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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 2018 (2017, 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

2018
AMOUNT ($bn)

2018 ODA/GNI
%
2017 AMOUNT
($bn)
2017 ODA/GNI
%
2000 AMOUNT
($bn)
2000 ODA/GNI
%
SWEDEN
5.8
1.04
5.5
1.01
1.8
0.81
LUXEMBOURG
0.5
0.98
0.4
1.00
0.1
0.70
NORWAY
4.3
0.94
4.1
0.99
1.3
0.80
DENMARK
2.6
0.72
2.4
0.72
1.7
1.06
U.K.
19.4
0.70
17.9
0.70
4.5
0.31
----------------            
GERMANY
25.0
0.61
24.7
0.66
5.0
0.27
NETHERLANDS
5.6
0.61
5.0
0.60
3.1
0.82
             
SWITZERLAND
3.1
0.44
3.1
0.46
0.9
0.34
BELGIUM
2.3
0.43
2.2
0.45
0.8
0.36
FRANCE
12.2
0.43
11.4
0.43
4.2
0.33
             
FINLAND
1.0
0.36
1.1
0.41
0.4
0.31
IRELAND
0.9
0.31
0.8
0.30
0.2
0.30
ICELAND
0.1
0.31
0.1
0.29
   
             
CANADA
4.7
0.28
4.3
0.26
1.7
0.25
NEW ZEALAND
0.6
0.28
0.4
0.23
0.1
0.26
JAPAN
14.2
0.28
11.5
0.23
13.1
0.27
AUSTRIA
1.2
0.26
1.2
0.30
0.5
0.25
ITALY
5.0
0.24
5.7
0.29
1.4
0.13
AUSTRALIA
3.1
0.23
3.0
0.23
1.0
0.27
SPAIN
2.9
0.20
2.4
0.19
1.3
0.24
             
U.S.
34.3
0.17
35.3
0.18
9.6
0.10
PORTUGAL
0.4
0.17
0.4
0.18
0.3
0.26
SLOVENIA
0.1
0.16
0.1
0.16
   
S. KOREA
2.4
0.15
2.2
0.14
POLAND
0.8
0.14
0.7
0.13
   
CZECH REP.
0.3
0.14
0.3
0.13
   
HUNGARY
0.2
0.14
0.1
0.11
   
GREECE
0.3
0.13
0.3
0.16
0.2
0.19
SLOVAKIA
0.1
0.13
0.1
0.12
   
             
TOTAL
153.0
0.31
146.6
0.31
53.1
0.22

From the table it can be seen that total ODA in 2018 amounted to US$153.0bn after $146.6bn in 2017, an increase of 4.4%. In 2016 ODA totalled $145bn after $131.5bn in 2015. 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 2018 represents 0.31% of rich countries' combined Gross National Income against 0.31% in 2017. (Over the last 50 years developed countries are reckoned to have given more than $3.3 trillion in foreign aid.)

In 2018 Sweden retained its position at the top of the ODA League Table with 1.04%GNI. In second place is Luxembourg with 0.98% closely followed by Norway with 0.94%. Other countries reaching the UN target are Denmark with 0.72% and the United Kingdon 0.70%. Germany with 0.61% and The Netherlands ith 0.61% are next. Bringing up the rear are Slovakia and Greece with 0.13%.

The US, the largest donor nation in total with $34.3bn, 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 2018. Germany, UK, Japan and France are the next largest donors.

Sweden, Luxembourg, Norway, Denmark and UK surely deserve to be congratulated on meeting their international obligations again in giving 0.7%+ GNI annually in aid. Governments in these 5 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 Swede contributes $580 annually to the developing world in aid whilst each American only hands over $105 (UK$294/£230). 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 more than 175 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 a shocking comparison. Only ONE in FOURTEEN of top taxpayers give away more than 1% of their wealth and only ONE in TEN give anything to charity at all. 4% of workers give from their pay packets. According to the Sunday Times Rich List 2019, in total, London has more billionaires than any city in the world, whilst the UK has more billionaires than any other country in the world except the US and China.)

Other countries' contribution include, somewhat surprisingly perhaps, Turkey with $8.6bn (1.1%) mainly in support of refugees and United Arab Emirates with $3.9bn (0.95%GNI) through providing exceptional support for Egypt. Russia gave US$1bn (0.06%GNI). [China uses multiple ministries and agencies to give money, mainly in the guise of concessional lending, 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.

