Journal On Foreign Aids

INTRODUCTION
This journal on foreign Aids is set-up to discuss on the impact of foreign aids in relation to economic growth of the recipient countries moreless Asia, Latin America and Africa. The journal will also re-visit literatures and empirical will reviews provided by prominent world Bank and other renounced economic researchers. The journal will further cover some of the following important sub-topics:-
Definition of foreign Aids
Literature and Empirical Reviews done by Burnside and Dollar (2000)
Impact of foreign Aids on Economic Growth
Conditionally in foreign Aids
Evaluation of foreign Aids
Realistic vision for foreign Aids
Conclusion based on lessons learned and my own views and opinions.

DEFINITION OF FOREIGN AIDS
Foreign Aid, consists of economic or military assistance that one Country gives to help another. Many Countries give foreign aid, including Japan, Great Britain, and the U.S; and much of these foreign aids are extended to poor nations.
Foreign aid can take many forms, including donations of money, goods, services, and technical expertise. Foreign aid can be bilateral, which means it is given by one Country bilateral, which means it is given by one Country to another. It can also be multilateral that is given by a group of Countries. The term foreign aid is also sometimes used to describe assistance given to a Country by a private organization in another Country.
Basing on Burnside and Dollar (2000) paper, foreign aid is the “grant element of aid, excluding the loan component of concessional loans, which are made at extremely low interest rates. The (OECD) organization for economic cooperation and development; defined foreign aid as “Official development assistance which consist of loans, grants that one government or multilateral organizations gives to developing Countries to promote economic development and welfare” the assistance must be granted on concessional terms, which in the case of case of loan means that at least 25 percent of it must be in the form of a grant. Data on officially development assistance also include technical co-operation, such as teaching farmers new techniques or providing advice on marking economic reforms; they exclude military assistance, political development programs, export credits, and debts forgiveness for military loans.
For the sake of a broader definition, the foreign assistance is considered as all money classified as official development assistance. These includes military assistance, political development programs, export promotion, debt forgiveness, and non concessional lending by all bilateral and multilateral organizations. any money that benefits a developing Country-grants, concessional loans or non-concessional loans, from a governmental or quasi-governmental organization is considered of credit from the International Monetary Fund (IMF), which is excluded unless otherwise noted. NB – Aid give for different purposes of, course will probably have different effects on development for example assistance designed to foster economic reforms or improve production methods is likely to have a greater impact on development growth than military assistance.

LITRATURE AND IMPERICAL REVIEWS-DONE BY BURNSIDE
AND DOLLAR (2000).
The above two authors set out to investigate the relationship between foreign aid economic policy and growth of per capital GDP using a new database on foreign aid, that had just been developed by the World Bank. They run a number of regressions in which the dependent variable of growth rates in developing Countries depends on initial per capital national income, an index that measures institutional and policy distortions; foreign aid and problems that aid interacted by policies. To avoid the problems that aid and growth may be correlated over periods of a few years, but not on year to year basis, they divided their sample into six four-year time periods, running from 1970-1973 to 1990-1993. In certain specifications, they also include variables for ethnic fractionalization, whether assassinations occurred, dummy variables for certain regions and even a measure of arms imports. In many of their specifications, they found the interaction term between foreign aid and good policy to be significantly positive; and they summarized that, “aid has a positive impact on growth in developing Countries with good fiscal, monetary and trade policies, but has little effect in the presence of poor policies.”
The paper has become a healthy stimulus to further research; and their paper had been the basic of a policy recommendation to increase foreign aid, if only other policies are good. International and agencies soon began to mention the results of burn side and Dollar (2000). A white paper from the British department for international Development (2000) argued, based on the working paper that “Development assistance can contribute to poverty reduction in Countries pursuing sound policies.” The Canadian International Development Agency (CIDA) put out a draft policy paper in June 2001, that compelling evidence that good governance and sound policy environment are the most important determinants of aid effectiveness.”
The issues of the effectiveness of foreign aid heated up in the weeks before a U.N Conference called “Financing for Development”; held in Mexico, in March 2002. In the run up to this conference, there was a major debate about whether to increase foreign aid. The burnside and Dollar (2000) paper was often invoked, either explicitly or implicitly in this debate. At present, the centre of gravity of expect opinion seems to settle around a slightly less optimistic thesis propagated by world Bank economist David Dollar, A Craig Burnside and Paul Collier: Aid can help, but it should be contracted on Countries with good macroeconomic policy and governments genuinely committed to improving public services and infrastructure, and stamping out corruption.
Estimates by Mr. Dollar and Mr. Burnside suggest that I percent of gross domestic product in aid given to a poor but well managed Country can increase its growth rate by a sustained 0.5 percentage points.

