The Challenges of Development Cooperation: How to Increase the Efficiency of Aid

Master's Thesis, 2004

124 Pages, Grade: sehr gut


Table of Contents


Figures and Tables



In Search of a Development Theory


Factors Influencing a Country’s Ability to Develop
Introducing Better Conflict-Prevention Strategies
The Impact of Culture on Development
Eliminating Corruption
Actively Fighting HIV/AIDS
Is International Trade the Answer to Alleviating World Poverty?


Size and Distribution of Foreign Aid
Bilateral Aid
Multilateral Aid
The UN System
The World Bank
The EU

The Determinants of Successful Development cooperation
The Call for a Comprehensive Debt Relief Strategy
What do Poor People need the Most?
Scrutinizing Democracy and Human Rights as a Prerequisite for Development
The Role of NGOs in Development Cooperation
Strengthening the UN Millennium Development Goals (UNMDG)
Conclusion: How to Increase the Efficiency of Aid

List of 23 DAC Members and Date of Membership
List of ODA Recipients
Current Status of the UN Millennium Development Goals



Development cooperation is a rather young field, which emerged only after World War II with the introduction of the Marshall Plan in an effort to aid Western Europe’s recovery. Unfortunately, poverty today is as widespread as ever and the gap between wealthy developed countries and poor developing countries is still widening. One frequent criticism is that there is an insufficient amount of money that is spent on development cooperation for it to be unsuccessful. Yet there are many more problems and challenges involved which need to be addressed. This thesis therefore identifies areas development cooperation needs to focus upon in order to be effective and calls for a global development strategy as the only way to bundle capital and expertise in the most efficient way. A detailed analysis (quantitative and qualitative) of the size and distribution of development cooperation illustrates that it is not the insufficient amount of development cooperation but its inefficient distribution which renders it unsuccessful. In order to provide developing countries with a good starting point to grow their own way out of poverty, it is necessary to free them from their unbearable debt burdens; to strengthen the UN Millennium Development Goals which represent today’s only global development strategy; to thin out the current jungle of IGOs and NGOs and bilateral agents active in development cooperation; to focus on rather few areas instead of trying to tackle all problems of developing countries at once; and to listen to the poor to find out what they really need instead of pretending to know what developing countries need most. Donor countries moreover need to stop demanding democracy and human rights as prerequisites for receiving aid because there is no clear sign that democracy triggers development or that benefits more likely trickle down to the poor. On the contrary, former developing countries that are now considered to be developed (e.g. the “Asian Tigers”) were far from being democracies when they grew out of poverty and have only recently started to slowly implement democratic principles and human rights. Development, however, strongly depends on the combined effort of developing and developed countries to actively combat corruption and HIV/AIDS and to provide the basis for a free and fair global trade system to allow developing countries to earn the needed income through exporting their products. A global development strategy is needed to successfully address the problems and challenges of development cooperation and to introduce the necessary preconditions for development to be possible. The UN Millennium Development Goals are a step in the right direction, but to be truly successful, they need to be strengthened. One multilateral institution should be in charge of development cooperation, but it needs to be able to enforce its actions without consulting with its members each time before acting. Development cooperation can be a success, with a global effort of all partners involved, a global reorganization of the development business and a refocus on key development areas, so that developing countries can be provided with a solid basis to grow out of poverty

Figures and Tables

Figure 1. The Relationship between Wealth and Conflict.

Figure 2. Net ODA from DAC Countries to Developing Countries and Multilateral Organizations, 1950-2002.

Figure 3. Net ODA in 2003 as a Percentage of GNI

Figure 4. Average Concessional Flows by Multilateral Organizations, 1994-98.

Figure 5. Regional Distribution of ODA, 2001-2002.

Figure 6. Net ODA per Capita per Region, 2001.

Figure 7. Total Net Flow of Long-Term Financial Resources to Developing Countries and Multilateral Organizations.

Figure 8. Concessional Flows by Multilateral Organizations.

