Tuesday, August 7, 2007

Again Foreign Aid

A columnist for everyone's favourite weekly reports from Papau New Guinea about the effectiveness of foreign aid:
On recent visits to Phnom Penh and Dili, the capitals of Cambodia and Timor-Leste respectively, one of the most impressive sights was the swarm of white four-wheel drives—emblazoned with the logos of every United Nations body, donor agency and charity imaginable—that clog the streets.
The UN’s $170m annual budget for Timor-Leste is equivalent to about half the country’s non-oil gross domestic product. And that is before counting the substantial spending by countless other donor agencies or the cost of the Australian-led peacekeeping force there. The $690m that donors are promising to Cambodia in the coming year is more than its government collects in tax revenues.
The sheer number of foreign-funded development projects, and the bureaucracy involved in dealing with their sponsors, overwhelm these poor countries’ ramshackle governments.
The latest version of these figures shows, for example, that despite all the aid it has received, Papua New Guinea’s HDI has worsened from 0.53 in 2000 to 0.523 in 2004 (compared with 0.965 for Norway, the highest scorer).
Cambodia’s HDI has improved from 0.536 in 1995 to 0.583 in 2004. This is good but perhaps one might have expected better, after nine years of being love-bombed with aid.

I am fully in the camp that aid does not constitute any means to promote sustainable growth. I have not quite reached the opinions of Easterly, but I sympathize with his views more than most, I suspect.

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