Development Aid

Levels of development differ across the world. Some countries are considered highly developed, whilst others, are significantly less so. These countries that are less developed often need support economically, politically socially, and even environmentally, in the form of development aid. But what exactly is development aid? What agencies are responsible for providing it? Are there different types of development aid? Read on to find out more. 

Development Aid Development Aid

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Table of contents

    Development aid definition

    The idea of aid can be understood as providing help to those that need it. Combine that with development, and we have development aid. But what exactly is the definition of development aid?

    Development aid is aid designated to a developing country to support its economic, political, social, and environmental development.

    This is also known as overseas aid or official development assistance (ODA).

    Development Aid A world map highlighting development assistance as share of government expense StudySmarterFig. 1 - Development aid as a share of government expense

    development aid world map givernment aid share GNI 2020 StudySmarterFig. 2 - Government aid as a share of GNI, 2020

    Development Aid agencies

    Development aid can be provided by different agencies. Let's example a few of these.

    1. Non-governmental organisations (NGOs): Non-profit organisations are independent of a government, typically focussing on social and economic issues.

    These include development charities such as Oxfam and Hand in Hand for aid and development. These organisations will distribute humanitarian aid, reconstruct infrastructure and implement sustainable livelihood programs. For instance, in Syria, these organisations provide essential goods and services such as clean water and clothes.

    2. Intergovernmental organisations (IGOs): Organisations made up of two or more sovereign states working together through formal and legal arrangements such as a treaty.

    United Nations: UN agencies respond to a lot of emergencies with short-term humanitarian aid. The World Bank arranges loans to developing countries to pursue capital projects and assist economic growth and development.

    3. Governments of developed countries: This includes the UK government, the first G7 country that made it mandatory to pledge 0.7% of its GNI annually to development aid. This figure of 0.7% derives from the UN General Assembly in 1970.

    Types of development aid

    There are different types of development aid. Development aid can be either bilateral or multilateral. Let's split these up.

    Bilateral aid

    This is when aid is given from developed countries to developing countries directly without intermediate agencies.

    This can also be known as “tied” aid as the country receiving aid may have conditions attached, usually trade-related, such as being obliged to buy their good or services in return. Donor countries may prefer this as it gives more control over where the financial aid goes and encourages long-term trade relationships with recipient countries.

    Some developing countries refuse this kind of conditional aid as they consider it neocolonialism.

    Multilateral aid

    This is aid from multiple donor countries, which will go to an intermediate agency or an IGO such as the World Bank, which will administer the money to the developing country.

    The developing country may prefer this because the intermediate is less likely to be pursuing their own political interests, meaning fewer ties and conditions for the country receiving aid. In addition to this, IGOs will be able to pool resources, increasing cost-effectivity, especially for larger projects.

    Aid from IGOs, NGOs, and governments will often go to humanitarian emergencies as short-term aid.

    Multilateral aid case study: Madagascar 2022:

    The UN responds to many short-term humanitarian emergencies such as natural disasters, for instance, Cyclone Batsirai, which hit Madagascar in February 2022. The most recent figures show the cyclone to have left 124,000 homes damaged or destroyed and 30,000 more displaced1. It has killed 120 people in Madagascar, all while the country is still struggling to overcome the previous cyclone and has been battling food shortages from a severe drought. The World Food Programme, part of the UN, has been working with the government as a response, providing hot meals. UNICEF and UNFPA, both also UN agencies, have been providing protection with emergency accommodation sites for the displaced as well as essential medicines and healthcare equipment.

    The EU was also able to act fast with a team of 5 EU Civil Protection experts from across Europe, trained in coordinating emergencies and solving humanitarian logistics, water and sanitation, and health problems.

    “UN and NGOs have landed in Madagascar to support relief efforts, thanks to the European Union, which has facilitated the necessary humanitarian air bridge” - UN spokesperson2

    To get top marks in an essay, apply a case study outside of conventional textbooks to prove your contextual knowledge and application skills. Remember to meet your assessment objectives, [AO2: Apply knowledge and understanding in different contexts to interpret, analyse and evaluate geographical information and issues]

    Development aid projects

    For an example of a development aid project, we're going to take a look at Haiti.

    Background: Haiti is an island in the Caribbean Sea and is at risk of multiple natural hazards, mainly earthquakes and hurricanes. Its relatively poor population and low HDI, ranking 163 out of 188, gives Haiti the nickname of “the republic of NGOs”. The Haitian earthquake in 2010, which killed over 220,000, led NGOs, IGOs, and governments across the world to respond with aid.

