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Economics of aid: Does it work in our favour?

AID (or development assistance) has been a major part of international development cooperation and an integral part of poor countries’ budgeting process.

Aid is provided in various forms such as project financing, budget support, technical assistance, debt relief, humanitarian assistance, food relief etc. But how effective has aid been in prospering our people and making us stronger and more resilient economically as a nation? Has it elevated us to a high-income category? Has it worked in our favor? Probably not!

There has been few success stories, but overall, there hasn’t been much to show off. Or else, we would have taken off economically by now and perhaps be at par with some tiger economies. Transgressing for a while, have we ever wondered why would developed countries assist us, when in fact, they wouldn’t personally take care of one another in the first place?

Who are we? Are we so special? Why would they even rank themselves as to who provides more aid than the other? It’s all business! With or without the internationally agreed pro-rata benchmark of 0.7 per cent of GDP, aid remains a multi-billion dollar enterprise.

The objective of any business is a healthy balance sheet, and so is aid! The net beneficiaries are the givers themselves. We only serve as markets or dumping grounds for their goods and services. Back to the subject matter. One of the reasons why aid hasn’t been as effective is lack of voice and true ownership by the recipient regarding the final use of the aid money.

This ownership may exist on paper, but really, it’s the giver who decides. Documentation may be availed in the best possible English, with noble goals and objectives, supported by crisp graphs and analytics, so appealing that we sometimes never question anything (which is our fault). Consequently, we fail to get the desired outcomes.

Pretty simply put, there’s some guinea pigging, and even sabotage, in some of the aid-funded programmes. Don’t be fooled by the hullabaloo and fanfare that we normally witness at inauguration. Secondly, lack of ownership implies that aid money can be used randomly outside the recipient’s topmost priorities.

It partially explains why we don’t see our traditional donors offering financial and technical assistance to our life-changing mega projects – the central railway line, the Nyerere hydro scheme, sanitation & sewerage systems in our Cities and Municipalities, street lighting, solar computers in primary schools, irrigation schemes, pharmaceutical plants, vaccine production, urban/city roads, flyovers, rural roads, bridges and culverts.

These are the social and economic foundations that we need the most to spur economic growth. The likes of JICA are few. Thirdly, there’s this irrational thinking by most recipients that aid is free money. This attitude often leads to pilferage and misuse by public officials for self-enrichment.

It explains the emergence of cash millionaires in our midst, having hefty local and overseas bank accounts and leading luxurious lifestyles. Obviously, such fraudulent practices deny poor citizens of the potential benefits they would have accrued had the aid been judiciously utilised for the purpose it was initially intended.

Moreover, some programmes preferred by donors are nebulous, complex and cross-cutting that are hard to implement, monitor and quantify. By nature, such programmes also impose huge financial and administrative burden on the recipient; thereby negating the additionality factor that these programmes would have provided.

Furthermore, have we ever scrutinised as to how much aid money actually reaches the grassroots? I have no definite answer but I guess it does not exceed 30-40 cents for each Dollar dispensed.

A large chunk goes for management, overseas procurement and supplies (which all benefit the donor country); along with vehicles, maintenance, office equipment, rental and other logistics (which do not benefit the target group directly). Foreign aid may also retard local initiative, that motivation for self-drive.

By crippling the mind, it perpetuates dependency. I’m my own witness. In my 20-year tenure outside Tanzania, I provided my three young brothers with seed capital several times, only to find out years later it was all waste! They “woke up” from slumber after I retired in 2017, tasting the harsh realities of life after many years of self-indulgence and unrealistic lifestyles.

Too late for them, as you may have guessed it right! Similar situation may befall a country. Politicians may never bother to harness domestic resources, under the illusion that aid will continue to flow forever. Corruption may also thrive under the same notion. This may explain our inability to attain the twin objectives of economic independency and self-reliance.

