Assessing the Impact of Foreign Aid

Value for Money and Aid for Trade

Viktor Jakupec, Max Kelly

• Publisher: Academic Press
• Year: 2015
• ISBN:
  9780128036716
• Topic: Economics
• Subtopic: International Economics
• Index: Economics

Assessing the Impact of Foreign Aid: Value for Money and Aid for Trade provides updated information on how to improve foreign aid programs, exploring the concept and practice of impact assessment within the sometimes-unproblematic approaches advocated in current literature of value for money and aid for trade.

Contributors from multi-lateral agencies and NGOs discuss the changing patterns of Official Development Assistance and their effects on impact assessment, providing theoretical, political, structural, methodological, and practical frameworks, discussions, and a theory-practice nexus.

With twin foci of economics and policy this book raises the potential for making sophisticated and coherent decisions on aid allocation to developing countries.

• Addresses the impact of aid for trade and value for money, rather than its implementation
• Discusses the changing patterns of Official Development Assistance and their effects on impact assessment, providing theoretical, political, structural, methodological, and practical frameworks, discussions, and a theory-practice nexus
• Assesses the effects and implications of the value for money and aid for trade agendas
• Highlights economic issues

Chapter 1

Official development assistance and impact assessment – theoretical and practical frameworks

Viktor Jakupec^*

Max Kelly^†
* School of Education, Faculty of Arts and Education, Deakin University, Warrnambool, Australia
^† School of Humanities and Social Sciences, Faculty of Arts and Education, Deakin University, Warrnambool, Australia

Abstract

This chapter aims to identify and critically analyze the contemporary context for impact assessment in the Official Development Assistance arena. The chapter explores the context and relevance of foreign aid in poverty alleviation and sustainable development as understood and practiced within current development architecture and modalities. In doing so, the increasing relevance of understanding the impact of foreign aid interventions is highlighted. Specific aid discourse around aid effectiveness and value for money frame issues of designing and managing for results, and the pressing need for more critical engagement with impact assessment within an increasingly complex social, political, and economic environment. Critical issues are identified from a range of perspectives and thus set the scene for the discussions that follow in subsequent chapters, which cover development theories, practices, and problems of foreign aid in the contemporary social, political, and economic environment. With this in mind, this chapter provides a background for critical evaluation of the complexity of Impact Assessment.

Keywords

foreign aid

ODA

aid architecture

aid effectiveness

impact assessment

Chapter outline

Introduction 1

Aid, ODA, and Resource Flows to the Developing World 2

Background to foreign aid 4

Contemporary Debates, Aid Effectiveness, Value for Money, and Aid for Trade 7

Aid Effectiveness 9

Value for Money 10

Aid, Development, Results, and Impact 10

Conclusion 12

References 13

Introduction

Official Development Assistance (ODA) remains the most prominent development instrument for allocation of foreign aid with the aim of promoting prosperity in developing countries. This includes economic, political, and social development, and most significantly poverty alleviation. However, it needs to be noted that the positive impact of ODA on recipient countries economic, social, political, and other forms of development is not a foregone conclusion. As such it is subject to diverse interpretations, value claims, perceptions, and a range of indicators. Thus, ODA has it proponents and opponents. As such the need for an assessment of the impact of ODA, be it positive or negative, remains a subject of discourse amongst academics, practitioners, aid agencies, politicians, governments, and other stakeholders.

The purpose of this chapter is to bring to the fore and to unpack some overarching issues, which will be taken up in following contributions from different vantage points. The focus will be on foreign aid, and development theory and practice in the contemporary social, political, and economic environment. This chapter sets the scene for a critical evaluation of how and why assessing the impact of foreign aid is both essential and complex. These themes are taken up in more detail in Chapter 2.

Aid, ODA, and resource flows to the developing world

Foreign aid or development aid covers a vast array of resource flows (cash, commodities, and services) to and between “developed” and “developing” countries. For a better understanding, these terms are used to convey a general split between OECD and non-OECD countries. Where required the terms Least Developed Countries or low, medium, or high human development countries are used as per UN Human Development Index categorization.