Figure 9. ODA from DAC Countries to Multilateral Organizations, 2002.

Figure 10. Emergency Aid as a Share of Bilateral Aid. Selected Donors, 1981-1982 and 2001-2002.

Table 1. Schematic overview of the main developments in the history of foreign aid.

Table 2. FDI-Share per Region in 2002.

Table 3. Top Ten Recipients of Gross American ODA in US$ million, 2002.

Table 4. Top Ten Recipients of Gross Japanese ODA in US$ million, 2002.

Table 5. Top Ten Recipients of French ODA in US$ million, 2002.

Table 6. Top Ten Recipients of British ODA in US$ million, 2002.

Table 7. Top Ten Recipients of Danish ODA in US$ million, 2002.

Table 8. ODA from DAC Countries to Multilateral Organizations, 1999 and 2002.


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Development cooperation can be broadly defined as an effort to assist nation states, and their citizens and institutions to develop and thereby grow out of poverty. It usually consists of a transfer of money and/or knowledge from developed to developing countries to support development efforts in a wide range of areas, such as infrastructure, governance, market reform, poverty reduction, education, health care, etc. It is a relatively young field in international relations, evolving after World War II with the Marshall Plan. The Marshall Plan was designed to help Western Europe recover and to establish democratic states based on market economy and to meet the Soviet communist threat. The success of the Marshall Plan led the United States to conclude that this concept could also be applied to other parts of the world, mainly to protect them from any communist tendencies, but also to reduce poverty. National security interests, however, were the leading motive for development cooperation during the Cold War. The American foreign aid policy continues to focus on national security interests up to today. Other donor countries, for example France and Great Britain, were supporting their former colonies, aiming at securing their commercial interests and maintaining access to natural resources. Only the Scandinavian countries (Denmark, Sweden and Norway) and the Netherlands placed humanitarian motives above security and commercial interests and aimed at eliminating poverty from the very beginning of their development cooperation. To achieve their diverse and varied goals, donor countries employed various strategies and repeatedly changed them to respond to their non-efficiency. Development strategies were also influenced by development theorists and varied from simply supplying developing countries with what they were missing (mainly capital) with the expectation that the benefits would trickle down to the poor, to structural adjustment programs demanding strict economical and fiscal policies. After the end of the Cold War, the demand for developing countries to display democratic principles was then added as a requirement for receiving aid. Yet none of these strategies has been able to close the global poverty gap.

Development cooperation is not charity. Although it is certainly linked to helping the poor, it is mainly an attempt to create a safer, healthier, more just and more peaceful world. Poverty is related to violence and in extreme cases, can breed terrorism. It is also linked with the increasing problem of refugees, particularly in Southern Europe where more and more people from Northern Africa try to reach the EU under extremely dangerous conditions to demand asylum. There is also the problem of HIV/AIDS and other diseases which are spreading extremely fast in developing countries and do not stop at the next border. The commitment to help developing countries is based on international obligations, as agreed on in the UN Charter, the International Covenant on Economic, Social and Cultural Rights (ICESCR), and the Declaration on the Right to Development. The Charter commits all member states in its preamble, Article 1 and Chapter IX, to international cooperation in promoting economic and social advancement. Article 2 (1) of the International Covenant on Economic, Social and Cultural Rights requires each member state to take steps, not just individually but also through international cooperation and assistance, to gradually achieve the full realization of economic, social and cultural rights, and the Declaration on the Right to Development recognizes a collective international obligation to promote development.

In an attempt to achieve global commitment towards poverty reduction, the UN member states committed themselves in September 2000 to adhere to the so-called Millennium Development Goals. These goals, to be reached by 2015, including: Eradicating extreme poverty and hunger; Achieving universal primary education; Promoting gender equality and empower women; Reducing child mortality; Improving maternal health; Combating HIV/AIDS, malaria and other diseases; Ensuring environmental sustainability; and developing a global partnership for development.[1] These development goals were incorporated into national development goals of the member states to promote them not only in multilateral but also in bilateral foreign aid policy. The effectiveness and achievements of the UN Millennium Goals too date will be evaluated later on in this paper.

