The Official Development Assistance Effectiveness

In 2015, the Millennium Development Goals will end, and from today’s perspective it does not seem that all the targets that have been set will be achieved! This motivates the questions and discussions about how the post-2015 development goals should be set, what development issues they should include, and how effective official development assistance (ODA) or development aid actually is.

Africa was supposed to receive $61.5 billion of ODA in 2010 but about $16.3 billion did not arrive! The effect of the financial aid that did arrive, on development is hard to measure, and it is even more difficult to interpret it correctly. The number of donor agencies, development banks, and multilateral programs has been constantly increasing since the Marshall Plan, and yet it is not clear how aid is contributing to the growth and development of poor countries, or how it could be organized more efficiently.

During the last 40 years, there have been a wide variety of papers being concerned with aid effectiveness. The different generations of scholars used the respective growth theories of their time, and thus ended up with different conclusions. While the first generation based its research on the Harrod-Domar model and the relationship between aid and savings, the second generation focused on the direct relationship between aid and investments.

The third, and current, generation uses a new growth theory for its underlying assumptions, and includes measures of economic policy and the institutional environment of a country in its analyses. The results of this research are still divided but there seems to be a tendency towards more coordination, a focus on better institutions, and a greater consideration of local particularities.

The World Bank and other international organizations try to acknowledge these new paths by implementing rules and principles on how to globally organize and manage development aid. Through the Paris Declaration, established in 2005, the international aid community aims at overcoming the current lacks of predictability and coordination, and aid fragmentation by streamlining the efforts in one country, following a bottom-up principle, and monitoring the progress of a program more efficiently and complete.

Nevertheless, we do not know which factors foster growth and development and thus the question remains: How can ODA be organized in order to reduce poverty?

Written by Julia Seither, Master student at Nova SBE and member of NOVAFRICA Student Group