Comments

Thanks Paul, Andrew, Deg and Beth for your comments and sorry for my delayed reply. Just a couple of points to note. Paul - most survey data that I'm aware of suggests that publics in developed countries believe that their governments should and do give more aid than they actually do. So I'm not sure if our aid budgets can really be accurately viewed as a product of politicians pandering to public sentiment. Also, the claim that aid helps politicians in recipient countries enrich themselves and also that it puts off any potential day of reckoning when citizens of these countries might hold politicians to account has a grain of truth to it. Certainly, in the past (and even in the present in the case of some donors) aid that has been primarily given for geostrategic rather than humanitarian reasons has ended up lining the pockets of tyrants and dictators. But this is much less prevalent (at least for the better donors) these days as conditionality and other control mechanisms are applied to try and ensure aid spending helps the needy. Similarly, there's not a lot of evidence to suggest that modern era aid leads to more rather than less corruption in developing countries. In short, the world of aid has changed somewhat for the better in the last two decades and while your concerns are valid, I think it would be easy to overstate them. Beth and Andrew, For the most part I think Andrew is right. Aid work is hard and comes with its particular set of stresses and if it is really poorly paid people with the best skills for the job (particularly when they reach the age of kids and a mortgage) won't do it. On the other hand, while this goes some way to excusing the lifestyles of aid workers I do also think Beth has a point and that, at some point, this line of thinking becomes a convenient excuse for salaries and luxuries that can't be justified. How often this point is passed, I'm not sure. Thanks for your comments.