In the last five decades development cooperation has achieved increased life expectancy all over the world and in all social classes, decreased child mortality, improved nutrition and health situation, higher school attendance and reduced the illiteracy rate.[2] However, after half a century of development cooperation, only a few countries (e.g. Spain, Portugal, South Korea, Taiwan, Singapore, and Hong Kong) have entered the developed world while the vast majority of developing countries are still lagging far behind. Of about 6 billion people in the world, less than 1 billion live in the “advanced democracies.”[3]

The following figures highlight the dilemma of the poor: Among the 4.4 billion people in developing countries,

- three-fifths live in communities lacking basic sanitations;
- one-third is without access to safe drinking water;
- one-quarter lack adequate housing;
- one-fifth are undernourished;
- nearly one-third can expect to die by the age of forty; and
- 1.3 billion live on less than one dollar a day.[4]

Out of the world’s 6 billion people, one-fifth struggle everyday to survive on less than one dollar a day while at the same time the amount spend on development cooperation is continuously decreasing.[5] The gap between rich and poor is increasing although developed countries have been active in development cooperation for more than five decades. Huge capital transfers between rich and poor countries have taken place yet the gap is further widening. There are, in addition, grave regional differences: in East Asia/Pacific, the number of people living in extreme poverty declined, whereas it increased in Latin America/Caribbean, South Asia and sub-Saharan Africa.[6]

After five decades of development cooperation, democratic institutions are still commonly weak or nonexistent in Africa, in the Islamic countries of the Middle East and in the rest of Asia. There is also a gap between rich and poor in developed countries: in the United States, 30 percent of Hispanics live below the poverty line and unemployment on some Indian reservations is as high as 70 percent, while at the same time the US economy experienced a decade of sustained growth and low unemployment.[7] Expectations at the beginning of development cooperation were high, but can we be satisfied with the results achieved so far? Could more have been achieved or is development cooperation just not working in some countries? Some people today go as far as Lawrence E. Harrison, who said: “In sum, the world at the end of the twentieth century is far poorer, far more unjust, and far more authoritarian than most people at mid-century expected it would be.”[8]

When I started researching about development cooperation, I was convinced that we did not spend enough money and I thought that by raising awareness and increasing the amount of development cooperation, development would be possible. However, when I spent the summer of 2004 in Bangladesh I was astonished to see that there are so many problems involved that simply increasing the amount of development cooperation will not change much.

The major result of this thesis is that for development cooperation to be successful the current problems need to be identified and a global strategy needs to be employed. The success will be determined by the creation of a free and fair global trade environment; by increased efforts in fighting corruption and HIV/AIDS; and by improved conflict-prevention strategies, along with a global donor commitment to reduce poverty. Development cooperation can only become successful with a global strategy that follows global goals, including a global effort from donor countries that takes local differences in recipient countries fully into consideration.

Chapter I takes a theoretical approach, looking at the history of development cooperation from different theoretical angles to explain the reasons for underdevelopment. Chapter II reveals the importance of connecting underdevelopment to other factors influencing a country’s ability to develop; mainly the creation of a free and fair global trade environment, fighting corruption, diseases, and taking into consideration cultural differences in recipient countries which call for specific donor strategies. Chapter III unveils the inefficiency of the spending of development cooperation driven by national interests and demonstrates that it is not the amount of Official Development Assistance (ODA) that is too small for development cooperation to be effective, but its distribution over a variety of organizations which weakens the overall effort. Chapter IV emphasizes the determinants of successful developing cooperation, namely relieving developing countries from their immense debt burdens; thinning out the current mass of active development agents; refocusing development cooperation on a few key areas instead of trying to solve all problems of developing countries; and strengthening the UN Millennium Development Goals (UNMDG). Chapter V links all previous chapters to demonstrate that development cooperation is important and needs to be strengthened through a global strategy, through more commitment from the donor countries and through a focus on a limited number of areas combined with a global commitment to fight all development-hindering factors (e.g. unfair trade rules, corruption, HIV/AIDS). Development cooperation will not achieve global equality but can provide developing countries with the prerequisites to grow out of poverty. In order to achieve this, the problems and challenges of development cooperation need to be identified and a truly global strategy needs to be employed.

