Introduction

On September 2000, the 189 United Nations member countries signed the UN Millennium Declaration. This eight-chapter declaration is the framework for the formulation of the UN Millennium Development Goals (UN MDGs) concerning eight targets that were scheduled to be realized by the year 2015. These concerns are:

1. Eradicate extreme poverty and hunger;
2. Achieve universal primary education;
3. Promote gender equality and empower women;
4. Reduce child mortality;
5. Improve maternal health;
6. Combat HIV/AIDS, malaria, and other diseases;
7. Ensure environmental sustainability; and
8. Develop a global partnership for development.

The accomplishment of these targets by the year 2015 is one of the bases of the creation of aid increase and effectiveness agreements such as the Monterrey Consensus in 2002 and the Paris Declaration on Aid Effectiveness in March 2005. The Monterrey Consensus resulted in new aid commitments by donor countries along with the assurance that Official Development Assistance (ODA) will be devoted to poverty eradication and genuine development. Donor countries also reached agreements on issues including debt relief, fighting corruption and policy coherence. On debt relief, donor countries committed to stop considering debt cancellation as a form of aid. The Paris Declaration meanwhile was agreed upon by donor and partner countries to establish global commitments to support more effective aid in the context of the scaling up of aid. The intention is to reform the delivery and management of aid in order to improve its effectiveness. The reforms are intended to increase the impact of aid in reducing poverty and inequality, increasing growth, building capacity and accelerating the achievement of the MDGs.

Increasing foreign aid and its effectiveness were among the main topics discussed at the July 2005 G8 summit held at Gleneagles in Scotland. The participants of the meeting committed to effectively increase aid by US$50 billion, from US$80 billion in 2004 to US$130 billion by 2010. A few months later, in September 2005, five donors stated their intent to reach the target ratio of ODA to gross national income (GNI) of 0.7% before 2015 with five European donors planning to reach 0.5% by 2010. Aside from increasing the amount of aid are other commitments to make aid more effective. The Paris Declaration include targets for improving ownership, alignment, harmonization, managing for results and mutual accountability.

Many years have passed since donor countries made these various commitments related to aid. With only two years before the year 2010, the results of their efforts in fulfilling these commitments still remain to be assessed.

Development Assistance Committee (DAC) statistics results for 2007

The Development Assistance Committee (DAC) is a round-table consultation body formed by the Organization for Economic Cooperation and Development (OECD) member countries. It is the key forum of major donors for coordinating international development cooperation efforts including those related to aid and aid effectiveness. The DAC conducts an annual monitoring of aid commitments, flows and the progress in achieving aid targets.

The most recent DAC statistics show that, overall, most donors are not on track to meet declared commitments to scale up aid and that the targets set for 2010 will not be met unless dramatic increases are forthcoming. Net ODA flows from the 22 member countries of the OECD-DAC, the world’s major donors, fell for the second straight year in 2007 when they provided just US$103.7 billion in aid. (See Table 1) This amount is only 0.28% of their collective GNI compared to the US$104.4 billion or 0.31% of their GNI in 2006. In real terms it is also an 8.4% drop from the year before.

The consecutive drop in net aid flows in 2006 to 2007 was on account of the bursting of the “debt relief bubble”. There was a dramatic increase in aid in 2005 with net ODA soaring from 0.26% of donor countries’ GNI in 2004 to 0.33% in 2005. However, this was mainly the result of the “debt relief bubble” created by counting debt cancellation as a form of aid ins spite of the promises donor countries made in the 2002 Monterrey Consensus to stop this practice . This meant that although aid appeared to increase in 2005, much of this was not real additionally money donated for the development of the recipient countries.

