The Issue of Misusing Foreign Aid

The aim of this research is to identify and explain the causes behind issues concerning the misuse of foreign aid and the imbalances created by international trade, while providing concepts for potential long-term solutions. The research will go over the respective issues, detailing the issues themselves, their causes, consequences and possible solutions for them. This research will also go over their relevance and importance in the personal, national, and global perspective. It is important to note that the information presented in this document is based on the sources as a whole rather than being directly linked to an individual source unless stated otherwise. 

The Problem: Foreign Aid

Foreign Aid, coming from abroad is well-intentioned: to help support and accelerate economic and human development in its target area. However, once it reaches the government of the country receiving aid, there is always the risk of it being used for other, less relevant projects or simply not being used at all, more so in a corrupt government. A corrupt government or corruption in particular is defined by the Merriam-Webster dictionary as “dishonest or illegal behaviour especially by powerful people' (such as government officials or police officers). Often, the groups most vulnerable to corruption are the poor, one example is in Paraguay where 12.6 percent of a “poor' person's income is lost in bribery, in countries like Sierra Leone the number is closer to 13 percent according to an article by the World Bank.

Matthew Rycroft, permanent secretary of the Department of International Development in the UK told a civil service website that two common arguments raised by skeptics are that problems are too big to fix, and that the process as a whole is subject to corruption. He admitted those claims were indeed “valid criticisms” that needed to be addressed. This is supported by the information that DfID fraud cases quadrupled between 2010 and 2015. 

Foreign aid misuse however is not solely the result of corruption. Poor financial management or an unforeseen disaster or issue may redirect aid that a country receives away from its initial objective and create a situation where aid money or resources were utilized, but the aim has not been achieved. 

Understanding Why a Government Can End Up Misusing Aid

The largest reason aid is susceptible to misuse is because of the fact that most bilateral aid is not from government to citizens, but from one government to another government. When the government receives aid – which is often (but not exclusively) in the form of capital – they have final jurisdiction on how it would be allocated. Once the government receives the aid, there is no outside authority that can physically or legally prevent it from using it for other purposes because once the credit is converted to the receiving country's legal tender, it is indistinguishable from the government's discretionary budget from other sources of revenue. Although such an approach where the application of aid was left to the local government had effect, based on initial personal judgement, it seems more of an exception than the norm given that the situation in Rwanda was different (preventing ethnic tension and violence alongside UN Peacekeepers) from the most common form of aid (developmental aid, which focuses more on infrastructure and economics as well as disaster relief).

Another reason may simply be a government’s inexperience leading to bad application and planning for foreign aid, using it as more of a stop-gap measure to solve immediate problems instead of being invested in long term prevention. That means there is little left to be used in mitigating future damage and eventually lowering the burden – particularly financial – on a society to recover. While that strategy is indeed a valid one, it's sometimes followed irrespective of the purpose of the aid being received. 

Possible Scenarios

This redirection or misuse of aid means that citizens do not get the infrastructure and service investment that they require and that keeps development hampered and that lack of progress does either one of two things: either it encourages even more foreign aid to be sent to the country, only for it to be poorly managed again and hamper development; or it aid could be withheld if the donor sees it as a reason to believe that aid is ineffective. It would damage public opinion of foreign aid in both the donor and receiving country, however receiving large amounts of aid certainly does have noticeable effects on public opinion of the donor. 

A survey was conducted by Pew Research Center and the Kaiser Family Foundation was conducted to gauge public opinions on the efforts of nations donating aid to their country, and Pew Research Center gave the following statement: “Majorities in nearly every country surveyed say wealthier countries are not doing enough to help poorer nations with problems such as economic development, reducing poverty, and improving health. But among countries surveyed that were major recipients of development aid, people were much more likely to say that wealthy nations are “doing enough” to help poorer nations.”

The US-based Pew Research Center is according to itself: “a nonpartisan fact tank that informs the public about the issues, attitudes and trends shaping the world.” It claims to be factual and unbiased and its credibility is strengthened by its reports being used as sources by outlets such as the New York Times. Foreign aid falls under its “Foreign Affairs and Policy” section and has published articles on foreign aid in 2015 and 2016. The section is headed by Michael Dimock a political scientist with a Ph.D. of political science from the University of California – San Diego, which is convincing enough to give their statements credence on the topic.

Corruption could set a potentially dangerous precedent where aid is potentially mishandled on purpose but aid is still sent. That incentivizes corrupt governments to follow a similar model, as a matter of fact this can already be seen in the Democratic People's Republic of Korea (DPRK), where the government receives food aid, redistributes it unfairly by inflating prices several times beyond their original value, and continues demanding food aid or they threaten to limit the population's access by inflating prices even further. This has given the government political leverage to continuously receive aid and continuously misuse it because of the high moral and human cost of not cooperating, according to Yeonmi Park, an outspoken North Korean defector and critic in her book “In Order to Live.” While the testimony of a defector may be biased against the DPRK, historically that scenario would not be surprising.

Proposed Solutions

A solution that can be considered is instead of giving aid upfront as a lump sum, it can be given slowly and conditionally, only growing as the quality of life grows. This can limit the extent to which foreign aid can be misused and incentivise worthwhile investment. If there is no real progress being made, then a re-evaluation of strategy will have to be done, possibly by using more field personnel or to make it more targeted towards certain aspects of domestic affairs or certain communities. If necessary, even temporarily halted as a preventive measure, even as morally compromising and hard to justify as that would be.

Personal Conclusion

The topics of foreign aid and International trade are very broad and many times it is on a case by case basis when it comes to assessing their effects and the driving causes behind them, this research may not be applicable in every case, but it does outline a general trend in the effects of trade and aid. As to the importance of this issue, foreign aid is a common part of foreign policy. The United States is the biggest contributor to foreign aid and China has begun investing billions of dollars into African economies to gain leverage (this statement is however based on my assumption after reading headlines in passing.)  Foreign aid is not perfect, it can't be because of all the connections between people and organisations that the process of foreign aid is conducted through. It can however be refined by changing working practices to be more secure and more traceable and easier to oversee.