In Search of a Development Theory

Development is generally defined as “the processes through which a country increases its capacity to meet its citizens’ basic human needs and raise their standard of living.”[9]

Underdevelopment is usually the result of a combination of factors both within developing countries and in their relationship with industrial countries that lead to insufficient levels of such standards. Development theories, which emerged mainly after World War II, focus on underdevelopment in third world countries and why these countries have failed to develop. These theories have highly influenced donor countries’ foreign aid strategies since the 1950s.

The history of development cooperation is characterized by the employment of a variety of aid strategies which will be presented here. The variety of development strategies is understandable as a result of the rather short history of development cooperation and donors’ attempts, influenced by development theorists, to find the optimal strategy. However, constant strategic changes leads to the problem of having started projects in a variety of different areas which end up abandoned. It also leads to losing attention and focus by jumping from one area to another. The employment of various strategies has acted as an acknowledgement of the multifaceted problems of development cooperation and a realization by many that none of the strategies ultimately led to development.

The first proposal for development assistance came from the American Secretary of State, George C. Marshall, in 1947. He was influenced by classical economic theorists, like Adam Smith and David Ricardo, as well as Karl Marx who argued that development was represented by an increase of per capita GNP. Marshall therefore proposed to support the European countries after World War II with massive aid to reconstruct them economically. The condition for receiving Marshall Aid was that recipient states had “to promote greater economic cooperation among themselves.”[10] The OEEC, the predecessor of the OECD, was set up to administer the distribution of the Marshall-Plan. The motives for the Marshall Plan were based both on security and commercial considerations. The United States wanted to preserve Western Europe from communism. Consequently, they also strongly supported integration in Western Europe which eventually led to the creation of the European Coal and Steel Communities (ECSC) in 1954, the starting point of the European Union. Creating business opportunities for the US was another important factor for the Marshall Plan because the US economy was growing considerably at that time but suffered from world-wide under-consumption leaving the United States in need of markets to sell their product. However, the national security motives were clearly dominating. When President Truman took office in the United States in 1948, he presented his plan to include developing countries in American foreign aid which were threatened by communism. His proposal was approved by Congress and included in the so-called ‘Act for International Development’. The countries that benefited most from this Act were South Korea and Taiwan who received a considerable amount of foreign aid, once the Marshall Plan in Europe was phased out. Development assistance was moreover increased to the Middle East and Asia and afterwards to Latin America and Africa. Truman’s aim of including developing countries in American foreign aid policy was to “support countries threatened by the communist powers and stop the spread of communist movements within the recipient countries.”[11] He believed that by granting development assistance, the living standard in recipient countries would improve and render the population less sympathetic to communist propaganda.

Development cooperation was always based on the belief that money transfers were necessary to promote development in poor countries. The selection of those countries to be supported were based on national security motives during the Cold War but the strategy on how to help the selected countries to develop changed over the years. Development strategy in the 1950s was mainly concerned with economic growth, as reflected in the Marshall Plan. GNP growth was the goal and other social objectives were believed to result from GNP growth and expected gains would trickle down to the poor.[12] As a result, investment became the proposed medicine for developing countries to speed up growth and development. Industrialization was identified as the engine of growth which would pull the rest of the economy behind it. Therefore, the industrial sector was assigned the dynamic role while agriculture was assigned a passive role.[13] As a result, most investment was directed towards the industrial sector. The role of foreign aid in the 1950s was to provide the necessary capital resource to allow developing countries to realize high enough savings rates to push them into self-sustained growth.[14] Since most developing countries had (and still have) problems attracting private investment, the only alternative, it seemed, was to offer foreign aid as a source of capital. This strategy failed to acknowledge the different level of industrialization, education, etc. in Western Europe compared to developing countries. The basic prerequisites were in place in Western Europe for a simple transfer of money to trigger development. The situation in developing countries was, and still is, unfortunately different, leaving too much room for failure.

