Posted by on June 14, 2013 in Blog

By Abdulla Zaid

Summer 2013 Intern

During the recent political and economic transitions in some Arab countries, the question of development has become an important component in the future of the Arab Spring. In today’s world, economic development is more than a domestic matter. International organizations, economic development foundations, and many developed countries are committed to supporting the economic growth of the developing world. Foreign aid has been one of the main tools used in development projects. To evaluate its effectiveness, one must ask how effective foreign aid is in helping developing countries to achieve a higher level of growth? We have to also ask how we can enhance aid effectiveness in the region. These are very important questions for the people in the donor and recipient countries. If foreign aid is not meaningfully effective, then it is a loss of resources that could have been allocated more efficiently.

The effectiveness of foreign aid and debt relief has long been a subject of debate among economists. There have been many empirical studies analyzing foreign aid effectiveness; some have showed a positive relationship between aid and growth, while some others showed a weak correlation. The variation of aid effectiveness among countries depends on many variables such as governance, political stability, and the level of health and education. During this transitional period in some Arab countries, aid will not be efficient with the absence of strong and representative governance. It is essential to develop governance capacity in the region by cooperating with emerging civil society organizations to help them guide the political transition and the formation of representative governments. This process will ensure that aid is better administered and allocated.

Many economists have been critical of foreign aid due to the lack of strong governance in poor countries to administer it. Easterly (2008) labels recent debt relief as “the feel-good economic policy of the new millennium,” and he also views debt relief as a “bad deal” for the poor countries. Easterly adds, “by transferring scarce resources to corrupt governments with proven track records of missing aid, debt forgiveness might only aggravate poverty among the world’s most vulnerable populations.” (Easterly, Secondi (ed), 516) To further enhance the impact of aid, donors should provide recipient governments with policy recommendations, educational development plans, and technical support. Without a policy recommendation, the recipient government might seek an alternative way to effectively use the funds in other sectors not targeted by foreign aid. Strong governance is not only important for aid administration, but also it is essential for generating sustainable development and a stable economy.

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