Dear David, Thank you for your response to my post, which originally appeared on ADBI’s Asia Pathways blog and linked to ANU’s Development Policy Blog. I appreciate your clarification and comments. It is my great honor to receive comments from the author of CDI, which I mentioned in my post. Let me re-clarify the points you commented on. 1. Prioritized region and selectivity Although I did not mention the reasons donors have prioritized regions due to space limitations of blog posts, it is true that many donor nations have their priorities in delivering aid. The priority may come from donors’ motivations to satisfy their altruism for the poorest people, or to share the burden to provide global or regional public goods, or to strengthen political and economic ties with certain countries and regions. These motivations back the delivery of aid. As ODA relies on the taxpayer money of donor countries, the aid should be of some value to the people of donor countries in addition to the people of recipient countries. For example, Japan’s ODA Charter states, “The objectives of Japan's ODA are to contribute to the peace and development of the international community, and thereby to help ensure Japan's own security and prosperity” (1. Objectives), and, “In light of the objectives stated above, Asia, a region with close relationship to Japan and which can have a major impact on Japan's stability and prosperity, is a priority region for Japan” (4. Priority Regions). I am not suggesting “ignoring” the “poverty selectivity” that indicates more aid should go to poorer countries. But what I am suggesting is the need to examine selectivity in more detail rather than evaluating it by looking at aid “in total” alone. Although Japanese ODA has been primarily directed at middle-income countries due to more ODA loans being allocated to them as they have higher debt sustainability, more Japanese “grant” aid has been allocated to lower-income countries, particularly in Sub-Saharan Africa. 2. Ranking of selectivity in CDI We appreciate the high ranking of selectivity of Japanese aid in your recent publications. The point of my working paper and blog post, however, is to see this measure more closely with by taking different types of aid into account, and from the long-term and regional perspective, i.e. “one size may not fit all.” I appreciate your recent efforts to evaluate each donor by its regional contribution, but more elaboration may be needed to reflect the effectiveness of the aid delivered by each donor. 3. Proliferation in the size of the project Yes, there is no contradiction in saying that Japan funds smaller projects in fewer countries. But there is also no contradiction in saying that smaller projects from a donor may not cause a heavier burden on the recipients than the burden that larger projects from numerous donors with different procedures may cause. Which is more burdensome? Having developing countries deal with a number of projects with the same procedures, or having them deal with fewer projects that have numerous different procedures because of the differences in donors? The transaction costs of aid recipients who handle more donors would be higher, as the “government effectiveness” (measured by a part of KKZ governance indexes) is negatively affected by the diversion of donors (measured by index of aid fragmentation, i.e. inverse Herfindahl Index of aid shares of donors in a recipient). Government effectiveness, in turn, negatively affects the growth performance of the recipient countries. (The 2SLS regression results are shown in the appendix of my working paper). 4. The impact of aid on growth I understand you have pessimistic views on growth regression of aid (as is seen in the title of your working paper) Through the Looking-Glass (2008). However, your colleagues at CGD, Clemens, Radelet, and Bhavnani (Counting Chickens When They Hatch: The Short Term Effect of Aid on Growth. First version. 2004) identified ”short-impact aid” (SIA) that can have a growth-enhancing impact on a country within four years. Although my blog post only mentioned the aid-growth nexus of Japanese aid in rank-order correlations, I also re-estimated in my working papers and Japanese articles the impact of SIA on growth for different sample periods and for Asia and Sub-Saharan Africa by following the method Clemens et al. (2004) employed (2SLS method with lagged explanatory variables to handle endogeneity). I found there the similar results as they found, in that the SIA has two to three times greater growth impact than using aggregate aid (net or gross ODA). Furthermore, as mentioned in the blog post, Japan has consistently provided its recipients with SIA, which has constituted more than 70% of Japan’s ODA since the early 1970s. While other major donors reduced their share of SIA in the 1990s and early 2000s, Japan maintained its share, which indicates Japan helped sustain the economic growth of recipient countries. Counting Chickens When They Hatch: Timing and the Effect of Aid on Growth (Clemens et al. Revised version. 2011) is not so straightforward, but admits that “increases in aid have been followed on average by modest increases in investment and growth.” 5. Net ODA “minus” per GDP It is true that the “very low net aid volume as a share of the economy” is the major contributor to the low ranking of Japanese aid in CDI. “Net aid” in CDI is the gross ODA minus ODA repayments and net interest payments, which is less than net ODA, which does not subtract the interest payment. “Net aid” does not count the forgiveness of the “other official flows “ (OOF) (e.g. untied loans from JBIC) debt and “offsetting entry for ODA debt relief,” which net ODA counts. As such, the loan-oriented ODA, which is a characteristic of Japanese aid, is penalized and the effort to reduce the debt servicing burden is not well valued. The regional Commitment to Development Index for Japanese “aid” to East Asia and Pacific scored “null” (zero), which may also be because of this “net aid” concept as substantial repayments have come from the aid recipients of this region. But the real point is whether this “net aid/GDP of the donor” has differentiable impacts on growth, poverty reduction, or welfare enhancement of the recipient countries. Is the 10 times smaller (in GDP) donor’s $1 worth 10 times more for the recipients than the $1 of the 10 times larger (in GDP) donor? For the recipient, each $1 may be almost the same regardless if it was received from a small donor or a big donor. That is why I put “result-oriented perspectives” to evaluate the quality of aid. There has been a long standing commitment of major donors to provide ODA at a volume of more than 0.7% of their GDP, but the commitment is for securing ample aid and not for ensuring the effectiveness of aid. As for the quality of aid, recent literature ranks Japanese aid as high as 8 out of 39 donors (Easterly and Pfutze. 2008), or 7 out of 31 donors in Fostering Institution and Maximizing Efficiency in Birdsall, Kharas and Perakis (2011), the first name of the authors is the president of CGD. As one size or type of aid may not fit all regions or recipients, one size or measure may not fit when evaluating commitments, contributions or aid effectiveness of all donors.

