“Tied aid is foreign aid that must be spent in the country providing the aid (the donor country) or in a group of selected countries. A developed country will provide a bilateral loan or grant to a developing country, but mandate that the money be spent on goods or services produced in the selected country. From this it follows that untied aid has no geographical limitations.” (wikipedia, 2012)
I was recently approached to provide my view on a funding proposal. My view was not the view that was expected or sought and this resulted in a “little-big” debate. The ensuing discussion and debate left me distressed and also questioning my view of aid, and specifically tied aid. The key issue is; are developing countries so very desperate for aid that they are willing to accept aid that comes with conditionality’s such as tied aid? This despite it being a known fact that tied aid is unsustainable and has been deemed illegal by certain donors?
“Tied aid is now illegal in the UK by virtue of the International Development Act, which came into force on 17 June 2002, replacing the Overseas Development and Co-operation Act (1980).” (http://www.appropedia.org/Tied_aid)
So the questions remain; is tied aid to be considered aid? and should developing countries accept tied aid as part of the sustainable development process? This becomes particularly important given, the current environmental, climate change and economic context. The current development context creates the perfect opportunity for an increase in aid requirements, needs and proposals, however, if the aid is tied and bound by conditionalities that are unsustainable in the long-term the impact of the aid will be unsustainable and will end up being counterproductive, which in my opinion is not the path that development aid should be pursuing.
“Development assistance may get a new lease on life thanks to global warming. Aid occupies a major place in multilateral negotiations and sometimes, by default, becomes the main outcome of negotiations, which stumble at real fundamental issues (Carbonnier, 2010)”
The details of the aid proposition that sparked this post are as follows:
- Country X (donor) to provide country Y (recipient) with funding to undertake specialist environmental studies.
- Consultant from Country X will undertake the specialist water resource studies for country Y, to the value of 75% of the donation.
- A maximum of 25% of the donation may be spent on consultants in the recipient country.
- The reasoning for the 25% 75% spilt between the consultants is due to the recipient country being perceived as not having the skills to undertake the specialist studies.
My key concerns with aid that is tied to sourcing of skills and/or produce etc from the donor country are;
- The majority of the economic benefit goes to the donor country. As a result the benefit to the recipient country is much less than anticipated.
- Skills transfer to the recipient country and recipient country consultants is minimal and often inefficient and ineffective and is therefore not a feasible or sustainable argument on which to base the tied aid. The reasons for this are
- Most of the skills will come with the donor country consultants and will not stay in the country. Very little skill will in fact be transferred to the consultants of the recipient country. If you want to capacitate, educate and transfer skills maybe education and the funding of degrees and actual work experience should be considered.
- In most cases donor country consultants have a limited understanding of the region and environment. In addition limited project times frames do not allow for donor consultants to adequately come to grips with regional sensitivities and details.
- The studies may assist in providing data and information for the recipient country to use in decision-making, however, what is the point of studies if the recipient country (according to the donor country, ie why donor consultants need to do the work) does not have the skills to undertake such studies or then use such studies in decision-making and project implementation?
I do realize that corruption, inefficiency’s and lack of capacity and implementation skill, etc are important issues that have to be considered and factored into development aid projects and certain conditionalities are required. One would imagine that the various debates around aid and dependency, unsustainable aid costs, aid misappropriation etc would have somehow made an impact and resulted in more appropriate, sustainable and effective aid proposals being made?
Some examples and impacts of Unsustainable Aid:
- Western surpluses resulting from faulty agriculture or other policies have been dumped in poor countries, thus wiping out local production and increasing dependency (http://en.wikipedia.org/wiki/Development_aid)
- Tieing recipient countries into using donor country skills and consultants prevents the development of specialist skills and capacities with recipient countries. This increases the dependency on foreign consultants and hinders the development of local and regional consultancies and specialist skills.
- Aid tying by OECD donor countries has important consequences for developing countries. Tying aid to specific commodities and services, or to procurement in a specific country or region, can increase development project costs by as much as 20 to 30 per cent.( http://www.cgdev.org/files/1422445_file_Morgan_Zambia_FINAL.pdf)
- Tied aid costs more. It is at least 15-30% more expensive than untied aid because of overpricing, and likely leads to longer delivery times (Ryden, 2011)
Examples of Sustainable Aid
- Development of local capacity through education, skills development and knowledge transfer, based on the development needs of the recipient country.
- The provision of food aid in the form of cash as opposed to food and produce shipped from donor countries.
- Local sourcing of food: “When food aid is provided in cash, it allows recipients to source food locally or regionally and at a much lower cost. In addition, cash assistance enables recipients to purchase food from producers in areas of the country with surpluses to distribute in areas of scarcity. This, in turn, helps strengthen local and regional agricultural sectors and markets, and it can increase incomes for smallholder farmers and poor rural communities”.( www.hungerreport.org/2011 )
- The provision of culturally appropriate food. “U.S. food aid sometimes falls short in this regard: countries whose staple diet is rice may get shipments of sorghum or wheat from the United States because those are the current surplus commodities, whereas rice might be available in nearby countries or in other parts of the country experiencing the hunger emergency. ( www.hungerreport.org/2011 )
- Untying administrative responsibilities to recipient countries, multilateral agencies or NGOs might also be beneficial, as they can provide more neutral and recipient-centred judgements, as long as donors actively evaluate the results. (Ryden, 2011).
- Untied aid: as this would increase the efficiency of aid to reduce poverty and thereby increase the impact of aid (Ryden, 2011).
References and other reading:
- Ryden H, 2011: The extent and effects of tied aid http://www.hannes.se/files/The_extent_and_effects_of_tied_aid_by_Hannes_Ryden.pdf
- Wikipedia: articles : http://en.wikipedia.org/wiki/Tied_aid, http://en.wikipedia.org/wiki/Development_aid)
- World Hunger Report 2011: chapter 3: untie aid http://hungerreport.org/2011/report/chapters/three/untie-aid )
- CGDEV: http://www.cgdev.org/files/1422445_file_Morgan_Zambia_FINAL.pdf)
- Carbonnier G, 2010. Official development assistance once more under fire from critics (http://poldev.revues.org/141 )