Aid to Africa

The merry-go round of aid: Foreign aid goes in and comes out in developing countries flush with cash

(December 30, 2010) Brady Yauch writes that a recent World Bank program in India has reignited the debate on when “developing” countries should stand on their own two feet.

Is foreign aid still needed in emerging political and economic powerhouses such as India and China—both of which operate their own foreign aid programs worth billions of dollars and collectively hold trillions of dollars in foreign reserves? Or should development programs—currently financed by the western world’s bilateral and multilateral aid agencies—in these countries be a responsibility of domestic polices and actions?

A recent decision by the World Bank to hand India a $1.5-billion, largely interest-free, loan to build roads in under-developed regions in the country is once again forcing both critics and supporters of foreign aid to ask: when do these countries start walking on their own?

A recent column by Rupa Subramanya Dehejia [PDF] in the Wall Street Journal highlights the contradicting messages sent when aid agencies pursue development projects in a country like India: “Accepting such a large loan from an international organization seems to contradict the oft-repeated claim that India is an emerging power, or indeed that it has already ‘emerged,’” she writes.

“It’s a strange optic that on the one hand we’re (India) clamouring for a permanent seat on the UN Security Council and on the other we go with our hands outstretched to another part of the UN system, the World Bank.”

Rupa Subramanya Dehejia goes on to note that the money from the World Bank is “doubly paradoxical, since India is also a large donor in its own right…we recently gave a $1 billion loan to Bangladesh for infrastructure development.”

She also questions the World Bank’s motive for supporting programs in India because one of the conditions generally considered necessary for a country to wean itself off of foreign aid—a well-functioning capital market and credit-worthiness in international markets—is already in place in India.

But there’s no reason to look only at India. In fact, aid programs in China have come under increased scrutiny in recent years, as China’s growing political and economic clout, plus its own vastly expanding foreign aid programs, has many leaders questioning aid programs in the country.

Jack Chow, former U.S. ambassador on global HIV/AIDS and lead U.S. negotiator at talks that established the Global Fund to Fight AIDS, Tuberculosis and Malaria, recently pointed out that China has received $1-billion in aid money from the Global Fund to fight AIDS, Tuberculosis and Malaria—making it the fourth largest recipient of the aid program, and putting it ahead of traditional aid favourites such as Ethiopia, India and Tanzania for the program’s grants.

Highlighting the absurdity of aid money being given to China, Chow said China received $149 million in malaria grant money, yet suffered only 38 deaths from the illness last year.

Furthermore, China’s aid cash grab comes as the country has, in recent years, become a major donor itself. According to Deborah Brautigam’s, “The Dragon’s Gift: The Real Story of China in Africa” China gave more than $2.5-billion in aid to African countries alone in 2009—along with $375-million in debt relief and more than $1.5-billion in concessional loans from its export-import bank.

As for India, it recently admitted—after British officials threatened to cut it off from foreign aid—that India could do without the aid money. India’s finance minister, Pranab Mukherjee called Britain’s aid to India “peanuts” in proportion to overall aid. He said he would rather surrender such funds if the British government decided to cut it.

It seems that everyone involved in the foreign aid industry acknowledges the absurdity of pouring more aid money into countries such as India and China—except, of course, the aid agencies themselves. It’s time we recognize that foreign aid is probably more for the benefit of the aid agencies than it is for those intended to benefit from them.

Brady Yauch, Probe International, December 30, 2010

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