2. Standard Definition [Development Assistance Committee (DAC) of the
Organization for Economic Cooperation and Development (OECD) ]
Financial flows, technical assistance, and commodities
that are:
(1) designed to promote economic development and
welfare as their main objective and
(2) are provided as either grants or subsidized loans

3. The DAC classifies aid flows into three (3) broad
categories:
 Official development assistance (ODA)
 Official assistance (OA)
 Private voluntary assistance

4. Non-monetary Aid-- Equipments, raw materials, food
and expert services
>Advantage: avoids financial mismanagement on the
part of the recipient country
>Disadvantage: the donor country decides what type of
projects the beneficiary country should put up

5. History:
 Gilipin: Foreign aid became a significant element of
international political economy after World War II
 Under the Marshall Plan, the United States provided
aid to Europe, devastated by the war.

6.  As European countries and Japan recovered and
prospered, they provided aid to developing nations.
 International organizations such as the World Bank
and the International Monetary Fund developed to
provide aid to poorer nations

7. Historically most aid has been given as:
 Bilateral assistance directly from one
country to another.
 Multilateral assistance, which pools
resources together from many donors.

8. Major multilateral institutions include:
 The World Bank
 International Monetary Fund
 The African, Asian, and Inter-
American Development Banks, and
 Various United Nations agencies such
as the United Nations Development
Programme

9. Rationale for Foreign Aid:
 National Interest –a country's goals and ambitions:
Economic
Political
Military
Cultural or
Other benefits for the donor country

10.  Humanitarian, Moral, and Ethical considerations
-Relieving human suffering
-Providing economic and educational
opportunities
-Supporting human rights; and
-Promoting a better and safer world

11.  Maintaining a viable Global System
Common areas of cooperation
include:
 Halt or if possible, reverse
environmental degradation.
 Stop the growth of global
population sooner rather than
later, and by human means.

12.  Achieve a secure balance between the
world of food needs and supplies.
 Reduce the rates of the depletion of
non-renewable natural resources by
means of conservation and
development of renewable resources
substitutes.
 Bring energy demands and supplies
into sustainable balance

13.  Why Do Donors Give Aid?
-During the Cold War, both the United States and the
Soviet Union used aid to vie for the support of
developing countries with little regard as to whether the
aid actually was used to support development.
-Taiwan and China have used aid (among other policy
tools) to try to gain support and recognition for their
governments from countries around the world.

14. -Many donors provide significant aid to
their former colonies as a means of
retaining some political influence.
-For political reasons, donors generally
want to influence as many countries as
possible, which tends to lead to a
disproportionate amount of aid going to
small countries.

15. -Many donors “tie” portions of
their aid by requiring that certain
goods and services be purchased
from firms in the donor’s home
country, or that it be used for
specific purposes that support
groups in the donor countries
(such as universities or business
consulting firms).

16. Criticisms of Foreign Aid:
 Aid can breed a culture of dependency. States often
live on aid, and this aid acts as an excuse to avoid
serious structural reforms.
 For the donor country, aid seems problematic if the
donor state, such as the United States, cannot pay its
own debts, both public and private.

17.  In many cases, the aid is
inappropriate, coming from the donor
state's perception of a problem rather
than the actual problem.
 In addition, aid can sustain a
government that might be the cause of
the problems to begin with.

18.  Countries extend foreign aids to other countries to
serve their own self-interest. Even for moral and
humanitarian reasons, the donors expect certain
benefits one way or the other.
 Foreign aid or (development assistance) is often
regarded as being too much, or wasted on corrupt
recipient governments despite any good intentions
from donor countries.