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Monday, May 3, 2010

A New Approach to Foreign Aid

Aid continues to draw controversy and debate amongst academics, recipients and development agencies. The anti aid campaigners in Africa argue that aid underwrites public sector incompetence and fuels corruption. Proponents of aid point to gains in delivery of health and education services to the most needy and underserved populations.

A new book by Nancy Birdsall and William Savedoff of the Centre for Global Development is the latest, compelling addition to the aid conversation. The central thesis of the Birdsall and Savedoff’s book, Cash on Delivery: A New Approach to Forign Aid is that aid money for poor countries should be given for outcomes, not input. They argue that aid money should not be used to cover expenses but instead be paid out if a country achieved certain development goals. They call this Cash on Delivery Aid (COD Aid).

COD Aid is meant to be robust approach to altering funder-recipient relationships, providing basis to ensure accountability and achieve shared goals. The key features of COD Aid include: i) payment for outcomes not inputs; ii) hands-off donors, responsible recipients; iii) ownership of process and institution building; and iv) transparency through public dissemination.

These features are inevitably amenable to local accountability, local ownership of process and most importantly, learning by doing on the part of recipients (no expats).

Although it proposes a fundamental shift in the aid business, the authors point that COD Aid is intended to supplant all other forms of foreign assistance. They see COD Aid as complementing existing aid programs. I find this concession rather problematic, especially in the face of an abundance of evidence on the critical flaws of the current practice of aid programmes.

Birdsell and Savedoff contend that when COD Aid’s mechanisms for measuring progress, providing incentives, and clarifying responsibilities become established, it will help funders and recipients make much more efficient use of existing resources across a spectrum of aid programs.

The authors provide some interesting examples of hoe COD Aid would work. For instance, instead of using aid money to pay to build schools, or to train teachers, aid could be used to reward a country for getting more kids to complete school–without sacrificing education quality, as measured in test performance.

It is not clear in my mind how one would do this. How for instance would a school district enroll, retain and graduate more children, let alone achieve some lofty quality standard when the fundamental problem is lack of schoolhouses and quality teachers. I am not sure that that the pay-off per child retained and graduating with an agreed level of competence can provide enough resources to invest in education expansion. I have doubts about the scalability of COD Aid.

I must say that Cash on Delivery: A New Approach to Forign Aid is an audacious, fresh and thoughtful addition to the aid debate. It is a must read for academics, funders and recipients of aid.

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