“Do you know how much money we’ve already given to developing countries?!” seems to be a signature statement of retired ex-government workers in Ottawa. Only just last weekend, I found myself yet again holding my tongue, as I was instructed by a retired Canadian official about the vast sums of money that had been “wasted outside of this country”.
While social etiquette limited my response at the time, it has become crystal clear to me that declaring “aid is dead” nowadays is bizarrely out-of-touch. It is, after all, 2018. To make such a statement displays a remarkable ignorance about the changing aid effectiveness agenda and an outmoded conception of how aid is distributed.
This blog post is intended to update those outmoded conceptions by highlighting how sector-level and geographic targeting practices have vastly improved aid distribution and effectiveness.
By far and away, the most popular opinions on foreign aid came from the sensational and polarized Sachs-Easterly debate of the early 2000s. Sachs’ simplified claim was this: when donors get aid delivery right, recipient countries see macroeconomic growth that lift their citizens out of poverty.
The counterpoints are numerous. Easterly illustrated case after case of development projects that were ineffective at best—and at their worst, perpetuated extreme poverty. Moyo, another popular development scholar, wrote in Dead Aid that African countries that rejected aid had prospered while those that became aid-dependent experienced increased poverty. Echoing TED Talks abound; anecdotal evidence galore. This is when ex-government folks typically tell their stories of “site-visits” to developing countries—to deliver that crushing final blow to the ‘myth’ of foreign aid.
But, there’s a catch—the foreign aid we heard about in these stories is no longer the reality of aid today.
Dumb Aid in the Past v. Today
Aid during the Cold War was horrendous—some may even say criminal. Foreign assistance was dubiously defined to at times include military assistance, expired pharmaceuticals, and the story I use when I need to play devil’s advocate: irradiated grain from Chernobyl. Tied aid was business as usual and interest rates were set by ‘donors’ to keep countries indebted. The aid industry, one-sidedly benefiting implementers over recipients, added fuel to charges of ‘poverty barons’.
However, to say this about contemporary aid distribution would be patently false.
The OECD Development Assistance Community (DAC) has emerged among policy circles, and academics alike, as the gold standard for what is considered aid (in the jargon: Overseas Development Assistance). With mandatory reporting from 30 OECD members, voluntary reporting from 200 multilaterals, and voluntary reporting from 21 non-DAC members, the OECD DAC system has institutionalized measures of aid since the 1990s.
Specifically, the DAC has clarified the rules and definitions that govern legitimate ODA as aid “administered with the promotion of the economic development and welfare of developing countries as its main objective; and is concessional in character and conveys a grant element of at least 25 per cent (calculated at a rate of discount of 10 per cent)”. Additionally, “military equipment or services are not reportable as ODA. Anti-terrorism activities are also excluded”.
Globally, we’ve made substantial progress towards untying aid. In 2016, 81% of ODA commitments were open to competition for aid funded procurement, as opposed to 46% in 2001. Indeed, 98.5% of Canadian aid is untied.
Improvements in government transparency and oversight have also scaled back profits for the aid industry. Rigorous evaluation and fee competitiveness among implementers have also significantly reduced profits to so-called ‘poverty-barons’. Most contemporary development projects carry restrictions on non-local staff and are primarily administered by local in-country teams. Further to the point, most grant funds may only be allocated to cover reasonable operating costs—not employee salaries (See the AUSAID’s Direct Aid Program for an example).
Targeting Aid and Precision-Guided Aid Distribution in the Future
Too often, aid is portrayed as an arbitrary grant to be distributed by corrupt governments with wanton regard for the well-being of their citizens. This is demonstrably false in contemporary practices. The donor community has gained from years of hard-earned lessons about what works in developing contexts and what does not. Acting on this experience, all ODA disbursements recorded by OECD DAC must target sector level challenges. Most OECD DAC members have integrated this sector-targeting practice into domestic foreign aid policy frameworks reinforced by robust commitments to the International Aid Transparency Initiative (IATI). Indeed. the methodology by which the Canadian Government designed its much lauded Feminist International Assistance Policy (FIAP) was directly informed by DAC sector codes.
Multilateral organizations have also shown tremendous success in targeting sector-level challenges. Organizations like the Global Fund to Fight AIDS, Tuberculosis and Malaria and Gavi, the Vaccine Alliance have made impactful sector-level changes in the poorest and most vulnerable countries.
The aid community is not only advancing sector-level targeting—geographic targeting is also becoming more precise. Increasingly, disaggregated sub-national data is bringing marginalized communities to the foreground of development efforts. Donors can better target ‘last mile’ communities, which have been left behind by existing development institutions. PRIO-GRID data, for instance, provide location-based indicators of development across the world, which facilitate granulated targeting of the least developed areas within developing countries (see below).
PRIO GRIDS Geographic distribution of night lighting – a proxy measure of institutional service delivery
Lastly, monitoring and evaluation activities have never been as engaged and responsive to citizens in developing countries as they are now. With cellphone and internet penetration in the developing world outpacing the rest of the world, citizens can directly access the internet and engage with donor community projects through social platforms, such as Twitter and Facebook. As such, community ownership is increasingly shaping the momentum and sustainability of development projects—enabling greater local engagement, management, and responsiveness to determine project outcomes.
In a word, better geographic data, combined with sectoral targeting and local feedback, are creating unprecedented opportunities for precision-guided development. The future of aid effectiveness is bright. There are potential game changers yet to be explored, featuring the contributions of innovative financing, Big Data, and machine learning. Sachs’ original point still stands—get aid delivery right and development will come—but now we have the tools to get the job done.
Lance Hadley is a first year PhD student at NPSIA and Managing Director at iAffairs.