Support for refugees reached $10.6bn in 2018 after $14.2bn in 2017 whilst humanitarian aid totalled $15.3bn. Debt relief grants fell to $0.8bn. Multilteral aid reached $43.3bn and bilateral aid was at $83bn.

A rule introduced in 1988 by the DAC allows donor countries to count certain refugee expenses as ODA for the first year of arrival. The number of refugees entering Europe has dropped since its peak in 2015/16 and these costs in 2018 represented 7.1% of total net ODA compared to 9.6% in 2017 and 11% in 2016, when in-donor costs were at their highest. For 7 countries, these costs represented more than 10% of their total ODA and for 2 of them it was over 20%.

Net bilateral aid flows to Africa totalled US$29.7bn representing a fall in real terms of 4% compared to 2017. Within this total US$25.9bn went to sub-Saharan Africa.

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 also announced that it would cut its ODA budget from 0.34% GNI in 2014 to 0.22% GNI by 2017/18 and looks to have achieved this cut. 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; in 2017 74%.) 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. In fact the UK should offer to educate/train future potential leaders, on a continuing basis, in areas of government, civil service and the public sector and so help to ensure that governance continues to improve in poor countries going forward.

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 2018 only represents 0.31% 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 $194bn in 2018.

Overseas aid though should also be seen in the wider context. In 2018, for all of sub-Saharan Africa, total ODA is estimated at around US$47bn comprising US$25.9bn 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$35bn in 2017.) At the same time the collective budgets of all sub-Saharan African countries in 2017 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 a report in June 2019 'UK Aid has demonstrated that it can deliver in the midst of conflict, in some of the world's most challenging contexts. This has given the UK more flexibility to pursue its objectives and enhanced its leadership role in international response to crises. Also 'DfID, often working closely with multilateral partners, had helped galvanise action on some key "leave no one behind" themes including the global campaign against female genital mutilation/cutting and reproductive health and rights to ensure a global supply of affordable family planning commodities.' However, ICAI is less positive about DfID's efforts to promote universal, quality public services in key areas such as education, health, water and sanitation. 'Although many of the DfID programmes had expanded access to basic services that did not mean necessarily improved quality. In maternal health, in particular, it was found that poorer service quality posed a significant risk to the achievement of better health care outcomes.'

ICAI also found that around 25% of UK ODA is now spent by departments other than DfID.

In the year 2018 the UK overseas aid spending amounted to £14.6bn (0.7%GNI) up from £14.1bn in 2017 (0.7%) and £13.4bn in 2016 (0.7%). It totalled £12.1bn (0.70%) in 2015, £11.73bn (0.70%) in 2014, £11.43bn (0.70%) in 2013, £8.8bn (0.57%) in 2012, £8.63bn in 2011 (0.56%) and £8.52bn (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 3rd largest donor of overseas aid after the US and Germany.

In 2018 63.6% of UK ODA was bilateral whilst 36.4% was given as multilateral assistance. The humanitarian sector, health and multisector (urban, rural, environment) received the largest portion of bilateral aid all at 14% followed by government and civil society (human rights, conflict prevention) with 13%. In 2018, Africa received the largest proportion of bilateral ODA with 51% of the total followed by Asia with 40%. (UK aid has been untied since 2001 thus ensuring cost effectiveness. Nevertheless, British companies still win 90% of contracts.)

For 2018 Pakistan was again the largest recipient of UK bilateral aid with £331m followed by Ethiopia £301m, Nigeria £297m, Afghanistan £249m, Syria £231m and Democratic Rep. of Congo £204m. Completing the top ten were Somalia £194m, Bangladesh £190m, Yemen £166m and Tanzania £152m. The next ten countries were South Sudan £151m, Jordan £138m, Kenya £116m, Uganda £107m, Burma £100m, Lebanon £96m, Nepal £96m, India £95m and Zimbabwe and Sierra Leone with £94m.

In 2018, multi-lateral ODA totalled £5.3m. The International Development Association (IDA), part of the World Bank, with (36.5%) topped the list of recipients followed by the European Commission with 26.2%. Then came the Global Fund to Fight Aids, TB and Malaria 6.8%, the Global Alliance for Vaccines and Immunisation 3.8%, Green Climate Fund 3.7%, Asian Infrastructure Investment Bank 3.0% and African Development Fund 3.0%.

Previously DfID has 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.

DfID also channeled £0.3bn 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.

(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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