Foreign Aid: Holds Itself Back

Having commenced after the end of World War II, humanitarian aid has been one of the tools used by Western nations to project themselves as the good guy in global interactions. Recently, the West has been slowly moving towards developmental assistance as the criticism against humanitarian aid has been getting tougher. As the diplomatic standoff between Ethiopia and the West worsens, with aid in the middle of the engagement, it is still difficult to pinpoint the role of aid in economic growth. Also at play is the effectiveness of and bad-practice prone implementation by local actors. EBR’s Mariamawit Gezahegn delves into the matter to offer this report.

“All we lose is their rotten wheat,” said Shimelis Abdisa, Chief Administrator of the State of Oromia, in May 2021 at a fundraising event for Fasil Kenema, the football club of the historic Gondar town. He was seemingly referencing a series of warnings by the US government towards the Ethiopian federal government in connection with its military engagement with the Tigray People’s Liberation Front (TPLF), labeled as a terrorist group by the House of People’s Representatives last May.

Warnings involving restrictions on travel visas, duty-free trade benefits, and aid cuts, among others, were frequently forwarded by the US government against Ethiopia and Eritrea. The USA’s strong stand and warnings sparked tough conversations among media, public officials, and Ethiopians at large on the repercussions of aid cuts and possible fallouts with the West in general. A photograph of a Caucasian man wearing a hat bearing the logo of the World Food Program (WFP) alongside a senior official of the TPLF rebels has made aid conversations even tougher.

Polarized and harsh criticisms against Western aid was not just simple political conversation, the outcome will implicate millions of citizens who depend on aid for living. The Ethiopian government declared persona non grata against seven top aid agency officials of the United Nations, accusing them of conspiring with the rebels. The federal government gave stark warning and went to the point of revoking and temporarily suspending the licenses of selected aid organizations for alleged meddling in internal affairs.

Recent diplomatic developments with foreign aid at the center of rather tough exchanges between Ethiopia and the West call for a closer look into the overarching aid sector.

In 2013, an ambitious development-based initiative was crafted by the global creative non-profit, Girl Effect, to tackle negative education ideologies for girls in Ethiopia. The initiative used popular media to shift gender norm perceptions that create educational access barriers for girls including disproportionate household responsibilities, child marriage, early pregnancy, and gender-based violence. Through a musical group called Yegna, the communication platform challenged patriarchal power dynamics and attempted to build a youth movement to empower girls and women.

This empowerment-based intervention partnered with the UK government for USD15.75 million from 2015 to 2018. At the time of the partnership, the group was reportedly reaching 8.5 million Ethiopians through their radio programs, talk shows, and music. The investment, however, was criticized heavily by UK media outlets and deemed a frivolous allocation of the nation’s tax payer’s money.

Meaning ‘ours’, when translated from Amharic, the group of five girls was dubbed ‘Ethiopia’s Spice Girls’. The project never recovered from the negative media coverage. The outrage resulted in a formal investigation by the former Department for International Development’s secretary and the subsequent termination of the UK’s partnership with Girl Effect in 2017. Despite the timing, the secretary denied her decision was motivated by public outrage.

“The decision was made following shifts in the UK’s political climate and was one of many,” said Liya Haile, Country Lead for Girl Effect Ethiopia in an emailed response to EBR. “There was an annual formal program assessment conducted, after which the program received one of the highest grades achievable.”

At face value, the Girl Effect venture can be written off as a wasteful misuse of foreign aid. However, the Yegna controversy encapsulates the complexity of development-based interventions. Development aid, unlike humanitarian aid, is designed to alleviate long-term and ongoing structural issues such as economic, social, and political developments. Such aid objectives need to address the root causes of a structural issue and not just alleviate its symptoms.

Empowerment interventions intend to slowly shift the perception of a community’s behavior that has long been reinforced by cultural norms and values that discriminate against a certain population. The Girl Effect project attempted to tackle the causes of school absenteeism among girls such as cultural expectations to maintain household chores, embarrassment over menstrual hygiene, and gender-based violence by openly challenging these topics. It used both traditional and digital media platforms to start the conversation among young people.

