The development of a country cannot be limited with poverty reduction. The notion of poverty reduction is not enough to explain how countries develop without industrializing (Rowden, 2011). On the other hand, economic growth which is achieved through focusing on industrialization while neglecting democratic and environmental values also cannot be considered as development. This is because; development has four dimensions, three of them are essential and one of them is complementary. The essential dimensions of development are economic, social, and institutional whereas complementary dimension is global. In this context, in order to achieve success in development, these four dimensions should be taken into account while implementing policies and strategies about foreign aid.
Economic Dimension: The Rise of China as a Middle Income Donor
When we compare the Western foreign aid strategies and Chinese strategies, we see that there are huge differences. We can summarize China’s approach as follows (Brautigam, 2009): China declares clearly that its goal in developing countries is not charity but mutual benefit. As other donor countries, China also gives aid to achieve strategic diplomacy, to gain commercial benefit (namely, to reach new natural resources and to expand into new markets), and to reflect its ideologies and values. But, different from other donor countries, China expresses its objectives clearly. China looks at their investment efforts as strategic partnership. Instead of being imperialist power, China tries to make its rise as peaceful and offers developing countries win-win cooperation. Chinese assistance is simply and not changing regularly. Chinese aid is shaped by its own experience of development and the request of recipient countries therefore it gives credibility to recipient country. China uses its experience of being a recipient country (especially from Japan) and becomes a role model for developing countries. Chinese aid emphasizes infrastructure, production, and university scholarships with the aim of decreasing production costs; creating employment, local capacity and demand for export of Chinese machinery and equipment.
Although the rise of China as a middle income donor is considered as a challenge in Europe and U.S., not only aid recipient countries but also traditional donor countries should learn something from this experience. Even though there are some deficiencies in the China’s aid strategy such as social, environmental, and governance standards, the good points of this new wave of aid should be adopted while designing foreign aid strategies in order to foster development in an efficient way. However, the other dimensions of development, which will be analyzed later, should not be ignored while achieving economic development.
It is known that the foreign assistance has focused on social development like poverty reduction, gender equality and education (Brautigam, 2009). But economic growth should not be ignored for the sake of social development. There should be a balance between different dimensions of development. For instance, manufacturing and agriculture still remain as an important area for developing countries. Therefore, as China has done, enough foreign aid should be allocated to improve infrastructure, industry and agriculture in order to foster economic recovery. In this situation, donor countries should revise their strategies, such as PD 20 regulation imposed in U.S. The foreign assistance should be shaped according to the interests, concerns and problems of recipient country rather than that of donor country. Also, training component of foreign aid should be accelerated in order to transfer technology and know-how.
It should not be forgotten that the only solution for economic growth is not structural adjustment policies. The traditional donor countries’ approach of “one size fits all” should be modified. As China implemented, “adapt” should be emphasized instead of “adopt”. Moreover, the gap between expatriate staff and local people should be minimized as much as possible. The expatriate staff should not behave as if they know everything and local people know nothing.
When we take into account Chad example, we see that the development project in Chad (The Chad Oil and Pipeline Project) which was started in 2000 became successful financially and technically. For instance, Chad’s total project revenue of $5.7 billion as of June 2010 far exceeded the amount once projected for the entire life of the project (Esso Chad, 2010). However, the project could not break the “resource curse”. This is because; the general investment pattern of donor community was also seen in Chad. As we know, European companies and “US companies have been equally reluctant to invest in Africa, aside from the lucrative petroleum and mining sectors” (Brautigam, 2009, p.92). In Chad example, we also see that sectors other than that of petroleum were neglected. For this reason, Chad government could not transform the oil wealth into productive purposes and improvement of other industries. On the other hand, there occurred serious delays in capacity-building because “the construction of the oil project advanced rapidly, while the capacity-building projects lagged behind or had hardly got off the ground.” (Horta et al., 2007, p.10). Local people and Chad government did not own the project because local people could not believe the sincerity of the actors and could not trust expatriate staff. Local people were not positive about the benefits of Western embrace.
Social Dimension: NGOs and Civil Society
With the effect of globalization, there has been a power shift from nation state to nongovernmental organizations (NGOs) “claiming to express global values and interests” and “aiming to influence global public policy” (Wade, 2009, p.44; p.26). Compared to governments, NGOs are quicker to meet new demands and to adopt new opportunities. Also, if funded adequately, they can show better performance than governments in delivering public services and responding to certain problems like threats of environmental degradation, denial of human rights, population growth, and poverty (Mathews, 1997). On the other hand, there are some weaknesses of NGOs, thus these weaknesses should be taken into account while making decisions. To illustrate, NGOs have tunnel vision which prevents them seeing the overall picture and makes them question every public activity in terms of their specific interest (Mathews, 1997). Also, they tend to oversimplify the problems which results in a fragmented structure. Therefore, NGOs should be organized.
