Aid for development

This paper deals with aid, trade, and development in the context of present quest to the perception of 'aid for development'. There are many questions on 'what is called development?' and 'development for whom?' In reality, without understanding these questions it is very difficult to concentrate on the questions of aid and trade. Here the focus will be on the political nature of aid and trade.

It is better to understand the notion of aid in the present global context as aid has been a very big issue in the current world situation. Aid can be subdivided into two categories: humanitarian aid and development aid. Development aid (also development assistance, international aid, overseas aid or foreign aid) is aid given by the developed countries for sustainable development in the developing countries. It is distinguished from humanitarian aid, being aimed at alleviating poverty in the long term.

In 1970, in a UN conference on International Development, the rich countries promised to give 0.7 per cent of GNP (GNI since 2000) to the poor countries for development within mid-70s (UN General Assembly Resolution 2626 (XXV), October 24, 1970, paragraph 43). But still 18 countries out of 22 countries (the aid is to come roughly from the 22 countries which are in the Development Assistance Committee -DAC) have constantly failed to reach their committed target. Instead of 0.7 per cent, the amount of aid given has been around 0.2 to 0.4 per cent, leaving some $100 billion behind. The combined Official Development Assistance of OECD countries in 2004 was $78.6 billion. Among the DAC countries, Norway's contribution is the highest in terms of the percentage of GNI which is 0.87 per cent. The EU countries contributed 0.36 per cent of their combined GNI. The United States is the lowest contributor in terms of percentage of GNI, 0.16 per cent. But, in terms of money the United States, as a single country, is the world's largest contributor of ODA. It donates $19 billion while the combined contribution of European Union is $42.9 billion.

It is very important to dig out the contribution of aid in the socio-economic development of the least developed countries (LDCs). From the experiences of last fifty years, 'Aid' in terms of poverty alleviation in the Third World countries has been proved failure, as it, aid, has been used to serve the strategic and economic interests of the donor countries to control the developing countries, and that is why aid has been beneficial to the powerful domestic interest groups. In the case of recent war against Iraq, the USA used its aid power to defuse some Afro-Caribbean countries including Cameroon, Guinea and Angola in the UN Security Council when the United States was seeking council support for the war. The USA has also held back dues to the United Nations as it claims UN is not working as per expectation. In this case expectation means UN is not doing enough to ensure USA interest.

Donor agencies give aid on the basis of their interest; they don't give fund to build industry or to create employment. Sometimes they give funds to infrastructure development projects, but most of the time that is soft loan, and that also depends on their interest not the recipients' need. 'Who will get aid' also depends on the donor countries foreign policies. So we can easily find the reason why poorest countries do not get more aid than others. Major portion of USA funding goes to Israel and Egypt, and obviously they are not among the least developed countries. Moreover, most of the aid comes with conditions which reduce the effectiveness of the aid. Generally the conditions make things costlier because the machinery, necessary for the project, would be costlier if they, the donor agencies, tied the condition to buy it from them. Same things happen with the services of consultants, and in most of the cases the aid recipient countries have no choice. One UN study reveals that aid with conditions cuts the value of it to the recipient countries by some 25-40 per cent.

Recently, not only the researchers and the academicians but also general public has been more critical of the whole process of 'aid' than ever before. After being affected by the neo-liberal theories, globalisation and formation of WTO, there has been a new wave of people's movement growing around the world. From Seattle to Genoa to Hong Kong everywhere people are showing their resentment against the global economic giants and their policies towards the LDCs. Trade is a big issue among the demands people are making around the world.

There is no doubt that the big parties, rich countries, are playing dirty games to avoid demand of the LDCs on free access to the market and zero-tariff facilities. They block the products from the least developed countries which can really compete with their own products. They argue against all kinds of protection in the market, but they are protecting their market. From Africa to Asia there is a growing demand of withdrawal of tariff and non-tariff barrier to the market of developed world rather than getting so called 'aid'. After the Second World War, the capitalist countries have been selling the idea of free market economy with the package of aid. Now, their double standard, hypocrisy is coming out as the developing countries are seeking the same facilities. Now the poor countries know that trade incentive could be the more instrumental for reducing poverty rather than getting aid. Oxfam in its report Rigged Rules and Double Standards says developing countries export face tariff barriers in the rich countries which are four times higher than those encountered by the rich countries when they export to the developing countries. Those barriers cost the poor countries $100b a year - twice as much as they receive in aid. Rich countries are still ready to give aid, or debt relief, which is almost a farce, but they are not ready to give any extra facilities in terms of trade to the developing countries. Oxfam in the same report says if the least developed countries can increase their share of world exports by one per cent, it could lift 128 million people out of poverty. Africa alone can generate $70b which is five times higher than they are getting in the name of aid. Developed countries spend $365b a year on agricultural subsidies, which is around five times higher than the total aid of 2004 to the LDCs. Although these subsidies might be good to protect their own farmers, it has an adverse effect on the farmers and trade of the poor countries.

Developed countries, and World Bank or IMF always play a blame game to put the burden, of being poor, on the least developed countries. They are arguing that poor countries are poor as because they do not know how to manage the economy. They never acknowledge that it is their policies, with definite intention, to keep the existing system with some make-up, even by knowing the fact that it won't bring any good to the people of the poor nations. It is about fifty years that the World Bank and IMF have been dictating developing countries on how to cope with the global economy. But there is a not a single example that was successful to become a developed country from a least developed country with the dictation from IMF or World Bank or from any rich country. On the other hand, we can find the opposite stories where economy got worsen then before.

It is time for Bangladesh to rethink the whole system of hypocrisy. It is the government which can really make the change in policies on the basis of reality. We do not think the policy-makers of our country do not know all these information, but knowing information and acting on it are two different things. If they really want to bring about any significant change to their economy, they have to be aware of all these unjust and double standards, and their policies should be made on their own.

(The writer is doing research at School of Oriental and African Studies, University of London, UK.)