University of Papua New Guinea International Economics Lecture 18: International Aid.
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Transcript of University of Papua New Guinea International Economics Lecture 18: International Aid.
![Page 1: University of Papua New Guinea International Economics Lecture 18: International Aid.](https://reader035.fdocuments.us/reader035/viewer/2022081603/56649e025503460f94aed3f7/html5/thumbnails/1.jpg)
University of Papua New Guinea
International Economics
Lecture 18: International Aid
![Page 2: University of Papua New Guinea International Economics Lecture 18: International Aid.](https://reader035.fdocuments.us/reader035/viewer/2022081603/56649e025503460f94aed3f7/html5/thumbnails/2.jpg)
The University of Papua New GuineaSlide 2
Lecture 18: International Aid Michael Cornish
Overview
• Definitions
• The 0.7% goal
• Trends in aid
• The relative importance of aid flows
• The role of aid
• Is aid a good thing?
• How can we improve aid?
![Page 3: University of Papua New Guinea International Economics Lecture 18: International Aid.](https://reader035.fdocuments.us/reader035/viewer/2022081603/56649e025503460f94aed3f7/html5/thumbnails/3.jpg)
The University of Papua New GuineaSlide 3
Lecture 18: International Aid Michael Cornish
Definitions
• International aid / international development
• ODA
– Provided by official agencies (read: governments)
– Promotion of economic development and welfare
of developing countries as its main aim
– Is concessional in character
• Non-official development assistance
• Bilateralism / multilateralism
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The University of Papua New GuineaSlide 4
Lecture 18: International Aid Michael Cornish
The 0.7% goal
• Pearson Commission (1969), adopted in 1970 by UN:
– “Each economically advanced country will progressively its
ODA to the developing countries and will exert its best efforts
to reach a minimum net amount of 0.7% of its GDP by the
middle of the decade”
• Was based on a financing gap model
• Is it relevant?
• Very few governments have reached this level
• Australia? 0.5% by 2015 (but we’ll see…)
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The University of Papua New GuineaSlide 5
Lecture 18: International Aid Michael Cornish
Trends in International Aid
Source: OECD DAC Development Cooperation Report 2010
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The University of Papua New GuineaSlide 6
Lecture 18: International Aid Michael Cornish
Australia’s aid program
Source: Aust. budget documents
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The University of Papua New GuineaSlide 7
Lecture 18: International Aid Michael Cornish
0
100
200
300
400
500
600
1970 1975 1980 1985 1990 1995 2000 2005
0
1000
2000
3000
4000
5000
6000
FDI (lhs)
Aid (lhs)
Exports (rhs)
The relative importance of aidAid, exports and FDI for developing
countries (current USD billion)
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The University of Papua New GuineaSlide 8
Lecture 18: International Aid Michael Cornish
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The University of Papua New GuineaSlide 9
Lecture 18: International Aid Michael Cornish
Aid to low, lower middle and upper middle income countries (% GDP)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
1960 1970 1980 1990 2000 2010
Low income Lower middle income Upper middle income
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The University of Papua New GuineaSlide 10
Lecture 18: International Aid Michael Cornish
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Aid to sub-Saharan Africa (% GDP)
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The University of Papua New GuineaSlide 11
Lecture 18: International Aid Michael Cornish
Aid as a % of GDP for SS-African countries (2007)
Libe
ria
Burun
di
Gui
nea-
Bissa
u
Sier
ra Leo
ne
Sao
Tom
e an
d Pr
incipe
Moz
ambi
que
Rwan
da
Mal
awi
Tanz
ania
Mal
i
Ugand
a
Mau
ritan
ia
Burkina
Fas
o
Congo
, Dem
. Rep
.
Niger
Ethi
opia
Mad
agas
car
Cape
Verde
Eritr
ea
Gam
bia,
The
Central
African
Rep
ublic
Comor
os
Camer
oon
Zambi
a
Benin
Leso
tho
Gha
na
Sene
gal
Keny
a
Chad
Gui
neaTo
go
Suda
n
Namib
ia
Swaz
iland
Congo
, Rep
.
