggle with the large number of tiny projects from the large number of donors, which soon entails (1) duplication of objectives and initiatives for the said agencies (beneficiaries) (2) time is consumed unnecessarily by government ministries that deal with aid-intensive states, (3) takes away the chances to praise successes of achieve any form of specialization and (4) the overhead expenditures for both beneficiaries and donors regrettably is outstanding. 3.2.3 INEFFECTIVE AID CHANNELSAccordingly, there a three types of aid which are generally considered non-effectives these include tied aid, food aid, and technical assistance. Tied aid associates with the prerequisite that a convinced percentage need be spent on goods coming from donor states, which in turn entails the recipient incurs an overcharge, since it increased the market power of said donor, and forms export promotion which in this case was not the objective. Food aid much identical, it associates with distribution of foods by donor states, that could alternatively by purchased much cheaper at local markets in another term it is high-income states dumping their over excess agricultural products in markets of low-income states.
Technical assistance, stated by the OECD “is defined as activities whose primary purpose is to augment the level of knowledge, skills, technical know-how or productive aptitudes of the population of developing states.” The meaning behind ‘tied’ reflects the notion that this type of aid is usually fitted with imitating donor rather than beneficiaries’ priorities, which is not always the case. Self-interests are usually accompanied with tied aid.3.2.4 SELECTIVITY INDEXSelectivity has two aspects that show its connection to aid and that has to do with policy selectivity which measures the degree to which a donor’s assistance is directed towards the states that are exemplary in institutions and policies, by their control of per capita income and population numbers. Again, the poverty selectivity analogously pushes at how a donor’s support is directed towards the notable poor states, cautious to maintain institutional and policy environment including the population.
The policy selectivity presumes that donors have preferences that should lean towards better governed countries that show good yield in their per capita income. Accordingly, the poverty selectivity presumes that donors have favorism complexes when considering poorer countries and in some cases may not have good governance. If one declares an overall indication it’s safe to say that for aid to be considered effective donors alongside beneficiaries should analyze the realities of aid transparency, due to the fact that both policy selectivity and poverty selectivity should be clear indicators when considering aid diffusion. To conclude, there is a broad understanding that aid assistance should primarily be targeted to poor countries, on the other hand middle income states with good institutions and good policies have access to the international capital markets, with average concentration of poverty. In real terms a significant amount of aid is allocated to middle income countries, so it’s safe to say declaring policy selectivity as a variable its useful to declare poverty selectivity as a variable too, in being capable of targeting more funds to poor countries with respectable governance.3.
2.5 ABSORPTIVE CAPACITYConsiderably, what is associated with this view is that aid is an investment, that development assistance has to be distributed in a manner that not only generates capital aid but shows how that capital aid can be generated elsewhere through the transparency dimension which in turn creates specialization, soon after cutting the time needed and funding to complete objectives. Foreign aid should be offered when there is guaranteed assurance of it being used accordingly, transparency is noted to be the biggest and cross boundary dimension that creates channels between all other described dimension.
Absorptive capacity entails that the foreign aid is assimilated into the system to increase domestic capital creation and a continuous inflow that further aid would be deemed as unnecessary. In other terms, foreign aid is effective as it significantly helps a state grow sustainably, this is done so by the recipient state have a high ‘technical absorptive capacity’, also defined as ‘the ability to utilize disbursed capital productively’. Problems in context absorptive capacity are intensified when the aid inflows are increasing and getting large, and corresponding is the suppliers response becomes slow and weak, countries that have demonstrated high absorptive capacity are those that have shown past domestic saving & investment, tax revenue mobilization, and a strong administration (relatively corrupt free).In contrast, associated with low absorptive capacity there are three aspects that will be discussed in favor of this. (1) Low capacity to mobilize aid; is noted in recipient countries, their failure to do so is due to low levels of aid commitments as they cannot present credibility programs good enough to convince donors that funding is well spent, this requires the ability to negotiate, use dialogue to interact whilst showing credibility and capacity ex ante.
