SHOULD WE RELY ON FOREIGN AID OR RESORT TO DOMESTIC RESOURCES?
The governments of developing countries, including Bangladesh or any other country, do not need to worry if they cannot gain the confidence of the donor countries to receive the desired amount of foreign assistance. Probably it is better to receive less. Instead, it is more desirable to formulate effective policies to mobilise resources from the domestic sources. The more we can rely on domestic resources, the better.
It seems that the governments of almost all the less developed countries (LDCs) set out a target to receive the highest possible amount of foreign aid, which may be in the form of grants, tied aid, and loans (soft loan, tied loan, commercial loans, etc.). Expectedly, Bangladesh is not an exception in this regard, too. Discussions are going on and meetings are being held in connection of foreign assistance. The efforts of government of Bangladesh are going on in full swing to gain confidence of the donor countries in order to acquire maximum possible foreign assistance. In doing so, the governments of LDCs probably have at least two objectives in mind. Firstly, foreign assistance fills up the resource gap. Secondly, it provides a proof for the creditability and acceptability of the governments overseas. Thus there appears to have a serious effort on the part of the government for gaining highest possible foreign funding by achieving confidence of the donor countries. In this scenario one might ask: is it too bad if the government fails to attract a sizeable amount of foreign assistance?
The answer to the above question depends on the response to another question: do we need foreign aid? Or, is foreign aid desirable? Apparently, this is an old question, but this is a recurring question, and the issue emerges with new angles. And, there is no straight answer to this. We should try to address this question from two perspectives: from the perspective of the aid seekers, and from that of donors. From the aid seekers' point of view, foreign assistance is justified if it is really to fill up the domestic resource gap (shortage of investible resources) and/or foreign exchange gap (shortage of foreign exchange) in order to contribute to economic development and the well being of the people. It is not advisable to shoulder the burden of foreign assistance merely for political motives devoid of any positive economic agenda.
From the donors' point of view, we need to perceive their motives in extending foreign assistance to LDCs. In principle, there may be two different motives and objectives for this: (i) assisting the LDCs in their development, and (ii) satisfying the donors' own political and economic interests. The former objective is no doubt a noble cause and the LDCs are welcome to receive foreign aid that arises from such noble objective. The second motive often goes against the interest of the aid receiving LDCs. But, now, the question arises: what is the motive of donors in reality? Sometimes it is difficult to appreciate their motive(s) from the receiving end. It is not, however, difficult for them to perceive what their own motive is. Let us, therefore, see what they have to say about their own motive in providing foreign assistance. "The biggest single misconception about the foreign aid programme is that we send money aboard. We don't. Foreign aid consists of American equipment, raw materials, expert services, and food -- all provided for specific development projects which we ourselves review and approve... Ninty-three per cent of AID funds are spent directly in the United States to pay for these things. Just last year some 4,000 American firms in 50 states received $1.3 billion in AID funds for products supplied as part of the foreign aid programme." [William S Graud, "Foreign Aid: How It Works; Why We Provide It", Department of State Bulletin 59, No. 1537, 1968].
K Griffin's statement suggests that foreign assistance from the donor countries is not to help the poor countries or to help fight poverty in LDCs: "In 1981 Israel's GNP per head was nearly 37 times larger than Ethiopia's. Israel received 90 times more foreign capital per head than Ethiopia" ('Doubts About Aid", IDS Bulletin 17, April 1986). Israel was 37 times richer than Ethiopia. Obviously, if poverty eradication was the objective, foreign assistance to Ethiopia should have been 37 times more than Israel, but in practice it received 90 times less than Israel.
