Navdeep kaur,section-C,Question no-18, Question-Foreign Aid For Development Assistance.

FOREIGN AID FOR DEVELOPMENT ASSISTANCE

Foreign aid- is an economic, technical or military aid given by one nation to another for purpose of relief and rehabilitation, for economic stabilization, or for mutual defense.

Foreign aid plays a vital role in improving the lives of poor households across the developing world. However, its use is to poverty reduction and development for increasing debate. It’s prompted by downward pressure on donor country aid. There should be having Greater confidence in aid effectiveness so that it increases the flow of funds from rich to poor countries. 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. In reality, both the quantity and quality of aid have been poor and donor nations have not been held to account. In 1970, the world’s rich countries agreed to give 0.7% of their GNI (Gross National Income) as official international development aid, annually. Since that time, despite billions given each year, rich nations have rarely met their actual promised targets. For example, the US is often the largest donor in dollar terms, but ranks amongst the lowest in terms of meeting the stated 0.7% target.

To understand the meaning of foreign aid for development assistance there is a need to understand the meaning of three terms

1. aid

2. Foreign assistance

3. Development

Aid

Aid to provide support for or relief to. Aid received, per capita, in 2007, in $ of Official Development Assistance per person. In international relations, aid is a voluntary transfer of resources from one country to another. It can be diplomatic approval, or to strengthen a military ally. Aid provide infrastructure to donor for resource extraction. If we set a definition of principles, it remains difficult to determine the effective flow of aid because aid is fungible. Official organizations and scholars used measure of aid, "Official Development Assistance" (ODA). It is compiled by the Development Assistance Committee of the Organization for Economic Co-operation and Development. The United Nations and the World Bank and many scholars use the DAC's ODA figure because it is easily available and calculated over time. The DAC consists of 22 of the wealthiest Western industrialized countries plus the EU. It is a forum in which they made their aid policies.

Types of aid

1International aid

2Overseas aid

3Foreign aid

Some more aid is there:-

Humanitarian aid-Humanitarian aid or emergency aid is given to people in immediate distress by individuals, organizations, or governments to relieve suffering, during and after emergencies (like wars) and natural disasters.

Lists the following principles of humanitarian action:

Ø The right to live with dignity.

Ø The distinction between combatant and non-combatants.

Development aid- Development aid is aid given by developed countries to support development in general which can be economic development or social development. It is differ from humanitarian aid. Development aid for long term and humanitarian aid for short term

Official Development Assistance (ODA), is a commonly used measure of developmental aid. Development aid is given by governments. Aid is given for a specific purpose e.g. building materials for a new school.

Programmed aid- Aid is given for a specific sector e.g. funding of the education sector of a country.

Budget support- A form of Programmer Aid that is directly channeled into the financial system of the recipient country

Sector-wide Approaches (SWAPs)- A combination of Project aid and Programmer aid/Budget Support e.g. support for the education sector.

Food aid- Food is given to countries in urgent need of food supplies. Food aid can be provided by importing food from the donor, buying food locally, or providing cash.

Untied Aid= the country receiving the aid, can spend the money as they choose.

Tied aid=the aid used to purchase products from the country that donated it or a specified group of countries

But aid could be beneficial

a) Trade and Aid

b) Improving Economic Infrastructure

c) Use aid to Empower, not to Prescribe

d) Rich donor countries and aid bureaucracies are not accountable

Development

Development means change. Development is a process of economic and social transformation within a country--both economic growth and economic development as well as improvements in human welfare. In this we can includes a concept of equity (the income level of the median household increases along with economic growth) and can include sustainability. The Congressional Budget Office (CBO) also uses a broad definition of development. In this study, development encompasses a long-term trend of growth in GNP per capita, rising education levels, improving health conditions, low to moderate population growth, sustainable use of natural resources and the environment, and secure access to adequate amounts of food.

Foreign Assistance

A common means of defining and measuring foreign aid is official development assistance, which is used by the Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD). Official development assistance consists of grants or loans that one government or multilateral organization gives to a developing country to promote economic development and welfare. The OECD also uses a broader concept called official development finance, which combines official development assistance with other official flows--that is, the financial flows from government organizations in developed countries and multilateral organizations to developing countries. Foreign assistance includes money, military assistance, political development programs, and

Export Promotion, debt forgiveness, and no concessional lending by all bilateral and multilateral organizations.

