Overseas Aid: Carrots and Sticks and Santa Claus

 

We need an agreaable method of measuring aid effectiveness that doesn't require interminable meetings and cause donor diplomats' hairs to bristle. Here's a candidate.

 

 

Some notes:

 

- The Aid Effectiveness Scores and Ratings have been developed by Tony Okoromadu as an efficient means of assessing the quality of aid deployment by recipient countries in alleviating poverty and providing basic needs for their resident populations. They are listed here from top AE Score (1-Malawi) to bottom AE Score (130-Equatorial Guinea).

- The DAC List of ODA Recipients comprises 150 countries and is revised every 3 years by the OECD. 3 of these countries during 2011-2013 were net aid donors (China, Malaysia, Thailand) and another 17 had insufficient data for analysis purposes, resulting in the 130 shown in the table.

- For accurate comparison, GNI/person as expressed in international dollars (Purchasing Power Parity) has been used. Aid/person (US$) and GNI/person (PPP$) are as provided by the World Bank.

- The country with the highest aid per capita, almost USD3,100 is Tuvalu, an island nation in the Pacific Ocean. The second highest recipient during 2011-2013 is another Pacific Ocean territory, the Marshall Islands, with just over half Tuvalu’s receipts: USD1,600 per person of population. Both have a Very Low aid effectiveness score (Tuvalu 20 and Marshall Islands 22).

- The top countries for aid effectiveness during the same period are: Malawi (Very High: 88; aid per person: USD65),  Burundi (Very High: 84; aid per person: USD56) and Liberia (Very High: 80; aid per person: USD149).

- 94 of the 130 countries scored a Very Low aid effectiveness rating during 2011-2013, yet they had the largest aid allocations. Those that scored a Low aid effectiveness rating also had large aid allocations. Paradoxically, the countries with the best aid effectiveness scores received smaller aid allocations.

 

 

 
 
 
 
 

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There is the story as told by the billionaire philanthropist, Mo Ibrahim, who found himself sat next to the Zimbabwean President, Robert Mugabe, at some fancy diplomatic event. "Mr. Mugabe," begins Ibrahim, about to pose a question that's been on the world's lips for an eternity, "when are you going to say goodbye to the Zimbabwean people?" Mugabe turns to face him, feigning bemusement and mock surprise. "Goodness, why?," was his sly reply, "Are they going anywhere?"

Robert Mugabe is witty like that. Whether the people he leads are as light-hearted is another matter; they have little reason to be. Living standards have plummeted for most of his unending reign and Mr Mugabe has been shorn of friends on the international scene; indeed he is more likely to keep the company of the North Korean president and their like. The only times where the rest of the world’s leaders are likely to abide his company is when they are compelled to, like funerals of heads of state, as happened with Pope John Paul II and Nelson Mandela.

 

 

 

 

Not that Robert Mugabe is complaining, mind you; and that - in a sense - encapsulates the quandary rich countries and aid donors frequently find themselves in: should we ignore a population because they've had forced on them a dictator they didn't choose? Should their nursing mothers and helpless children bear the punishment for an irritant leader? And so, inevitably, the aid dollars continue to flow. Of the 130 recipient countries studied for this project, Zimbabwe was number 71, receiving more aid per person than Tanzania, Burundi, Guatemala or Bangladesh.

 

 

 

Last year the industrialized nations spent 137 billion dollars in overseas aid to poorer countries, about 0.3% of their collective gross national income. The United States was the biggest donor: we gifted 33 billion dollars abroad, nearly one-fourth of world total, and about 0.2% of our gross national income. Despite this volume of activity, which inexorably will continue to increase as has been the case since 1960, there isn't a template for assessing who gets what and how much. Who's been nice and who's been naughty is a question every donor country addresses on their own. Not surprisingly, it doesn't always work out efficiently. We need a ratings system, akin to individual credit ratings employed in personal finance transactions.

 

 

 

 

The world of aid - as we know it


Budgeted, fixed, charitable disbursements are - of course - not the entire story where poor country assistance is concerned. A lot goes on behind the scenes, in smoke filled rooms, resulting in large amounts channeled towards, for example, security purposes; those items will come under the “Aid” or “Grants” column in donor government ledgers, even if it goes in the “Military Assistance” or “Intelligence Efforts” or whatever name government mandarins coin for it, sub-section. Similarly, natural disasters will warrant aid disbursements and these by their nature cannot be predetermined, although governments will have a rainy day fund tucked away somewhere, this time in the “Unforeseen Contingencies” section of the accounts ledger. Then there are the thousands of non-profit organizations that make it their raison d’être to do their noble bit in trying to better the world by helping to somewhat redistribute resources from the wealthy to the needy. It can be a complicated universe, this aid business, but one organization is usually at the centre of it, trying to bring a measure of record keeping and target setting to the enterprise: the OECD, acronym for Organization for Economic Co-operation and Development.

The OECD is headquartered in France and comprises 34 countries, mostly the world’s advanced nations, although some emerging economies like Chile, Mexico, and Turkey are members. It’s brief is to stimulate economic progress and world trade.

