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overseas aid (ODA)

Back in 1970, the United Nations (UN) passed a resolution recommending that wealthy countries donate annually 0.7% Gross National Income (GNI) to poor countries in Official Development Assistance (ODA) in order to help the fight against poverty. This is still the target today and every year the Organisation for Economic Co-operation and Development (OECD), produces figures showing how much each wealthy country gives in ODA and what percentage of its GNI that figure represents.

Below is the ODA league table for 2016 (2015, 2000) which shows the aid contributions of the members of the Development Assistance Committee (DAC) of the OECD - 29 of the richest countries in the world.

WORLD 'PREMIER' LEAGUE

.
COUNTRY

2016
AMOUNT ($bn)

2016 ODA/GNI
%
2015 AMOUNT
($bn)
2015 ODA/GNI
%
2000 AMOUNT
($bn)
2000 ODA/GNI
%
NORWAY
4.4
1.11
4.3
1.05
1.3
0.80
LUXEMBOURG
0.4
1.00
0.4
0.95
0.1
0.70
SWEDEN
4.9
0.94
7.1
1.40
1.8
0.81
DENMARK
2.4
0.75
2.6
0.85
1.7
1.06
GERMANY
24.7
0.70
17.9
0.52
5.0
0.27
U.K.
18.0
0.70
18.5
0.70
4.5
0.31
             
NETHERLANDS
5.0
0.65
5.7
0.75
3.1
0.82
             
SWITZERLAND
3.6
0.54
3.5
0.51
0.9
0.34
             
BELGIUM
2.3
0.49
1.9
0.42
0.8
0.36
FINLAND
1.1
0.44
1.3
0.55
0.4
0.31
AUSTRIA
1.6
0.41
1.3
0.35
0.5
0.25
             
FRANCE
9.5
0.38
9.0
0.37
4.2
0.33
IRELAND
0.8
0.33
0.7
0.32
0.2
0.30
SPAIN
4.1
0.33
1.4
0.12
1.3
0.24
             
ITALY
4.9
0.26
4.0
0.22
1.4
0.13
CANADA
4.0
0.26
4.3
0.28
1.7
0.25
NEW ZEALAND
0.4
0.25
0.4
0.27
0.1
0.26
AUSTRALIA
3.0
0.25
3.5
0.29
1.0
0.27
ICELAND
0.1
0.25
0.0
0.24
   
JAPAN
10.4
0.20
9.2
0.20
13.1
0.27
             
U.S.
33.6
0.18
31.0
0.17
9.6
0.10
SLOVENIA
0.1
0.18
0.1
0.15
   
PORTUGAL
0.3
0.17
0.3
0.16
0.3
0.26
S. KOREA
2.0
0.14
1.9
0.14
GREECE
0.3
0.14
0.2
0.12
0.2
0.19
CZECH REP.
0.3
0.14
0.2
0.12
   
HUNGARY
0.2
0.13
0.2
0.13
   
POLAND
0.6
0.13
0.4
0.10
SLOVAKIA
0.1
0.12
0.1
0.10
             
TOTAL
142.6
0.32
131.6
0.30
53.1
0.22

From the table it can be seen that total ODA in 2016 amounted to $142.6bn after $131.6bn in 2015, an increase of 8.9%. For the rest of this century the figures were $137.2bn in 2014, $135.1bn in 2013, $126.9 in 2012, $133.7bn in 2011, $128.5bn in 2010, $119.8bn in 2009, $122.3bn in 2008, $103.7bn in 2007, $104.4bn for 2006, $106.8bn in 2005, $79.6bn in 2004, $69.1bn in 2003, $58.3bn in 2002, $52.3bn in 2001 and $53.1bn in 2000. The total for 2016 represents 0.32% of rich countries' combined Gross National Income against 0.30% in 2015. (Over the last 50 years developed countries are reckoned to have given more than $3.0 trillion in foreign aid.)

