Development aid is still critical for cutting rates of poverty worldwide
International development assistance still remains a vital element in reducing global poverty. What’s known as Official Development Assistance (ODA) has now reached record levels of more than US$135 billion annually and is channeled to a group of 148 countries ranging from the poorest of the poor such as Bangladesh and Haiti to better-off but needy lands such as Egypt and Kenya. When it comes to development assistance the largest donor countries remain the United States, the United Kingdom, Germany, France and Japan.
That’s the assessment from the Organization of Economic Cooperation and Development ( OECD) the Paris-based agency whose Development Assistance Committee tracks and coordinates aid flows globally.
“In the past 15 years, net ODA has been rising steadily and increased by 66 percent since 2000. It has long been a stable source of financing for development,” the OECD states. Aid for poverty reduction projects and technical assistance accounts for the majority, but in recent years humanitarian aid has risen considerably while debt relief grants have fallen. The spike in humanitarian aid reflects the chaotic world situation.
Though Official Development Assistance has grown considerably, “the growth was unevenly distributed across developing countries.” Aid remains significant for what’s termed as the “fragile” Least Developed Countries but in fact according to reports, “prioritization” is now being focused on “non fragile” but needy countries such as Ghana, Honduras and Belize.
The OECD report states that “The United States continued to be the largest donor by volume with net ODA flows amounting to US$32.7 billion in 2014.” The numbers reflecting an over 2 percent increase, were focused on humanitarian aid especially to subSaharan Africa.
European Union ( EU) states continued to give the lion’s share of assistance offering US$74 billion in aid in 2014.
For example, the United Kingdom gave US$19.4 billion, Germany US$16.2 billion, and France US$10.4 billion. Smaller European countries such as Norway offered US$5 billion and the Netherlands US$5.5 billion.
Only two East Asian states belong to the elite Development Assistance Committee; Japan and South Korea. Japan donated US$9 billion while South Korea offered US$1.8 billion.
In addition, Australia sent US$4.2 billion in aid while New Zealand offered US$502 million.
According to the OECD, the relative importance of ODA is diminishing. “The growth in foreign direct investment, portfolio investment and other forms of private finance has significantly outpaced ODA growth over the past decade.”
This remains a positive develop- ment where market-driven forces of investment can replace government grants and loans to admittedly poor countries. Nonetheless the least developed countries still have not attracted sufficient foreign investment to offset the need for aid. And the middle income countries such as Indonesia, Mexico and South Africa still face development challenges despite attracting significant foreign investment.
Foreign direct investment which fell by over 16 percent globally in 2014 according to U.N. reports, still remains vital to most economies. Yet such aid still accounts for over forty percent of development finance to developing economies.
Though aid is certainly necessary in many cases, ODA can clearly create a dependency which keeps many countries from reaching their potential.
In many ways such a dependence on foreign economic assistance can be compared to training wheels on a child’s bicycle. Though prudent and necessary in the beginning, wqho would seriously keeping the training wheels on the bicycle year after year? Many countries like South Korea, for example, certainly needed serious American aid in rebuilding in the 1950’s after the war, but then graduated from this dependency and became successful in their own right. Other countries still have that lingering dependence on aid which serves both as a short term blessing but long term bane. John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of Divided Dynamism The Diplomacy of Separated Nations; Germany, Korea, China (2014). contact jjmcolumn@ earthlink.net