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Official Development Assistance (ODA) or simply Foreign
Aid, is a government to government transfer of resources, meant to hasten the
development of a poor country. If one or both governments, the donor and
recipient governments, is/are corrupt, then waste is huge. The money would only
fatten the pockets and personal bank accounts of politicians, bureaucrats and
consultants of recipient governments.
For many years, the singer from the Irish band U2, Bono,
has been at the forefront, pressuring governments of rich countries of North
America, Europe, Japan and a few others, to keep pouring foreign aid to Africa
and other poor continents of the planet. Africa is often a test case because since
about 1950, many governments of that continent have been receiving an average of $10 billion a year for six
decades, and poverty has remained rampant.
In 2005, Bono and another British rock star, Bob Geldoff, were among the pioneers of “Make Poverty History” movement. Since then, most economic indicators show that poverty has remained if not expanded in many target countries. Recently though, Bono seems to have changed tune. In a speech at Georgetown University, he said, “Aid is just a stop-gap. Commerce and entrepreneurial capitalism takes more people out of poverty than aid.”
And rightly so. Being a government to government transfer
of money, and since most recipient governments are corrupt and dictatorial,
foreign aid is a circuitous and leaky process.
It is the “pork barrel” by politicians and governments of rich countries
to buy the loyalty of corrupt leaders of poorer countries. For instance, Myanmar
and North Korea governments, and slowly some African governments, cannot
disobey China, because of the aid they receive. The same can be said of
foreign aid by the US and European governments to many countries in Asia,
Africa and South America.
There are some “outliers” among African leaders. The President
of Rwanda, Paul Kagame, among the early
proponents of private investment and improved rule of law, said that “Entrepreneurship is the most sure way of
development.” *
The US government’s aid policy via huge funding from the
WB, USAID, the UN and others, is itself highly wasteful if not corrupt. The
federal government is borrowing hundreds of billions of dollars every year just to fill a huge revenue gap every year,
and yet it is spending tens of billions of dollars yearly to other governments
via those aid institutions. Many foreign governments, aid officials and bureaucrats
and local consultants in other countries are feasting on this huge amount of borrowed
money.
The government of Nepal is among the recipients of such
aid, but not as big as what other governments received. From the Asian
Development Bank, the Nepal government has received nearly $2 billion of loan.
Source: ADB and Nepal Fact Sheet, http://www.adb.org/sites/default/files/pub/2013/NEP.pdf
And from the World Bank group, the Nepal government has
received disbursement of $1.88 billion in loans plus $0.56 billion in grants.
There are other sources of foreign aid, like loans and
grants from the European Union, WHO, UNDP and other agencies of the UN.
Sources:
WB.
Aid is a band-aid solution and it should be a short-term and not forever solution. The aid institutions should have a “sunset” provision in their respective charters, meaning a section when they should close shop. But there is none as they intend to stay forever, expand forever.
A more direct people to people transfer of money and
resources at the global level is through international trade, investments,
tourism and people mobility. A company abroad likes certain products by a local
producer, the goods are shipped and the producer gets paid, the producer pays
its workers, managers and suppliers, and those who work and work efficiently
are rewarded. The same applies to investments, tourism and movement of people
across countries and continents.
The people in poor countries need more entrepreneurship
and less bureaucracy and taxation. They need more free trade, not more aid and
more public debt.
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* Source of quotes from Bono and Kagame is Values
and Capitalism blog, November 2012.
Business 360 6: Peace and Prosperity in Asia, April 13, 2013
Business 360 7: Jeju Forum for Peace, May 10, 2013
Business 360 8: TPP, RCEP, SAARC and Free Trade, June 17, 2013
Business 360 9: Free Trade and Economic Prosperity, July 03, 2013
Foreign Aid 13: Freedom from Borrowing, July 05, 2011
Foreign Aid 14: ADB's Electric Tricycles, April 07, 2012
Fat-Free Econ 40: IMF Irrelevance, March 16, 2013
Foreign Aid 15: Shrink the IMF, March 21, 2013