This year Norway tops the top of the world 'premier' league table with 1.11% GNI In second place is Luxembourg with 1.00%. Other countries exceeding the UN target are Sweden with 0.94%, Denmark with 0.75%, Germany with 0.70% and UK with 0.70%. For the first time in many years Netherlands failed to meet the UN target with 0.65%GNI. In eighth place is Switzerland with 0.54%. Bringing up the rear are Slovakia 0.12%, Poland 0.13%, Hungary with 0.13% and Czech Rep. with 0.14% - all of which have just become members of the DAC. Greece and South Korea also spent 0.14% GNI. In the case of Greece approximately 90% of bilateral aid is spent in Greece itself, primarily on students and asylum seekers. The US, the largest donor nation in total, provides aid to more than 140 countries with Afghanistan, Israel, Jordan, Pakistan, Iraq, Kenya, Ethiopia, South Sudan, Tanzania and South Africa heading the list in 2016. (Israel is set to receive US$38bn from the US over the next 10 years.)

Norway, Luxembourg, Sweden, Denmark, Germany and UK surely deserve to be congratulated on meeting their international obligations again in giving 0.7%+ GNI annually in aid. Governments in these 6 nations, it seems, really do believe that their contributions help to make a lasting difference to the lives of people in the developing world.

Another way of looking at these figures could be to say that every Norwegian contributes $825 annually to the developing world in aid whilst each American only hands over $104 (UK$277/£223). But Official Development Assistance (ODA) only shows each government's support for international development; it does not take into account donations from private individuals in each country. When these are taken into account the US comes out much more favourably. For example, Bill Gates, founder of Microsoft, through the Bill and Melinda Gates Foundation has invested heavily in, amongst other things, helping combat HIV/Aids in Africa. Together with Warren Buffet, chair of Berkshire Hathaway, Gates has promised to give away the bulk of his wealth in his lifetime mainly to help tackle suffering in the developing world. The Bill and Melinda Gates Foundation takes the giving of aid so seriously that it supposedly tracks every dollar to ensure it buys what it is intended to buy. Gates and Buffet have also signed up 115 other American billionaires to do likewise as part of the Giving Pledge. In the US philanthropy seems to be celebrated as part of the nation's culture with an estimated 98% of top taxpayers giving, on average, 7.4% of their income to charity whilst 35% of American workers give to charity through the tax-efficient payroll system. (Comparable figures for the UK show that only 27% of top taxpayers give, on average, 1.2% of their income to charity whilst 4% of workers give from their pay packets.) In total, in the West, it is estimated that overseas aid given privately through foundations or international NGOs amounts to US$50bn annually.

Other countries' contribution include United Arab Emirates with $4.1bn (1.12%GNI) through providing exceptional support for Egypt, and Turkey with $6.2bn (0.79%). Russia gave US$1bn (0.08%GNI). [China uses multiple ministries and agencies to give money and does not release reports about how much aid is provided although in 2012 it is estimated to have given about $18bn or 0.31%GNI in ODA. This is thought to have been made up of medical teams, training and scholarships, humanitarian, youth volunteers, debt relief, budget support, infrastructure projects, ODA-in-kind and technical assistance]

Overseas aid (ODA) donated by rich governments to poor countries can be given in 5 different ways:-
bilateral aid is money given directly to the recipient government or spent on a project in that country;
multilateral aid would be given through a third party i.e. World Bank, IMF, African Development Bank (AfDB) etc.;
humanitarian aid would be given in an emergency, most probably through an international NGO like Oxfam or Save the Children, to provide food, clean water, shelter, medical supplies;
support for refugees ODA budgets in many EU nations are now being used to support refugees;
debt relief cancels outstanding debts between the donor and recipient.

In 2016 out of the total of $142.6bn given as ODA, $69bn comprised bilateral, $43bn in multilateral, $14bn as humanitarian, $15bn in-donor refugee costs, and $2bn as debt forgiveness.

*Many donor countries have seen unprecedented inflows of refugees in the last 2 years, and DAC is working to clarify its ODA reporting rules to ensure refugees costs do not eat into funding for development.

Over recent years the World Bank has been monitoring aid distribution and is now encouraging countries to start to untie more of their ODA for the Bank maintains that tied aid is 25% less effective than untied aid. Several donors have already moved to completely untie their overseas aid including UK, Canada, Denmark, Australia, Norway and Switzerland. Chief culprits in still tying their aid to goods and services produced in their own country are Italy, US and Germany. At present it is estimated that as much as 50% of aid is still tied.

