By Morgena Makombo Sikwila
The effect of foreign aid on development is the subject of ongoing debate.
Some economists hold the view of aid as the drivers for economic growth and development, others argue that aid has rather led to increasing poverty and decreasing economic growth of poor countries.
Some economists hold the notion that aid does not lead to development, but rather creates problems including corruption, dependency syndrome, limitations on exports and Dutch disease, which negatively affect economic growth and development of most African countries and other poor countries across the globe.
Although aid has had negative effect on the growth and development of most African countries, research shows that development aid, in particular, actually does have a strong and favourable effect on economic growth and development. Development aid has a positive effect on growth because it may actually promote long term economic growth and development through promoting investments in infrastructure and human capital.
In some instances, foreign kills industries in developing countries. Foreign aid in the form food aid that is given to poor countries or underdeveloped countries is responsible for the death of local farm industries in poor countries. Local farmers end up going out of business because they cannot compete with the abundance of cheap imported aid food, that is brought into countries as a response to humanitarian crisis and natural disasters.
Large inflows of money that come into developing countries, from the developer world in foreign aid increases the price of locally produced goods and products. Due to their high prices, export of local goods reduces. Local industries and producers are forced to go out of business.
Donor countries offer foreign aid to poor countries while bargaining for economic and political influence of the poor receiving countries and policy standards that allow donor countries to control systems of poor countries, for the benefit of donor countries and this is purely neocolonial.
Neocolonialism is the new face of colonialism, which is made possible by foreign aid.
Because of foreign aid, most poor or developing countries develop Aid dependency syndrome- the situation in which a country cannot perform many of the core functions of government, such as operations and maintenance, or the delivery of basic public services without foreign aid funding and expertise.
Aid has made many African countries and other poor regions incapable of achieving economic growth and development without foreign assistance.
Most African economies have become dependent on aid and this is because foreign aid has become a significant norm of system of international relations between high and low income countries.
Yes, some economists have acknowledged that high levels of aid provide a host of incentives and institutional barriers that can affect a government’s capacity to stand on its own and improve on its governance system. There are, however, also cases of countries that have used high levels of aid as steppingstones to excellent growth and improved governance of its population.
Taiwan and Botswana are perfect cases. Botswana is one country that managed its aid and natural resources well to a level it graduated from aid-dependency to being self-sustainable. Botswana, unlike other countries, had the voice to reject the imposition of unfit and irrelevant projects, simply because it was donor money.
While development aid is an important source of investment for poor countries and often insecure societies, aid’s complexity and the ever- expanding budgets leave it vulnerable to corruption. Foreign aid encourages rent-seeking behaviours. This where government officials and leaders use their personal positions and authority to increase their personal wealth at the expense of citizens.
Most African leaders and officials, are able to amass huge sums of personal wealth from foreign aid received- they enrich themselves and do not use the aid provided for its intended purpose. Corruption is very hard to quantify as it is often hard to differentiate it from other problems such as wastage, fraud, abuse and mismanagement.
Systematic aid is a form of aid which is responsible for holding back poor African countries economically. Systematic aid is in the form of grants or concessional loans greatly hampers development. The money is directly transferred to governments, the political and economic conditions are distorted. Systematic aid is not strictly regulated and does not impose stringent conditions in case of default, which implies increased leeway to governments and reduces incentives to effectively manage their aid monies.
Aid weakens the whole social construction of the country. Since aid acts as a substitute for tax revenues, governments are not anymore financially dependent on its citizens and consequently the natural checks and balances and accountability mechanisms prevailing between governments and their citizens are distorted and broken down.
Governments become all-powerful, acts without taking into account the public’s needs and pursues own financial interests. Moreover, since states concentrate on large amounts of systematic aid monies, it becomes a highly coveted place, which creates social unrest and civil wars- which impede development!
Donors should do away with aid conditionalities that inhibit smooth capacity-building initiatives in the recipient country. Donors should make sure that their aid is not guided by their own development priorities. These donors should operate within existing national organizational frameworks in order for them to help the strengthening of local institutions and structures for development. Capacity- building should be aimed at the human resources development. Donors support should complement government efforts. Technical assistance aid packages should be de-packaged.
Donors, development agencies and policymakers have, by and large, chosen to ignore blatant alarm signals, and have continued to pursue the aid-based model even when it has become apparent that aid, under whatever guise, is not working.
Morgen Makombo Sikwila
MSc Peaceand Governance
BSc Counselling
Diploma in Environmental Health
Certificate in Marketing Management
email address: morgensikwilam@gmail.com
phone number: 0772823282
