Does Foreign Aid Help or Hurt Developing Countries? - Paper Example

Introduction

Foreign aid is the financial assistance accorded by the government or other agencies to countries that require assistance to support economic, social, environmental, and political development. According to Molenaers, Dellepiane, and Faust, (2015) foreign aid people can call it charity and if it is not then it cannot be termed as aid. In this case, many developing countries require foreign aid for various aspects of development and growth. Many countries in Sub-Saharan Africa to be precise are dependent on foreign aid. Many countries started gaining such assistance from the 1960s the post-independence era (Molenaers, Dellepiane, and Faust, 2015). Apart for the governments, there are many NGOs which are determined to make the world a better place. Therefore, they are involved in a series of humanitarian activities that include providing food and water, fighting serious illnesses and providing teachers just to mention a few. All things considered, this exploration centers around the impacts of foreign aid on development, thinking about the impacts of political institutional factors as interceding in the association among aid and development. In particular, this examination thinks about the impacts of majority rule government (political rights and common freedoms) and level of defilement on the connection among aid and development in sub-Saharan Africa. Development is controlled by the Human Development Index, which considers net national salary, future, and instruction level.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

There are many countries which have benefitted from foreign aid. However, the main question, in this case, is whether foreign aid is helping or hurting developing countries. This paper will focus on foreign aid in sub-Saharan Africa. The Sub-Saharan region is the largest recipient of foreign aid. It constitutes about 35 percent that has been accounted for (Tang & Bundhoo, 2017). This rate is three times what is allocated to the South Asian Region.

Interestingly, a country like the Democratic Republic of Congo gets a lot, and yet most of the people are still living in poverty (Tang & Bundhoo, 2017). The World Bank also provided interesting statistics, which state that since between 1981 and 2010, about 700 million people were pulled out of poverty (Lyons, 2014). Out of these people, 627 million people were from China (Lyons, 2014). Therefore, approximately the rest of the 73 million people were from Africa (Lyons, 2014). From the above statistics, it is evident that foreign aid has been a controversial issue since there are people who believe that foreign aid helps the developing countries, while others believe that it is only hurting them. Therefore, the paper will also clearly states with a good explanation of the merits as well as the disadvantages of foreign aid.

Disadvantages of Foreign Aid on Developing Countries

1. Exploitation

Foreign aid is a way of helping people for a short time so as to have major gains in the future. In essence, it only lessens immediate suffering for a short time and not creating sustainable methods that can help pull people out of poverty for good. The main aim of seeking foreign aid is boost the economy and reduce the poverty rates. However, the process of getting help is too lengthy and cumbersome at that (Niyonkuru, 2016). As a result, the company is left with high exchange rates and increased debts (Niyonkuru, 2016). Eventually, the government is unable to stabilize its economy due to the high debts (Niyonkuru, 2016). I such a case, this is clearly exploitation. If the process of getting foreign aid was not lengthy and cumbersome, then the country would complete its projects on time, and this would not lead to high rates of borrowing. It quite clear that these foreign aids are only hurting developing countries.

2. No Impact on Economic Growth

It is also evident that Official Development Aid (ODA) has no impact on economic growth. Scholars argue ODA has not helped in improving the economic and social conditions in developing countries. Sectors that are critical to the economy of a developing nation receive a very small percentage of the available funds. Also, less than 6.5 percent is directed towards sectors like education, technology, infrastructure, or agriculture. Studies also estimate that about 10 to 20 percent of aid ever reaches its intended targets (Acemoglu, and Robinson, 2013). With such a small percentage allocated to critical areas of the economy, there would be no impact on economic growth. If there were larger amounts allocated to such key areas of the economy, then the impact would be tremendous. Therefore, in this case, foreign aid has no impact on economic growth, which results in hurting the country instead of helping it.

3. Corruption

Foreign aid increases the risk of corruption. In this case, there are high chances that such financial assistance does not reach the intended people, hence the objective is not attained in the first place. In developing countries, there are higher chances that the funds are likely to get lost in the hands of greedy officials. Therefore, it leaves the country at a state of increased borrowing and high debt rates. In essence, then there is no visible economic growth. In such a situation, it is clear that foreign aid is only hurting the country. If there was no chance of getting foreign aid, then developing countries would have to make do with the available funds. In essence, it would not give a chance for greedy officials to take the money through corrupt means.

4. Unproductive Policies

Some countries that provide foreign aid have led the country to make political and economic policies that are unproductive to the country. In this case, since the country providing aid has an upper hand, it may influence the strategies taken by the country in one way or another. Some policies are meant to favor the needs of the foreign country and eventually leave the aided country devastated. Some of the unproductive policies include things like restricted trade, the price that might discourage the agricultural practices, assets confiscation and foreign capital exploration (Reci, 2014). One of the most prevalent policies is the price policies that affect agricultural production. In such a case, things like agribusiness are crippled, which leaves the country dependent on others. Such a policy is indeed unproductive because it means that the country will always be in need of foreign assistance. According to Lundsgaarde, foreign aid fosters dependency and it is detrimental to the growth of free markets (Lundsgaarde, 2013). Therefore, this means that to a great extent, foreign aid hurts developing countries, instead of helping.