It has a sub-committee, if you will, called the DAC - Development Assistance Committee. There are currently 29 members: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, The Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, the United Kingdom, the United States and the European Union. One of the major tasks of the DAC is to maintain a list of aid eligible countries: the DAC List of ODA Recipients, where ODA is the formal lingo for aid: “Official Development Assistance”.

That ODA list of recipient countries is described as only a guide for aid disbursement, maintained largely for statistical purposes, not for preferential treatment. But it goes a long way in effectively shortlisting countries deemed to be bonafide cases for aid assistance. The said list is revised every three years and the major criterion is the recipient countries’ wealth, specifically their Gross National Income. So, every three years some countries drop out and others are pencilled in, so that the 150 should always contain the most economically vulnerable nations in the world. The current revision is valid for 2014-2016, meaning the latest revision for which there is complete (data) reporting is the 2011-2013 ODA list. That is the list this investigation is based on.

 


Aid effectiveness - as we don’t know it

 

And here is where matters get a little murky. There isn’t presently a uniformly accepted and feasible way to determine the effective utilization or otherwise of the aid received by a host nation. There is no shortage of efforts in that regard, though. The OECD has what it calls the Busan Partnership Agreement, which it defines as “a consensus that a wide range of governments and organizations have expressed their support for”. This Busan agreement provides, continues the OECD, “a framework for continued dialogue and efforts to enhance the effectiveness of development co-operation”, which is diplomat-speak for lots of motion and little movement. That partnership agreement document runs into 36 sections and plenty subsections. The United Nations also has its own Millennium Development Goals (MDGs),

 

 

 

 

which have been widely adopted as reference targets; but these also tend to be heavy on the verbiage and not so practical to measure or assess. In the end, there really is no tight, specific and concrete means currently available to determine whether a recipient country should be handed a carrot or wielded a stick. Aid disbursements continue, partly because the wealthier countries have to be able to feel some sense of moral duty fulfilled, and partly because periodically, tragic situations arise where help is desperately needed. In the end, the Robert Mugabes of the world can continue to trust that the aid channels will flow, regardless.


My submission here does not purport to present a water-tight unfaltering method to aid effectiveness assessment. But it does attempt to show that such an assessment is empirically possible and can be more than adequately described in a one-page document. A major reason why assessment attempts have been unfeasible is the complexity they present. The MDGs are laudable targets, but they are not easily calibrated. Poor countries, when there is the will to attempt these goals, find themselves with too much paperwork and too many fluid concepts. It needn’t be so.
 


Getting down to the basics
 

An efficient system of assessing the effective utilization of aid must be clear, concise and concrete. It must be measurable empirically, and it also must be easily verifiable. At the same time, it must compensate for the relative disparity in incomes of the recipient countries: a richer country, by that fact, would have more resources available to it to work towards effectiveness targets, than would a poorer one. And so, the assessment method must take into account how much country A has achieved with the resources it had, compared to country B. Scouring through development data available for the greatest number of the world’s countries, I settled for 6 parameters, which can be easily agreed to be most basic and which every aid donor would accept as targets that their development funds should be seen to influence.

 

 

 

 

There are other potential parameters, but drill down and these 6 would likely form their foundations. It must be remembered, too, that an important factor in their selection is the availability of data from a universally accepted “umpire” - in this case the World Bank - and the verifiability of this data at both ends: the donor country or organization, and the recipient country. In other words, the data should be easy enough to count. These 6 development indicators make the cut:

 

  • Infant mortality rate (children less than 1-year old)

  • Mortality rate among under-5 year-olds

  • Incidence of tuberculosis

  • Access to drinkable water

  • Access to adequate sanitation facilities

  • Life expectancy

 

They are not the only possibles, of course, but whichever parameters are selected the criteria described must be applicable.

My Aid Effectiveness Scores are a composite of each country’s performance on each of the 6 indicators, where each country is weighted according to its gross national income relative to the others.

 

 

 

 

Whoops, there it is!


Of the 150 countries on the ODA Recipients List, complete data was available for 133. Of these, 3 countries turned out to be net donors and not net recipients during the period, and so were omitted from the assessment (China, Malaysia, Thailand). The Aid Effectiveness Ratings are in four bands, depending on the Aid Effectiveness Scores: ‘A’ Rating: 80 - 100; ‘B’ Rating: 50 - 79; ‘C’ Rating: 25 - 49; “D” Rating: 0 - 24.

Based on the Country Rating, donor nations and organizations can make decisions for the recipient country’s eligibility for what amount of aid. This is only an attempt to afford donors some form of template on which to start evaluations; other considerations might outweigh the Aid Effective Ratings here, as they should. But - at least - there would be a basis for demanding a minimum of accountability for aid receipts. Recipient countries cannot be held responsible for the unsolicited rough hand that nature or life might have dealt them, nor can their populations. But they should be responsible for the effectiveness with which they deploy the resources disbursed to them in remedying that hand. A ratings system such as this one would make a good start.◼︎

     Aid Effectiveness Scores of 130 Recipient Countries during 2011-2013

                            [Click on column headers to sort. Table may be downloaded.]