At the same time Australia and Canada have perhaps surprisingly recently moved to dismantle their own aid agencies and merge them with foreign affairs. The aim here is to concentrate more on surrounding countries - Australia on Pacific nations and Canada on Latin America and the Caribbean - and also to seek to engage more with the private sector and to lessen links with multilateral institutions. However, Australia has also announced that it will cut its ODA budget from 0.34% GNI in 2014 to 0.22% GNI by 2017/18. Meanwhile the UK government has passed legislation which cements into the statute book 0.7% GNI being given annually in ODA. This push by the UK to maintain the UN target for aid has prompted accusations that DfID has to rush to spend such a huge budget leading to the hiring of very expensive consultants in a panic spending spree to get the money out the door by the end of each financial year. Presently almost half of the UK's international aid budget is being spent by multilateral organisations like the IMF and World Bank or funnelled through costly consulting firms as DfID appears to lack the capacity to administer enough projects to meet its increased spending.

[In November 2015 DfID and the UK Treasury announced a new aid strategy with the aim of allocating 28% of UK Aid outside of DfID's control by 2020. (In 2014 DfID delivered 86% of UK aid.) 50% of UK aid will also be allocated to fragile states by 2020.

There will be 4 new strategic objectives for the UK government:-

* strengthening global peace, security and governance;
* strengthening resilience and response to crisis;
* promoting global prosperity;
* tackling extreme poverty.

Much of the increase outside of DfID is likely to be spent on support for refugees, peace-keeping and security]

To truly deliver though ODA needs to be transparent. According to Publish What You Fund, the global campaign for aid transparency, there is currently too little readily available information about aid which undermines the efforts of donors, recipients and civil society to promote development and accountable governance. In its 2011 Pilot Transparency Index, out of 58 donors, best practice, with an assessment of fair, came from the World Bank and Global Alliance for Vaccines and Immunisation (GAVI) followed by the African Development Bank, Netherlands, UK, Sweden, US, Denmark and the European Community. Donors classed as very poor include Spain, Portugal, Italy, China, Greece, Cyprus and Malta with the last two nations scoring a quite remarkable 0 out of 100.

The recently published 'Agenda for Change' is an attempt by the EU to improve poverty reduction efforts. This aims to direct EU aid to where it is needed most and where it will have the greatest impact; concentration on a maximum of three sectors per country; a clearer focus on good governance, growth, democracy and human rights; improved policy coherence, continuity and member-state co-ordination. This has several advantages - poor countries would be able to plan ahead more confidently, there would be fewer donor missions to recipient countries (currently there are on average 250 to each recipient country each year), there should be less waste, duplication will be avoided and, eventually, it should lead to most ODA being untied. The success of this idea, however, will depend on the ability of EU member states working together on development to ensure a coherent and effective approach. This suggestion is certainly a constructive way forward in maximising ODA but the EU could and should have been bolder.

As UK prime minister Tony Blair's Commission for Africa report in 2005 highlighted, many countries in Africa suffer from a lack of expertise not just in organisation and administration but in many technical fields as well. As a result new ideas and projects are often instigated but then when difficulties are incurred things fizzle out. This is underlined by the staggering fact that only 1 in 6 World Bank projects set up in Africa continued after funding ceased. Rich countries abound with people with a great number of skills desperately needed in Africa. As a further approach to using ODA more effectively then rich countries could send experts to work with individual governments to help implement future development plans throughout the country. This could involve helping to secure food supplies by advising on different seed varieties/ fertilisers, searching and securing sources of water, reducing the energy deficit by exploiting solar/hydro power, helping to improve the physical infrastructure of the country and developing telecommunications. Assistance with the provision of health and education could also be given. The value of this kind of technical assistance is further underlined by Paul Collier, Director of the Centre for the Study of African Economies at Oxford University who argues, in his book The Bottom Billion, that 'demand driven technical assistance adds US$15 for every US$1 spent.' At the same time nationals of each country could be trained in numerous relevant skills on the job. (China is already doing many of these things).

Whilst technical assistance points the way to extraordinary value in development, donor countries should also make it clear that the continuing flow of ODA to any country is dependent on better governance. The Meltzer Commission set up by the Clinton administration in the US concluded that foreign aid should be targeted to where it can be used best. To this end it recognised that aid fosters development only if officials in recipient countries willingly promote and sustain reforms. Further evidence here lies in a report by the World Bank which concluded that an annual increase in aid of $10bn would take an extra 25m people a year out of poverty if it was targeted at poor countries with governments adopting progressive policies; spread across the board, the same amount would lift only 7m people out of poverty.