However, such intervention at a community or national level takes a long time. It is difficult to show a measurable impact in the short term. What the UK public viewed as a vanity project was a long-term strategic investment at shaping the youth’s perception of the rights and value afforded to the experiences of girls in Ethiopia. Their deviation from major goals like increasing the number of schools, affirmative action for female students, and gender-equality training resulted in the misunderstanding of the design and mission of the project itself. Ultimately, a country such as Ethiopia which largely depends on foreign aid assistance has to be able to justify program implementation impact to secure continued financial support.

Ethiopia is among the world’s top recipients of foreign aid. In 2019, the country received USD4.81 billion, making up roughly50Pct of the national budget. The majority of Ethiopia’s aid flows came from the US, UK, and World Bank Group. The US, one of the largest donors to Ethiopia, donates annually between USD200 and 500 million for both humanitarian and development efforts. The UK, Ethiopia’s second-largest donor, budgeted USD374.8 million for 2019/2020 fiscal year aid programming. Just recently in March 2021, the World Bank approved USD500 million in International Development Association credit to realize Ethiopia’s goal of providing nationwide electricity access by 2025.

Overall, foreign aid interventions in developing nations have shifted from a humanitarian focus to a more development-based assistance. Ethiopia is no different. The interest in developing Ethiopia is tied to the country’s role within the Horn of Africa. Ethiopia is a key figure in the region regarding maintaining regional stability, regulating migration, and food security improvements. Such a position aligns the country with the initiatives and objectives of Western nations for that part of Africa.

Donor nations, hence, allocate aid that aligns with their foreign policy needs and prioritized agendas. Accordingly, their programming strategy document details their developmental goals for each year. The USA’s ‘Sustainable Development Goals’ (2019-2024) target Disaster Risk Management, Resilience of Vulnerable Populations to Key Shocks, Private-Sector led Economic Growth, and Sustained Improvement in Essential Service Delivery Outcomes Focused on Women and Girls. Therefore, their donations and support will be budgeted and allocated under one of these intervention areas.

Foreign aid is either distributed as budget support directly to the Ethiopian government or as development support to the donors’ respective aid agencies. These agencies will then design projects, partner with locally-based Civil Society Organizations (CSOs), contractors, and oversee their implementation.

The major contention of development-oriented aid intervention is the issue of how to measure impacts. Questions of effectiveness can arise when evaluating the duration of foreign aid interventions in Ethiopia. Development aid interventions began in the 1960s. However, Ethiopia is still grappling with the same issues that had been plaguing it like systemic poverty, unemployment, gender inequality, and civil rights violations, among others.

Does this mean aid is inherently ineffective? Is development aid incapable of creating impactful and sustainable change? Answering these questions will require understanding the system of aid distribution and implementation.

In criticizing the resolution efficiency of the sector, it is important to note that despite the prevalence, foreign aid remains instrumental in reducing poverty, providing primary healthcare, and improving the overall quality of life. There are examples that support this. Demographic and Health Survey (DHS) of the United States Agency for International Development (USAID), which collected, analyzed, and disseminated accurate and representative data on population, health, HIV, and nutrition through more than 400 surveys in over 90 countries, notes that the national rate of infant mortality in Ethiopia declined by 52Pct from 2000 to 2019. The rate of female genital mutilation (FGM) has decreased by 16Pct from a prevalence of 73Pct in 1997 to 57Pct in 2007.

Furthermore, Ethiopian households’ access to improved toilet facilities increased by 12Pct from 8Pct in 2011 to 20Pct in 2019.

By reading through a document published by the United Nations Children’s Fund (UNICEF) in 2017/18, one can understand how significant foreign assistance is, particularly to the health sector. According to the document, foreign donors contribute significantly both to state budgets and national health accounts.

“The share of external assistance to the total health financing resource is up to 85Pct [of the entire investment in the health sector in Ethiopia in the year], indicating high donor dependence,” concludes the document.

Despite demonstrable progress across decades in most areas, critics of aid intervention point to corruption for the lack of sustainable impact. This argument isn’t without merit and should account for some of the obstacles faced by the sector. Documentations of resource misappropriation have come to light throughout the years. The funds raised during Life Aid and Band Aid to feed the 1984/1985 famine victims were famously diverted to secure weapons for the then opposition group, who then became rulers of the nation for 27 years, and are now a Parliament-designated terrorist group.

