The Progress of Nations: The Industrial World

Aid now at lowest level for 20 years

The world's rich countries have made further cuts in development assistance, reducing aid to 0.3% of their combined GNPs - its lowest point for 20 years.

Hopes for a peace dividend for development have proved vain. Worldwide military budgets have dropped by a quarter since the ending of the cold war, saving over $250 billion a year; aid has risen by only $1 billion a year in real terms.

The countries of northern Europe - Norway, Denmark, Sweden, and the Netherlands - still give a considerably greater proportion of their GNPs in aid than the other industrialized nations, according to the 1996 report from the Organisation for Economic Co-operation and Development (OECD).

Norway, now giving 1.05% of GNP, heads the aid league for 1994, the latest year for which figures are available.

At the other extreme, the United States has fallen further behind the other rich nations, giving just 0.15% of its GNP - of which 18% goes to Egypt and Israel.


Photo (above): Only about 10% of aid goes to meet basic, obvious needs like safe water and sanitation, primary health care, and basic education.©


In absolute dollars, Japan gives the most aid - $13.2 billion in 1994. The US comes second with $9.9 billion. Almost two thirds of the 1994 aid total of $59.1 billion came from four countries - Japan, the US, France, and Germany.

Official aid works out at $73 per head per year for each person in the industrialized countries. The Danes are the most generous, giving $278 per person per year. Canadians give twice as much per head as Americans, Japanese twice as much as Britons, Dutch twice as much as Germans.

Aid target

In 1994, only four countries - Norway, Denmark, Sweden, and the Netherlands - reached the aid target figure of 0.7%.

An aid target of 1% of GNP was first adopted in the 1950s by the British Labour Party and subsequently endorsed by the World Council of Churches (1958) and the UN General Assembly (1960). At that time, the US Government supported the idea, as it was supplying about two thirds of all aid to developing countries and saw targets as a means of sharing the burden.

The 1% target included all finance going to developing countries, including private investment. In 1969, the Development Assistance Committee (initially 9, now 21, donor nations) introduced the idea of official development assistance or ODA. To qualify as ODA, aid must come from governments, be intended for development purposes (so excluding military aid), and be in the form of grants rather than commercial loans.


Photo (below): Aid for emergencies up from $2 billion in 1989 to $5 billion in 1993.©


Once aid had been redefined in this way, a new target of 0.7% of GNP (called for by the Pearson Commission in 1969) was accepted by all the members of the Development Assistance Committee and endorsed by the General Assembly.

In the mid-1960s, ODA amounted to about 0.5% of GNPs of the rich nations. But instead of gradually rising to the target level, aid declined steadily to about 0.29% in 1973, increased slightly in the late 1970s and 1980s, and fell back in the 1990s to today's 0.3%.

Direction

Rising private flows have helped to offset declines in government aid, but most commercial capital is invested in the already dynamic economies of South-East Asia. Of the $45 billion in direct foreign investment in developing countries in 1994, for example, only $2 billion went to Africa.

At first glance, it seems as if this might be compensated for by the gradual increase to 30% in sub-Saharan Africa's share of official aid. But much of this has come in the form of debt relief and rescheduling. This allows aid levels to be maintained at higher levels than would otherwise be the case, at no extra cost. But it does not represent new money for development. Debt relief now accounts for between 10% and 20% of aid, meaning that a significant proportion of ODA never leaves the account books of finance departments in the donor nations. In Portugal, for example, almost two thirds of aid in 1993 was given in the form of debt relief. In Italy, the proportion was almost one third.

In the 1990s, aid budgets have also come under pressure from the new and needy countries that have emerged from the disintegration of the Soviet Union. Although not counted as ODA, assistance to former Soviet bloc countries (sometimes referred to as 'countries in transition') reached $7.5 billion in 1994 - the equivalent of about 13% of the aid given to the developing world. (Central Asian republics are now recipients of official aid.)

Aid for long-term development is also threatened by the rising cost of emergencies. Aid for disaster relief has risen from less than $2 billion in 1989 to $5 billion in 1993.

The one bright spot in an otherwise bleak picture is the increase in aid from non-governmental organizations (NGOs). Although estimates vary, total aid from NGOs now amounts to about $6 billion a year or approximately 10% of the aid provided by governments (although the picture is confused by the fact that in some countries significant amounts of government aid are channelled through NGOs).

Aid to basics

The quality of aid is more difficult to measure than the quantity, but in recent years there has been growing pressure on donors to say how much of their aid goes to meet obvious basic needs - adequate nutrition, safe water and sanitation, basic health care, primary education, and family planning.

At present, it is thought that only about 10% of ODA is allocated to these basics. Five United Nations agencies - UNDP, UNESCO, UNFPA, UNICEF, and WHO - have called for this to be increased to at least 20%. But most NGOs in the rich world believe this proportion is too small. A Netherlands NGO, Novib, for example, advocates that 50% of all aid should be spent directly on improving the incomes of the poor.

AmountsChange over time

Total Aid
($ billions)
Aid
per person
($)


ODA as % of GNP

Change
(as % of
GNP)
199419941973-741993-94
Japan13.2106Denmark0.501.030.53
United States9.938Norway0.521.030.51
France8.5146Sweden0.620.970.35
Germany6.884Netherlands0.570.790.22
United Kingdom3.255Finland0.160.370.21
Italy2.747France0.430.630.20
Netherlands2.5163Switzerland0.150.350.20
Canada2.377Italy0.130.290.16
Sweden1.8209Austria0.170.320.15
Denmark1.4278Ireland0.090.230.14
Spain1.333Japan0.250.280.03
Australia1.161Germany0.350.350.00
Norway1.1264Canada0.450.44-0.01
Switzerland1.0138New Zealand0.270.24-0.03
Austria0.783United Kingdom0.380.31-0.07
Belgium0.772United States0.230.15-0.08
Finland0.357Australia0.510.35-0.16
Portugal0.331Belgium0.510.35-0.16
Ireland0.131Luxembourg-0.38-
Luxembourg0.1147Portugal-0.32-
New Zealand0.131Spain-0.28-
Total59.1Average 73Total0.300.300.00

Note: percentages do not add up to 100 because of rounding.

SOURCE OECD Development Cooperation 1995, 1996.

Aid to countries in transition*

(not counted as ODA)

$ millions In relation
to ODA (%)
Australia 40.4
New Zealand 11
Japan 2472
Canada 733
Denmark 373
Norway 454
Netherlands 1185
Sweden 915
Italy 1967
France 6508
Portugal 289
United Kingdom 2939
Belgium 7911
Switzerland 10711
Luxembourg 712
Spain 15712
Ireland 1615
Finland 5118
United States 2,42224
Germany 2,61338
Austria 26140
Total 7,49713

*Belarus, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Moldova, Poland, Romania, Russian Federation, Slovakia, Ukraine.

SOURCE OECD, Development Cooperation 1995, 1996.


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