Together, then, technical assistance combined with the targeting of aid at the better governed developing countries would appear to deliver a win/win situation for poor people. Direct technical assistance would help those immediately involved whilst the whole country would benefit from improving governance. Yet this is something that development agencies like the UK's DfID gives too little weight to.

However, in this whole debate on the giving of overseas aid there are still the sceptics. Many people still view aid as wasteful, often going to criminal, corrupt and complacent regimes and seldom finding its way to those who need it most. For some people like Lord Bauer, it is 'the transfer of money from poor people in rich countries to rich people in poor countries.' And here a report in January 2016 by the European parliament might vindicate this view. According to these findings European Union development aid worth £11.5bn a year is being 'thrown down the toilet' because of poor management and local corruption in Arab and African countries. This means that UK taxpayers are losing £1.4bn a year in contributions paid to the EU on projects that are poorly managed. It also means that every second euro spent by the EU fails to deliver.

As can be seen from our World 'Premier' League table above, the total collective giving of all DAC countries in 2016 only represents 0.32% GNI, and is still less than half way to the 0.7% target set by the UN in 1970. This means that developing countries lost out by $168bn in 2016.

Overseas aid though should also be seen in the wider context. In 2015, for all of sub-Saharan Africa, total ODA is estimated at around US$46bn comprising US$25bn in bilateral ODA, US$15.8bn in multilateral support, US$4.7 in humanitarian aid and US$0.4bn in debt relief. Of this total about US$20bn would probably represent direct budget support to governments. (In contrast, inward remittances sent by the diaspora totalled US$32bn in 2014.) At the same time the collective budgets of all sub-Saharan African countries in 2014 totalled around US$360bn raised mainly through taxes and the sale of rights to exploit natural resources. This means that only around 6% of government budgets in countries in sub-Saharan Africa comes from Western support which means that home grown development should be fundamentally more important than ODA. However, to cap it all, according to Global Financial Integrity, US$45bn is transferred out of sub-Saharan Africa each year through illicit flows resulting from tax exemptions to foreign companies and tax evasion.


Somewhat surprisingly perhaps, the country in sub-Saharan Africa receiving most ODA is Cape Verde with US$438 per capita; the country in receipt of the least is Nigeria with US$10 per capita. This could perhaps be down to rich countries underestimating the size of the population of Nigeria at 171.3 million, but equally, it could be down to the fact that Cape Verde is much better governed. However, Nigeria does produce almost 1bn barrels of oil every year worth US$55bn whilst, in the next two years, despite pervasive poverty, the country has it in mind to send astronauts into space!

The Commitment to Development Index produced each year by The Center for Global Development based in Washington DC takes the commitment of rich countries to helping poor countries a stage further. Taking the average of 7 different categories - aid, trade, investment, migration, environment, security and technology - the Center calculates the effectiveness of each OECD country's contributions to supporting poor nations.

Under this method Denmark comes top with 6.1/10.0 followed by Sweden 5.8, Norway 5.7, Finland 5.6, Netherlands 5.6, France 5.5, UK 5.5, Portugal 5.4, New Zealand 5.4, Australia 5.2, Canada 5.2, Germany 5.2.

==================================================

According to the UK Independent Commission for Aid Impact (ICAI) in October, 2014 'DfID has not developed an approach equal to the challenge of corruption, nor has it focussed its efforts sufficiently on the poor. While some programmes show limited achievements, there is little evidence of impact in corruption levels or in meeting the particular needs of the poor.'

'DfID's willingness to engage in programming that explicitly tackles corruption is often constrained by political sensitivity in a country. It is not capturing and applying lessons learned.' As a result of these findings ICAI has given DfID a rating of AMBER-RED.

In the year 2015 the UK overseas aid spending amounted to £12.1bn (0.70%GNI) from £11.73bn (0.70%) in 2014, £11.43bn (0.70%) in 2013, £8.8bn (0.56%) in 2012, £8.63bn in 2011 (0.56%) and £8.45bn (0.57%) in 2010. (These percentages are the highest ever recorded for UK ODA since 1970 and the 0.70% GNI target has been enshrined in law since 2015.) This also makes the UK's DfID the 2nd largest donor of overseas aid after the US.