The 1960s were declared as “Decade of Development” by the UN. It was also the decade when most of the world’s new nations came into being with the establishment of 44 newly independent nations. In the 1960s the United States Agency for International Development (USAID) was established under the 1961 Foreign Assistance Act; the Peace Corps (1961); and the United Nations Development Program (UNDP) (1965) were founded.[15] Moreover, in 1961, the Development Assistance Committee (DAC) of the OECD was formed when the European countries had produced enough economic strength to assist developing countries. The prevailing opinion in the 1950s and 1960s was that developing countries needed capital and technological transfers which would then lead to economic growth. Thus development in the 1960s was still largely focused on GNP growth as the key objective. It was expected that modern technology and increased capital resources would trickle down and spread out to all areas of society.[16] In contrast to the 1950s, agriculture was assigned a much more active role in the development process. The role of foreign aid was either to increase savings or balance the current account of the balance-of-payments through providing foreign exchange. Dissatisfaction about this strategy increased in the late 1960s because there were no clear signs of the expected trickle down effect. In the 1960s, the majority of Official Development Assistance (ODA) consisted of project aid, of which the majority was spent on infrastructure projects: roads, railways, water and sewerage, ports, airports, power stations and telecommunications.[17] Often these projects weakened the role of recipient governments but got widespread support in donor countries due to visible results.

Development cooperation in the 1970s was influenced by the work of dependency theorists, who focused on the links between developing countries and the global political economy. The most famous dependency theorist, Raúl Prebisch, a Latin American, was associated with the Economic Commission on Latin America (ECLA) and the United Nations Conference on Trade and Development (UNCTAD). He focused on the unequal terms of trade between raw-material exporting LDCs and manufactured-goods exporting industrial countries.[18] Dependency theory claims that the world political economy is divided into a core (advanced countries), a periphery (developing countries) and a semi periphery (emerging/transition countries).[19] The relationship between advanced countries and developing countries is characterized by exploitation, and thus underdevelopment is caused by capitalism’s division of the world into rich and poor countries. Dependency theorists claim that underdevelopment is the result of a situation “in which the economy of certain countries is conditioned by the development and expansion of another economy to which the former is subjected.”[20] Raúl Prebisch argued that the Third World was merely being used as the producer of raw materials for First World manufacturers and therefore was heavily dependent on the raw materials that were needed. Therefore, he argued that some degree of protectionism in trade was necessary for developing countries if they were to reach self-sustaining development. For him, the only way out of this vicious circle was that the periphery countries would industrialize as soon as possible to reduce dependence on imports and foreign credits.[21] In order to achieve this goal, protectionist measures were needed to build up a domestic industry and developed countries should be pressured to take the interests of the periphery into consideration. Prebisch’s ideas also provided the intellectual basis for the activities of the United Nations Conference on Trade and Development (UNCTAD) and the idea of a New International Economic Order[22] (NIEO) proposed by the Group of 77 LDCs in the 1970s, which was relentlessly criticized by the industrialized West.[23] Western countries considered the NIEO to be a communist attack on the free-market economy model, which is understood as being the basis of Western countries’ wealth.