Thank you for this piece. These are issues that I am presently struggling with. Security concerns are used to justify accommodation within gated communities but the accommodation I have been provided with is in some ways better than I could afford in my home country (including access to a pool). There are two major issues for me, the first being the disparities between local staff salaries and those of international staff. Such a complex issue when local staff are already being paid well relative to the local context and there is some argument behind paying salaries high enough to attract highly skilled international staff. However, given the mission of INGOs in relieving poverty and inequality it is difficult to stomach a system that pays people doing the same or very similar jobs at a different level. The second difficulty is the separation from the local community. I have purchased a push bike to get round town (which has the added exercise benefits) as a small way in which to reduce that separation. I know there will always be a gap between international staff and the local community but living in such disparate conditions increases this tenfold. I think one other issue that hasn’t been mentioned is the funding model. I am working on an incredibly well funded project so staying in top hotels, hiring cars needlessly etc. are not only possible but are encouraged by a funding model which would require us to return any unused funds and reduce our likelihood of securing similar levels of funding in the future. I agree with Terrance’s arguments but I think there is also an element of ‘group think’. Yes, the work can be tough, and there is a need to attract ‘good’ people but by continuing with the mantra of ‘because I’m worth it’ there seems to be little reflection. In my current organisation there has only recently been a plan to move towards having a national as country director. We each like to be valued and most of us like life’s luxuries so it is understandable that those on good salaries and benefits will argue that they are necessary, but I don’t think that means that they always are. I wonder if the donors need to scrutinize to a greater degree where the finances are being spent and push for increased nationalisation within delivery partners(?)

Thanks Tobias for this, well presented and well grounded. The issues you raise in relation to Solomon Islands arise elsewhere in the region as we know. The cultural norms you identify contribute to the political environment of Solomon Islands as it is and it is only by accepting and understanding that can there be any meaningful dialogue about how to work with and within that environment to contribute to development, economic and otherwise.

Dear Takashi, Thank you for this analysis. As the person who runs the <a href="http://www.cgdev.org/cdi" rel="nofollow">Commitment to Development Index</a>, I would like to make several corrections: 1. The post says that "since many donor countries tend to focus their aid allocation in their prioritized regions or countries, it is more appropriate to estimate selectivity in the aid allocations of a donor by region than to estimate it world-wide." But the text does not explain why. If a donor gives all its aid to relatively rich countries, why should we ignore that in measuring selectivity? Are poor people in Africa less deserving of aid because they are farther away? 2. Your results on selectivity do not contradict those in the CDI. The <a href="http://www.cgdev.org/section/initiatives/_active/cdi/?country=JPN&component=&w=0" rel="nofollow">Japan page of the CDI</a> decribes selectivity as a "Japan Strength" and ranks Japan #4 overall on selectivity. 3. The discussion of proliferation confuses two different concepts. The CDI measures <em>project proliferation</em>---the tendency to fund small projects---while the analysis you cite measures <em>country-level proliferation</em>---the tendency to give aid to many countries. There is no contradiction in saying that Japan funds smaller projects in fewer countries. 4. It is not surprising that Japan's aid recipients, predominantly in Asia, have grown faster. But that does not prove that Japanese aid <em>caused</em> faster growth. The cross-country statistical approach to assessing the impact of aid on growth is no longer taken that seriously. 5. The post rightly points out that Japan (like the United States) gives very little aid for the size of its economy. I think it is worth emphasizing that <em>this</em> is the major reason that Japan scores low on the aid component of the CDI, not the selectivity and proliferation issues focused on in the post. And, along with high barriers to foreign rice and foreign workers, this is why Japan scores low on the CDI overall. --David

Hi Andrew, Your comment “what will be left behind (hopefully) will be the necessary knowledge and skills, not money” goes straight to the heart of the question of overseas aid. The correlation between the cost of providing overseas aid and the benefits accruing therefrom should be the nub of the debate. Unfortunately, this is rarely the case. Providing significant overseas aid budgets seem to have become an end in itself and not a means to achieve an end. Successive Australian governments appear to have been very conscious of their ability to devote significant amounts of taxpayer funds each year without any subsequent evaluation of the results achieved. Each financial year, hundreds of millions of dollars are pumped into an amorphous and open ended bucket which apparently suffices to stifle any further debate on what Australia is doing to help other less fortunate countries. If the average Australian is either apparently unconcerned or disinterested enough to be able to discern any problem in this equation, one might think those countries that are supposed to be benefiting from these large amounts of money might want to know the details of what results are actually being achieved. The silence on this issue alone is deafening apart from a few who cast some vague aspersions about so called ‘boomerang aid’ as if the value of the aid money should in fact just be merely just handed over as a once off payment to the recipient country each year without any further accountable result or feedback loop. The launching of high profile aid projects is one beloved by both the donors and recipients. Much publicised media events on the ‘splash’ of the metaphoric ship’s launch and any associated and garnered prestige are to be milked to their limit. Yet when it comes time to consider ongoing maintenance, fuel and the crewing of the ship, no one at the launch apparently wants to know. So what is the obvious end result? Neither the donor country nor the receiving country apparently wants to challenge the process. Inevitably that creates a ‘black hole’ that each successive year of overseas aid budgets are dumped into where everything goes in but nothing apparently discernible comes out? That brings me back to my first point. The real question that should be asked is; ‘What tangible and permanent results are left behind after aid money is spent?’ The second obvious point must then surely be; ‘How can you effectively manage something not being realistically measured?’ For some reason, everyone associated with the so called ‘aid programs’ seem to be eggbound on these two crucial issues. Perhaps the real issue is that most governments seem to be unable to comprehend which end of the microscope you are supposed to look through.