In 2010, two Human Rights Watch investigative reports exposed how donor resources were being misused. Abuse of power and preferential treatment was found among some kebele administrators in determining eligibility for aid including food assistance, healthcare services, micro-loans, land, and agriculture. Similarly, a 2011 investigative report from the BBC and the independent Bureau of Investigative Journalism produced evidence that development aid was being used as a political weapon. Certain villages were being omitted from accessing donated items and financial resources including food items.

Inappropriate use of aid heavily derails its potential and even worse, oppresses the same people it intends to protect. Strict oversight of aid implementation is vital to combat gross abuse of power. The government regulatory body charged with overseeing CSO compliance is the Agency for Civil Society Organizations (ACSO). Apart from registering CSOs, ACSO reviews annual audited reports and monitors the alignment of operations with registration permits.

Unethical operations result in formal investigations and subsequent reprimands. Apart from government oversight, CSOs also formed a self-governance body early in 2021 called the Civil Society Council which has a mandatory membership to all registered CSOs in operation. The council enforces accountability and observance of the code of conduct. There are established bylaws and the Code of Conduct Observance Panel investigates formal and informal complaints submitted against member CSOs. The panel can make recommendations of reprimand up to deregistration. Such multidimensional accountability measures protect the integrity of the sector and erode obstacles to sustainable change.

Obviously, not all the obstacles of development can be alluded to as corruption. Systematic and operational issues in how the sector works largely account for the slow-paced impact. Inconsistent and limited amount of funding allocated to the intervention are also identified as glaring hurdles to securing sustainable development. Development programs and projects tackle grave and rooted issues such as poverty. These grand problems require significant funding that is sustained over a long period of time. Strategic and continual intervention is necessary to eradicate the problem. Unfortunately, the sector’s system isn’t always set up to support such endeavors. Donor fragmentation is a common occurrence in the development funding process. This is where many donors are present but each disseminates small amounts of funds. Calls that are posted for CSOs to bid on are often worth less than a million dollars. On the higher end, they might be one or two million. Such amounts are just too little to make a significant impact on a development issue. They will only be effective if done as a pilot to test innovative strategies that will later be scaled up.

However, often, donors don’t stick with a single issue for more than a year. Such diversion from one issue to another creates an inconsistent stream of funding with no intervention sustainability. This type of aid volatility makes it impossible to predict and plan resource flow. Ultimately, donor fragmentation and aid volatility force CSOs to plan their intervention scale on available funds instead of the gravity of the issue. Tending to a portion of an issue ends up creating a cyclical process of intervening in the same issue repeatedly but disjointedly. Consequently, small donations lead to crafting interventions that address symptoms rather than root causes of systematic issues. Lack of adequate funding that matches the scale of the issue will always derail the meaningful progression of development aid.

Another operational issue is the saturation of aid players in the sector space. The vast increase of CSOs has made the space competitive, resulting in a lack of information sharing, waste, and duplication of efforts. Currently, there are over 3,000 international and local CSOs registered and operating in Ethiopia. While there is some division of specialization, several organizations have similar if not identical missions. This makes them compete for the scarce resources of an already fragmented donation.

“Competition criteria of open calls create a disadvantage for small CSOs,” said Meseret Azage, Founder and General Manager of Meseret Humanitarian Organization.

Although they operate at the grassroots level and have a better network with the target beneficiaries, they might not meet the qualifications set by the donors. Such criteria include a number of years in operation, previous management of large-scale donations, and prior partnerships with international CSOs. In such cases, smaller local CSOs may need to partner with larger CSOs as secondary bidders. While the primary CSO oversees the programming efforts, the secondary bidder can implement the program activities at the ground level. This is of course the best-case scenario for small CSOs as larger CSOs may bid individually and implement the program in-house.

CSO program operation depends on income from the administrative funds. Therefore, if an organization is unable to win and secure funds, it will cease to exist. Meseret stressed the pressure such realization causes for small CSOs. Most will be forced to accept smaller funds that don’t make large sustainable impacts just to continue making a contribution.