Merits of Foreign Aid in Developing Countries

1. Empowering Citizens

As mentioned earlier, the issue of foreign aid is indeed a controversial one. Even though it hurts developing countries, some people believe that it helps developing countries. Supporters of this line of thought believe that it empowers citizens by making them active and effective participants of the democratic process. For instance, a country like Ethiopia has a formal and institutionalized form of democracy assistance. Some key democratic institutions include Canadian International Development Agency (CIDA), European Union and United Nations Development Program (UNDP) to mention a few (Nigatu, 2015). Some of the organizations in Ethiopia that benefit from these institutions include the Ethiopian Human Rights Commission (EHRC) and Regional State Councils (RSCs) (Nigatu, 2015). These organizations offer foreign aid by helping the local institutions to be effective in promoting and protecting the rights of citizens and deepening democracy through various projects like human rights and advocacy training. Therefore, to some extent, foreign aid helps developing countries to promote democracy.

2. Poverty Alleviation

Foreign aid is also adopted by countries for poverty alleviation. Apart from its negative aspects, it has contributed to a certain extent towards reducing poverty in developing countries. Some international assistance programs have the main aim of implementing sustainable projects that would lead to a reduction in the rates of poverty. Many programs have been implemented to alleviate poverty, some of which include healthcare, education, nutrition, and sanitation to mention a few (Muscat, 2016). There are also strategies for economic empowerment that are directed towards women in gender-biased communities. A good example is a foreign aid offered to Maasai women who make beads in Kenya. Some foreign organizations seek markets abroad for these women to sell their beads and this empowers them financially. In essence, there are a series of projects that help in poverty alleviation. Therefore, foreign aid has its upsides, despite the many challenges that exist in hurting developing countries.

Conclusion

In conclusion, foreign aid is the financial assistance provided to countries that require it, especially developing countries. The issue of foreign aid has been a controversial issue and has resulted in heated discussions since the recent past. In this argument, the main discussion revolves around the fact that foreign aid hurts instead of helping the country. In line with hurting developing countries, foreign aid leads to exploitation; there is no impact on economic growth, it leads to corruption, as well as unproductive policies. Despite the fact that it is evident that foreign aid significantly hurts developing countries, proponents of international assistance believe that it has positive effects. In this case, financial aid helps in empowering citizens through democracy and alleviating poverty. In essence, foreign poverty is not all that negative; it has its upsides. All in all, it is clear that foreign aid is doing more harm than good. Therefore, developing countries should refrain from seeking financial aid. Instead, they should implement policies that promote the economy of the country and most importantly ensure that there are no high debt rates. Also, citizens in developing countries should strive to choose diligent leaders; it reduces the rate of corruption. (1544words)

References

Acemoglu, D., & Robinson, J. A. (2013). Why nations fail: The origins of power, prosperity, and poverty. Broadway Business.

Lundsgaarde, E. (2012). The domestic politics of foreign aid. Routledge.

Lyons, J. (2014). Foreign aid is hurting, not helping Sub-Saharan Africa. Retrieved from https://www.lejournalinternational.fr/Foreign-aid-is-hurting-not-helping-Sub-Saharan-Africa_a2085.html

Molenaers, N., Dellepiane, S., & Faust, J. (2015). Political conditionality and foreign aid. World Development, 75, 2-12.

Muscat, R. J. (2016). The Fifth Tiger: Study of Thai Development Policy: Study of Thai Development Policy. Routledge.

Nigatu H, A. (2015). Foreign Aid in Developing Countries. Journal Of Political Sciences & Public Affairs, 03(03). doi: 10.4172/2332-0761.1000186

Niyonkuru, F. (2016). Failure of Foreign Aid in Developing Countries: A Quest for Alternatives. Business And Economics Journal, 7(3). doi: 10.4172/2151-6219.1000231

Reci, A. (2014). ADVANTAGES AND DISADVANTAGES Of FOREIGN ASSISTANCE IN Albania. Forum Scientiae Oeconomia, 2(3). Retrieved from http://www.wsb.edu.pl/container/Wydawnictwo/Do%20pobrania/reci-m.pdf

Tang, K., & Bundhoo, D. (2017). Foreign Aid and Economic Growth in Developing Countries: Evidence from Sub-Saharan Africa. Theoretical Economics Letters, 07(05), 1473-1491. doi: 10.4236/tel.2017.75099