We have discuses about the foreign aid and its terms. Foreign aid has merits as well as demerits. Sometime it can be effective and cannot be effective.

Aid Has Often Been Effective

Foreign assistance has often been effective to achieve its goals. Foreign aid helped eradicate polio, greatly reduce the incidence of small pox, increase life expectancy, and reduce fertility rates around the world.

· The United States Should Provide Humanitarian Assistance- Humanitarian assistance or emergency aid is given to people in immediate distress by individuals, organizations, or governments to relieve suffering, during and after emergencies (like wars) and natural disasters

· Development in Other Countries Enhances U.S. Security-

A potential threat facing the United States after the Cold War may be the spread of weapons of mass destruction, especially if combined with political instability. An internal conflict in a developing country that became a regional conflict would have dire consequences for U.S. allies if it involved use of nuclear, chemical, or biological weapons--not to mention the potential impact on the regional and global environment. In 1994, "a brief survey of the world's trouble spots showed a fairly striking correlation between economic malaises on the one hand and domestic unrest and political instability on the other. If the United States can address those problems by using its foreign aid to help to create economic opportunities and invest in human capital, then the chance of conflict may be reduced.

· Foreign Aid Helps Provide Public Goods in Developing Countries-

Many developing countries do not have sufficient funds to provide public goods such as education or transportation systems or clean water and waste disposal facilities. Although such goods are essential for development, their economic rate of return is so uncertain that private investors are unwilling to provide them on a large scale. Foreign aid can substitute for private capital in those instances, providing the funds for investment in public goods that the international capital market will not supply to those developing countries or would supply at a high interest rate.

Why Do Others Criticize Aid Programs?

Critics of foreign aid use a variety of political, strategic, and economic rationales to make their case.

· Aid Is Often Ineffective

One argument is that foreign aid does not contribute significantly to economic progress in developing countries. Aid enables to divert money to other, nonproductive activities. Aid is wasted in countries that do not have the technical or administrative ability to absorb and use it properly..

· Aid Often Harms Developing Countries

Aid has serious in the political life of recipient countries. Aid is generally transferred to the government of those countries, which tends to increase the government's power, resources. People will spend their time focused on the outcome of political and administrative decisions, thereby diverting attention, energy, and resources from more productive economic activities. That may encourage tension and disturbances

· Economic Growth in Developing Countries May Not Be Beneficial for the United States

Economic growth among developing countries means that they have become competitors in the global market. Cheaper wages in developing countries allow foreign competitors to charge prices that are lower than those for comparable U.S. goods in world and domestic markets, critics would claim, thus causing the United States to lose jobs.

· Aid Should Support Only U.S. National Interests

Another argument is that the United States should target its foreign aid dollars toward countries and policies that directly support U.S. national interests. Helping all the poor people of the world, though laudable, is impractical. The United States should, therefore, enable countries to defend themselves, reward its friends, and reinforce success where it is occurring. When viewed in that light, helping the poorest of the poor may be an ineffective use of U.S. aid dollars.

My own views on this topic

Foreign aid- is an economic, technical or military aid given by one nation to another for purpose of relief and rehabilitation, for economic stabilization, or for mutual defense. Foreign aid is used to improving the lives of poor households. Foreign aid is used to reduce the poverty and development for increasing debate. It increases the flow of funds from one nation to another. By describing the policies and interactions of foreign aid donors and recipients that influence economic growth and improve human welfare in developing countries, this study specifies some catalysts of development and potential causes of underdevelopment There are numerous forms of aid, from humanitarian emergency assistance, to food aid, military assistance etc. Development aid has long been recognized as crucial to help poor developing nations grow out of poverty rich to poor countries. n 1970, the world’s rich countries agreed to give 0.7% of their GNI (Gross National Income) as official international development aid. But foreign aid has often come with a price of its own for the developing nations:

Aid is often wasted on conditions that the recipient must use overpriced goods and services from donor countries

Most aid does not actually go to the poorest that would need it the most

At the end foreign aid is used to reduce the poverty. Foreign aid is official development assistance, which is used by the Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD).

REFERANCES

WWW.WIKIPEDIA.COM

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SUBMITED TO

PROF. GURDEEPAK SINGH

SUBMITTED BY

NAVDEEP KAUK

CLASS MBA

SEMESTER 1st

SUBJECT ACCOUNTING FOR FINNACIAL MANAGEMENT

OUESTION NO= 18

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