    NGOs:

    • Oxfam responded by providing clean water, shelter, and sanitation immediately following the earthquake. Their focus soon shifted to funding rebuilding efforts and growth projects
    • The Red Cross sent hundreds of personnel on the ground and established field hospitals
    IGOs:
    • The World Bank has further provided an amount of US$100 million to support Haiti’s recovery and reconstruction following the earthquake
    • The EU had pledged €122 million in humanitarian assistance with €30 million in an emergency relief package
    Governments:
    • The US government contributed US$1.3 billion in humanitarian assistance as well as a further US$2.2 billion in recovery, reconstruction, and development projects3. USAID (US Agency for International Development) has continued to support long-term development by promoting economic growth, job creation, agricultural development, and education services. In 2020 alone, USAID secured 1,900 hectares with improved management technologies in agriculture4
    • The UK donated US$10 million as well as pledging another US$22 million in aid

    Development Aid economics

    We can think about development aid economics through the idea of trade. One method of donor countries giving aid is through trade, or, “aid for trade”. This bilateral aid will promote diplomatic relations between the two countries to trade their goods and services, which will open the developing country to advance their economies. A lot of low-income countries will lack the infrastructure and ability to compete in a global market. Having access to this market can allow the country to import and export goods and services, consequently encouraging more manufacturing, innovation, employment, and even potentially establishing comparative advantages. All of this ultimately allows the country to improve its economic resources and develop a better quality of life for its citizens.

    Comparative advantage: This is the country’s ability to produce a specific good or service at a lower opportunity cost than any competitor. This will usually make the country the largest exporter of that specific good or service.

    The World Trade Organisation (WTO) helps developing countries to trade globally through:

    1. Creating trade strategies.
    2. Offering the knowledge to be able to negotiate for better transactions.
    3. Assisting the countries to develop better infrastructure like roads, ports, and communication systems. This will allow more efficient transport for goods and services to trade.

    Uganda: 48% of the country’s development aid from 2006 to 2013 was from ‘aid for trade’, the WTO initiative. The country’s exports rose by 144% and its commercial services rose by 362%.

    • Its annual GDP per capita made a huge increase, jumping from US$349 (2006) to US$880 (2014)
    • Under 40% of its population now live under US$1.25 compared to over 50% in 2006.
    • The country has also improved its development indicators, moving from a Human Development Index (HDI) score of 0.393 (2000) to 0.483 (2014)

    Development Aid - Key takeaways

    • Development aid is aid designated to a developing country to support their economic, political, social, and environmental development
    • Bilateral aid is when aid is given from a developed country to a developing country directly without intermediate agencies
    • Multilateral aid is when aid from multiple donor countries will go through an intermediate agency or IGO, such as the World Bank, which will administer the money to the developing country
    • Bilateral aid can have disadvantages such as political interest involving conditions while multilateral aid has advantages like its ability to pool resources
    • International aid promotes economic growth through schemes like ‘trade for aid’ by the WTO.

    References

    1. Madagascar: Emergency teams deploy to areas hit hard by deadly cyclone, UN News, 2022
    2. Madagascar death toll from Cyclone Batsirai nears 100, Al Jazeera News, 2022
    3. Haiti: Is US AID effective? First Session, 2013
    4. USAID, Haiti, 2022]
    5. Aghalino, Combating the Niger Delta Crisis: an appraisal of Federal Government response to Anti-Oil protect in Niger Delta, 2004
    6. Fig. 1: Development aid, government expense (https://en.wikipedia.org/wiki/File:Development-assistance-as-share-of-government-expense.png) by Our World in Data (https://ourworldindata.org/grapher/development-assistance-as-share-of-government-expense?time=2015) licensed by CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/)
    7. Fig. 2: Development aid, government aid GNI (https://ourworldindata.org/grapher/net-oda-to-ldcs-as-percentage-of-donors-gni?tab=map) by Our World in Data (https://ourworldindata.org/grapher/net-oda-to-ldcs-as-percentage-of-donors-gni?tab=map) licensed by CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/)
    Frequently Asked Questions about Development Aid

    Does foreign aid promote economic development?

    Yes, foreign aid can promote economic growth through schemes such as 'aid for trade'. Investments into trade will give the country access to the global market allowing it to import and export goods and services. This will consequently encourage more manufacturing, innovation and employment. This isn't the only way of improving its economic resources as loans and grants for specific projects can do this too, ultimately almost always developing the country's economy as long as the aid isn't held back with corruption. However its extent of success can be up for question depending on the project and external interests.

    What does the agency for international development do?

    This agency and agencies similar to USAID, will provide aid to authorities and will also distribute relief packages accordingly as short term aid. However, as government agencies, USAID will also spread their own political interests attached to their provision such as advancing democracy. Other aid agencies may do the same unless they are NGOs.

    What is international aid and development?

    International aid is aid, typically given as money, designated to a developing country to support their economic, political, social and environmental development. This development in low income countries is vital in reaching goals such eradicating poverty and ending world hunger.

    How does aid help developing countries?

    Schemes such as 'aid for trade' will bring investments into a developing country that will teach a country how to operate in a global free market, which can accelerate economic growth and stability. This will be done as goods and services will now be imported and exported subsequently encouraging more manufacturing, innovation and employment. Through optimising and improving economic resources in a country, it will also improve other development indicators such as literacy rates and infant mortality.

    Why is development aid important?

    As development aid improves the low income countries' human development, poverty will drop along with world hunger and a multitude of social issues such as minors working in dangerous conditions. These are part of the UN MDGs which countries across the world are committed to achieving.

    Test your knowledge with multiple choice flashcards

    Who gives development aid?

    Which IGO started the initiative called 'trade for aid'?

    How much did Uganda's exports rise by?

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