Structural theorists influenced strategies for development cooperation in the 1970s in various ways: development cooperation moved from simply supplying capital and knowledge to so-called integrated rural development projects, which included a wide range of activities (e.g. infrastructure, health, education) that were all tackled parallel to address the root causes of rural poverty. This is also known as the change from small-scale, clearly defined ‘project aid’ to larger ‘program assistance’ which included many activities, sometimes even whole sectors (e.g. health, education). Integrated rural development projects developed as a result of the growing dissatisfaction with the trickle down effect and the failure of the GNP-oriented development strategy. Therefore, achieving a more equal income distribution and a reduction of absolute poverty were added to the goal of economic growth.[24] The target group were poor people and therefore this strategy was aimed at small farmers and involved central and local administrations. Investments in agriculture and rural development became more important as well as investments in social services, e.g. housing, education and health.[25] The participation and involvement of the poor was considered necessary for sustainable development. However, this improved aid strategy ran into several problems:[26] First, these integrated projects were too complex. Second, the strategy was highly influenced by the positive experience of many industrial countries with the success of their ‘welfare-state’ whereas developing countries lacked both the capacity and resources to implement this development strategy. Third, the elites in developing countries considered this strategy with its focus on poor people in rural areas as an effort of developed countries to weaken their claim of a New International Economic Order (NIEO). The NIEO aimed at better access to markets, investments and technology rather than taking care of the needs of the poor.

The 1970s also saw the emergence of humanitarian relief organizations. Large NGOs, such as CARE, had begun years before as relief organizations (delivering “CARE packages”) and were originally founded to respond to emergencies and disasters and to help people recover from war. The 1970s brought humanitarianism as a political movement and the foundation of Médecins Sans Frontières (MSF) in 1971 which propagated the right to intervene with humanitarian aid in situations of natural and political disaster. Beginning in the mid-1970s these grassroots organizations, relief organizations and other development assistance organizations began increasingly to enter the field of development cooperation. Finally, to remind everybody that growth actually does work, the “Asian Tigers” (Taiwan, Singapore, Hong Kong, and South Korea) entered the development stage towards the end of the 1970s.

When the proposed policies of the structuralists did not produce the expected results, a Neo-Liberal countermovement developed. The Mexican financial crisis of 1982, which soon spread to other parts of the Third World, became the impetus for a new development strategy. The achievement of balance-of-payments equilibrium and budget equilibrium became the most important objectives and the necessary conditions for economic growth and poverty alleviation.[27] Moreover, trade was linked to growth and therefore trade liberalization and opening up the markets of developing countries to encourage international trade became important. As a result, the World Bank and the IMF developed their so-called structural adjustment programs to assist developing countries with foreign aid in exchange for market liberalization and the removal of state control in the national economy. They were influenced by the changes of government in donor countries, mainly the United States, the United Kingdom and West Germany, where conservative governments emphasized developing countries’ responsibility to establish development-encouraging conditions.[28] Developing countries were encouraged to rely on market forces and minimize government intervention in most spheres.[29] However, the privatization of public services and the reduction of the civil service led in many countries to mass unemployment, to an increase in the cost of living, and to a tremendous jump in the number of people living below the poverty line. As a result, the Structural Adjustment Programs did not prove successful to help developing countries grow out of poverty .

The 1980s were also the last decade of the Cold War and were characterized by extensive aid flows from OECD countries to Western oriented developing countries, no matter how democratic their governments were or how great the extent of poverty in these countries. The UN system, the Nordic countries, the Netherlands and Canada focused more on poverty reduction but still acted within the framework of structural adjustment programs. In addition, environmental considerations were added and became mainly known under the concept of ‘sustainable development’ which was defined in the Brundtland Report of 1987: “development seeking to meet the need of the present generation without compromising the ability of future generations to meet their own needs . It aims at assuring the on-going productivity of exploitable natural resources and conserving all species of fauna and flora.”[30] The Brundtland Report also triggered the UN "Earth Summits" in 1992 and 2002, the International Climate Change Convention and worldwide “Agenda 21”[31] programs. Women and gender equality was subsequently added to the development goals of donor countries at first because women were perceived as a vulnerable group that needed special protection and later because women were recognized as being able to significantly contribute to development. Women and gender equality was thus identified as an important development goal. The 1980s experienced a growing legitimacy for NGOs and for the first time southern NGOs entered the stage to fight poverty.[32] Besides that, one had to realize that the success of the Asian Tigers was less a product of efficient development cooperation and more a result of their internal policies. In other areas, such as sub-Saharan Africa, for example, the development community had to realize that the development efforts showed only poor results. Stabilization and adjustment were still the predominant objectives in development cooperation at the beginning of the 1990s. The Washington Consensus - a consensus between the IMF, the World Bank and the United States Treasury Department, outlining a set of policies believed to bring development to Latin America – was introduced in 1989. It was later extended from Latin America to all developing countries. Following the Washington Consensus, most Latin American countries were back on a growth path after having implemented the demanded reforms, but sub-Saharan Africa and the transition economies in Eastern Europe were still stagnating. The Asian crisis in the late 1990s and the crisis in Argentina in 2001, which had closely followed the policies of the Washington Consensus, resulted in questioning the Washington Consensus. The debate about the Washington Consensus, its definition, its successes and failures continues up to today.

