Official development assistance

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Mike Wootton

Mike Wootton

The patterns of official development assistance, to give ODA its formal title, are changing.

There is a long-standing target set by the Organization for Economic Cooperation and Development (OECD) countries [the advanced economies]to contribute 0.7 percent of their combined gross domestic product (GDP) to aid in the form of grants or soft loans to the less developed world. This target has not been achieved overall, although a few mainly Nordic countries have managed it; overall, the contribution has been about 0.32 percent [$127 billion in 2010] of their GDPs. Meanwhile, China [itself a recipient of ODA]is fast increasing its contributions [over $2 billion last year]to the world that is even less developed than itself.

The Philippines received its highest ever ODA in 1992, $1.7 billion. Since then it has decreased a lot to a 2010 level of $355 million. ODA contributes to gross national income [which includes money earned outside the country]often [usefully]confused with GDP [which should not include money earned outside the country].

The advanced economies have struggled recently with their own financial and economic problems thus money available for ODA has been tighter than in the past. Nevertheless, regionally there has been a shift of target recipients; Vietnam which in 2008 got $300 million in 2010 received nearly $3 billion. Interestingly, China in 1998 received $2.5 billion. Indonesia in 2010 received four times as much as the Philippines. Rather oddly, the National Economic and Development Authority (NEDA) is reporting that the Philippines will be the recipient of about $8 billion in ODA in 2013 [6.3 percent of the world’s ODA for a country with 1.4 percent of the world’s population?]


ODA flows are strongly affected by recipient country policy consistency, any civil unrest and corruption—does the money get used for the purpose for which it is intended, has government changed its policy on the matter for which the aid is intended, is the money filtered off before it can be used for the purpose for which it is intended? In a less developed country, setting these questions are highly valid; in a lower middle-income country which the Philippines purports itself to be, such questions are still relevant but should be of lesser concern to the OECD donor states. The degree to which such matters are of concern to the less developed donor world [China, India, Venezuela, etc.] is I strongly suspect, much less.

ODA has been characterized by Peter Bauer, one-time Professor of Economics at London School of Economics, as “an excellent method for transferring money from poor people in rich countries to rich people in poor countries.” You can draw your own conclusions on the relevance of that rather cynical view to the situation here! Having been myself in the position of applying for loans and grants from the multilateral development agencies as well as directly from donor government entities, I can attest that the degree of detail needed to satisfy applications is enormous [and in many cases irrelevant], and that because of this it is only well staffed organizations which would have the “horsepower” to undertake such herculean tasks.

I am also well aware that many of the world’s biggest and most profitable companies make frequent use of development aid in their business pursuits. So leaving the matter of who gets their hands on Philippine ODA aside, I am still inclined to agree with the view of Professor Bauer.

The Philippines is a case which needs not only development money but also development guidance, and a bit of close monitoring as to where the money goes. It will not serve the development of the Philippines if the money [whether it be $500 million or $8 billion for 2013]just ends up again in the hands of the oligarchs, who have consistently shown that they don’t do too much which is very useful for anybody apart from themselves. The money needs to be spread around more equitably, and the guidance and monitoring needs to be to, and of the government. And please don’t channel it through Filipino banks who have a major aversion to giving out any money regardless as to whether they are doing it on behalf of others in order to stimulate desirable development policies. They just apply their own Filipino banking rules and often return the money to the donors as they “can’t get enough suitable projects.”

Mike can be contacted at mawootton@gmail.com

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