(2) Ability to execute objectives and projects; this entails the skill to implement objectives and projects to release aid tranches, and not to mention the skill to enterprise the development of programs and cease to expect donors for program implementation, lack of capability for implementation creates a holdup of unspent aid dedications (3) Low rate of return efficiency; this entails that there is a deficiency in achieving expected outcomes, low absorptive capacity means huge gaps between ex ante and ex post gradients of returns on projects and objectives.3.2.6 OVER-HEAD COSTSIn retrospect it normative to assume that with no transparency, high fragmentation, low absorptive capacity, use of ineffective aid channels, and in concise selectivity, the over-head costs are undoubtedly expected to go up. In elaborate terms, no transparency would indicate no information is openly transcended from one organization to another, this would in turn cause discrepancies on expenditures, in some instances notable repetitions of expenses. When information is not disclosed appropriately, information tends to change, and in some cases go missing. High fragmentation would indicate too many donors, too many beneficiaries and too many sectors, funding will inevitably be broken down a number of times before it actually reaches its destination, in some cases it ends up not doing its intended objective due to the high division stages the aid passed through.
Low absorptive capacity, would indicate that the funding is not meeting its objectives and begins to create an unsteady environment for aid to flow successfully especially when it’s from donor to poor beneficiaries who require the aid urgently and without delay. Noting that before aid is disbursed there are months of negotiations that take place between states to agree on said budgets. Use of ineffective aid channels, would indicate that aid is being donor through channels that do not benefit the beneficiary, it only creates more money to be channel out of the state through tied, food, and technical aid, these three aids formulate a strategy where the self-interest of the donor country is satisfied over the needs of the LDCs in question, comparatively to over-head costs ineffective aid channels create an issue as costs increase on the side that can barely keep its economy functional; without said aid. In concise selectivity, would indicate that selectivity can incur the highest over-head cost, as it entails making sure that donor funds are not misappropriated, making sure funds are used for their allocation reduces the chances of aid being re-distributed for the same projects, this just creates a channel that causes ineffective aid.
CHAPTER FOUR4.0 METHODOLGYResearch Question: TO DETERMINE THE SUFFICIENT INDEX ON AID EFFECTIVNESSIn this study my method was qualitative as the information the study required to answer the question which came from books, journal articles, working papers and various internet sources. .In this case the research design is an evaluative study which is to determine the long-term changes that have occurred since foreign aid has been associated with development. My interest is angled from a summative angle that will help in significantly showing that aid is considerably valuable to LDCs, and their development. The impact is evaluated by the sum –up of significant factors necessary to achieve this recognition accordingly.In this study the main method of data collection is centered on primary data specifically documentary data, which is from books and various internet data sources. This qualitative type of data has been used to analyze the statement: to determine the indexing dimensions on aid effectiveness across aid agencies.
This study has the aim of confirming that foreign aid has significance on the continent. This topic has been researched a number of times, and data collected on foreign aid, provided through the Organization for Economic Co-operation and Development; Official Development Assistance, World Bank and the International Bank of Reconstruction and Development; International Development Authority, assist in glancing on the foreign aid that has been dispersed to different states and in turn the projects that have made relevant impact in those different areas.The aim of the study should acclaim to the true fact that foreign aid may have set backs however through transparency assisted with the four dimensions on practice it shows that aid is significant and is realized over a period of time, that development has occurred in the different sectors and countries. Aid indexing has shown its relevance in the international system as a potential on attaining aid effectiveness for all sectors, donors and beneficiaries.CHAPTER FIVE5.
0 ANALYSIS and CONCLUSIONThe idea that those who have should share with those who do not is inherent in most societies, when considering how controversial this topic is, it begs to wonder why aid is so complicated. Why are questions arising and issues arising when aid is considered? Is aid a bad thing or is it a good thing? Analyzing the functions of aid, aligns with the interests and aims of a state receiving aid, also some conditions do come aligned with the aid being given. This paper aims to justify that aid effectiveness index is very valuable especially when distinguishing whether it’s plausible.
Considering that aid is a huge part of the international system, analyzing the concept of aid allows us to manage and comprehend how aid really works. Keeping in mind that this paper is about the positive outcomes many developing states should achieve and how effective aid is when it is transcended from the international system, from multilateral organizations which include the World Bank, United Nations International Children’s Emergency Fund (UNICEF), World Food Program (WFP), and from Bilateral organizations which basically are relationships between states, usually regarded as more advantaged; economically, politically and socially.In contrast, foreign aid comes in different fractions, which all seem to target different problems found within least developed countries (LDCs). Coming up with sustainable development goals has become a global initiative to making the global village livable for the foreseeable future. Understanding that there are generations still to come, it’s important to create an environment that caters to all who inhabit the world. Already issues have arisen on climate, on economy, and in politics.