ODA forms the most commonly used measure of flows to developing countries and incorporates

…flows to developing countries and multilateral institutions provided by official agencies, including state and local governments, or by their executive agencies, each transaction of which meets the following test: a) it is administered with the promotion of the economic development and welfare of developing countries as its main objective, and b) it is concessional in character and contains a grant element of at least 25% (calculated at a rate of discount of 10%)’ (OECD, 2015b, Definition of ODA).

ODA makes up one component of overseas capital flows. However, in terms of relative contribution of aid, there are two further and important considerations to be noted. These are Foreign Direct Investment (FDI) and remittances.

As can be seen in Fig. 1.1, Net ODA reached an all-time high in 2013 and 2014. Figures for 2013 are $135.1 billion, and $135.2 billion in 2014, although this represents a 0.5% decline in real terms (OECD - DAC, 2015). These somewhat impressive figures represent a 66% increase in ODA since 2000 when the Millennium Development Goals (MDG) were agreed (OECD - DAC, 2015). However, it falls short of the 0.7% GNP committed to by “economically advanced countries” since the 1970s when it was firstly raised by UN General Assembly. In effect, it represents 0.3% of DAC donors Gross National Income (GNI). The United Kingdom achieved 0.7% of GNI in 2013 and appeared to be retaining this level of spending. In contrast, recent Australian budget cuts to Aid Flows have reduced Australian aid commitments from a high of 0.35% of GNI in 2012/13 to a historic low of a planned 0.22% aid/GNI ratio in 2016/17. The current context for foreign assistance is more complex than just ODA flows. Private flows and Other Official Flows (OOF) are non-ODA flows from DAC member countries. Total OOFs for 2013 were around US$7 billion, or 5% of ODA (OECD, 2015c). There are also increasing flows from nontraditional, or non-DAC donors. Although there are a number of countries within this category, the principle source of south–south transfers comes from the so-called BRICS (Brazil, Russia, India, China, and South Africa).

Figure 1.1 Net Official Development Assistance Flows from DAC Member Countries Source: Compiled from OECD Data, http://www.oecd.org/dac/stats/data.htm, accessed May 26, 2015.

Estimates of foreign assistance from BRICS countries vary widely. For example, OECD estimate (based on direct reporting or indirect assessment of likely flows) US$5.1 billion in flows in 2013. PR China contributed two-thirds, and a further 25% came from India (OECD, 2015a). Nontraditional donors operate outside existing donor mechanisms, including effectiveness and accountability reporting, co-ordination, and aid modalities. Xu and Carey (2015) conclude that there are considerable policy implications of the increasing importance of nontraditional donors, specifically China, which is likely to become the world’s largest supplier of finance to developing countries. Given the predominance of western concepts and intellectual centers in the existing aid architecture (particularly Bretton Woods ...

Table of contents

• Cover
• Title page
• Table of Contents
• Copyright
• List of Contributors
• Author Biographies
• Preface
• Chapter 1: Official development assistance and impact assessment – theoretical and practical frameworks
• Chapter 2: Conceptualizing impact assessment in foreign aid
• Chapter 3: Competing development paradigms and alternative evaluations of aid effectiveness: challenging the dominant neoliberal vision
• Chapter 4: Aid for trade: a critical analysis
• Chapter 5: The rhetoric and reality of results and impact assessment in donor agencies: a practitioners’ perspective
• Chapter 6: Beyond aid distribution: aid effectiveness, neoliberal and neostructural reforms in pacific island countries
• Chapter 7: Regulatory impact assessment: the forgotten agenda in ODA
• Chapter 8: Can we assess the overall impact of development agencies? The example of corporate results frameworks in multilateral development banks
• Chapter 9: Assessing the impact of knowledge on development partners
• Chapter 10: From evidence to action: stakeholder coordination as a determinant of evaluation use
• Chapter 11: Inside the black box: modeling the inner workings of social development programs
• Chapter 12: Impact assessment and official development assistance: ethnographic research of the World Bank’s community-based rural development projects in Ghana
• Chapter 13: Finding balance: Improving monitoring to improve impact assessments of development programmes
• Chapter 14: Impact assessment in practice: case studies from save the children programs in Lao PDR and Afghanistan
• Chapter 15: The nongovernmental development sector and impact assessment
• Chapter 16: Impact assessment: from theory to practice
• Index