STRONG GROWTH AND GREATER AUTONOMY ARE MAKING POOR COUNTRIES LESS AID RELIANT

Strong growth and greater autonomy are making poor countries less aid reliant, claims a report that offers the development community a fresh take on a traditionally discomfiting issue.

MDG : Aid effectiveness : Union Trade Centre shopping mall in Kigali, Rwanda
Rwanda is one of several countries that have identified reducing aid dependence as a key medium-term development goal. Photograph: Tadej Znidarcic for The Observer

ActionAid has published a report celebrating the fact that poor countries are relying less and less on aid. The number of low income countries (LICs) receiving aid equivalent to 30% of government expenditure or more has reduced from 42 to 30 in the past decade.
In Zambia, for instance, aid has fallen from 84% of government expenditure to just 44%. That doesn't mean Zambia is receiving less aid in absolute terms – it means more money is coming in from elsewhere, making aid a less important part of the mix. In fact, ActionAid notes the apparent paradox that while aid giving has increased globally, aid dependence has reduced because of strong economic growth.
Growth is the major factor at work, but it is linked to another positive development strongly emphasised in the ActionAid report: a new-found determination among poor countries to end 30 or more years of heavy aid dependence that has seldom delivered the kind of development for which they had hoped.
Some of the poorest countries in the world - Afghanistan, Cambodia, Ghana, Liberia, Nepal, Rwanda, Sierra Leone, Uganda and Vietnam - have set reducing aid dependence as a key medium-term goal in their national development or aid-management policies.
Ghana's new aid policy says: "The government of Ghana has taken cognizance of the need to reduce dependence on aid in the medium to long-term, and therefore intends to redouble its efforts at mobilising non-aid resources to fund its development objectives."
Recognising the difficulty of reducing aid dependence, and the need to engage complementary policies, the government of Uganda (which is still as aid dependent today as it was 10 years ago) has designed a set of goals for its donors to achieve on issues including agriculture, trade, tax evasion and incentives, climate change, technology transfer, migration and regional integration.
In pointing out that high levels of aid for long periods of time can be anti-developmental, hindering rather than helping countries reduce poverty, ActionAid's third Real Aid report is simply conveying to a western audience what political and civil society leaders have long been saying in poor countries.
When its first Real Aid report came out in 2005, ActionAid was in the vanguard of attempts to try to keep the aid world honest, claiming that as much 60% of what the rich world claimed was aid was really "phantom". For countries like France and the US, only 10% of aid counted as "real" ie genuinely targeted at poverty reduction rather than tied to donor country purchases (of people or things), double counted or otherwise misspent.
When it published Real Aid 2 a year later, ActionAid tackled the issue of technical co-operation, which it described as "often overpriced and ineffective, and in the worst cases destroys rather than builds the capacity of the poorest countries".
In criticising aid, it risked the wrath of large donors reluctant to defend their more artful practices in public. It also faced criticism from other NGOs who were worried about washing dirty linen in public, where support for aid is fragile.
The importance of this latest report is the way it develops a new narrative on the role of aid that will be easy for many parts of the development community to take on board. Critics of aid dependence have tended to lambast aid as harmful. But this report adopts a different tone. Rather than dwell on aid's shortcomings, it argues that aid spent well can itself contribute to reduced aid dependence, particularly when it supports efforts to mobilise domestic resources.
This is not paradoxical. Actually, it is pretty obvious. But those who have previously been nervous about talking about "reducing aid dependence" will find in this report an analysis they can comfortably adopt.
Since the first two Real Aid reports we have had five years of the Paris Aid Effectiveness process, which has sought to respond to many of Actionaid's criticisms. As the meeting on aid effectiveness in Busan approaches, the idea that aid should always come with an exit strategy is likely to be a central theme.
As bilateral aid gradually reduces in importance as a development issue, it feels a bit like stepping into the unknown. We all know that trade, climate change, tax evasion and a host of other issues are more important, but somehow aid is manageable, deliverable, known. We don't really know what will happen on the bigger issues, with so many powerful interests at play. All the more reason for the NGOs to accelerate their shift away from being aid agencies and towards being true development agencies.
But a reduction in bilateral aid does not mean an end to aid. Richer countries still need to spend a couple of hundred billion dollars a year on global public goods, developing a truly global public sphere to manage and contain liberalised private interests and capital. That is the one of the most important projects of the 21st century – but thinking on it has hardly begun. Perhaps it would make a good thematic focus for Real Aid 4.