Knowing that foreign aid plays a significant role in how developing states develop, begs to questions why funded poor countries are is still on the back burner.Foreign aid has been considered the allocation of services, goods, or capital from a donor country or international organization, for the recipient country or its citizenry. Aid comes in different forms it may be given as military assistance, humanitarian assistance, economic management, political policy advice or social construction. Foreign aid conducts the transfer of economic resources or supply of products such as medical equipment or information or food.Official Development Assistance (ODA) represents a common type of foreign aid; it is associated with promoting development and diminishing poverty.
When considering the ODA, its funding is usually generated through the Organization for Economic Cooperation and Development (OECD), which has the Development Assistance Committee (DAC); The DAC includes western European countries, the United States, Canada, Japan, Australia, and New Zealand. Other providers of significant assistance include Brazil, China, Iceland, India, Kuwait, Poland, Qatar, Saudi Arabia, South Korea, Taiwan, Turkey, and the United Arab Emirates. The purpose of this study is to show that foreign aid given to the developing states has considerable value. These countries are noted to have gone through major developmental achievements over the years.
This study is to aid other known works on showing the extent to which foreign aid makes significant logic towards the LDCs and it facilitates the political, economic and social aspects of a number of developing countries.Roche (1999) According to Roche it’s apparent that something as extensive as foreign aid needs some level of inspection, so as to know and navigate around the particulars that involved donor countries and receiving countries.Why do countries give foreign aid? Some earnest idealists see aid as a modern form of Kipling’s “white man’s burden’: a worthy, noble, enterprise, aimed at lifting those worse off than ourselves out of poverty. Considerably, every industrialized nation has a foreign aid program, and each of these programs aims to facilitate the development of denizens of the poorest countries.
This study is set to understand that aid effectiveness is perceived and analyzed in a certain manner, which should show the criteria set to understand aid and its function in the globe. This angle has been studied before and this objective is set forth to help see how aid should be monitored, at the current moment aid has many aspects and this point of view is aimed at forming at standard criteria on ranking aid.So the marking scheme will compose of a number of aspects that this paper is hoping to underline, and these cover what an ideal aid agency would seek to attain such as; transparency which is considered a good aspect as aid agencies are continuously recommending transparency towards recipient governments. To achieve a clear transparent image as an agency it’s noted that this should be aligned with the five dimensions of best aid agency practice; fragmentation, selectivity, ineffective aid channels, over-head costs, absorptive capacity.From the study it was noted that the three types of aids that were considered less effective was tied aid where it requires the recipient country to purchase goods from the donor country, food aid where food is donated to the recipient country which could have otherwise been purchased at a cheaper price locally, and technical assistance that requires information to be taught to citizens in recipient state at high costs and no employment environment afterwards due to saturation.The underlying issues can be irradiated with the princi-pal agent theory of organizations (agency theory) it encapsulates the notion that the public sector enactment can be developed if incentive-based agreements between actors are implemented.
Principals will be more likely to accomplish their desired goals, while agents will have transparency around work programs and objectives.To technically follow up on aid transparency it’s needed that certain information comes to view, this information is data that has to do with what the agencies provided for evaluation. The International Development Statistics provided by the Organization for Economic Cooperation and Development (OECD) contain two different data bases that hold the necessary details on aid activities; The Development Assistance Committee (DAC) database, and the Credit Reporting System database(CRS).
Aid utilization is only effective when aid is being distributed to the appropriate states, and this appropriation is based on the facts of whether a state can handle the aid it is given. Handling the aid is based on the states policies, the economy, their developmental initiatives, and the states seriousness to achieve its maximum potential, this chapter studies on aid and its practice effectively through the five dimensions mentioned earlier in this writing.This part, the review is based on the top aid practices based on the five dimensions; fragmentation, selectivity, ineffective aid channels, over-head costs and absorptive capacity.Specialization is noticed to exist among bureaucracies and private corporations in high-income states.