In 2015 63% of UK ODA was bilateral whilst 37.% was given as multilateral assistance. The humanitarian sector received the largest portion of bilateral aid with 16% followed by government/civil society 13%, health 13% and economic infrastructure 12%. In 2015, Africa received the largest proportion of bilateral ODA with £2.54bn. (UK aid has been untied since 2001 thus ensuring cost effectiveness. Nevertheless, British companies still win 90% of contracts.)

For 2015 Pakistan was the largest recipient of UK bilateral aid with £374m followed by Ethiopia £339m and Afghanistan £300m. Completing the top ten are Nigeria £263m, Syria £258m, Sierra Leone £218m, South Sudan £208m Tanzania £205m, India £186m and Bangladesh £164m. The next ten countries were Kenya £156m, D R Congo £143m, Uganda £123m, Somalia £122m, Burma £114m, Rwanda £101m, Lebanon £100m, Zimbabwe £93m, Nepal £88m, Malawi £86m. The vast majority of UK bilateral aid was spent in Africa 55% and Asia 41%.

In 2015, multi-lateral ODA totalled £4,473m. The International Development Association (IDA), part of the World Bank, received the largest amount of UK multilateral assistance (£1.64bn), followed by the European Commission (£1.14bn), the Global Fund to Fight Aids, Tuberculosis and Malaria (£285m), the Strategic Climate Fund with (£274m) and the Global Alliance for Vaccines and Immunisation with (£269m). DfID has also been accused of dumping billions of pounds in obscure World Bank trust funds in an apparent attempt to meet the country's annual target for aid. According to a senior aid consultant DfID gives large sums to trust funds in order to fulfil Britain's requirement to spend 0.7% of GNI annually when time is about to run out. And sometimes that money can sit in there for years it is claimed.

Priorities for DfID in 2015 included helping 9 million children into primary school, immunising more than 55 million children against preventable diseases, saving the lives of at least 250,000 new born babies and encouraging global action on climate change.

However, DfID also channels £1.5bn through CDC, the government's private equity division. And projects that have been financed by CDC recently include several large shopping malls in Nigeria, an Indian online fashion retailer, a chain of electronics stores selling iPhones in Egypt, Chinese budget hotel franchise called '7 days' as well as restaurant chains in Vietnam, India and Peru.

At the same time, it might come as a bit of a surprise to some to learn that millions of pounds of DfID's budget is spent in the UK every year. According to The Times consultancy spending by DfID has now reached £1bn per year of which ten UK companies received almost half of the funds. In 2014 DfID paid £26,000 to hire Krishnan Guru-Murthy, the Channel 4 News presenter, and £14,000 to hire Zeinab Badawi, the BBC broadcaster, to moderate a handful of sessions at a 2 day conference in Mexico. In 2012, £12m went on projects like global citizenship lessons in Scottish schools, military and security training for officials from African countries at the UK's Defence Academy, and a study visit to the UK for North Korean officials. Also counted as ODA are cultural and scientific promotions by the Foreign Office to serve diplomatic goodwill. Under this banner come touring Shakespeare plays and zoological initiatives.

It might seem strange to most members of the general public to find that Ethiopia gets such a large slice of its overseas aid when the government scores abysmally on human rights, corruption and development? Although impressive advances have been made in health care over the last decade, too many families still do not have enough food to eat and currently 10 million people are relying on food aid. In many fertile areas of the country people are being forcibly moved from their land in a process known as villagisation which clears large areas for commercial farming but sees the former occupants forcibly evicted to areas where farming is impossible and where there is no water, schools or healthcare. As for the opposition, their leaders are in prison for daring to protest against unfair elections where the ruling party secured 547/547 seats in Parliament in the last election in May, 2015. Perhaps, though, the real reason for Ethiopia receiving such a large slice of UK Aid is political. Throughout history, for the UK Foreign and Commonwealth Office (FCO), politics has always come before people whereas for DfID people would undoubtedly take precedence. But at the end of the day the FCO will have the casting vote and at present the Ethiopian army is acting as a proxy for western governments in Somalia in the fight against terrorism and Al-Shabab.

(According to the UK Taxpayers Alliance, £730m (9%) of UK overseas aid never made it to the communities for whom it was intended in 2009.)

 
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