CAIRO: There is an emerging consensus that while aid alone cannot create prosperity, it can address critical human needs and contribute to economic development. In line with this view, a World Economic Forum report released Sunday identifies new trends that can make aid more effective in the future.
“Some have argued that increased aid would allow developing countries to break out of a poverty trap and launch into self-sustained growth. The mirror image view has been that aid has not achieved this objective and is, therefore, ineffective, states Michael Kremer, author of the report and professor of developing societies at Harvard University.
“There is now a movement towards a more realistic view of what aid can potentially accomplish and a willingness to confront the reality that aid has all too often been misspent in the past, he adds.
Kremer argues that aid programs (such as increasing access to basic education and healthcare) can enable people to take better advantage of economic opportunities only when domestic policies and the broader international environment are conducive to growth.
He advocates a move towards sustainable long-term aid approaches rather than quick-fix aid programs.
Most aid programs, he points out, run for only a few years and are designed to cover only start-up costs. Kremer found that continually shutting down existing projects and starting up new ones escalated administrative and consultant costs in aid agencies, put a large administrative burden on host nations, and restricted the range of activities that aid could support.
“A better way would be to support approaches that have proved successful, such as provision of vaccines . on a long-term, large-scale basis, he says. “In cases where the most effective approach includes long-term recurrent funding (such as hiring staff for health programs or repairing roads), donors should be willing to cover these costs on a long-term basis.
While countries with effective and non-corrupt governments can efficiently use aid as an incentive towards facilitating growth and reducing poverty, Kremer believes that other countries should be assisted through privately-owned entities.
“To address human needs of those in countries with poorly performing governments – including post-conflict, failed and highly corrupt states – it is often appropriate to channel assistance through the private sector and non-governmental organizations. For example, contracting with non-governmental organizations to provide basic health and education services on a competitive basis has proven effective.
Moreover, Kremer explains that it was highly crucial to direct aid towards programs that would particularly benefit poorer segments of the society. “There is a strong case for donors to provide global public goods that are disproportionately important for the poor, he writes.
“Private investors, and even country governments, do not have enough incentive to provide global or regional public goods because they do not recapture their full benefits.
Towards that end, he encourages international institutions and donors with a mandate for reducing poverty globally to undertake aid-based investments, as they had a clear comparative advantage. For example, donors should invest in research and development in developing vaccines and drugs against tropical diseases and in agricultural products suited to the tropics.
“These trends are already underway and have the power to thoroughly reinvent aid – dramatically improving the lives of the poor worldwide.