The original post and the many comments have raised several interesting and complex issues. Before responding to some of them, it may be worth revealing that my comments are based on 35 years in development, covering periods as a staff member of both the ADB and WB, an employee in a commercial consulting firm in a developing country, a resident consultant on a long term advisory program in a small island and, more recently, a freelance consultant. What level of salary and conditions are appropriate? I think we need to remember that market mechanisms operate in the development aid sector as they do elsewhere. So, while some professionals may be happy to take on contracts in developing countries at less than comparable salaries than they could earn in their home country, placing a high value on the satisfaction they get from doing such work to replace the cash deficit, many will not, particularly if they have families. And the conditions provided, such and housing and transport, are an equally important part of the decision a potential contractor takes. While the excitement of living in a new culture and environment is real (and has a value) in the early years, the many disadvantages which are often present – damage to partners’ career development, limited health and education facilities, adverse security conditions, widespread petty corruption, unreliable utilities and consumer services, etc – also have a value. The longer the professional’s career in developing countries extends, the more weight is given to these issues, i.e., a young couple may take on such an appointment for a limited number of years but will be less likely to stay in the field unless the total compensation is adequate. Yet, from a development perspective, greater experience embodied in the expatriate professional is normally a desirable trait for a funding agency. “Boomerang aid”. A long career in development has left me convinced that the greatest need by developing countries is not a transfer of money or other financial resources. Rather the principal need is for knowledge and skills – across a wide range of areas: technical, policy, governance etc. So, to the extent that funding agencies recognise this and focus on advisory services, “boomerang aid” will exist: the principal costs will be for the advisors and what will be left behind (hopefully) will be the necessary knowledge and skills, not money. Relative salaries and local resentment. I believe this to be largely a non-issue, as good working relationships are about mutual respect not relative salaries. Expatriates who make no attempt to understand local cultures and make friends with those with whom they work or who adopt a superior attitude are unlikely to generate the respect necessary to be effective in their roles. At the same time, their local colleagues will be well aware that the expatriate has been hired to bring to their country knowledge or skills which are not available within the local community. If, indeed, the expatriate and the local employee are doing equivalent work and taking similar responsibility (which would justify similar remuneration), the question should be asked why the expatriate has been employed when local resources are available.

Two questions raised by Richard in his article leads to the core of the Aid dilemma. His deep understanding on the region and youth has placed him in a position to critically analyze the issue. The aid dependency and the inability to revive economies of the recipient countries is a common issue in the 'ever' developing world. The poor countries have failed miserably over generations. In my opinion two factors mainly lead to this situation. Firstly absence of a Vision for the country concerned. The leadership of the country has to formulate it and a proper SWOT analysis has to be done in designing one. Secondly not having a genuine desire among the leadership to achieve the vision. Why do donors provide aid? People believe that there are strings attached to them. Do donors have a genuine interest for the citizenry of another country [of which their own leaders have no regard for their own people]? Why some aid are given only to government institutes when donors very well know they are corrupt? Why don't they go through small NGOs [who are less corrupt] and the private sector? Is this because donors cannot benefit through them? If the donors really want and if their monitoring and evaluations are effective they can always see early warning signs before it's late. Donors should avoid the social elite and go to the beneficiary direct and gather unbiased information. And most importantly - they should respect local knowledge and expertise.

