An official review of Dutch aid to Africa found that money and aid programs are not often reaching the poorest on the continent. The study uncovered two reasons for this: The controversial program of loaning money so governments can purchase Dutch exports and the problems of giving money directly to governments with little oversight.
The Netherlands gave almost six billion euros to Africa between 1998 and 2006. But that money didn't always go to help those in the most desperate need, concludes the Inspectorate (IOB) of the Ministry of Foreign Affairs. For example, in this period about one billion euros - a sixth of the budget for Africa - was cancelled from the debts of such countries as Congo and Nigeria.
Frans Bieckmann, Editor-in-Chief of The Broker, a magazine about development cooperation, finds this a nasty business.
"It's a very complicated story, but what it comes down to is that a billion euros have been used for the financing of exports from Dutch business. And the big question is whether the poorest have received any benefits. I doubt that very much, especially if it's countries like Nigeria and Congo."
In some African countries, debts exist because the importers couldn't pay the bills for Dutch products. The debts should really be paid by the Minister of Finance and not through development cooperation, deems the Inspectorate.
A further question is how far the poor have profited from the radical changes that have been made to Dutch aid for Africa in recent years. For example, the Netherlands has introduced a system of general budget support. Governments that fulfill certain conditions can get a sack of money that can be spent according to their own wishes. The idea is to give them more say in the aid.
In principle, budget support is a great instrument for the fight against poverty, thinks Paul Hoebink, a development specialist at the University of Nijmegen. But if it's given to the wrong countries, the poor don't get sufficient benefits:
"If you give this sort of support, you have to be sure the country is well governed. There are examples of countries where this clearly isn't the case. For example, Uganda received budget support while the country was carrying out raids into Congo. Human rights were also abused. Those sorts of things should be reason enough to give those countries less."
Here, take my money
There was a time that whenever I heard the term “general budget support,” I instinctively reached for my revolver. As a method of development, handing over sacks of money directly to governments sounds just a tad more efficient than flying over the ocean and throwing the money out the window.
However, I found this attitude can be shortsighted. General budget support can work, if done correctly. In some cases, it works better than money earmarked to a specific project.
To generalize, an IMF study found that general budget support is preferable when the amount is relatively small compared to the resources of the recipient government; conversely, project support works best when the project – and expenditures – is quite large. The reasons are manifold, but singular project aid often gives full power to the donor, who decides which organizations will carry out the work, where the work will take place, etc. Thus, the recipient government has very little “ownership” of the program and will most likely not lend a hand if the project falters. This has lead to the idea that donors and recipients are partners in aid, brushing over the inherent unequal relationship between the two parties. Project aid also does work when the governments are not very committed in carrying out aid of any type.
On the other hand, when governments are handed money on the condition they complete a project, say building schools, it is the various ministries who make major decisions: Where the schools go, who will build them and who will be ultimately responsible for them. This ownership helps to insure the project is completed and builds capacity (a nice buzzword) for large project oversight. States may also make the decision to divert funds from elsewhere to help expand this project. Secondly, and very importantly, when the donor has near complete control, they have less room to negotiate with the government regarding this project or future endeavors. This is rooted in the fact that for the project to work, both the government and the donor must have similar objectives in mind. (I would also argue that the local population’s objectives be taken into account, also.) Because of the conservations and planning involved at the outset, general budget support is one way to ensure goals are harmonized.
A study by OECD found that general budget support, when working well, is more efficient, thus less expensive than project support. That’s because well run governments often use the money to realize the things they do best, for example building water systems or schools. Budget support also works well when the issue at hand crosses multiple sectors, like AIDS.
At the bottom of this debate, of course, is the fear of diverted aid flows. The cynics in us will say that a government will either divert some of the funds to Swiss Bank accounts or houses in the south of France. Or, more subtly, the government will decide to build the schools in the president’s village or region, thus awarding political allies. The underlying use of aid donors is to create a system of checks and balances in the recipient country so regular people can help guide governmental decisions. (However, the OECD study admitted that budget assistance had no discernible effect on the empowerment of the poor.)
Another issue is monitoring. Who should do the testing – and what outcomes they should observe to insure the project is a success – has long been debated. Sometimes donors are stuck in the corner of monitoring “observable” policy measures only, perhaps even earmarking a large share of funds towards these. This is often problematic. Take the example of monitoring the number of children attending new schools, but not the quality of their education due to a different student-teacher ratio.
There’s another overriding factor: the question whether aid is completely altruistic. The IMF researchers admit that outside strategic and political issues sometimes factor into a governmental decisions. I would also add that outside factors influence the decision of development agencies. Some agencies are forced to obey certain political realities of their home country, like taking part in controversial projects like monetization. There is also the fact that some country directors are bent on empire building and scope creep. And finally, there’s the obvious need of finding a use for all those shiny white 4x4s.