Additionally, aid is never enough. No recipient country should expect it to cater for its entire needs. With the exception of the Marshall Plan and the Four Point Programme, no country has ever developed through aid. Besides, aid is notoriously unpredictable, given at the whims of the donor. This renders one’s development programmes off-track.

Donors tend to pull plugs, without the slightest warning, when you need aid the most; leaving you in limbo and helplessness. Also, withdrawal requests and disbursement procedures are inherently complex, cumbersome and costly. Instead of relieving the administrative machinery of the recipient, aid actually burdens it even more.

There have also been instances where aid is used for manipulating some in-house decision making processes, such as taxation rates, award of contracts, appointments, etc. Worst of them all, aid now embeds the “human rights” agenda, whose interpretation is intentionally distorted by the west under the pretext of universality; merely to justify the imposition of their immorality and prostituted culture onto others.

They forget that one’s “human right” is someone else’s criminal act depending on one’s culture, traditions and religious beliefs. Above all, the very first human rights tenet is to never impose one’s preferences onto another.

Nevertheless, the new American administration has directed its Diplomats to push for homosexual rights in host countries as a matter of policy, and that any resistance will be met with a “swift and meaningful” response (whatever that means!). Eligibility to American aid will also be subject to meeting this conditionality.

Why would America impose its problem on other countries? How can aid render humanity in trouble? Africa will be the ultimate victim. Asian countries do not tolerate such nonsense. And lastly, I find some forms of aid; such as sanitary pads/tampons for school girls, food aid, used clothing, foreign consultancies (even for the simplest tasks), shallow wells, protective gear and the like troubling and embarrassing.

Why would we accept such aid when we can easily cater these for ourselves? We should be proudly decisive in our choices, and be able to say “NO” to some forms of aid. Or else, they’ll continue to tread and humiliate us. With the above in hindsight, and the fact that no amount of aid will serve our needs, what alternatives do we have? We should opt for trade.

But we can only trade favorably if we improve our local manufacturing capacity, especially agro-and-mineral processing, with the view to adding value, improving export prices and harnessing domestic economic linkages. But would the west allow free entry for our processed products? The illustration below negates this possibility.

Coffee was a USD 102 Billion industry in 2019. Coffee producers got USD 18 Billion only. The remainder, USD 84 Billion (or 82per cent) went to intermediaries, coffee merchandisers and processors such as Nestlé, Starbucks, Sarah Lee, Kraft General Foods, Proctor & Gamble etc. They earned 4.6 times more than the primary producers!

Our raw-material exportation madness has not only patronised Europe and the USA at our expense, but has sacrificed local employment; STI (science, technology & innovation); revenue; income and other opportunities. This lopsidedness has existed for many years under “dubious” trading and partnering arrangements sponsored by the west, as they capitalised on our naivety.

We know that rapid declines in poverty in Asian countries was a result of trade, not aid. They, in turn, invested heavily in the most marginalised (as Bangladesh has done). But again, would the west trade with us? If these countries are really concerned about “plight” as they claim to be, they’ll open their markets for us.

But I doubt it. If they won’t thwart our efforts by tariffs, they will do so by raising non-compliance issues. Thus, as we industrialise, we better diversify our export markets. Another option is to promote local consumption of our products. Again, taking coffee as an example, its consumption locally is restricted, unlike Rome in Italy where you may see 60-plus variants of “coffees” being brewed daily.

Arab or Turkish cities exhibit the same. Such specialty coffee outlets are rare in our townships and cities. These would have employed thousands of the hospitality industry graduates. Upstream of the outlets, there could be complementary activities in hulling, decaffeinating, roasting, grinding, packaging and distribution, thus widening the domestic value chain even more. Wasalaam!

• The views expressed in this article are entirely of the author, and in no way should they be viewed or perceived as the official stance of the Daily News, TSN or Management

CARGO traffic handled at the Dar es ...

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Author: ABDALLAH KILIAKI

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