On the other hand, civil society is a necessary condition for effective development and democracy because civic groups, internally, improve cooperation, solidarity, public-spiritedness, and trust whereas, externally, aggregate interests and articulate demands to ensure the accountability of government (Henderson, 2002, p.140). Building a civil society is a matter of collective action dilemma, namely tragedy of commons and prisoner’s dilemma. In order to solve the collective action dilemma, social capital should be used. Social capital “refers to features of social organization, such as networks, norms, and trust, that facilitate coordination and cooperation for mutual benefit” (Putnam, 1993, p.1). Social capital is necessary for not only economic development but also effective government because it embodies network of civic engagement which fosters generalized reciprocity, facilitates coordination and communication, and amplify information about the trustworthiness of other individuals (Puntam, 1993).
Therefore, in order to achieve development, foreign assistance should strengthen social capital. If foreign aid is not designed properly to facilitate the growth of civil society, then unexpected results can be seen like emergence of a vertical, institutionalized, and isolated civic community. If target becomes donors and foreign assistance programs instead of domestic needs; if foreign aid creates a distinct elite group instead of facilitating horizontal networks among groups; if foreign aid creates opportunities for some while hindering others; if funded civic groups pursue individual and short-term gains rather than collective and long-term development; if funded civic groups copy the Western assistance agencies which are wealthy, centralized, and bureaucratized corporate NGOs, then the foreign aid can discourage people to function as a civil society (Henderson, 2002). For this reason, while directing foreign aid, these risks should be taken into account.
In order to fulfill effective development and build civil society, donors should benefit from NGOs but they should let them to create their own agendas according to local needs and problems. Donor’s attention should be domestic needs and problems. All funding efforts should be designed to reflect recipient country’s interests and concerns. While giving grants, trainings or seminars, all groups of the country should be taken into account. In other words, some regions or some groups should not be ignored in order not to encounter with the problem of new elite group. Productive linkages among community groups, schools, employers, workers etc. should be provided. Moreover, incentives for funders should not be associated with quantitative results and short-term interests. Donor’s developmental policies should be assessed through less obvious management techniques instead of focusing on numbers.
When we look at Chad example, we see that NGOs played a big role to raise the awareness of international community in the problems of particularly environment and social welfare of Chad. NGOs especially became active through writing reports and organizing parades. On the other hand, foreign assistance could not benefit from NGOs and failed to promote civil society in Chad. For instance, foreign assistance tended to focus activities in the big cities and regions close to oil pipeline. Due to this reason, it prevented to set network of horizontal ties, cooperation and civic environment in Chad.
Institutional Dimension: Democracy and Governance
In order to assist democracy, at the beginning political approach should be adapted. As it is stated in this approach, foreign aids should be directed “at core political processes and institutions – especially elections, political parties, and politically oriented civil society groups – often at important conjunctural moments.” (Carothers, 2009, p.5). Training, advice, moral support, or funding can be given to political parties, political associations, politicians, or politically oriented nongovernmental organizations (NGOs). Also, an independent electoral commission, an independent judiciary, or independent media can be supported in order to guarantee open and fair political competition and in order to check the power of nondemocratic actors.
It is obvious that these efforts are not sufficient enough to ensure ideal democracy. This is because; democracy is more than competitive election and respect for political and civil rights. However, all good things cannot be pursued at once. In order to achieve something, goals must be clear and explicit. If goals are vague or broad, then it would be difficult or even impossible to attain these goals because people cannot define their tasks by reference to vague and broad goals. Also, it would be more difficult to monitor the achievement level of goals and to decide whether foreign aid efforts are consistent with the goals or not. For this reason, at the beginning, it is very important to direct foreign aids at achieving clear tasks such as elections and political liberties. In this context, democracy concept should be narrowed and clear tasks should be set as political approach stated. However, after some progress is achieved in economic situation and institutions, the democracy concept should be expanded to encompass concerns about equality and justice. Therefore, there should be a transition from political approach to developmental approach when main institutions for democracy are started to function and basic institutions to ensure political legitimacy and order are set.
On the other hand, good governance is vital for effective development because “if governments perform poorly, the consequences are wasted resources, undelivered services, and denial of social, legal, and economic protection for citizens” (Grindle, 2004, p.525). Similar to democracy assistance, also in governance reforms, the priorities should be determined to create more efficient, effective, and responsive governments. In this context, “good enough governance” is a more realistic and manageable goal (Grindle, 2004). Thus, instead of big-G governance reform, the small-g governance reform should be adopted. Big-G refers to “strengthening of national-level institutions that hold government to account” such as elected legislatures, the judiciary, centralized auditing authorities, ombudsmen, and media whereas small-g refers to “a focused effort to foster participation in and oversight of the provision of public services by stakeholders with strong, unambiguous incentives to achieve good results” (Levy, 2010, p.30). Small-g governance reform is a better solution for low income country of rapid growth with excess of either order (dominant-power politics) or disorder (feckless pluralism).
