(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

Further Reading:

• Zambia corruption scandal links back to Canada
• Miami rice: subsidizing poverty creation in Haiti
• Tax happy: Another African leaders says taxation a better way to promote development
• Like water through your hands: Most foreign aid money sent to East Timor not spent in the country
• Rewarding corruption: World Bank gives more money to corruption-riddled Uganda
• Foreign aid discredits itself
• Taxation with representation: the better way to development say experts
• Dictators and Disasters: a disaster waiting to happen
• China learning how to play the foreign aid game
• Banking on disaster: Pakistan officials accused of diverting funds from earthquake aid
• African leaders tell Britain to end aid game
• Enough is enough: British public taking a stand against foreign aid
• Foreign aid in Afghanistan: what goes in must come out
• Health charity spent millions to raise thousands
• Foreign aid to Pakistan is a victim of nepotism
• Banking on the hand that feeds: Food aid is big business in the US
• African leaders call for tax reform, not foreign aid
• Foreign aid and under-development in Africa
• Corruption biting the hand that feeds: food aid industry facing tough questions
• Moyo: international aid to Africa spurs corruption
• Aid in Haiti creates competition with local business owners
• Foreign aid takes another blow—this time in Australia
• Another foreign aid critic says there is a better way
• Banned Aid: Why international assistance does not alleviate poverty
• Thinking outside the foreign aid box
• Foreign aid on the ropes