Rethinking Foreign Aid

Five Ways to Improve Development Assistance

Women queue to receive bags of rice during food distribution in downtown Port-au-Prince, February 3, 2010. (Kena Betancur / Courtesy Reuters)

So much is written and said about foreign aid that it has become difficult to contribute meaningfully to the debate about whether it is effective. But if we are charting our fates as citizens of a crowded, fragile planet, then any honest assessment must conclude that progress has been made, whether in terms of child survival or literacy or access to basic sanitation. Still, profound social disparities exist; so too does extreme poverty. And the prospects of those living on less than two dollars a day remain grim. 

With the stakes as high as they are, the need to challenge the assumptions we make about aid is paramount. Myths and mystifications about aid persist. Whether we speak of feedback loops or best practices -- or, perhaps, simply better practices -- we have a long way to go.

Despite agreements on aid effectiveness reached in Rome, Paris, Accra, and Busan over the last decade, 80 percent of aid from major bilateral and multilateral donors to fragile countries still bypasses the systems of local public institutions. But the aspiration to improve the lives of those living in extreme poverty through better public health, public education, and public works by definition requires public-sector capacity.

By way of example, consider some data from Haiti after the 2010 earthquake. Based on United Nations estimates, bilateral and multilateral donors channeled $6.04 billion in humanitarian and recovery funding to Haiti from 2010 to 2012, but disbursed less than 10 percent of it directly to the Haitian government. Just 0.9 percent of immediate relief aid right after the earthquake (totaling $2.41 billion) made it directly to the Haitian government. Even the local NGOs and businesses were excluded: less than 0.6 percent of that $6.04 billion was invested in Haitian organizations and businesses. One of the top bilateral donors in Haiti awarded only 1.4 percent of its contracts to local companies.

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