Foreign aids

Foreign aid has become a hot topic, with supporters claiming that some countries are growing overly reliant on such financial assistance. This study seeks to analyze potential solutions and alternatives. The goal of such an assessment is to identify whether there are any alternatives to foreign help. There have been numerous issues raised in relation to the provision of financial assistance. It entails allocation, the issue of over-dependence, sustainability, and other recurring issues such as corruption.
To maintain an open mind, this study explores opponents' suggestions as feasible alternatives to international aid. They were evaluated in terms of their benefits and drawbacks. Possible alternatives found in related literature are investments, community empowerment through local businesses, and fair trade.
This paper found out that foreign aid may still be the best solution to help developing countries. However, it took into consideration the various alternatives mentioned and whether it is feasible to apply them.
















Introduction
While the giving of foreign aid have greatly benefited recipient countries, some critics question whether such system is sustainable and if it actually encourages over-reliance instead of growth and development. This paper aims to answer that dilemma and if alternatives are feasible. International aid system had become prominent nowadays and recipient countries constantly expects them (Noam 2012). Some proponents question whether this should continue or not. The very act of constant expectation by countries is questionable. While it is good to help developing countries, over-dependence to foreign aids can be counterproductive to their growth. The very obvious advantage of such system is ingrained in the monetary benefits it can give to recipient countries. Through financial aid, these nations can build their infrastructures and develop businesses within. Countries who were affected by an economic crisis can also recover through such help. On the other hand, there are also a lot of disadvantages. There is the question of corruption and whether money is being used properly by both donor and recipient nations. Some critics also point out the challenge of allocating the funds and whether it is going to the proper sectors. Sustainability is also a big challenge for the system to continue. Some critics point out the need to adapt and adjust because of the vulnerability of world currencies. The biggest disadvantage is actually the question of whether the recipient countries are using the money to develop themselves or are they just constantly relying on aid. A lot of things could happen to the world economy and while its effects may not be automatic, it could build up over time. The over-dependence of recipient nations have questioned the efficiency of foreign aids and whether alternatives are available to replace such system.
Foreign Aid: To Continue or Not?
Allocation of Aids
One of the major dilemma in the issuance of aids is the question of whether the proper amount is being given to a recipient country. Aside from that, the allocation of funds within such nation is also critical. Proper sectors should receive such financial help. Some critics point out that this dilemma needs to be answered in order to make sure that countries do not become over-reliant to foreign aids. It is assumed that the proper allocation of funds would encourage development. It is important to measure the right amount of foreign aid to be given to avoid over-dependence of recipient countries (Azam 1999). The determination of such funding would be the corresponding next dilemma. It is important to ask how one can know how much to give to country and what factors need consideration. Some proponents believe that the institutional capacity of countries is a big factor in determining amount of aid (Azam 1999). As of the moment, such data can be determined through information from World Bank regarding the status of the country. Being a third-world nation is one sure way to become a candidate for foreign aid. However, not all countries belonging to that classification necessarily deserves aid. It can also be considered a challenge to choose which nations really need help. Aside from that, the funds need to be allocated as well on sectors within the country. This can be a challenge and some critics accuse foreign aid giving bodies of favoring certain industries (Halonen-Akatwijuka 2005).
The Question of Over-dependence
Some countries are being accused by critics as being over-dependent to foreign aids. It is important to discern whether such claims are actually valid. The over-reliance of some countries to foreign aid need to be quantified in order to determine if aid is needed or not (Deaton 2010). Thus, various measurements and calculations need to be considered. Tools like equilibriums can be used for such function (Azam 1999). However, a lot of other factors still need to be considered. One sector of a country may look promising but the other industries may need help. Sometimes, the government of such nation may not have enough money to support such move. Aside from that, other factors such as the status and growth of the country should also be looked into. It is important to analyze whether the specific nations are developing or not. It can be an important determinant on whether the aids are properly used for development or not. Recipient countries still rely on aid 60+ years after the foundation of World Bank (Zoellick 2012). It is critical that nations which are constantly given aids are investigated. Authorities should analyze where the money is going and whether it was really being used for development. Sometimes, foreign aids are legitimately consumed for a country's growth but they are just so poor, they can't really grow. It is also important to analyze whether the financial management team of a country is competent enough to allocate aids for a nation's development.
Recurring Issues
While some issues have been brought up in the past, it seems like they just recur every year. It is easy to say that one should properly secure the tracks in which the foreign aids go. However, it would be hard to monitor such movement. Aside from that, authorities may not be able to confirm whether the money is being used legitimately. Such issue is not only limited to recipient countries. Sometimes, it may start on the donor nations. It is critical that the government is monitored and the financial tracks of the aids are audited. However, not all the people involved can be trusted enough to perform the right thing. It is a common recurring issue that the governments of both donor and recipient countries used foreign aid for their own corrupt ways (Moyo 2010). It is difficult to check such claims. Sometimes, authorities can't confirm whether the foreign aids were properly used or not.
Some critics also claims that there are some sort of favoritism among the governments of countries regarding the allocation of foreign aids. Again, this can be related to the corrupt practices of some politicians in recipient nations. To counter such issue, some proponents suggest that the need of the country as a whole should be considered. Again, this is very difficult to do. Each country may have their own bias. Usually, social sectors are favored even though the condition of the country as a whole was not determined (Halonen-Akatwijuka 2005).