Foreign Aid – Why have it? Hi Terence, your post raises some interesting discussion points. As one who in my younger days spent some time at the grass roots (or kunai) level in PNG, my experiences of those times may well be dated. However for a number of years when I was younger, I mostly lived in a house built of local materials. I did have a stout pair of boots and a bike and I did eat canned bully beef and fish more often than those in neighbouring villages but not a lot else was different. Together we achieved a lot. Yet a basic human tenant of behaviour has not changed, so perhaps I could offer my twopenneth worth. Firstly, the question of whether there should be overseas aid is really axiomatic. Most people feel a genuine need to help those who are less fortunate than themselves. In Australia, many people recently gave generously of their time and resources after a number of natural disasters. This generosity was not meant to create any long term obligation or reciprocity but merely to genuinely help those who have suffered loss. That same inherent desire to help others translates into efforts to help those in other nations in circumstances clearly less fortunate than ourselves. Politicians in so called western countries try to capitalise on this basic human trait and promise large amounts of overseas aid funding to garner public support. A cynic might reflect however that it’s not their money after all and it doesn’t affect their salaries. How politicians in the so called developing world see the opportunities provided by foreign aid money from elsewhere is questionable in many cases. The experience in many ‘developing’ countries seems to be that if their nation is seen as poor then it will attract more overseas aid. If overseas aid is available to pay for services usually provided by the government, then those same politicians from developing countries can get on with acquiring their own fortunes at the expense of those in their country less fortunate than themselves. In these cases, overseas aid can be therefore seen as essential to try to provide the desperately needed services that in reality, should be provided by the country’s own resources. These resources are instead, reputedly being accumulated in foreign bank accounts and property. So maybe the real question that should be asked is not why have foreign aid but how should it be managed? Therein I suspect, lies the nub of the problem. There has been constant criticism about Australia’s so called ‘boomerang aid’ programs that never seem to achieve much except line the pockets of consultants and aid workers. The solution is unfortunately in the eye of the beholder. Everyone seems to have a different idea and this unfortunately clouds the real issue. I believe the benchmark for successful foreign aid programs aught to be a pre set achievement outcome for each program that must be transparently signed off and reported on and independently audited. Can everyone see why this isn’t acceptable to government?

What a fantastic, well-balanced post. It describes the uncomfortable feelings I've had about 'moving up' in salary and perks, and the one-upmanship of "which expat aid workers lives in the most badass rough conditions". >>>>And there is a risk that if they are paid a lot more, aid might end up distorting local job markets, meaning that the most talented local staff strive to be aid agency employees rather than working for their own governments or private sectors, which do desperately need their skills. I think that's already the situation in Zambia, and probably other countries too 🙂

Papua New Guineans like Andrew Mako and myself are a major part of the problem. At this point, the only group that our politicians could possibly become accountable to are honest, caring and determined Papua New Guinean urban activists who take to the streets in percentage numbers at least as high as what has occurred in Egypt, various European countries, including the UK over the past several years. Civil disobedience, always a powerful tool of the public, needs to become the rule, not the exception in PNG because the politicians themselves would be the last ones to pass laws that restrict their current limitless cowboy activities. Only a concerned, possbly dangerous public would scare the pollies enough to step down as necessary, and pass the necessasry reforms under the guidance of learned Papua New Guineans who absolutely refuse to work within the system but put pressure and ideas from outside. Sadly, none of this occurs and people like Andrew and myself will continue basking in the illusion that there is gain with no pain, that the tepid Transparency International marches achieve anything but displaying more evidence of public weakness, and that think tanks such as NRI are listened to by anyone other than head nodders. Andrew may not pray for it but I pray for a true leader who will be of honest soul and sound ethics, and will be a true muckraker and troublemaker. Nothing less will cause our current corrupt politicians to take pause. But in my praying for such a person I realise that I'm just like all the rest of us middle class or upper middle class urban Papua New Guineans - afraid to do anything activist myself. We reap what we sow.

Thanks a lot for the comment, Melanie. I’d say it’s the job of researchers to try to understand the world a little better, which is what we try to do. We don’t say that economic factors are all there is to consider.