FOREIGN AID: CANADA AND THE USA

KIGOZI JIMMY ANDREWNGUYEN THI HAI YEN

FALL 2012

Korea UniversityGraduate School of International Studies

Table of content

ODA Policies: historical views and current situation

Government Organizations and ODA ProcessODA size, main destinations and types and

areasRecent trends and remarks

CANADA

•8th largest ODA Donor - 2011•Contribution: 4% of total ODA as of 2011

ODA policies: Historical views

The 1950s: joined the Colombo Plan for Co‑operative Economic Development in Asia: aid for supporting American-led Western alliances; preventing the spread of communism in Asia.

The 1970s: economic and social development of developing countries were the primary objectives of Canada development assistance.

The 1990s: Humanitarian, political and commercial rationales.

ODA policies: Current situation

The key sectors the Canadian Foreign Aid program focuses are:•Enable every child to attend elementary school Health issues such as HIV/AIDS Developing the private sector Environmental sustainability Help end extreme poverty and hunger Reduce child mortality rates Improve maternal health Create decent jobs

Main ODA Government Organizations

Canadian International Development Agency (CIDA): Canada’s lead aid agency, delivering Canadian ODA to poor countries and countries in transition.

Department of Finance: provides Canada’s contribution to the World Bank as well as to several concessional lending facilities of the IMF.

Department of Foreign Affairs and International trade (DFAIT): oversees the funding of the IDRC and makes contributions to a number of multilateral organizations such as the World Health Organization and the Food and Agriculture Organization, and to the Commonwealth Scholarship Program.

International development research center (IDRC): a public corporation financed by Canada to initiate, encourage, support and conduct research into the problems of the developing regions of the world and into the means for applying and adapting scientific, technical and other knowledge to the economic and social advancement of those regions.

ODA process: Multilateral aid

Through its agencies, Canada supports multilateral organizations including UNDP, the World Food Program, the United Nations Children’s Fund…

Contributes to the World Health Organization, relief for refugees, international farming research, and Commonwealth and Francophone technical co-operation funds.

Canada’s contributions are mostly annual UN assessments, multi-year pledges, or humanitarian aid channeled through the multilateral agencies. The Multilateral Development Banks (MDBs – the World Bank Group and development banks serving Latin America, Africa, Asia and the Caribbean) have also received substantial support from Canada.

ODA process: Bilateral aid

Gov Budge

tfor Aid

Gov Budge

tfor Aid

Recipients

NGOs

Gov aid Gov aid agenciesagencies

CIDACIDA

ODA by government agencies in 2010-2011

Source: CIDA

Canada's bilateral ODA by type of aid 2010-2011

Source: CIDA

Top recipients of Canadian ODA (1999-2008)

Source: ODCD - DAC

Top recipients of Canadian ODA (2009-2010)

Recent trends

Canada currently is the 8th largest DAC donor, supplying 4% of the total DAC’s ODA.

Increasing its funding for low income countries, especially those in sub Saharan Africa – doubled its aid to Africa between 2005 and 2010.

ODA/GNI ratio reduced from 0.34% in 2010 to 0.31% in 2011. It is well short of the long-standing UN target of giving 0.7% of GNI as ODA, which the Government of Canada has not endorsed.

Following the decline of aid volume between 2010-2011, Canada is set to reduce aid by further amounts over the medium term. March 2012 budget, which is laying out the Government’s Deficit Reduction Action Plan, includes proportional reductions to the Public Service’s budget including its international assistance portfolio for the period 2012-13 to 2014-15.

Expected economic growth over the medium term of 2-3%, the planned aid volume reduction from 2012 is likely to lead to a further decline in ODA/GNI ratios.

Canada’s ODA problems

Lack of effectiveness and transparency: CIDA operations.

Loose and ineffective coordination among CIDA and other aid agencies.

Have been long criticized of its failure to make clear commitment to increase ODA significantly with a view to reaching the 0.7% GNI target, the current government decided to reduce aid in the medium term.

Current government is now interested in expanding trade relations rather than giving aid.

USA

•Was and still the world’s largest ODA Donor•Contribution: 24% in 2005 of world ODA•2009: 0.2% of GNI

ODA policies- Historical views

1947: Marshall Plan: Provided $ 13 billion in 4 year program to help spur economic stabilization and recovery in Europe and also to prevent the spread of communism; humanitarian and economic issues forming the gist of MP aid.

1961: Kennedy administration- Focused on development as diplomacy, but in fact, USA aid is still concentrated on supporting its allies.

1964: The Peace Corps was established to send Americans to developing countries to help in technical assistance, training and manage small aid projects.

ODA policies- Historical views (Cont.)

1970: Majority of aid was for food to help resolve problems of famine and world food shortage during first half of 1970s.

End 1970s: Jimmy Carter administration- Human rights became the priority of US’s aid.

End of Kennedy, Johnson, Nixon, Ford and Carter: the US had truly dualistic aid program – strong diplomatic orientation (including both Cold War containment and Peace – making in the Middle East – the main reason to choose recipients) and a significant development purposes (Sub-Saharan African).