Niger
ia
Mau
ritiu
s
Botsw
ana
Cote
d'Iv
oire
Gab
on
Angol
a
Seyc
helle
s
Equa
toria
l Gui
nea
Sout
h Afr
ica
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%94.7%
Note the huge variation; 21 countries with aid > 10% GDP
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The University of Papua New GuineaSlide 12
Lecture 18: International Aid Michael Cornish
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Aid to South Asia (% GDP)
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The University of Papua New GuineaSlide 13
Lecture 18: International Aid Michael Cornish
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
Aid to East Asia (% GDP)
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The University of Papua New GuineaSlide 14
Lecture 18: International Aid Michael Cornish
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
1.0%
Aid to Latin America (% GDP)
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The University of Papua New GuineaSlide 15
Lecture 18: International Aid Michael Cornish
Aid to Middle East and North Africa (% GDP)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
1960 1970 1980 1990 2000 2010
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The University of Papua New GuineaSlide 16
Lecture 18: International Aid Michael Cornish
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Tim
or-
Lest
e
Solo
mo
n I
slan
ds
Mic
ron
esi
a, F
ed
. St
s.
Mar
shal
l Is
lan
ds
Kir
ibati
Pal
au
Van
uat
u
Ton
ga
Lao
PD
R
Cam
bo
dia
Mo
ngo
lia
Pap
ua
Ne
w G
uin
ea
Vie
tnam Fiji
Ph
ilip
pin
es
Ind
on
esi
a
Mal
aysi
a
Ch
ina
Thai
lan
d
Aid as a % of GDP for Pacific / some East Asian countries (2007)
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The University of Papua New GuineaSlide 17
Lecture 18: International Aid Michael Cornish
The role of aid
• Innovation and ideas
– Is this all good?
• Stabilisation
• Emergency and food aid
• For security and geopolitical reasons
• Economic growth?
• Poverty reduction?
![Page 18: University of Papua New Guinea International Economics Lecture 18: International Aid.](https://reader035.fdocuments.us/reader035/viewer/2022081603/56649e025503460f94aed3f7/html5/thumbnails/18.jpg)
The University of Papua New GuineaSlide 18
Lecture 18: International Aid Michael Cornish
Is aid a good thing?
Four broad perspectives:
1. Very good, very important
– Jeffery Sachs [Book: The End of Poverty]
– The ‘poverty trap’
– Complementary and simultaneous
investments
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The University of Papua New GuineaSlide 19
Lecture 18: International Aid Michael Cornish
Is aid a good thing?
2. Very bad (and thus very important in a bad way!)
– Peter Bauer [Book: Dissent on Development]
– Corrosive influence
– Dependency
– Politicisation of developing country economy
– Central planning
– Rent-seeking
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The University of Papua New GuineaSlide 20
Lecture 18: International Aid Michael Cornish
Is aid a good thing?
3. Marginally good, but not too important
– Policies and institutions are most important
– …but aid can help at the margins
4. Marginally bad, but not too important
• Bill Easterly [Book: White Man’s Burden]
• Planners v. searchers
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The University of Papua New GuineaSlide 21
Lecture 18: International Aid Michael Cornish
Is aid a good thing?
The verdict?
• Evidence mixed…
• Lack of counterfactual
• Econometric studies
• Poverty reduction
• The equity argument
…and perhaps the better question is:
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The University of Papua New GuineaSlide 22
Lecture 18: International Aid Michael Cornish
How can we improve aid?
• My preferred approach – consider these three
elements:
– Recipient
– Donor
– The relationship between the two
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The University of Papua New GuineaSlide 23
Lecture 18: International Aid Michael Cornish
How can we improve aid?
Recipient:
• Governance-centric
– Conditionality
• Domestic influences / political support
– Technical assistance
• But is there commitment to reform?
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The University of Papua New GuineaSlide 24
Lecture 18: International Aid Michael Cornish
How can we improve aid?
Donor:
• Knowledge burden
• Development is complex (in case you hadn’t
worked it out by now!)
• Doing a lot of ‘a little’
• Problems getting data
• Lack of feedback loops
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The University of Papua New GuineaSlide 25
Lecture 18: International Aid Michael Cornish
How can we improve aid?
The relationship:
• One recipient, but many donors
• Heavy transaction costs
• Harmonisation
• Alignment