Therefore, in the short term, the foreign aid should not be directed to get the institutions right, particularly those of accountability and transparency (Grindle, 2004). This is because, we know that “building the full panoply of liberal-democratic institutions takes time” (Levy, 2010, p.29). For this reason, at first, actions should be taken to improve the representation and participation of vulnerable groups of society (poor, women, internally displaced people etc.) rather than to focus on government activities. Therefore, service delivery should be improved through investing in rural development, infrastructure, better quality education, expanded health care for particularly vulnerable groups. Basic institutions and basic conditions should be provided to encourage poor people, micro credit system should be applied to empower women and thereby, interest-seeking groups should be developed from neglected and weak parts of the society. If it is managed to create interest-seeking groups, then the power of elites can be reduced and democracy and governance can be achieved. This is because; these interest-seeking groups will ask for good results and will enable accountability and transparency. After strengthening vulnerable people and creating interest-seeking groups, resources, energy and capital should be directed at decentralization of public services and public expenditure reform.
We can give the example of Chad to support the things mentioned above. In Chad, the specific goals were not determined for democracy for this reason; no efforts were transferred to improve democracy. On the other hand, the governance objective in Chad Oil and Pipeline Project was defined as “strengthening governance, including institutional arrangements for public resource management and service delivery [and] the rule of law” (World Bank, 2009, p.xii). As it is seen, the main focus to develop governance in this country was institution rather than people. Therefore, Chad’s oil money was not used for the well-being of all Chadians. To illustrate, Chad government spent part of its $25 million signature bonus from oil consortium to purchase weapons (Horta et al., 2007). Furthermore, Chad government added military expenditures to the definition of priority sectors for development in 2006 in order to transfer oil revenues to military purchases (Horta et al., 2007). For this reason, vulnerable people could not benefit from the revenues gathered by the project and the interest-seeking groups which would oversee governmental activities and demand for good results could not be created. According to Corruption Perception’s Index, Chad ranked 171st among 178 countries in 2010 while it ranked 142nd among 146 countries in 2004. Therefore, the project failed in achieving the initial objective of governance progress.
Global Dimension: Globalization and Environment
Globalization can bring huge benefits to a country if it is managed properly just like East Asia. However, there are some risks of globalization for developing countries such as liberalization of financial and capital markets which results in hot money pouring and high interest rates associated with volatility (Stiglitz, 2002). Also, rules set by industrialized countries to govern global market, particularly, intellectual-property rights bring some risks to developing countries. For instance, Trade-related Aspects of Intellectual Property Rights (TRIPS) restrict the environment for technology transfer although industrialized countries enjoyed the low level of patent and copyright protection in their early stages of industrialization (Wade, 2003, p.626). This situation ties the hands of developing country governments and “constitutes a shrinkage not only of development space, but also of ‘self determination space’” (Wade, 2003, 622). As Stiglitz states, “globalization itself has been governed in ways that are undemocratic and have been disadvantageous to developing countries, especially the poor within those countries.” (Stiglitz, 2002, p.1). Therefore, it is crucial to manage globalization properly in the development process.
In order to minimize the challenges of globalization, the countries which get foreign aid should ensure the government support. As it was happened in East Asia, governments should take an active role in managing the economy. State owned enterprises should be strengthened. Foreign aid should be directed at building strong regulatory institutions. After building regulatory institutions, the focus should be transferred to the private sector. Additionally, foreign aid should be directed at modifying the rules in the international market to allow developing countries to improve import replacement through tariffs, subsidies etc. TRIPS should be altered to enforce lower levels of intellectual property protection for these countries. Also, the rules should be changed to allow these countries to discriminate against patent rights if the product is not locally produced.
On the other hand, global warming is an important challenge with long term implications for the sustainable development. The concept of sustainable development requires nations to satisfy “the needs of the present generation without compromising the prospects of future generations” (Matthew and Hammill, 2009, p. 1119). This approach makes it difficult or even impossible for developing countries to reduce poverty and improve the welfare and security while protecting natural resources and ecosystems.
Although all developed countries overexploited and damaged the nature in their early stages of industrialization, today developing countries have to act in accordance with reducing greenhouse gas emissions and stabilizing the world’s climate. However, it would be unfair to force them to be climate sensitive in their development process. For this reason, developed countries should finance their opportunity costs and let them join to international system in a fair way. Also, in terms of foreign aid, the capacity of developing countries to respond effectively to climate risks should be improved.
When we look at Chad example, we see that development project was formed between Chad government and three-private company oil consortium (Exxon/Mobil 40%, Petronas Malaysia 35%, and Chevron %25). Other than partners, World Bank was also included into the project to provide funds which were aimed to be used for securing the investment share of Chad. In this project, the policies consistent with Washington Consensus were applied such as minimalist role of government and liberalization. Although the project became successful financially and technically, it could not achieve its development objectives. Since there was not any state intervention and any incentives for environmental protection, the project was not implemented in an environmentally sound manner. For instance, International Advisory Group (IAG) and External Compliance Monitoring Group (ECMG) addressed that this project aggravated the problems of dust pollution, hazardous waste and general public health (Horta et al., 2007).
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