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Reforming U. S. Foreign Aid: All Pomp and Little Circumstance

August 2, 2011

On July 28, the Brookings Institutions hosted a discussion on the recently completed Peer Review 2011 by the Development Assistance Committee (DAC), OECD, of the United States.   The discussion featured J. Brian Atwood,  Donald Steinberg, Homi Kharas, and Connie Veillette.

A copy of the DAC Peer Review 2011 was made available to the audience, making it easier it to follow J. Brian Atwood’s presentation and these key recommendations:

  1. Continue to make every effort to consult with and gain support from Congress;
  2. reinforce the role of USAID in the National Security Council;
  3. give USAID a stronger voice in the final foreign aid budget;
  4. make full use of the interagency policy committee on global development;
  5. maintain the 2010 ODA level;
  6. ensure that budgets align with the strategic direction provided by the presidential policy directive, and coordinate with Congress to streamline aid budget;
  7. and, complete the roll-out of the whole-of-government country strategy model.

Mr. Atwood mentioned that the Peer Review was to be a center piece discussion paper for the forthcoming “Measuring for Success at the Busan (South Korea) High Level Forum on Aid Effectiveness” in November.  He concluded by saying: 1) we want a renewed commitment to the MDGs; 2) a definitive statement on results; and 3) not a set of global goals but rather country-specific goals.

Mr. Steinberg believed that DAC has overstated the role of ODA in development assistance, saying most aid comes from non-ODA sources rather than ODA itself, and that remittances were an important component of private resource flows.   He went on to comment that in the whole-of-government approach, which included some 27 US agencies, only four were actually involved in substantive aid work, such as USAID, State, DHHS, and Defense.

Dr. Kharas reiterated Mr. Steinberg’s concern that the ODA review placed too much of an emphasis on ODA. He was concerned that the Busan Meeting would not identify who will play a leadership and coordinating role in development assistance. As an example, he cited Secretary of State Clinton’s recent question during a trip to Pakistan. She had asked how much aid monies were in Pakistan’s civil administration and no one knew!

Ms. Veillette observed that U. S. aid policies predicated on a whole-of-government approach do not include the Congress, despite it being frequently mentioned as a vital partner, and that we have yet to harmonize policies within its 27 different agencies.

This Peer Review isn’t a persuasive exercise in historical reassessment. For one, a contemporary U. S. role should have taken into consideration the justification for the Foreign Assistance Act of 1961, which gave birth to USAID. At that time, the entire sub-continent of Asia and all of Africa were newly emergent post-colonial states. It was appropriate to focus all aid on building capacity in their nascent public sectors.  Today, in most sectors, such as health, well over 70% of services are delivered via their private sectors. Still, the largest portion of ODA continues to flow into their public sectors.

Secondly, panel members were correct in noting that private resource flows to the developing world are much larger than ODA—notwithstanding the fact that OECD has not done the best job in measuring these flows. At Hudson Institute’s Center for Global Prosperity, we measure the various resource components, as shown in the table below (see Index of Global Philanthropy and Remittances for more information).


On July 30, the New York Times ran a front page article on maternal deaths in Uganda, revealing that as the U. S. has given billions to fight AIDS, Uganda has simply re-allocated its public health budgets to other priorities, such as military procurements. The article quoted from a November 2010 study by the University of Washington.  It tracked a rise in global development assistance for health, moving from $8 billion in 1995 to $27 billion in 2010. Yet, it had a negative effect on domestic government spending on health, such that for every $1 of health aid to governments, health expenditures from domestic sources were reduced by $0.43.” (See Celia W. Dugger, New York Times, Maternal Deaths Focus Harsh Light, July 30, 2011)

What the article did not comment on was an additional finding in that same study:

“development assistance for health to the non-governmental sector had a positive and significant effect on domestic government health spending.” (See Financing Global Health 2010, Institute for Health Metrics and Evaluation, November 2010.)

The High-Level Forum in Busan will have two tasks: 1) take stock of commitments to improve the quality of aid made at previous forums in Paris and Accra; 2) to establish a new Global Compact that can drive further effectiveness improvements in the official aid sector while exploring the different circumstances under which aid today is delivered. (See Measuring for Success at the Busan High Level Forum on Aid Effectiveness, the Brookings Institution, May 2011)

Given these two tasks, it would be instructive for the U. S. Delegation to have in hand the circumstances which USAID faced and overcame when propelling South Korea from a country that was economically and socially prostrate atop a pestilent swamp of infectious and parasitic diseases after the Korean War to one which became the newest member of the OECD and a donor nation. It should be noted that USAID didn’t whine then about not being a member of the National Security Council, nor did it depend on an interagency policy committee to promote coherence in its field programming.

In Korea, USAID accomplished capacity building efforts in key sectors of science and technology; agriculture; finance and banking; macroeconomic planning; health; forestry; medicine; shipbuilding; export industries; and engineering. For instance, it recruited Korean physicists, engineers, and scientists to return home in the 1960s and staff the newly USAID funded Korea Institute of Science and Technology (KIST).

In its present context, DAC’s Peer Review 2011 of the United States is all about us rather than them. There is scarcely a mention in the text of those for whom our aid is intended, taking the Review on an inward looking perspective of pomp here at home over circumstances in the developing world.  The Review focuses on those issues which satisfy U. S. interests rather than those of the aid recipients—who care not a fig if USAID has a seat at the National Security Council.

If OECD/DAC continues to believe that ODA is the only game in town, then it is viewing the future of development assistance through a blurred rear view mirror—when the major tasks at Busan are  to “capture the different circumstances under which aid today is delivered … to drive the new Global Compact.

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