Foreign aid in bottomless basket
Sakib Shariar | Wednesday, 21 December 2011
Sakib Shariar
Aid received for development of a country must be managed properly; otherwise the wheels of development will grind to a halt. Now the question comes what is effective aid? And what is development? Aid is said to be effective if it can fulfill its mission for which it was taken; development is the continuous improvement in the standard of living and the quality of life of the people in a country. Indeed, development is the main mission of aid. Hence aid is said to be effective if there is a positive relation between aid and development. Capitalism is the most dominant ideology in today's world. Globalisation is its craft by which it travels throughout the globe. One of the most widely criticised demerits of capitalism is unequal distribution of wealth. This demerit has been acute with the advancement of globalisation because the poor become poorer and the rich become richer for it. When African and Asian children die for want of food, huge quantities of wheat is reportedly dumped in ocean by the developed countries for keeping wheat price high in world market. Due to this unequal capitalistic system, poor people get struck in an unending cycle of poverty. That is low capital results in low investment; low investment results in low productivity leading to lower leading to lowerincome and savings resulting in low capital formation. This vicious cycle results in low standard of living and finally throws a nation into an unending loop of poverty. To get out of this curse, it is mandatory to inject some extra capital from external source to the existing capital flow of a country. It will help create more capital to invest and thereby increase productivity. Higher productivity leads to more income and saving. Finally, more saving leads to greater capital formation which will ultimately lead to high standard of living and socio-economic development of a country. A major portion of aid in almost all countries is consumed by the mismanagement, ineffective allocation, powerful government interest, and public representatives are engaged in aid management. Generally underdeveloped countries have low capital to invest. For their capital formation, developed countries grant aid. Their own capital and the granted aid bounded together from the development budget (annual). A major part of foreign aid is swallowed up by government employees, politicians and employees engaged in aid management. They launder the money in foreign banks. Thus, a huge amount of money is drained out of the country's money circulation hindering the formation of capital within the country. For example, Mobuto Sese Seko, the former autocratic President of the Democratic Republic of the Congo at the time of death, had sufficient personal fortune (particularly in Swiss banks) to pay off the entire external debt of Zaire. This situation is same as the foolish fisherman catching fish and putting them in his basket. Catching fish is nothing but a psychological satisfaction for him because the fish get freed in the same water it was caught. Or catching fish can be an eye wash for his family members. Similarly, due to this bottomless basket system, foreign aid has been an eyewash of development. On the other hand, some countries such as South Korea and Taiwan started getting developed after stopping receipt of large-scale of foreign aid. So will the foreign aid be banned? Think of Mozambique, in 1990 when it was the poorest country in the world. Since then Italy and other developed countries have been providing aid to it. Aid money has helped Mozambican government increase its spending on health by over 50 per cent. The number of health centers in the country has increased by a quarter in the last 5 years. In the last decade the number of mothers dying in childbirth has fallen by over 50 per cent and the number of children who die before they see their fifth birthday has been reduced by 18 per cent. According to the ranking of World's Poorest Countries by United Nation's Human Development Report 2010, its position is now fifth. So, foreign aid is not the problem, the main problem is its ineffective use. Now the question comes, how can the bottomless basket be patched up? That means how can the aid be used effectively for development? To tape the hole of the bottomless basket, aid money should be spent in some effective sectors for development. First and the foremost sector where the aid money should be spent is education. It creates consciousness among people that creates a ground of accountability which will save the mismanagement of aid. Aid should be given to small and medium enterprises of a country for entrepreneurship development. It will help decrease abnormal dependency on multinational companies that is basically a fixed establishment to transfer a huge amount of capital from inside to outside the country by the name of developing standard of living. Funding medium enterprises will increase productivity, raise income levels, generate more savings and eventually lead to better standard of living. A famous Chinese proverb status: It is better to teach a person how to cultivate fish rather than feeding him huge amount of fish at a party; because it will help him to eat fish all year long rather than eat fish in a single day to hearts content. Accordingly, aid should be given in infrastructural development of a country rather than for developing consumption sector. Aid should be granted for developing roads and highways, bridges, power sectors and skilled labours. Establishing mutual accountability to make the aid transparent is the most important point to manage aid effectively. Both parties relating to aid should be accountable in the point of effective management. Aid should be given in developing different types of institutions related to human resource development. Such types of new institutions should be established by the development partners and controlled directly by them so that there is no mismanagement of fund. Giant corporations should be made to follow strict guidelines in performing their corporate social responsibility (CSR) in the country of their operations. Their social aid should be given for infrastructural development of the country. There are different types of non-government organisations (NGO) working in third world countries. Although they get huge aid from foreign donors, there is no transparency in the management of funds received. Donors pay the money for the upliftment of under privileged people, but how much of the fund is actually used for their development? Accountability and appropriate monitoring system of aid in NGOs need to be established. It is sad to note that Nobel laureate Professor Mohammad Younus is also not free from the blame of aid mismanagement. Final point is that if the government mismanages aid it will be high impossible for the developing partners to materialise their vision. All human beings have the same blood, same feelings of joy and sorrow, pain of starvation and satisfaction of eating. Developed countries which are wasting their wealth should understand this. On the other hand, developing countries which receive aid also need to understand the situation. This understanding will lead them to provide more aid and to manage them effectively for development. The writer is with the Marketing Department, Dhaka University, and can be reached at email: sakibshahriar@gmail.com
