The future of aid: not all about the money?

Amidst the ongoing budget tightening in aid circles (except for the UK) and the uncertainty as to whether Australia will keep to its commitment to increase aid, a recent World Bank blog makes a provocative statement: in the future, aid will not be about money.

The blog focuses on Africa but the point has been made with regard to Asia as well. The argument goes that “aid will be increasingly about transferring knowledge rather than money.” Given rapid economic growth across much of Asia and Africa, the domestic resources available to countries in developing Asia and Africa will dwarf aid contributions. Taking Indonesia as a prime example, according to the OECD DAC, net ODA received over the period 2009-2011 was about US$1 billion per year for the country’s 242 million people or $4 per person. Compared to Indonesia’s GDP per capita of US$3500 and fast rising total GDP (16th highest in the world compared to Australia’s 13th) and compared to the more than US$10 billion in net private inflows, the aid contribution is tiny.

Indonesia might seem to be an exceptional case but, from 2001-2010, the top ten fastest growing countries in the world included Angola, Myanmar, Ethiopia, Cambodia, Nigeria and Rwanda – all currently large aid recipients. The World Bank blog states that most of today’s stable low-income countries will reach middle-income status by 2025.

Andy Sumner’s recent paper The New Bottom Billion: What If Most of the World’s Poor Live in Middle-Income Countries? echoes this challenge and has very important repercussions for how aid is targeted and delivered.

Given these trends, AusAID and DFID have both made bold and justified decisions over recent years to reduce or eliminate aid to countries that have built strong domestic economies such as India and China exactly because they can fund poverty reduction programs using those domestic resources. But this situation is only spreading to more and more countries.

So there are a couple options or considerations for how aid is delivered. First of all, the blog rightly acknowledges that traditional aid will have to be targeted increasingly to fragile states. There remains, and will remain, a number of countries that are not on this path to growth due to conflict, geographic challenges, poverty traps and the like. The Independent Review of Aid Effectiveness of 2011 called for 50 per cent of Australia’s bilateral and regional aid to be spent in fragile states.

But what should AusAID and other donors do in stable growing countries? The blog emphasises the transfer of know-how and skills calling it thename of the game.” What does this mean? If Indonesia and the Philippines and Kenya don’t need AusAID’s money, then what do we have to offer? As these countries grow, the policy challenges become more complex. Health challenges move from delivery of basic services to building a strong functioning health system with a sustainable health financing and insurance model; education challenges might focus on improving quality and developing a strong tertiary sector to reduce brain drain; infrastructure development and urban planning takes on greater importance; and building transparent, effective tax systems for the growing formal sector takes on even greater importance. As the World Bank blog states: “aid should move from building monuments (schools, clinics and roads) to improving the machine room.”

This has profound implications for how AusAID, NGOs, universities and everyone else involved in development work over the next decade or two. Sharing knowledge and skills is a very different skill from managing aid delivery contracts. It is more fundamentally based on an open exchanges of ideas rather than top-down dogmatic imposition. It requires greater humility, honesty and a skill-set of facilitation rather than just technical smarts. An AusAID report [pdf] on the quality of its technical assistance noted that while its advisors generally had the requisite knowledge, their mentoring, capacity building and partnership skills were often sorely lacking.

If knowledge is the new aid resource, the impending question for the Australia is: will anyone value Australia’s knowledge? Australia has a strong health system but Britain’s National Health Service has a global reputation. Countries seeking ideas on building transport infrastructure will look to Japan and China and will actively avoid NSW bureaucrats. Australia does have a global reputation in digging stuff out of the ground and selling it – and AusAID is increasingly relying on this expertise to drive its advisory offering – in Africa in particular. While this is a legitimate offering it is certainly limited and sells Australian expertise short.

The Australian government will have to do more to justify to partner countries why they should listen to and seek out Australian knowledge vis-à-vis other offerings from Canada or the UK or Brazil.

