Foreign Aid Dilemma

The international aid to developing countries as a means to enhance the process of development has been a big question in the development discourse itself. The question follows multiple steps of the aid disbursement: the need/estimation of aid to a country, the call for aid to different international leaders, provision of the aid and the funding gap, and finally the disbursement through various international and local institutions. Many foreign and social policy experts have brought into question the efficiency and effectiveness of foreign aid. On one hand, it can be referred to as a windfall of resources for the governments to increase their consumption levels, on the other, it can also be thought of as an indirect channel for economic growth through increasing the investment share of GDP.  In most of the developing countries, the government institutions lack accountability and transparency, due to which a major share of the aid received is lost to the rent seeking behavior of the state. When aid is earmarked to increase the investment share, by virtue of the weakness of the same institutions, the resources are not utilized effectively, even if they are utilized honestly. The foreign aid in the form of emergency humanitarian aid is a completely a different ball game, and it poses different questions to the way international aid is disbursed.

My argument is a different one: I believe that the way international institutions utilize foreign aid in a specific country is also marred by the various external factors associated with the functions of these institutions, namely international NGOs. 

In 2010, when Pakistan was hit by the worst floods in the history, an estimated damage to the infrastructure amounted to about $43 billion, which was roughly equal to a quarter of the GDP of the country. The floods affected around 21 million people directly, while leaving millions displaced with their livelihoods completely destroyed. Such a massive level of natural disaster in a country with an already weak infrastructure conjured up a storm of international discussions and conferences to provide the required humanitarian assistance in the wake of pre existing malnutrition, food insecurity, and weak social indicators in Pakistan. The UN called for a flood appeal, asking for $2 billion in the form of international aid for Pakistan, and despite the claims by all the international leaders, only $450 million was made available for the first three months of the emergency. This goes for the first three steps of international aid i mentioned in the first paragraph. Despite the mobilization of resources and human capital, there is always a big gap of funding which is sorely inadequate for the desired purpose of the international aid. Throughout the time of humanitarian assistance to the flood affected communities in Pakistan, the provision of aid as opposed to the required aid was around 70% (an estimate). Despite the funding gap for the actual emergency response, there was no inhibition of international agencies swarming into Pakistan with specialists and experts conducting researches and studies on the deteriorating levels of underdevelopment in the affected zones. This brings me back to my argument of the inefficiencies of the international institutions in creating a real impact. 

Although there was a need for more resources to tackle the disastrous situation given the floods and the weak government institutions (responsible for implementation of emergency programs), a huge chunk of the international aid was used to fund the human capital costs associated with the international agencies. Even the UN agencies use up almost 40% of the international aid to sponsor the direct support costs (DSC) which include the salaries of the international experts and national staff, management fees to the local NGOs, transportation costs, and various other costs required to maintain certain protocols. Having said that, it does not mean at all that the interventions of such institutions have no positive impact on the targeted populations. Despite of this situation, agencies like WFP ended up feeding millions of people who were rendered food insecure in the wake of the disaster, in the same way UNICEF was able to launch broad based programs addressing the issue of malnutrition in the children under the age of 12, likewise WHO launched initiatives on building capacities of the local health departments through advocacy programs. 

The question still remains: is it enough? When so many resources are being invested to investigate the inefficiencies of government institutions to actively engage in the process of development, and when there is an awareness on how international agencies burden the international aid with their associated expenses, why can not we change the course of development practice in such a way that it is both efficient and effective, while the impact on the targeted communities is sustainable. The need to focus more on building capacities of institutions in the developing countries is imperative. If there are enough resources to be spared for associated costs, then they should be channeled to teach the idea of sustainable development to social institutions while drawing from the experience that the international agencies have to offer. This approach can also curb the trust deficit between local and international institutions, and result in programmatic synergies vis-a-vis development interventions. Finally, a localized approach to the development question can make the developing countries be self sufficient in the long run (capacity building), and it will be easier for international agencies to withdraw and channel their resources and energies on other deserving countries.