Aid received for development of a country must be managed properly; otherwise the wheels of development will grind to a halt. Now the question comes what is effective aid? And what is development? Aid is said to be effective if it can fulfill its mission for which it was taken; development is the continuous improvement in the standard of living and the quality of life of the people in a country. Indeed, development is the main mission of aid. Hence aid is said to be effective if there is a positive relation between aid and development. Capitalism is the most dominant ideology in today's world. Globalisation is its craft by which it travels throughout the globe. One of the most widely criticised demerits of capitalism is unequal distribution of wealth. This demerit has been acute with the advancement of globalisation because the poor become poorer and the rich become richer for it. When African and Asian children die for want of food, huge quantities of wheat is reportedly dumped in ocean by the developed countries for keeping wheat price high in world market. Due to this unequal capitalistic system, poor people get struck in an unending cycle of poverty. That is low capital results in low investment; low investment results in low productivity leading to lower leading to lowerincome and savings resulting in low capital formation. This vicious cycle results in low standard of living and finally throws a nation into an unending loop of poverty. To get out of this curse, it is mandatory to inject some extra capital from external source to the existing capital flow of a country. It will help create more capital to invest and thereby increase productivity. Higher productivity leads to more income and saving. Finally, more saving leads to greater capital formation which will ultimately lead to high standard of living and socio-economic development of a country. A major portion of aid in almost all countries is consumed by the mismanagement, ineffective allocation, powerful government interest, and public representatives are engaged in aid management. Generally underdeveloped countries have low capital to invest. For their capital formation, developed countries grant aid. Their own capital and the granted aid bounded together from the development budget (annual). A major part of foreign aid is swallowed up by government employees, politicians and employees engaged in aid management. They launder the money in foreign banks. Thus, a huge amount of money is drained out of the country's money circulation hindering the formation of capital within the country. For example, Mobuto Sese Seko, the former autocratic President of the Democratic Republic of the Congo at the time of death, had sufficient personal fortune (particularly in Swiss banks) to pay off the entire external debt of Zaire. This situation is same as the foolish fisherman catching fish and putting them in his basket. Catching fish is nothing but a psychological satisfaction for him because the fish get freed in the same water it was caught. Or catching fish can be an eye wash for his family members. Similarly, due to this bottomless basket system, foreign aid has been an eyewash of development. On the other hand, some countries such as South Korea and Taiwan started getting developed after stopping receipt of large-scale of foreign aid. So will the foreign aid be banned? Think of Mozambique, in 1990 when it was the poorest country in the world. Since then Italy and other developed countries have been providing aid to it. Aid money has helped Mozambican government increase its spending on health by over 50 per cent. The number of health centers in the country has increased by a quarter in the last 5 years. In the last decade the number of mothers dying in childbirth has fallen by over 50 per cent and the number of children who die before they see their fifth birthday has been reduced by 18 per cent. According to the ranking of World's Poorest Countries by United Nation's Human Development Report 2010, its position is now fifth. So, foreign aid is not the problem, the main problem is its ineffective use. Now the question comes, how can the bottomless basket be patched up? That means how can the aid be used effectively for development? To tape the hole of the bottomless basket, aid money should be spent in some effective sectors for development. First and the foremost sector where the aid money should be spent is education. It creates consciousness among people that creates a ground of accountability which will save the mismanagement of aid. Aid should be given to small and medium enterprises of a country for entrepreneurship development. It will help decrease abnormal dependency on multinational companies that is basically a fixed establishment to transfer a huge amount of capital from inside to outside the country by the name of developing standard of living. Funding medium enterprises will increase productivity, raise income levels, generate more savings and eventually lead to better standard of living. A famous Chinese proverb status: It is better to teach a person how to cultivate fish rather than feeding him huge amount of fish at a party; because it will help him to eat fish all year long rather than eat fish in a single day to hearts content. Accordingly, aid should be given in infrastructural development of a country rather than for developing consumption sector. Aid should be granted for developing roads and highways, bridges, power sectors and skilled labours. Establishing mutual accountability to make the aid transparent is the most important point to manage aid effectively. Both parties relating to aid should be accountable in the point of effective management. Aid should be given in developing different types of institutions related to human resource development. Such types of new institutions should be established by the development partners and controlled directly by them so that there is no mismanagement of fund. Giant corporations should be made to follow strict guidelines in performing their corporate social responsibility (CSR) in the country of their operations. Their social aid should be given for infrastructural development of the country. There are different types of non-government organisations (NGO) working in third world countries. Although they get huge aid from foreign donors, there is no transparency in the management of funds received. Donors pay the money for the upliftment of under privileged people, but how much of the fund is actually used for their development? Accountability and appropriate monitoring system of aid in NGOs need to be established. It is sad to note that Nobel laureate Professor Mohammad Younus is also not free from the blame of aid mismanagement. Final point is that if the government mismanages aid it will be high impossible for the developing partners to materialise their vision. All human beings have the same blood, same feelings of joy and sorrow, pain of starvation and satisfaction of eating. Developed countries which are wasting their wealth should understand this. On the other hand, developing countries which receive aid also need to understand the situation. This understanding will lead them to provide more aid and to manage them effectively for development. The writer is with the Marketing Department, Dhaka University, and can be reached at email: sakibshahriar@gmail.com