I am aware that this emphasis on knowledge over money might look like it provides cover for Australian governments to cut the aid budget. That is certainly not my intention and it could be argued that, if anything, this new paradigm would require more funds amidst a new way of delivery. Engaging partner governments on technical reform, building deep relationships of openness and sharing and building teams capable of such engagement cannot be done on the cheap.

This new aid paradigm is already upon us in certain countries – are we ready?

Joel Negin is Senior Lecturer in International Public Health at the University of Sydney.

Joel Negin

Joel Negin is Head of School and Professor of Global Health at the University of Sydney School of Public Health. He focuses on health and development in sub-Saharan Africa and the Pacific.


  • Just a Quick Point:
    I have just come back from my first time working in a middle income country, having previously worked only in LDCs.

    It is immediately obvious that that gap between our resources and theirs was smaller than in LDCs. But the gap between our knowledge and theirs is even smaller.

  • This is a wonderful and rich discussion that I think really seeks to bridge the elusive gap between good policy and practice.

    There is one piece here that has been turning for me in the couple of years since I became an independent consultant (having worked at AusAID for a number of years). This is about the need for a promotion across the sector of the kinds of values that Joel describes: in my experience it is really hard to offer useful knowledge unless there is the kind of “humility, honesty and a skill-set of facilitation rather than just technical smarts” that Joel is talking about. Lots of development practitioners I think know this and it is here that many find meaning in their work – when they actually facilitate a process of transformation that leads to better, sustainable, locally appropriate development outcomes. In this dynamic it is often the bringing out and valuing of existing knowledge that catalyses sustainable change and frankly, local empowerment. That means, for example, building coalitions of local change agents who are steeped in local culture and politics (perhaps advised by an expert), rather than setting up a technical advisory panel for hire.

    At the same time, in engaging this topic, ie the need to aim for mutuality in interactions with counterparts, I also run up against a deep ambivalence among practitioners. I have had most to do with managing contractors and academics, but it goes something like this: “the Government” (AusAID, DfiD, USAID) has all the power, and won’t give it up – this is why project designs aren’t truly locally appropriate, nor locally driven.

    The next bit is more slippery. This is the exhale of the practitioner/managing contractor who fears jeopardising their livelihood in the longer term, and takes the safe route of not challenging “the government” to do a bit better. I have seen in myself an investment in being the one that knows, and in the (undue) deference I can be afforded because I represent the donor’s purse strings. And as a consultant focussed on development effectiveness, I wonder if I am in danger of catching the contractors’ malaise that can see an unimaginative approach to contract implementation (usually with an over-focus on TA), and no space made or allowed for innovation and dare I say it, mutuality.

    To put it bluntly, managing contractors tendering for work are the first to say they are slapped (ie they don’t win bids) if they try to be innovative, even if innovation is what AusAID asks for in later performance reviews. Perhaps there is some degree of defeatism or even laziness here, but I see a sectoral resistance to staying at the edge of good practice on the grounds that it isn’t what AusAID rewards in the arenas that matter to implementing organisations. For every horror story I heard in AusAID about frustratingly dumb managing contractors, I’ve heard others about AusAID asking specifically for “a dumb contractor who doesn’t think, just implements”. This kind of arrogance and paternalism are exactly what is wrong with aid more broadly. Perhaps not surprisingly, contractors seem not take opportunities to hold AusAID accountable (this is also called not biting the hand that feeds you), which means a sea of lost opportunities to promote changes within AusAID that might lead to a true partnership approach to promoting good practice.

    In fact, there is enough in the development good practice literature and in donor policies (yes, donor policies!) and evaluations, to back the kind of humility and mutuality that I think Joel is getting at. It takes a certain kind of courage to be able to show up not as the expert but as the one who needs to listen and learn (and then contribute where possible). And to have done the background research and preparation necessary to facilitate an empowering development processes. It isn’t surprising that so-called south-south cooperation is appealing to developing countries because Brazil, India, China, South Africa and other emerging donors who have experienced first hand the subtle (and sometimes blatant) power plays that can occur in a development “partnership”, and so know how to promise to behave with greater respect. (OECD research says its a bit early to tell if they are walking the talk).