THE IMPACT OF FOREIGN AIDS ON ECONOMIC GROWTH
Determining what role, if any, foreign aids has played in promoting growth and development is difficult for many reasons.
First, the dynamics propelling material and social progress are extremely complex historical process and are influenced by many factors some possibly remaining unidentified only one of which is foreign assistance.
Second, a great many social and economic trends, may occur together with the flow of foreign assistance, which makes determining causality elusive.
Third, there is no clear and universally accepted research efforts designed to determine the role of foreign aid or any other factor are problematic; for example less than a tenth of the low-income populations of Asia, Africa, and Latin America live in Countries with reasonably complete vital statistics, much less economic accounts.
A broad review of the literature on development suggests that foreign aids in the best of circumstances will play only a modest role in promoting human welfare. Other factors, such as the quality of developing Country’s government and economic policies it pursues; appears to be considerably more important in promoting growth and development than the quantity, quality or type of foreign and the Country receives. In fact how successful foreign aid is in promoting growth depends crucially on those “background conditions.” Although foreign aid overall appears to have only a marginal effect it may promote or hinder development depending on the environment in which that aid is used and the conditions under which it is given. Aids given to Countries that are well governed and have adopted market oriented economic policies may provide a boost to their development. Conversely, aids given to Countries that have been governed poorly or have employed restrictive economic policies is less likely to make a positive contribution to their development. In addition, the terms and conditions under which donors give foreign assistance will affect its utility in both of those circumstances. More assistance is not always effective, too much foreign and may overwhelm a Country’s overall effectiveness. Yet even a small quantity can be useful in achieving results, depending on its purpose and how it is spent. Essentially, foreign and given to developing Countries reinforces what is there. If a Country has good government and economic policies, the result is likely to be more good government and economic policies. If a Country has a highly corrupt political system and has pursued counterproductive economic policies, the result is usually more the same. That is not to say that foreign and never benefits a Country that is pursuing counterproductive economic policies. For example child immunization programs, are likely to benefit a developing Country regardless of its economic policies.
The way donors give foreign assistance may also influence its usefulness in promoting economic and social development. For example, aid may be given to alternative the effects of natural disasters, protect the donor nations political and strategic interests; or increase the donor’s exports. But when aid is given to achieve more than one objective, it may not be as useful to the recipients growth and development. In addition, other economic or trade policies sometimes undermines the developmental goals of a donor’s foreign assistance program. An extreme example is when the U.S set up quotas on textile imports from Bangladesh shortly after providing foreign aid. Again Aids for different purposes of course, will probably have different effects on development. Assistance designed to foster economic reforms or improve production methods is likely to have a greater impact on development than military assistance which aims to build stronger arms forces in the recipient Country.

CONDITIONALITY IN FOREIGN AIDS
Aids agencies often place conditions on loans and aid. These conditions typically include microeconomic stability (Low budget deficit, and inflation), non-interference with market pricing, privatization of state-owned enterprises and opens to international trade. However, the agencies often provide additional future loans with little regards for the performance of previous loans. This problem arises for both the World Bank and the International Monetary Fund. The IFM likes to stress that is not an aid agency. However in low-income Countries, especially in Africa equivalent to delivering aid to these Countries. A common reason for to be given even after conditions are violated is that with high political instability, a new instability, a new government took power and was given a clean slate by aids agencies. The attempt to foster “Structural adjustment,” including “Structural reforms” such as removing price controls and macroeconomic “adjustments” such as reducing budget deficits, in the developing Countries in the 1980s and 1990s was about directing and money selectively to Countries that met conditions of having good policies. The new selectivity is supposed to be about rewarding Countries that reforms on their own, in Contrast to structural adjustment that is now alleged to have been imposed reforms on Countries. In both cases aid and concessional loans are selectively available to Countries that meet conditions, so if any practical difference exists, it is extremely subtle. For example, in 2002, a World Bank task force made recommendations on how to direct aid states convulsed by predatory autocrats and corruption. In other words, a nation will selectively receive aid if it is a “good performer.” Unless it is a bad performer, in which case it will receive aid from the “bad performer” fund. In these circumstances the imposition of conditions is no more than a wistful hope, rather than a policy with consequences.