Sustainability
While foreign aids can still be given nowadays to nations who need them, some critics ask how long this can continue. It is important to note that such system had been existing for a long time. Usually, the financial backing comes from richer nations such as the United States, which has the dollar as its currency. Thus, such denomination control other currencies in the world. This can be a double-edged sword. While it is effective for getting money from richer nations, it may backfire if instability kicks in and affect those donor countries. As a domino effect, the recipient nations are also affected. Recently, critics have speculated the stability of the world's currencies, especially those belonging to rich ones. The dollar has actually become vulnerable and this might affect the dissemination of aid (Stiglitz 2009). Aside from that, those who have the capacity to back such financial help are also questioned for stability. Through the instability of the currencies mentioned, loans and other similar tools or instruments might be affected. This can create another chain reaction. The pool of funds where foreign aids are gathered might get affected too. With this assumption, one could see that it is only a matter of time before instability affects the system. Thus, it is important that nations backing such cause make important progress. Donor countries would need to double their efforts to maintain the sustainability of giving aid (Paxton 2008).
Alternatives
Investments
Some people have suggested that countries needing monetary aid are given other alternatives to help them. Investments have become one of those things that were proposed. It is assumed that this could give more benefit to recipient countries. Investment is more favorable than simply giving aid (Moyo 2010). However, various experts in finance and accounting can see the obvious flaw of this suggestion. In fact, even non-experts would be able to figure it out. How can a country invest in another nation if they do not see any way that they can profit? This dilemma is a critical consideration in the proposal to consider investment above foreign aid. Giving investment that is not expected to earn profit would be similar to monetary help. Thus, it is just foreign aid and is just given another name. While this suggestion is not really bad, it is critical that it is considered under the point of view of businesses since it is an investment.
Local Businesses and Community Empowerment
Another popular alternative is that local businesses are supported instead of just giving the aid to the country's government. This would allow the nation to flourish from the inside, especially within poor communities. Thus, community empowerment can be used to develop the country from within. This would mean that the nation would rely on its own while support is still welcomed. The government can then concentrate on developing areas that need development. The community plays a huge role in teaching people to start their own business and for countries to rely on their own resources rather than on aid (Novogratz 2010). While this proposal looks good, there are some dilemmas in considering it as an alternative to foreign aid. If the financial help being given to the government are difficult to monitor and audit, what more if it involves local prospects. It might actually encourage corruption in those smaller levels.
Fair Trade
Other alternatives to aid need to be considered such as fair trade (Stiglitz 2008). By considering a macroeconomic approach, it may actually legitimately help third-world nations to develop and grow. Fair trade would mean that people wont be taken advantage of. All countries would have their share of monetary gains without benefiting from the other on a one-sided basis. This international approach may solve a lot of dilemmas including foreign aids. However, it is important to take note of the basic concept of economic supply and demand in which richer nations have taken advantage of. If a real fair trade is to adopted, there should be proper rules that need to be followed. This would solve a lot of dilemma among countries in terms of trade. Stringent policies are important to solve possible challenges (Noam 2012). However, it is important to take note that the richer nations would have to develop such rules. Thus, they would naturally be biased and create policies that would benefit them. This would be detrimental to the real purpose of a fair trade.
Conclusion
Foreign aid have become a preferred way to help poor countries to develop and grow. However, it seem to have not fulfilled its purpose amidst the years that it was being practiced. Various issues have been raised such as corruption and mis-allocation of funds. To solve the dilemma, some people suggested other alternatives. Investments were proposed. While this may be good for the country, it is important to look at it at the point of view of business. It is a challenge to ask countries to invest in poor ones if they don't see how it will benefit them. Another alternative involves development from within through community empowerment and creations of local businesses. This alternative solution is good but the disbursement and distribution of funds in smaller political levels would be more difficult to manage than the current system. Thus, corruption may become more rampant. Some people suggested fair trade. This macroeconomic approach would be a good solution if rich nations are willing to give in and develop a system that would fairly benefit everyone during trades. Such concept appears to be impossible at the moment.
While there are other alternatives to foreign aids, it seems like the current system would still be more appropriate. This paper do not consider other options as not feasible. Rather, it would be difficult to implement other possible alternatives suggested by experts. Instead, the current process of giving foreign aid should be improved. The world is changing and modifications to existing system are needed (Zoellick 2012). Issues such as sustainability, allocation, corruption, and over-dependence can be solved through proper applications of proposed solutions mentioned in this paper. It would be easier to do this rather than change the system to introduce a new alternative.













































References


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Chomsky, Noam. 2012. "Changing Contours of World Order" State Crime Journal 1(1): 8-26. http://www.jstor.org.ric.idm.oclc.org/stable/41917768.

Deaton, Angus. 2010. Instruments, Randomization, and Learning about Development." Journal of Economic Literature 48(2): 424- 455.

Halonen- Akatwijuka, Maija. 2005. "Coordination Failure in Foreign Aid". Woodland Road, Bristol: University of Bristol.

Moyo, Dambisa. 2010. Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa. New York: Farrar, Straus and Giroux.

Novogratz, Jacqueline. 2010. The Blue Sweater: Bridging the Gap between Rich and Poor in an Interconnected World. New York: Rodale

Paxton, Pamela Marie. 2008. Individual and country-level factors affecting support for foreign aid. Washington DC: World Bank.

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Zoellick, Robert B. 2012. "Why We Still Need the World Bank: Looking Beyond Aid." Foreign Affairs 91(2): 66- 78. http://www.jstor.org.ric.idm.oclc.org/stable/23217222.