Encyclopedia Britannica defines foreign aid as “the international transfer of capital, goods, or services from a country or international organization for the benefit of the recipient country or its population.” From a layman’s perspective, foreign aid is perfectly altruistic, and is thought of as beneficial only to the recipients. But foreign aid regime is not as simple and straightforward. Aid is seldom given with the motive of pure altruism. There is a well known British saying: “There is no such thing as free lunch.” Aid helps not only its recipients, but also donors. But why is the discourse—to borrow Foucault’s term—created in such a way that recipient countries appear to be ‘junior partners’, and are projected to be in dire need of foreign aid ? Is foreign aid for a particular developing country a necessity, or is the ‘truth’ of necessity created to promote donors’ interests? Why are the interests of donors missing in the documentation of aid?
Foreign aid is channelized in various ways depending on its source, liability, degree of concessionality, flexibility, implementation modality, and so on. If it flows directly from a donor country, or through its own aid agency, it is termed bilateral aid. At the same time, aid also flows from many countries through multilateral institutions, such as the World Bank, Asian Development Bank, United Nations etc. This type of aid is known as multilateral aid.
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Many critics point out that in bilateral aid, donors may have ulterior motives like supporting an ally in international politics, influencing the political process in receiving countries, supporting the donors’ private companies, and so on. But the documentation only reflects the interests and needs of recipients. The interests of donors, which sometimes may even outweigh the interests of recipients, are absent in the documentation. Sometimes, reading between the lines can give a clearer picture than reading the text itself. In this regard, Pierre Macherey, a French literary critic, urges readers to see the gaps, fissures and silences of a particular text. What is left out is sometimes more important than what is in print, never more so than in foreign aid regime.
To put these observations in a historical context, critics point out that when there was conflict between capitalism and communism between the two camps led by the US and Russia respectively, aid flow to recipients was maintained accordingly. These superpowers tried to use aid to influence internal politics of other nations and support allies. Marshall Plan, which is considered a milestone in international aid, is widely criticized as the American attempt to attract European nations towards capitalism and away from communism.
Though multilateral aid has not received as much criticism as bilateral aid, it is not completely free from criticism either. Aid from powerful multilateral institutions like World Bank, ADB and IMF have been criticized as being the tools for opening up new areas for global capitalists, and only secondarily concerned with the wellbeing of people in recipient countries.
Everything is subject to criticism if the expected and promised results are not achieved. A blame game is no solution to effective aid policy. Nothing can be viewed in isolation. Foreign aid is not as ‘evil’ as its critics would have it. Demand-driven, recipient-owned, recipient-led and result-oriented aid is a ‘necessity’ for developing countries. The truth of ‘necessity’ is created in aid documentation when recipient countries are able to channelize their interest well in aid negotiation. As such, criticizing foreign aid only as a tool to fulfill donors’ interest is illogical. The major issue for most developing countries including Nepal is how effectively negotiation has been carried out to use foreign aid in national interest. Only a party with effective bargaining skills can engage in beneficial negotiations.
On the backdrop of voluble criticism of overall aid effectiveness, a simple but meaningful question arises: why do recipients continue to receive aid if it is not beneficial to them? The answer is the assumption that foreign aid is a ‘win-win’ situation. In the context of Nepal, foreign aid entered the country in 1951 with America’s ‘Point Four Program’. Immediately after that, in 1952, India started providing support to Nepal. Till 1956, India and the US were the only donors that provided aid to Nepal.
After this period, the number of donors and volume of aid to Nepal steadily increased. There could be different reasons and ‘interests’ for this increase, like Nepal’s role in non-alignment movement, its strategic location between China and India, its membership in UN, and so on. For more than 60 years now, Nepal has been continuously receiving aid for the improvement of its socio-economic status, but results so far have not been satisfactory. When Nepal initiated its first five year plan in 1956, the entire development expenditure was financed from foreign aid. Despite its prominence, foreign aid has not ushered in visible or significant changes in Nepal’s development.
Criticizing foreign aid as only a tool to fulfill donors’ interest is illogical when recipient countries are given ample say in aid negotiation.
As far as the implementation of foreign aid-related issues is concerned, Nepal Portfolio Performance Review (NPPR) has been held annually since 2000. It reviews the status of ongoing projects, troubleshoots problems and finds ways to overcome such hurdles. Still, the overall picture of aid effectiveness is not encouraging. As a result, there is doubt about whether foreign aid is actually needed in Nepal. Before we decide, we need to understand the structure of Nepali economy. The Nepali economy is characterized by structural bottlenecks, large fiscal and external deficits, and significant imbalances between savings and investment. In such a scenario, foreign aid could act as important support if it is vigorously negotiated by prioritizing the interests of the country. In addition, we need to review the aid cycle and find out where we have gone wrong.
This is the age of globalization, and the whole world has become a global village. The country could greatly benefit from the transfer of knowledge and technology. Rather than viewing aid in isolation, it has to be viewed in a spirit of mutual co-existence. Through fruitful negotiation we can reach a win-win solution for both parties. The view that negotiation alone plays a vital role in aid effectiveness is mistaken. After fruitful aid negotiation, implementation related issues become prominent. It is said that a job well begun is half done, and the same is true of overall aid cycle. Recipient countries should cautiously identify the pros and cons of intended aid. Above all, we need to be sure that the intended aid is demand-driven, rather than supply-led. If we act from this perspective, aid could bolster our efforts to reduce poverty.
The author is a section Officer at the International Economic Cooperation Coordination Division at the Ministry of Finance. Views expressed are his own.
sharmahari2009@gmail.com
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