The bigger picture illustrates, that aid agencies divide their assistance, among too many donors, countries, and sector for each donor, showing that “too many” reveals the aspect that multiple donors against multiple projects lose the advantages of specialization and mean higher than supposed overhead costs for both donors and beneficiaries.Accordingly, there a three types of aid which are generally considered non-effectives these include tied aid, food aid, and technical assistance mentioned earlier in the conclusion.Accordingly, there a three types of aid which are generally considered non-effectives these include tied aid, food aid, and technical assistance.Selectivity has two aspects that show its connection to aid and that has to do with policy selectivity which measures the degree to which a donor’s assistance is directed towards the states that are exemplary in institutions and policies, by their control of per capita income and population numbers. Again, the poverty selectivity analogously pushes at how a donor’s support is directed towards the notable poor states, cautious to maintain institutional and policy environment including the population.Considerably, what is associated with this view is that aid is an investment, that development assistance has to be distributed in a manner that not only generates capital aid but shows how that capital aid can be generated elsewhere through the transparency dimension which in turn creates specialization, soon after cutting the time needed and funding to complete objectives.In retrospect it normative to assume that with no transparency, high fragmentation, low absorptive capacity, use of ineffective aid channels, and in concise selectivity, the over-head costs are undoubtedly expected to go up. In elaborate terms, no transparency would indicate no information is openly transcended from one organization to another, this would in turn cause discrepancies on expenditures, in some instances notable repetitions of expenses.
When information is not disclosed appropriately, information tends to change, and in some cases go missing.It is fair to say that foreign aid is composed of information that comes from every notable transaction that is done between countries and countries and between countries and agencies. Making sure to note that the five dimensions mentioned above are set forth to elaborate on the term ‘aid effectiveness’. This analysis dedicated to showing that aid effectiveness is important when figuring out if aid is doing its job. Noting that aid effectiveness is a marking scheme to link towards aid agencies and the like to note if they do associate with the dimensions of aid practices. The five dimensions given that a granted exist and are relevant, because when one seeks to attain the right knowledge associated with aid agencies I guarantee that the number of agencies would reduce, this begs to wonder whether agencies are being created for the right reasons and for the right objectives, let’s not forget to mention that a majority of the world depends on foreign aid.
Making sure that aid effectiveness is achieved at all levels whether at donor level or beneficiary level. Both need the considerations as both play a role at developing states that are lingering in the developmental concept. In retrospect figuring out that aid requires so much resilience and consistency, it begs to wonder whether any of this would have been considerable in the sense that it is an established point of view. Let us not forget that foreign aid is because of foreign interaction and integration. Most continents would not suffice without the other due to some noticeable coincidences on mere reality.
6.1 RECOMMENDATIONSIt is evident that through a study like this necessary recommendations are required to show that research was undertaken and that the results were not only achieved because they were available but because the information was assimilated and understood. For this study the recommendation’s that seemed most relevant related to the fact that some issues around dimension were still not addressed regardless of the fact that achieving these results is relatively easy. The recommendations that were expected after analysis had to do with;1. Keep communication lines open; it’s important for the different organizations involved in foreign aid to communicate and exchange information, this will save time and reduce projects repeating mistakes.2. Managing transactions that are disbursed to keep aid inflowing rather than stagnant; funds are sensitive and require the necessary care that soon creates trust between donors and beneficiaries. It’s key to keep transparent information open so to prove that funds are not being misappropriated.
3. Transparency needs to be a mission and vision for organizations; having this as a priority it indicates that organizations have nothing to hide and are willing to show the work they have done and the work they plan to do.4. Establish that data collection is necessary to maintain open and favorable relationships; data is important because keeping track of documents ensures that the right transactions and their destinations are relevant and should be monitored at all times to increase transparency and reduce over-head costs.
5. Mandate that joining organizations such as the OECD requires you to have full disclosure; this should be considered as important because joining said organizations should require one to provide information so to increase transparency, reduce fragmentation, curb ineffective aid channels, change selectivity index and maintain absorptive capacity.REFERENCESCooper. R. Top 10 Think Tanks in Washington DC. Organizations Influencing Public Policy in Washington DC.
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