ODA policies- Historical views (Cont.)

1990s: Support transitions in Eastern Europe and

former Soviet Union after the collapse of USSR.

Aid for democracy promotion (in Sub-Saharan Africa).

Aid to address global problems: after UN Conference on Environment and Development in Rio de Janeiro in 1992.

ODA policies: Current situation

Aid objectives include:Promoting economic growthReducing povertyImproving governanceAddressing population growth,Expanding access to basic education and health careProtecting the environmentPromoting stability in conflictive regions,Protecting human rightsPromoting trade, curbing weaponsProliferation, strengthening allies, Addressing drug production and trafficking. The

ODA policies: Current situation (Cont.)

Three key rationales of the US’s aid:National and global securityCommercial interestsHumanitarian concerns

Government Organizations

The U.S. Agency for International Development (USAID) : For 50 years is the bulk of the U.S. bilateral economic development and humanitarian aid program has been administered and implemented; directly administers the Development Assistance, International Disaster Assistance, and Transition Initiatives accounts, as well as a USAID-designated portion of the Global Health account.

The Department of Defense (DOD) and the State Department administers military and other security-related programs.

The Millennium Challenge Corporation: The Millennium Challenge Corporation (MCC) was created in 2004 with the purpose of concentrating significantly higher amounts of U.S. resources in a few low- and lower-middle income countries that have demonstrated a strong commitment to political, economic, and social reforms. A significant feature of the MCC effort is that recipient countries formulate, propose, and implement mutually agreed multi-year U.S.-funded project plans known as compacts.

Other agencies: The Peace Corps; The Trade and Development Agency (TDA); The Overseas Private Investment Corporation (OPIC)…

Foreign aid process

Government budget for aidGovernment budget for aidGovernment budget for aidGovernment budget for aid

Aid Agencies

Recipients NGOs

Aid Program Composition, FY2012

Source: U.S. Department of State, Summary and Highlights, International Affairs, Function 150, FY2013; House and Senate Appropriations Committees; CRS calculations.

USA’s ODA Share: 2009

28.8328

Source: OECD 2009

Source: OECD-DAC

U.S. Foreign Aid: FY1946-FY2012

Top Recipients of U.S. Foreign Assistance, FY2002 & FY2012

Shifts in Program Emphasis, FY2002-2012

Regional Distribution of Aid, FY1992, FY2002, and FY2012

Recent trends

A wide range of aid programs address development and humanitarian concerns. These are provided both bilaterally and multilaterally. In FY2012, $21.3 billion—56% of U.S. assistance— focused on mitigating human suffering and poverty in developing countries.

Continue concentrating in global health programs, and increased security assistance directed toward U.S. allies in the anti-terrorism effort.

Obama Vs Romney on Foreign Aid Policy

“I happen to think it doesn’t make a lot of sense for us to borrow money from the Chinese to go give to another country

for humanitarian aid” Mitt Romney

“This is something that I have made a priority, we are gonna double foreign aid. We are gonna make the millenium

development goals America's goals. Those priorities are going to be ones that we care deeply about. We won't be able to ramp up the $25 billion all in the first year, we're looking at $6 billion dollar increments ... additional increments each

year until we get to the $50 billion dollar mark” Barack Obama

http://www.youtube.com/watch?v=8puAo2A8BZ8&feature=player_embeddedhttp://www.youtube.com/watch?v=VsfX8mN_ASw&feature=player_embedded

Why are donors only interested in increasing actual dollars than GNI

percent?

Why are the poorest countries often left out yet aid is largely meant to fight poverty?

The rich are getting richer and poor getting poorer yet with aid. What is the logic?

Would filling the $3.6 trillion shortfall help if aid comes with all the criticized strings still attached?

Could far more be achieved with far less aid dollars if there was a change in approach with less top-down and more bottom-up?

Who is really to blame for the aid inefficiencies? Donors or recipients?

Replacing foreign aid with foreign trade. Is this a sustainable way of empowering the poor?

References

Curt Tarnoff, Marian Leonardo Lawson (2011), “Foreign Aid: An Introduction to U.S. Programs and Policy”.

Curt Tarnoff, Marian Leonardo Lawson (2012), “Foreign Aid: An Introduction to U.S. Programs and Policy”.

Organization for economic co-operation and development (2012), “Canada: Development Assistance Committee (DAC), PEER REVIEW 2012”.

Canada and oversea development: http://www.canadiangeographic.ca/atlas/themes.aspx?id=cida&sub=cida_basics_past&lang=En.

Canadian international development agency: http://www.acdi-cida.gc.ca/acdi-cida/ACDI-CIDA.nsf/eng/NIC-5493749-HZK.

Trade, not aid, the theme of Haper’s visit to Africa: http://www.theglobeandmail.com/news/politics/trade-not-aid-the-theme-of-harpers-visit-to-africa/article4597741/.

Thank you for your attention!