Billions of dollars are donated to Ethiopia in the form of aid. Although this amount is significant to cause lasting change in the quality of Ethiopians’ lives, proper management and strategic allocation is key to ensure the change is sustainable and moves the country forward and out of aid dependence. Development interventions need to move beyond treating symptoms and investing in the eradication of root causes. It is imperative that the sector effectively communicate its strategy to avoid misunderstandings and demonstrate transparency and accountability to foster trust. Donors, government agencies, and CSOs operating in Ethiopia also need to coordinate their efforts more closely to reduce waste, duplication, and cyclical interventions.

Will Aid Cuts Hurt Economic Growth?
Developed countries began sending aid to poorer countries following World War II. The rebuilding of war-torn Europe under the Marshall Plan, an American initiative enacted in 1948 to provide foreign aid to Western Europe. The United States transferred over USD13 billion in economic recovery programs to Western European economies after the end of the war. The Marshall Plan is documented as the birthing of the aid tradition. It was also meant to boost economic growth beyond rebuilding Europe. Official development assistance (ODA), commonly referred to as foreign aid, is the mobilization and transfer of resources in the form of grants and loans with favorable terms. ODA from developed countries to developing economies has reached a record of more than USD167 billion in 2019, according to the World Bank.

ODA comes in all shapes and sizes, and so does its effectiveness. There is economic aid mainly focused on raising capital accumulation by increasing a recipient nation’s stock of physical capital such as machinery, buildings, and equipment. Such type comes in two forms: those allocated for production sectors including agriculture, manufacturing, mining, construction, trade, and tourism sectors; and others allocated for the development of economic infrastructures comprising of equipment for communication and electronic networks, road and railroad construction, financial infrastructure, and energy distribution.

The second category of ODA is social aid which is intended to build additional physical and human capital in recipient countries to promote economic growth. This comprises of education, healthcare, sanitation, and drinking water supplies, among others.

The third category is humanitarian aid which is intended for consumption during emergency situations and includes medicine and food.

For the last few decades, the impact of ODA on the economic growth of the recipient country has been a subject of not just numerous studies, but also of contradicting conclusions and controversies. One such study published in 2018 by Cherkos Meaza Gebregergis, a doctoral student at the University of Verona Department of Economics, is a case in point. Cherkos concluded that in the short-term, foreign aid is negatively related to the economic growth of the recipient country. However, he is reluctant to make the same conclusion on long-term impacts.

A 2014 study by Seblewengel Debebe, on the other hand, concluded that aid shows differing impacts on GDP per capita when differentiated into humanitarian and developmental aid. Even such impact differs further in the short and long term.

Even though the making of the ‘Ethiopian Spice Girls’ has taken a twist and the original backers are no longer present, Girl Effect has continued its project through radio and TV productions. The impact of which will take years and years to measure, as is to be expected from such a grand endeavor of changing national societal norms.

“But all too often we treat the symptoms of poverty and overlook the causes,” says Liya, arguing how aid needs to focus on long-term solutions and not just treating symptoms.

It takes longer to measure Yegna’s impact and the aid investment on it. It may even be impossible as the current diplomatic standoff maintains an uncertain future for the whole aid conversation.

The aid industry brings in scarce foreign currency, employees quite a large number of citizens, and provides services especially in the health and education sectors. As a country where millions of citizens live by the support of donor-funded productive safety net programs and when at times of drought and natural disasters over 10Pct of the population needs humanitarian assistance, the implications of declining or no aid could be devastating. It is indeed life-threatening to aid-dependent citizens, of which there are millions.

Such analysis always requires looking at the whole wide picture, an end-to-end examination of the pros and cons of handling the country’s relations with donors and the local impacts. That requires refraining from making ill-advised public comments regarding the meaningless role of aid, be it by a senior official or lower-ranking administrators. Caught by domestic and other pressing issues, donor fatigue is already an elephant in the room. There will be a big loss as a country and millions will be implicated because of such insensitive comments. EBR

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10th Year • Jan 2022 • No. 103