An important motive behind foreign assistance is the donor countries' political, diplomatic, commercial and strategic interests. "... the major motives of aid donors are not to increase efficiency and growth....... a primary motive is to promote the political, diplomatic, industrial and commercial interests of the country offeringforeign assistance. In practice foreign aid is doing little to promote growth in the third world and less to alleviate poverty
.In the end it appears to be doing little more than sustaining corrupt and often vicious regimes in power." [K. Griffin, "Doubts About Aid", IDS Bulletin 17, April 1986]. "Donor countries give aid primarily because it is in their political, strategic and/or economic self-interest to do so". [M P Todaro, Economic Development in the Third World, Longman, New York, 1981]. "Britain is one of the most expert 'tyres' and even boast that two-thirds of her aid never actually leaves Britain". [New Internationalist, October 1978]. "Canada requires that at least 80 per cent of aid be spent on Canadian aids and services." [L Timberlake, Africa in Crisis, Earthscan, 1985]. "For example, the Economic support fund of the US' Agency for International Development is explicitly intended to provide support to countries on the basis of US's political and security interests and about 40per cent of all US bilateral aid comes from this Fund." [K Griffin, "Doubts About Aid", IDS Bulletin 17, April 1986]. "It remains widely agreed that donor countries have utilized foreign aid largely as a political lever to prop up or underpin 'friendly' political regimes in the third world countries." [MP Todaro, Economic Development in the Third World, Longman, New York, 1981].
Thus, foreign assistance is rarely for the benefit of the poor countries. Instead, it may turn up as a burden for them in the form of debt servicing. LDCs have to submit to the dictates of the donor countries in international politics, and even in the domestic decision-making. Besides, a large amount has to be paid every year in interest, not to speak of the principal. "In 1985 the Third world's repayments of loans and interest amounted to US$30 billion more than the loans it received in that year.
In 1986 it received US$14 billion in aid, but it paid out US$54 billion on loan repayments plus interest. Over the period 1982-1985 it paid back US$106 billion more than it received." [Ted Trainer, Developed to Death, Green Print, London, 1989.].
These are some analyses of foreign assistance given by the experts of foreign aid from the donor countries themselves. They do not provide any encouraging picture of foreign aid for assistance; they are rather gloomy. Although exceptions may not be ruled out, the foreign aid is given mostly for the self-interest of the donor countries. They establish their control over the poor countries through foreign aid to interfere in their economic and political policy matters at the domestic as well as international levels to serve the political and strategic interest of the donor countries. Foreign assistance tends as well to serve their economic interest at the cost of the poor aid receiving countries. A major share of the foreign assistance does not leave the donor countries, or goes back to them for buying expertise services or materials. Debt servicing has become a serious burden and problem facing the developing countries. So, do we need such foreign aid? Not really. We don't. And, should we rely on such foreign assistance? No, we shouldn't. Therefore, the governments of developing countries, including Bangladesh or any other country, do not need to worry if they cannot gain the confidence of the donor countries to receive the desired amount of foreign assistance. Probably it is better to receive less. Instead, it is more desirable to formulate effective policies to mobilise resources from the domestic sources. The more we can rely on domestic resources, the better. These are some analyses of foreign assistance given by the experts of foreign aid from the donor countries themselves. They do not provide any encouraging picture of foreign aid for assistance; they are rather gloomy. Although exceptions may not be ruled out, the foreign aid is given mostly for the self-interest of the donor countries. They establish their control over the poor countries through foreign aid to interfere in their economic and political policy matters at the domestic as well as international levels to serve the political and strategic interest of the donor countries. Foreign assistance tends as well to serve their economic interest at the cost of the poor aid receiving countries. A major share of the foreign assistance does not leave the donor countries, or goes back to them for buying expertise services or materials. Debt servicing has become a serious burden and problem facing the developing countries. So, do we need such foreign aid? Not really. We don't. And, should we rely on such foreign assistance? No, we shouldn't. Therefore, the governments of developing countries, including Bangladesh or any other country, do not need to worry if they cannot gain the confidence of the donor countries to receive the desired amount of foreign assistance. Probably it is better to receive less. Instead, it is more desirable to formulate effective policies to mobilise resources from the domestic sources. The more we can rely on domestic resources, the better.
Source: Professor Abulhasan M Sadeq, PhD is Vice Chancellor, Asian University of Bangladesh. The Daily Star, 19. 05. 02.
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