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Reducing the Development Gap

Aid and development in LEDCs, and judging development in one

  • 3 things to know
  • Unit AS 2

Overview

Bilateral aid, multilateral aid and tied aid.

What you need to know

Answer each one before you reveal it.

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Key term

What is aid, and what counts as official development assistance?

Evaluation

What is bilateral aid, and what are its strengths and weaknesses?

Evaluation

What is multilateral aid, and what are its strengths and weaknesses?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    What is aid, and what counts as official development assistance?

    Model answer

    Aid is the transfer of money, goods, services, skills or expertise from one country or organisation to another for the benefit of the recipient rather than in exchange for full payment. Official development assistance is the technical term for government aid that is provided on concessional terms, as grants or loans well below commercial interest rates, with the promotion of economic development and welfare as its main objective. Military assistance and commercial export credits do not count. Aid also comes from non-governmental organisations funded by private donations.

  2. 2

    What is bilateral aid, and what are its strengths and weaknesses?

    Model answer

    Bilateral aid is given directly by the government of one country to the government of another, usually through a national development agency. Its strengths are that it can be targeted at chosen countries, sectors and projects, delivered relatively quickly, and built on a long-term relationship in which the donor develops real knowledge of the recipient. Its weaknesses are that it is the most political form of aid: it tends to follow the donor's strategic, historical and commercial interests rather than the greatest need, it may come with conditions attached to the recipient's economic or foreign policy, it has often been tied to purchases from the donor, and it can be reduced or withdrawn when the donor's politics change, making it unpredictable to plan around.

  3. 3

    What is multilateral aid, and what are its strengths and weaknesses?

    Model answer

    Multilateral aid is channelled through international organisations such as the World Bank, the International Monetary Fund, United Nations agencies and the European Union, which pool contributions from many donor governments and then allocate them. Its strengths are scale, allowing projects too large for one donor; specialist technical expertise; allocation based more on assessed need than on any single donor's foreign policy; and reduced duplication between donors. Its weaknesses are bureaucracy and slowness, distance from local conditions, the dominance of the largest contributors in decision-making because voting power reflects contributions, and, historically, the imposition of policy conditions such as the structural adjustment programmes that required cuts in public spending and privatisation in return for lending.

  4. 4

    What is tied aid, and why is it the form of aid students should be able to criticise?

    Model answer

    Tied aid is aid given on condition that the money is spent on goods, services or contractors from the donor country. It is heavily criticised because the recipient cannot shop around, so the same money buys less; estimates commonly suggest tying reduces the real value of aid by something like 15 to 30 per cent. The donor's own firms and workers capture much of the benefit, which makes the aid partly an export subsidy dressed up as generosity. The goods supplied may be inappropriate: machinery unsuited to local conditions, requiring imported spare parts, fuel and specialist maintenance that lock the recipient into further purchases. Projects may be chosen to suit what the donor sells rather than what the recipient most needs. And it undermines local suppliers who could have done the work more cheaply. International agreements have pushed donors to untie aid, and some, including the UK in 2002, have legislated to end the practice.

  5. 5

    What is emergency or short-term relief aid, and what are its limits?

    Model answer

    It is aid given immediately after a disaster such as an earthquake, flood, drought, epidemic or conflict, in the form of food, clean water, shelter, medical care, sanitation and rescue services, usually delivered by governments, UN agencies and NGOs. Its strength is obvious: it saves lives in the days and weeks when nothing else can, and it is the one form of aid whose necessity is rarely disputed. Its limits are that it treats symptoms rather than causes and leaves the underlying vulnerability unchanged; that imported food and goods can undercut local farmers and traders and delay market recovery; that funding depends on media attention, so neglected crises are underfunded while televised ones are oversupplied; that short funding cycles make the transition to reconstruction difficult; and that in conflicts supplies can be diverted or taxed by armed groups.

  6. 6

    What is long-term development aid, and what forms does it take?

    Model answer

    Long-term or development aid is sustained assistance intended to raise a country's capacity to develop, rather than to meet an immediate emergency. It takes the form of capital projects such as water supplies, roads, power, clinics and schools; programme funding for a whole sector such as education or health; technical assistance, providing expertise and training; support for agriculture, including seeds, irrigation and extension services; budget support paid directly into government finances; and concessional loans. Its purpose is to build assets, skills and institutions that continue to produce benefits after the funding ends, so its success is judged over decades rather than months.

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