    In short, if we are to share knowledge and facilitate transformation processes with developing countries, we have some work to do within our own organisations to ensure that there is mutuality and an encouragement to good practice among all players.

  • All very interesting indeed. Maybe the proportion of money and knowledge will/needs to change over the next century, with more allocated to knowledge sharing getting more priority. And someone has noted, that too will likely as, if not more costly as direct grants. But it seems to me that money will always be needed to look into new vaccines and their distribution, for training teachers and medical people. And isn’t it needed initially to start up micro finance organisations for the provision of small loans for even the poorest people to set up an income generating small business? Don’t wealthy countries need to support multi-national organisations like the Global Fund to Fight AIDS, TB and Malaria with money to distribute to poor nations for life saving programs?

    As I’m in my seventies, I won’t be around to see how the balance changes, but as 19,000 children still die from preventable causes each day, let’s remain focused on the basic needs of the poor and target them prudently.

  • I think it is a mistake to suggest that GNP is an indicator of development. Especially in a market driven economy. It is an indicator of economic growth only. Even though a country’s GNP per capita is for example $3500, there remain many people who have income levels much below this, and many astronomically higher. There is still plenty of scope for development aid that is designed by outsiders and used properly to overcome poverty. The $4 per capita of development aid would be a much better indicator if it was compared to the headcount of those living in poverty or vulnerable to economic downturn. Then you can compare countries. And have you forgotten climate change and environmental degradation which will increase rapidly in the coming years. I think more detail is needed in this suggestive analysis. I agree that stronger partnerships and more “working down” is needed with aid funds, and I see Australia in a good position to do this.

  • The experiences of Asia’s top 10 economies are driven by majority ordinary people whose creativity and skills bring in much income and allow them to take advantage of the tourism, internet and mass production of export goods and services (market). The economies are not driven by policies, and the good intentions of governments do not necessarily realise equitable distribution of resources, or aid money for that matter. Many people even in Asia are still poor today.

    Papua New Guinea will realise the potential of its people when market opportunities are available, transport, including internet services are cheaper and necessary infrastructures are in place to enhance that potential, Aid follows policies and achievement of the policies do not necessarily make aid successful for everyone. Aid money to date, if evaluated, will result in much of it been misused indirectly and did not necessarily impacted the beneficiaries who are understood to be a minority of people for the sake of donors good reporting purposes.

  • Great post. It’s a really interesting topic. With increased knowledge must come freer movements to build human capital. By opening up migration possibilities, developed countries like Australia could complement the move from developing nation to middle-income country.

    David Phillips has a new book, Development without Aid, that explores migration in particular (albeit with a focus on the poorest developing nations).

  • Thanks Joel for this post which spookily combines two of the things I have been reading and thinking about recently – the future of aid (I’ve just read Aid 2.0 by Sumner & Mallett – review forthcoming) and how to share knowledge to improve policy making. In terms of the changing face of aid, as someone described it to me recently the Pacific is the ‘hole in the doughnut’ when it comes to aid ‘theory’ and that is borne out by the work you’ve referenced here – the thinking is driven by and derived by the Africa experience and then extrapolated to Asia. This is (it seems to me) partly because the thinking is largely done by the DFID/ODI grouping and its satellites, who have long been recognised as thought leaders in this space and with good reason. And, as I have also been reminded recently, the ‘theory’ is and can be different when your aid is going a long way away rather than just next door. So it is likely to remain the case that there will be some Pacific exceptionalism going forward. Having said that there is certainly the need to address the changing development dynamics arising from the fact that PNG and Fiji are now aid donors in their own right, Timor-Leste, PNG (and possibly Solomon Islands in the future) are resource-rich which means that aid is becoming increasingly less significant in terms of contribution to the overall budget and there is increasing awareness of the importance of taxation both domestically and in terms of addressing international aspects of the policy coherence imperative.
    As for knowledge strategies…maybe next time!

    Looking forward to hearing from others on this

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