Aid versus Trade, Investments, Remittances
In the United States for example, most of the food aid, including the additional $770m food aid last year, for the poor countries requires the aid recipients to purchase food from the US agribusiness. These funds do not help the farmers in the poor nations grow food for the countries to become less dependent on foreign help. The US farm lobby continues to flex its muscle and enrich itself, without regard for the severity of the hunger crisis in the poor nations resulting from sharp increase in food prices. Three years ago, farmers and their allies in Congress effectively destroyed an effort by the Bush administration to begin the switch to untied food aid. The current composition of US Congress is no different, as far as the overwhelming power of the farm lobby is concerned.
European governments switched to giving all-cash donations for food in the mid-1990s, arguing that cash allows more flexibility in responding to crises and that the U.S. uses its food aid as a form of farm subsidy. But the Europeans also continue to erect various barriers to food imports from poor nations that could improve the viability of agriculture in many Asian and African countries.
Private donations abroad by Americans, including pledges to charities and churches and disbursements from corporate foundations, now are three times as large as America's official development assistance of $20 billion, and there is every indication this trend will continue. Washington's contribution looks even more miserly when the ODA data are broken down. Here are some basic facts about US foreign assistance:
1. Less than half of aid from the United States goes to the poorest countries.
2. The largest recipients are strategic allies such as Egypt, Israel, Russia, Pakistan, Afghanistan and Iraq.
3. Israel is the richest country to receive the highest per capita U.S. assistance ($77 per Israeli compared to $3 per person in poor countries).
4. Even after the planned tripling of the US aid to $1.5 billion a year to Pakistan, it still amounts to about $8 per Pakistani.
According to Asia Times, last year only five of the 22 countries considered industrialized - Norway, Denmark, the Netherlands, Luxembourg and Sweden - achieved the donor benchmark of allocating 0.7% of GNP to ODA. The benchmark was adopted at the Earth Summit in Rio de Janeiro in 1992 under the UN Agenda 21 program for eradicating poverty through development assistance. No other countries have even come close to meeting the target.
France managed 0.41% of GNP last year, the United Kingdom 0.34%, Germany 0.28%, Canada 0.26%, Spain 0.25% and Australia 0.25%. Japan, the only Asian participant, came in a lowly 19th with a paltry 0.2%, maintaining a reduced ODA commitment that dates back to 2001.
Dambisa Moyo, a former economist at Goldman Sachs, and the author of "Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa.", recently argued in a Wall Street Journal OpEd that "money from rich countries has trapped many African nations in a cycle of corruption, slower economic growth and poverty. Cutting off the flow would be far more beneficial."
She goes on to say, "Giving alms to Africa remains one of the biggest ideas of our time -- millions march for it, governments are judged by it, celebrities proselytize the need for it. Calls for more aid to Africa are growing louder, with advocates pushing for doubling the roughly $50 billion of international assistance that already goes to Africa each year.
Yet evidence overwhelmingly demonstrates that aid to Africa has made the poor poorer, and the growth slower. The insidious aid culture has left African countries more debt-laden, more inflation-prone, more vulnerable to the vagaries of the currency markets and more unattractive to higher-quality investment. It's increased the risk of civil conflict and unrest (the fact that over 60% of sub-Saharan Africa's population is under the age of 24 with few economic prospects is a cause for worry). Aid is an unmitigated political, economic and humanitarian disaster."
Last year, remittances to developing nations grew by 8.8% to $305 billion, more than three times the official development aid, according to World Bank.
Official development assistance received by Pakistan has not been particularly effective, according to media reports attributed to UN findings. A United Nations report titled "U.N. reforms and civil society engagements" in 2008 claimed that Pakistan has received 58 billion dollars in foreign aid from 1950 to 1999, however it systematically underperformed on most of the social and political indicators. The report further added, "If Pakistan had invested all the ODA (official development assistance) during this period at a real rate of six percent, it would have a stock of assets equal to 239 billion dollars in 1998, many times the current external debt."
At the end of calender year 2008 in Pakistan, remittances topped 7 billion dollars, an increase of 17 per cent year over year, led by higher remittances from oil-rich GCC countries, which grew by 30 per cent year on year. Similarly, FDI inflows jumped 100 per cent year over year to 708 million dollars in December, 2008, as the telecom, oil and gas, and financial-services sectors continued to attract foreign inventors, according a report in the Nation newspaper. Annual cash remittances from overseas Pakistanis and foreign direct investments (FDI) in Pakistan earlier this decade have been far larger and much more significant in its rapid growth than all of the foreign aid put together.
Last year, remittances to various other Asian countries were as follows: $8.9 billion for Bangladesh, $27 billion for China, $30 billion for India, $6.5 billion for Indonesia, $2.2 billion for Nepal, $1.8 billion for Malaysia, $16.4 billion for the Philippines, $2.7 billion for Sri Lanka, $5.5 billion for Vietnam and $1.8 billion for Thailand, according to International Labour Organization estimates.
While recognizing that there is no one silver bullet to alleviate poverty, microfinancing, along with social entrepreneurship, is becoming an essential component of non-government efforts in Pakistan and other developing nations to empower ordinary people toward self-reliance by lifting them out of poverty and teaching them the right skills to help themselves. “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” This proverb has guided the efforts of late Dr. Akhtar Hameed Khan, acclaimed Pakistani social scientist and founder of Orangi Pilot Project. Supported by private foundations working in Pakistan, all efforts at alleviating poverty should be guided by this proverb that captures the essence of self-reliance.
While government and multilateral financial institutional programs do help to some extent, it is the privatization of aid, trade, remittances and investments for the poor through various investors and donors, such as private corporation, foundations and the immigrants working in the rich countries, that provides the best hope to ensure that the funds and the practical benefits reach the intended recipients. Such a strategy minimizes the role of the politicians and the corrupt officials in both the donor and the recipient nations.
Microfinance in Pakistan
PIDE Report on FDI in Pakistan
Foreign Remittances Help Developing World
Foreign Aid Continues to Pour in Resurgent India
US Food Aid and the Farm Lobby
Dambisa Moyo: Aid to Africa
Rampant Corruption in Construction Industry
Obama's Farm Subsidy Cuts Meet Stiff Resistance
Global Slowdown Hits Foreign Workers