Download Bilateral and multilateral aid

Bilateral and Multilateral Aid: Donor
Motivations and Growth and Development
Benefits
Clement S. Henry Ph.D. Candidate
International Relations
University of the West Indies
Presented at the LIRDS/University Guyana Academic Seminar
Theme: “Analysing Current Issues in the Changing Hemispheric
Environment”
University of Guyana, 06 November, 2014
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Presentation Outline
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Definition & Rationale
History of Foreign Aid
Trends in Multilateral and Bilateral Aid
Economic Perspectives on Foreign Aid
Foreign Aid in International Relations Theory
Aid Effectiveness Debate
Conclusion & Implication for Policy
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Definition & Rationale
• Foreign aid is a form of international cooperation involving the
transfer of resources from donor to recipient nations that is
generally aimed at promoting economic growth and development
(Todaro and Smith 2012, 698; Hess and Ross 1997, 498-499).
• Aid can take several forms: cash grants, commodity transfers,
technical assistance, relief workers and concessional portion of
loans.
• Generally dispensed bilaterally or multilaterally.
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Definition & Rationale
Questions
1.What are the motivations behind aid giving?
2.What factors govern country selectivity?
3.To what extent does foreign aid contribute to economic growth and
development?
Rationale
1.The Persistence of Aid Programmes despite disappointing results
point to other motives beside economic development of recipient
states.
2.Apart from Morgenthau’s paper on aid few studies incorporating IR
Perspective
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History of Foreign Aid
1. The Marshall Plan -- bilateral assistance from the United States to
countries in Europe to aid in their reconstruction after World War
II.
2. Multilateral Approach-- setting up of the United Nations and the
Bretton Woods institutions
3. Early Post World War II period the North rejected aid as
development instrument for the south, promoted private capital
instead
4. Institutionalisation of the Cold War resulted in Policy changes first
by Russia then by the US and her allies– aid was given to the
South for geo-political reasons.
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History of Foreign Aid
1. In addition to geo-political concerns and economic growth poverty
reduction emerged as a motive for aid.
2. In the 1980s structural adjustment (Washington Consensus)
incorporated in foreign aid practice.
3. 1990s end of Cold War and HIPC programme.
4. Millennium development Goals (MDG) and Rome Declaration on
Harmonisation of Aid Practices.
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Trends in Multilateral and Bilateral Aid: Official
development finance to developing countries
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Trends in Multilateral and Bilateral Aid: Distribution
of Multilateral and Bilateral Aid
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Trends in Multilateral and Bilateral Aid: Gross
Disbursement US Millions (2012 Constant
Prices)
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Trends in Multilateral and Bilateral Aid: Gross
Disbursement US Millions (2012 Constant
Prices)-Bilateral and Multilateral Contributions
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Trends in Multilateral and Bilateral Aid: Gross
Disbursement US Millions (2012 Constant
Prices)- IDB Sp. Fund
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Trends in Multilateral and Bilateral
Aid
1. Top Five Bilateral 2010 - 2012 Annual Average: US (Norway
US$24.1M; US$19.7M; Japan US$5.6 M; Canada US$3.5M; and
Germany US$2.3M)
2. Top Five Multilateral Donors 2010 - 2012 Annual Average: IDB
Sp. Fund US$57.6M; EU- US$29.1M; Global Fund US$4.6M;
UNDP & UNICEF Combined US$1.8M; and IDA US$1.7
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Economic Perspective on Aid
1. Aid Spurs economic growth and hence development
Dual Gap Analysis
-- Savings Investment Gap and foreign exchange gap (Both Gaps filled
by External Capital)
Harrod-Domar Assumption – Investment increses growth
and I = S + A, where S is domestic saving; and A is foreign savings,
i.e. capital inflows.
2. Boast recipient growth and hence trade
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IR Perspectives
• Realism- Aid Giving for security/Power and influence
• Liberal Internationalist- Advance democratic regime,
international cooperation and humanitarian
• Constructivism- Identity and Interest
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Aid Effectiveness
• Aid not effective in spurring growth (Griffin 1970; Easterly
1999; Boone 1996)
• Aid effective in creating growth (Chenery and Strout 1966;
Papanek )
• Aid is effective in the right policy environment Burnside and
Dollar (1997; Durbarry et al)
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Conclusion & Implication for Policy
• Institutional and policy development to ensure efficient use of
resources
• Transparency in rules and principles
• Close relationship with Multilateral Partners
• Improved relations with bilateral partner
• Long-term development strategy
• Multilateral aid above bilateral
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