Why Donors Exist
Donors exist for a number of reasons and these need to be explored first from the historical perspective and, secondly, from examining challenges to global security, development and current thinking on aid. Recent events, such as 9/11 and the Boxing Day Tsunami, have sharply increased the pace and nature of development assistance and necessary change in donors.
Historical Background
1929 marked the birth of what is now known as ‘development assistance’ (specifically bilateral assistance), whereby the notion that UK governments had a responsibility for the development of its former colonies in the post colonial period. This was recognised under the UK’s Colonial Development Act .
Bilateral assistance is a common tool for governments particularly in the delivery of foreign policy with bilateral processes for the UK and Australia developing along similar paths. In 1961 the UK took a key step of establishing the Department of Technical Co-operation, which had a key role in its aid program. The Ministry of Overseas Development was established in 1964 as a separate entity that combined the functions of the former Department of Technical Co-operation and the overseas aid policy functions of government departments. The Australian aid program initially focused on PNG and the Commonwealth (Colombo Plan administered by the Department of Foreign and Commonwealth Affairs training branch). PNG’s independence in 1974 provided the impetus for the establishment of the Australian Development Assistance Bureau (ADAB) in 1977, finally bringing all aid related activities under one roof. ADAB became Australian International Development Assistance Bureau (AIDAB) in 1987 and finally AusAID in 1996.
Multilateral development assistance originated from post-war European reconstruction and the loans necessary to enable it. The International Bank for Reconstruction and Development (IBRD, commonly known as the World Bank) and the International Monetary Fund (IMF) were established at Bretton Woods Conference in 1944. While their primary purpose was reconstruction, the value of multilateral approaches to development assistance and Cold War imperatives were noted. During the 1960s, their mandate was expanded to include ‘post colonial’ states (which became known as the ‘Third World’). Over time, this process of establishing multilateralism as an approach to development assistance saw the growing influence of other multilateral institutions including the Asian Development Bank. The 1980s saw multilateral aid emerging as a more dominant player, in both policy and volume.
Monitoring and evaluating actual and potential impacts became a concern as aid volume and influence grew resulting in multiple and often competing mandates for development assistance. In 1961 the Development Cooperation Directorate (DAC) of the OECD was established primarily to monitor the impact of aid and guiding the bilateral and multilateral process. While the DAC keeps an eye on donor activities, the United Nations Development Program (UNDP) sets targets for international development contributions. In 1980, the Brandt Report established the international target for aid of 0.7 per cent of GNP by 1985, and 1% before 2000.
Current Donor Motivations
Donor motivations are many and varied, some as basic as the pressure from the international community to meet the 0.7% target. The Millennium Development Goals are motivators, but have created two camps: one that is wedded to the targets; and the other agrees with the concepts but not the process. A recent ODI paper on international aid identified the following common motivation for donors:
- Multiple foreign and security policy objectives, such as trade, stability and security, which are promoted as being beneficial to recipient countries;
- Strategic interests (which have always been abiding), in the context of globalisation and interdependence, are an integral part of bilateral aid;
- Institutional barriers in particular poor governance (weak accountability, transparency, financial planning) which challenge mechanisms for engagement and place significant impediments to sustaining economic and social gains in fragile or failed economies;
- Development assistance provides donor governments with essential entry points across the client spectrum (emerging economies may reject foreign intervention while fragile economies may lack the necessary absorptive capacity);
- Maintaining reputation as a ‘development partner’ (rather than simply being an ‘aid institution’) to deliver assistance and heading off the competition for influence in the competing world of private and voluntary organizations, the Millennium Challenge Account, the International Financing Facility, and Global thematic funds (HIV/AIDs and Malaria); and
- Maintaining the ability to address humanitarian motivations (emergency relief, human rights, right to development, post colonial obligations and commitment to international justice).
Donors are increasingly under public scrutiny and pressure to respond to growing criticism within developed and developing countries (and from various ideological viewpoints). Recent events (tsunami, earth quakes, terrorism and security) have not only caused public support and awareness of aid to sharply increase but have increased the need for donors to demonstrate their ability to effectively deliver aid. In the current debate lies the question: what value do donors add to the development process that justifies their current existence? Significant increases in foreign direct investment by the private sector is an additional challenge for donors both in demonstrating impact and in developing cooperative mechanisms.
The future for donors lies in demonstrating impact through sound development partnerships, coordination and strategically targeting assistance to meet the needs as expressed by their own and partner governments.
Giles West
gwest@hassall.com.au
The Act allowed Parliament to vote for up to £1 million in assistance in any one year, over a period of ten years.
Such as the former Foreign, Commonwealth Relations and Colonial Offices.
North-South: A Program for Survival
The international Aid System 2005 – 2010: Forces For and Against Change Andrew Rogerson ODI January 2004
