One of the most prominent scholars of international relations Hans J. Morgenthau once wrote, “Of the seeming and real innovations which the modern age has introduced into the practice of foreign policy, none has proven more baffling to both understanding and action than foreign aid.” Advocates of aid have frequently argued that it is in the interest, perhaps long-term interest, of the rich countries themselves.
Throughout the Cold War period, strategic political considerations were responsible for shaping aid allocations. The competitive bipolar international system posed a huge challenge to security of the two large alliances, thus prompting each side to mobilize and use aid as a tool to shape relations with other states. The Western international donor community, because of their influence in the decision-making process granted by the weighted voting system in the Bretton Woods Institutions, also made use of the World Bank and the IMF to fulfill their political objectives.
Since the late 1970s, the western international donor community started making their aid program conditional—sometimes in the garb of structural adjustment policies and sometimes behind the veil of good governance. The objectives, however, were clear—to carry out market-oriented liberal policies (neoliberal policies) that would benefit their economy and also use it as a leverage to be involved in the internal political and social affairs of borrowing countries. At the same time, bilateral donors saw aid as being vital for the survival and stabilization of regimes in which they had strong political interests, irrespective of the governing system of the recipient country.
However, since the early 1990s, questions began to be raised about donor policies since they failed to transform living conditions in the global south and instead increased economic disparity within and between states. Civil society organizations (CSOs) and other stakeholders criticized the Western-sponsored policies for being exclusionary. The development policies lacked country ownership and had been prepared without any consultations from the representatives of the country in which they were to be implemented.
In 1996, several donor agencies introduced poverty reduction as the major goal of their aid in response to the rising criticism against them and also shifted their approach from so-called conditionality to ownership, at least rhetorically. The same sentiment is found in one of the publications of DFID: “Too much aid in the past was badly used, often because it was driven by the priorities and preferences of donors rather than of poor people and poor countries.”
Accordingly, this paradigmatic shift in international aid architecture from donor-led structural adjustment policies to country-driven poverty reduction strategies promised a new process for development lending. A transition that would alter aid relationships by putting recipient countries in the driver’s seat of development policy making and also ensuring broad participation by CSOs and other stakeholders. The growing consensus on new principles for providing and receiving aid culminated in the Paris Declaration on Aid Effectiveness in March 2005, emphasizing on ownership and harmonization of ‘donors’ actions, making it more transparent and collectively effective.
However, several studies on country ownership and participation have concluded that there has been no alteration in the nature of business between the donors and recipients, and donors continue to influence recipients on the pretext of the latter not having enough resources and talent to make their own policies. Thus, in practice there has been no change and status quo remains. This is exactly what Fukuyama says, “donors will not abandon the ‘hapless’ countries because they ‘don’t like to give up the influence and power over client countries that dependence brings.”
Recent experience of Nepal exposes the bankruptcy and corrupt nature of donors and their commitments.
This has not discouraged donors from talking about aid effectiveness. Donor agencies recently met in Busan, Republic of Korea, where they again reiterated their commitments for ownership, results, accountability, transparent and responsible cooperation for development effectiveness. All this, however, is mere rhetoric.
In fact, the recent experience of Nepal exposes the bankruptcy and corrupt nature of donors as well as their commitment. Western donors, who emphasize so much on partnership orientation and good governance, have themselves resorted to bad practices. A Rs 1.27 billion multi-stakeholder forestry program funded by DFID, government of Finland and Swiss Agency for Development and Cooperation (SDC) is against the spirit of the Paris Declaration on aid effectiveness, Accra Action Agenda and Busan Development Partnership.
The decision by donor agencies to grant the project to a private company named Rupantaran Nepal has been criticized for being nontransparent and undemocratic by several stakeholders including the parliamentary committee. Rupantaran Nepal is a private company with no prior experience in fund management. But this has been ignored by the donors, despite the fact the project was to be assigned through a “competitive” selecting process.
This decision will obviously have long-term implications in aid and development effectiveness in Nepal and may weaken the moral authority of the donors. Since most of the donors are members of the International Aid Transparency Initiative (IATI)—an initiative of aid transparency launched in Accra in 2008—the recent decision of donors in the multi-stakeholder forestry program in Nepal goes against their own campaign and will have a larger implication on the entire initiative.
This case is just one of the many examples where donors have continued to undermine policy ownership by imposing their own priorities and policies through new aid instruments, while marginalizing the voice and participation of citizens of the receiving country in the process. Thus, the entire process of granting aid remains undemocratic and opportunistic and is far from promoting the good governance it promises to do.
The author has an MPhil in International Organization, Jawaharlal Nehru University, New Delhi