The two biggest debt relief grants were for Iraq and Nigeria. In November 2004, the Paris Club announced debt relief for Iraq amounting to nearly US$ 40 billion or approximately 80 percent of Iraq’s debt. Meanwhile in October 2005, donors agreed to cancel up to US$18 billion or 60 percent of Nigeria’s outstanding debt. The first tranche of debt cancellation of these countries happened in 2005. These two debt relief schemes accounted for US$ 17 billion of the US$21 billion increase recorded in 2005 which significantly distorted aid tallies and inflated overall DAC aid by more than 20 percent. However debt relief operations in Iraq and Nigeria were almost complete by 2007 and debt relief diminished to US$ 8.7 billion from 2006.

Analyses

Recent DAC statistics results show that the donor countries have been repeatedly failing to achieve the commitments they have made to materialize the MDGs and to realize aid effectiveness.

In terms of quantity, the performance of donor countries is poor in 2007 with a net ODA disbursement of only 0.28 percent of their GNI. This is just 56 percent of the total ODA commitment of 0.50% of their GNI by 2010. Donor countries effectively need to double their effort within the three years left for them to make up the shortfall – or about a 25 percent increase in ODA yearly in order to reach their commitment by 2010. With the completion of major debt relief operations in 2007, new aid will need to be programmed to sustain trends in post 9/11 foreign aid flows from donors.

Qualitatively, donor countries are still liable for issues posed by the international community regarding the quality of aid they provide every year. A considerably large amount of ODA from donors was devoted to debt relief, technical assistance, emergency assistance and support for refugees and students in donor countries. Critics say such flows are merely short term aid and should not even be considered as aid since they do not really translate into a transfer of resources and only distort the amount of aid actually given and received.

Donors also still tend to direct aid not to countries which need this the most but to countries where their specific foreign interests lie. Such is the case with Israel and Egypt, both key allies of the United States, which for years have ranked as the biggest beneficiaries of US aid even if they can be classified as relatively rich countries. Donor countries still predominantly use geopolitical interests, geographical proximity and former colonial ties as their basis for allocating aid rather than whether or not these are the countries which need aid the most. To be sure, the impact of aid is likely improved in countries with relatively stable economic and social structures as compared to countries which are less fortunate because of weaker governments – but these may not necessarily be the countries most in need.

Aid needs to be a genuine and significant transfer of resources from donors to beneficiaries if this is to contribute to eliminating poverty and to promoting true development. In effect, in order for the MDGs to be realised, donors should disburse real money and this money should be used in accordance with nationally-determined programs geared towards development. Along with this donors need to recognize the centrality of human rights, gender equality, poverty reduction and social justice as the true measure of the aid effectiveness agenda, as pointed out by civil society organizations (CSOs).

Conclusion

Short term aid should be differentiated from aid used for infrastructure and investments that potentially result in real economic growth. The increased allocation of aid for politically and geographically challenged countries should also be taken into account. The challenge for donor countries is, firstly, to go beyond institutional and policy preconditions in granting aid and, secondly, to identify a framework with criteria regarding growth and development that goes beyond preconditions and constraints.

CSOs around the world are calling out to donors to be true to their commitment in providing development aid in its true essence − where it plays a vital role in assisting in the progress of developing countries. ODA should be deployed according to a human rights and developmental framework. It should also be made more effective in the sense that there is genuine ownership of aid by citizens as well as real transparency and accountability.

References

IBON Foundation. (2002).Reality of Aid.
IBON Foundation. (2004). Reality of Aid.
IBON Foundation. (2006). Reality of Aid.
IBON International. (2007). Primer on Development and Aid Effectiveness.
31st G8 Summit.(2007). Retrieved May 19, 2008 from http://en.wikipedia.org/wiki/31st_G8_summit

What are the Millenium Development Goals? (n.d.). Retrieved may 19, 2008 from http://www.un.org/millenniumgoals/index.html

Paris Declaration on Aid Effectiveness .(2005). Retrieved May 19, 2008 from www.adb.org/media/articles/2005/7033_international_community_aid/paris_declaration.pdf

Oxfam International. (2006). The View from the Summit-Gleneagles G8 One Year On. Retrieved May 19, 2008 from Action Aid International. (2006). Real Aid 2. Retrieved May 19, 2008 from http://www.actionaid.org/docs/real_aid2.pdf