The end of the Cold War then had an immense impact on foreign aid strategies in the 1990s: the Soviet Union collapsed and thus several foreign aid donors became aid recipient countries themselves. Developing countries had to realize that the only remaining superpower, the United States, would not abstain from using military power against difficult countries (Iraq war 1990/1991) and the OECD countries shifted their focus on the transitional countries in Eastern Europe. The 1990s were marked by ‘aid fatigue’ influenced by the fear that foreign aid was creating aid dependency in developing countries and by the loss of ideological motives for development assistance as experienced during the Cold War. Donor countries focused more on demanding democratization (e.g. multiparty elections, promotion of human rights, and good governance) and aid was aimed directly at strengthening the resources and power of special target groups.[33] Sweden had already incorporated democratic development as a development goal in 1978 but most other bilateral donors avoided incorporating political goals. Since Sweden was a “neutral” country during the Cold War it could take the freedom of including political goals without running into problems whereas most other bilateral donors could not. The official explanation was that political goals in development cooperation would interfere with internal affairs and would thus violate the principle of state sovereignty. However, since the end of the Cold War, political goals have become an integral part of development cooperation. In most of the cases it is argued that a democratic government promotes economic development and respect for human rights, which eventually leads to poverty alleviation. Today, many donor countries demand changes in recipient countries’ political system regardless of the principle of state sovereignty. Bilateral donors even use political development goals as a prerequisite for receiving aid. President Carter passed legislation as early as in 1977 to allow American foreign aid to be reduced or even terminated if the recipient government was found to be guilty to violate human rights. During the Cold War this legislation did not have any significance because national security interests prevailed but since 1990 it has played a more important role in American foreign aid policies. Members of the OECD Development Assistance Committee (DAC) as well have adopted several declarations, stating that democratic and responsible regimes, the promotion of human rights, and an effective and equality-oriented economic policy were all interrelated, thus allowing DAC countries to interfere in recipient countries’ political systems. On the other hand, DAC countries also adopted several declarations, recognizing developing countries’ right to lead development cooperation, at least in principle.[34] Multilateral donors do not have the same possibilities as bilateral donors when it comes to intervening in recipient countries’ political systems, especially not regarding the form of government. Yet, they can do so more indirectly: the World Bank for example emphasizes good governance as a goal and a prerequisite for effective implementation of economic policy and the UNDP identified human development (including good governance) as a major goal.[35]

In the 1990s, most of the important aid donors developed their own policy dialogue with developing countries as opposed to the 1980s, where most development-policy dialogue was carried out between the World Bank, the IMF and the governments of developing countries. Furthermore, foreign aid policy was increasingly characterized by setting prerequisites for receiving aid instead of simply giving aid. Aid was thus used as incentive for developing countries’ governments which had implemented policies as demanded by donor countries (e.g. good governance, human rights). The 1990s also saw more open discussion about a problem that so far existed in many developing countries but was not addressed in public: corruption. The World Bank even started initiatives to address corruption directly.[36] Corruption as a problem of development cooperation is still widespread today and will be discussed in more detail in Chapter II. Foreign aid strategies in the 1990s moreover aimed at capacity-building in order to enable developing countries to manage and carry out development by themselves.

