Development aids: Who are the real beneficiaries?

With development aids to developing countries continue to rise, many are beginning to question ask if all these really benefit recipient nations; BENJAMIN UMUTEME writes.

Aid for development or what is called Official Development Assistance (ODA) continues to mean many things to many depending on the side one is; to some, it has helped many developing countries to get by while for others, it is another form of recolonalisation that recipient nations are tend to overlook because many of their government will find it would find it hard to survive without aid from the advanced economies.

What really is ODA?

Generally, development aids include monetary assistance in the form of direct grants, programmes or training to support a developing country’s political, social or economic development. Developed countries often give development aids, but developing countries can do so as well.

ODAs are grants or loans at favourable rates whose aim is to fund programmes to improve access to drinking water, health care, electricity, school, decent housing, and/or preservation of the environment, etc. These aids help to develop long-term projects and to provide humanitarian aid in emergencies. It can focus on small local projects or on very huge policies at a national level.

ODAs are implemented by local actors such as ministries, local authorities, banks, professional organisations, NGOs, or even businesses. But the aim is always to help local people.

The aids can go directly from the donor country to the beneficiary country. This is called “bilateral” aid. It can also take the form of contributions from States to the operating costs and programs of international organizations such as UNICEF or the World Bank; this is called “multilateral” aid.

At the global level, ODA amounted to $142.6 billion in 2016. But this amount represents only one aspect of development financing or funding, which also includes public, local, and international financing, as well as private investment, money transfers from diasporas (around $400 billion per year), and actions carried out by foundations and NGOs.

From among this broad range of financing and funding sources, ODA plays an essential role. It helps start up projects in sectors or areas that have been left behind. It initiates processes of “virtuous development” and creates dynamics that can help bring all the other stakeholders, especially businesses, into the picture. It creates a leverage effect that multiplies impacts. All in all, since the 1960s, development aid has proven to be effective: it’s a powerful factor of change for the most vulnerable populations.

Top ODA countries

A look at the list of countries with the highest development aid revealed that Luxembourg made the largest contribution as a percentage of gross national income (GNI) at 1.05% and the United Nations’ ODA target of 0.7% of GNI was also exceeded by Norway (1.02%), Sweden (0.99%) and Denmark (0.71%).

The European Union accumulated a higher portion of GDP as a form of foreign aid than any other economic union.

The United States is a small contributor relative to GNI (0.18% 2016 but is the largest single DAC donor of ODA in 2019 (US$34.6 billion), followed by Germany (0.6% GNI, US$23.8 billion), the United Kingdom (0.7%, US$19.4 billion), Japan (0.2%, US$15.5 billion) and France (0.4%, US$12.2 billion).

Many providers beyond the DAC have long traditions of development cooperation. Amongst these, according to the preliminary figures for 2019 reported to the OECD, Turkey exceeded the 0.7% ODA/GNI target with 1.15%.

Data showed that in 2021, the United States budgeted $38 billion for foreign aid spending. And it disbursed over $32 billion, and an estimated 25% of that budget went to Ethiopia ($1.13 billion), Jordan ($1.03 billion), Afghanistan ($860 million), South Sudan ($821 million), Congo ($814 million), Yemen ($814 million), Nigeria ($803 million), Syria ($774 million),Sudan ($488 million), and Somalia ($475 million).

Experts’ views

In spite of the huge sum that changes hands in terms of ODA, there are still questions being asked. For some, the process of disbursement is not is so transparent.

A Financial analyst, Gabriel Idakolo, in his view, notes that the lack of monitoring and corruption has not been helpful to how ODAs are disbursed. He told Blueprint Weekend that lack of transparency is also a challenge.

“International aids flowing into the country as well as local aids most times do not reach the intended recipients due to corruption in the process and non- monitoring of the process by the donors and critical stakeholders.

“There must be proof of accountability of previous aids received with a proper audit trail. When donor agencies or countries can attest to the effective utilisation of previous aids they will be encouraged to do more. Most times the government does not prioritise the keys areas of need and can easily divert aids to other areas they might not be paramount,” he said.

Solving problems

As far as political economist Adefolarin Olamilekan is concerned, the argument against aids not benefitting recipient nations is not just valid, but has also revealed the poor nature of the gesture in the sense that it is a tool to impoverish recipient nations.

According to him, aid is not meant to solve Africa’s entire problem. Nonetheless, the challenge therein is how this aid package has been promoted as if it the magic wand that solves all of the continent’s challenges.

He said, “An overview of many years of sub-Saharan Africa receiving such aids either it technical, items or training as only aided in creating more problems than solving them.

“Africa indeed has been documented to perpetually survive on aids survival for many years. If the aid is actually meant to solve her problem, the continent would have been developed. But the reverse is the case, as the continent’s challenges continue unabated. A good example is the recurrent insecurity, food supply, water, health etc that aids have been giving. Nigeria has also received aid from donor nations and agencies on several occasions that it is going to be difficult for one to conclude if such acts really solve our problems.

“So, with little or no evidence, arguments against aid tend to be correct because a critical insight into what constitutes aid really does not benefit recipient nations.

“Take for example technical aids in health or medicine. The donor nations would be benefiting from creating jobs for its people, earn more foreign currency, increased it GDP, expand it economy and market, attract more investors etc. while recipient nations depend on import, suffer balance of trade deficit, suffer from currency devaluation, suffer brain drain, the aid may not even get to the right people due to corruption and politicisation, and it also create anxiety in the system.”

Making aids more beneficial

According to Olamilekan, there is a need for donor countries to make aids more beneficial to recipient nations.

“As much as the argument against aids stands to be corrected, making aids more beneficial to recipient nations’ citizens must start by donor nations and organisations not attaching any interior motives or stringent rules to the aids; rather, they must see recipient nations as equal partners.

“Another point is that aids should be accepted so long as it not going to destabilise local economy production because instances have shown that aids in the long run destroy the economy of recipient nations.

“In addition, recipient and donor aid nations as well as organisations must see themselves as joint stakeholders with all of them having equal benefits from the act.

“Furthermore, aid must not be a tool to further destabilise or destroy the economic structure of recipient nations. Aid in this regard must not be weaponised to cause fiscal and monetary challenges to recipient nations.

“Lastly, the gesture of aids should not be used to impoverish recipient nations by not politicising the aids gesture beyond what they temporarily aim to achieve.”

Related content you may like