EVALUATION OF FOREIGN AIDS
Despite the potential benefits of learning from the past experience aid agencies seem reluctant to promote honest evaluations that could lead to publicity about failures. Aid agencies typically give low priority to evaluating projects after completion. The World Bank reviews only 5 percent of its loans after three to ten years following the last disbursement for development impact (Meltzer Commission, 2000). Even the evaluation are based on self evaluations by staff in charge of the original projects and their implementing agencies and reviewed by management. The world Bank has done surveys of borrowing governments since the mid – 1990s on how the bank has performed from the governments point of view, but the bank has declined to make these surveys public and there seems to be little mechanism for having managers to learn from them (Wade zoo). Not only the world Bank can be taken to have no good evaluation records, but even other development agencies for example NGOs and some of the U.N agencies. U.N agencies working on development issues do not have a stellar record, they often appear to spend most of their energies on large international summits that accomplish little beside preparing for further summit. Increasing evaluation of and agencies need especially not be especially costly. In most cases, it may involve little more than specifying concrete and measurable objectives (Not the dispersal of money) in advance. In particular and agencies have almost never engaged in controlled experiments of particular interventions, despite the small amounts required relative to loan volume. The development literature has increasingly stressed scientific evaluation of interventions through, despite the small amounts required relative to loan volume.
The development literature has increasingly stressed scientific evaluation of interventions through controlled experiments. Perhaps and agencies should collectively agree to an “Evaluation compact” in which they all agree to an independent evaluation of their effectiveness.
The results of such evaluations could shed light on what makes and institutions work well or less well, a subject on which there is little knowledge after five decades of foreign aids.

REALISTIC VISION FOR FOREIGN AID

How to achieve a beneficial aggregate impact of foreign aids remains a puzzle. Aids agencies should set more modest objectives than expecting aids to “Launch the take off into self sustained growth” Aid agencies have misspent much effort looking for the next big idea that would enable aid to buy growth. Poor nation include an credible variety of institutions, cultures and histories :- millennia old civilizations in gigantic China and India Africa nations convulsed by centuries of the slave trade, colonialism arbitrary borders tropical diseases and local despots; Latin America nations with two centuries of independence and five centuries of extreme inequality; Islamic civilization with a long history of technical advanced relative to the west and then falling behind and recently created nations like tiny East Timor the idea of aggregating all this diversity into a “developing world” that will “take off” with foreign aid is a heroic simplification there is no next big idea that will make the small amount of foreign and the catalyst for growth of the world’s poor nations the goal of having the high income people make some kind of transfer to very poor people remain worthy one despite the disappointments of the past. But the appropriate goal of foreign and is neither to move as much money as politically possible or to foster society wide transformation from poverty to wealth the goal is simply to benefit some poor people remain worthy one, despite the disappointments of the past. But the appropriate goal of foreign aid is neither to move as much as politically possible, nor to foster society wide transformation from poverty to wealth. The goal is simply to benefit some poor people some of the time. In any case, improving quality of aid should come before increasing quantity. This step is difficult but not impossible.

CONCLUSION
It is not a bad thing for people having higher incomes to contribute part of their wealth to enable the poor people to get out of poverty. Though it is not a sin to accept foreign aid, this should be noted that, for sustainable economic development to be realized among the poor nations; these nations should recognize that there is more to achieve development than looking to foreign aids for solutions to our problems. Preoccupation to a greater extend to foreign aid has been largely ineffective in helping the poor nations, achieve sustainable development. The poor nations particularly Africa should now start to focus inward and joint the efforts together, politically exploit both their human capital, social capital, as well natural resources, with one stronger voice in the global economic. To remedy the epidemic of poverty in poor nations, the following are suggestive strategies:-
Poor nations working together in enlightened self-interest to meet domestic needs; and global challenges.
Reflecting indigenous values, cultures, and environmental issues; state policies and programs instead of the indiscriminate adoption and cheap mimicry of Western practices and paradigms that have little practices and paradigms that have little or no relevance to the poor Nations social cultural conditions and necessities.
Minimizing opportunism, rent-seeking, and bad governance, by establishing constitutionally limited governments and economic systems, through well-structured democratic sets of rules (Constitution) that reflect and protect the interest of all stakeholders.
Paying more attention to the human dimensions and issues associated with immediate needs of survival and development.
Working seriously and with a more unified front to reduce poor nations crippling debts through effective negotiation with western-controlled, multilateral, financial institutions and banks.
Adopting new strategies for collective industrialization among poor nations.
Developing new values and attitudes about nationalism, patriotism, ethnic and religions pluralism, political tolerance, gender equity, good governance, effective leadership, accountability and so on.
The need for the Western governments and the institutions they control to do their part to improve the unfair global trade and financial structures, and reduce the crippling debt burden on poor nations.
REFERENCE:
Journal of economic perspectives - volume 17, number 3 - summer 2003 – pages 23-48.
the role of foreign aids in development may 1997, document prepared by Kathryn quattrone.
Okechukwn Ukaga and Osita G. Afoaku; Sustainable development in Africa, Africa world press, Inc. P.O.BOX 48 Asmara, Eritria; 2005