The 1990s and its complete transformation of world politics led to new development theories. Amartya Sen, a Bengali economist who received the Nobel Prize of Economics in 1998, offered a new approach to deal with underdevelopment in the late 1990s. He introduced several new aspects of poverty and thereby strongly influenced the creation of the Human Development Index, published by the UNDP. His work also contributed to the shift away from focusing on income and growth in development to taking capabilities, freedoms and rights into consideration, highlighting the importance of human rights in development. Sen left the path of solely condemning the developed countries of being responsible for underdevelopment but asks the citizens of developing countries to take responsibility for their situation themselves.[37] This is certainly an important initiative to stop holding others responsible and starting to actively change the present situation. Although developing countries cannot be blamed in total for their current situation, it can be said that there is a reason why some developing countries develop faster than others and some do not develop at all. Developing countries need the support of developed countries in certain areas, e.g. the creation of a fair global trade environment, the global fight against corruption and HIV/AIDS. They do not need, however, to be treated like children when developed countries come and attempt to rapidly change the political landscape of developing countries. Democracy, for example, is a learning process and cannot be implemented in a country from one day to another. A good example is Afghanistan, whose citizens just democratically elected for the first time its President. The population was being educated in democracy and how and why this election is taking place. Yet most of the citizens do not understand the whole procedure and its importance. They hardly know the candidates and do not understand their goals. Moreover, Afghanistan is a patriarchal society and thus usually the head of the family or clan decides what to do. Now, suddenly, every family member shall decide whom to vote for. Democracy has to be learned and will certainly not fully work just by giving people the right to vote and briefly explaining to them the procedure. These first democratic elections in Afghanistan were an international sign and will be celebrated as success of democracy by Western countries but it will not be important for the majority of the Afghan population. Maybe in a decade the citizens of Afghanistan will understand democracy and embrace it. However, the preconditions have to be in place: a good information network all over the country so that the citizens know about the candidates and their goals, a good level of understanding of democracy and a literacy rate that allows the citizens to inform themselves about the elections. Implementing democracy in my opinion needs time and the will and support of the population. Therefore the question remains if the internal system of a country shall be changed from outside actors or if one should focus on providing the means to internally promote democracy, via for example education, press freedom, etc. This will be discussed in greater detail in Chapter IV.

The work of Amartya Sen inspired other theorists, who were mainly concerned with culture and its differences among countries. When examining two countries, one in Africa (Ghana), one in Asia (South Korea), which were on the same development stage in the 1960s (GNP per capita), were receiving the same amount of aid and had a similar level of industrialization, one is struck by looking at the two countries today: South Korea is today an advanced country, which has about the same level of GNP per capita as Greece, whereas Ghana has today one-fifth of South Korea’s GNP and seems to have developed backwards. This comparison is frequently used to point out that there must be a reason for underdevelopment, other than the level of aid, industrialization and development cooperation. When taking a more in depth look at how countries do business, different ideas about governing (even in “Western” countries), the importance of certain rights and freedoms (also between “Western” countries), one realizes, that culture plays an enormous role in determining not only the state and its legislative system, but also the way we interact and the way we do business. This has already created several problems in international trade, but also in politics. Even in Europe where culture is supposed to be somewhat more similar than between Asia and Africa, differences persist. Several authors, among them Samuel P. Huntington and Lawrence E. Harrison, have focused on the connection between culture and underdevelopment. The connection between culture and development will be illustrated in more detail in Chapter II.

Table 1 summarizes the main developments in the history of development cooperation in terms of donor ideology, focus and types of foreign aid that were used:

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Table 1. Schematic overview of the main developments in the history of foreign aid.

Source: Hjertholm, Peter and White, Howard. Foreign aid in historical perspective. Background and trends. Foreign Aid and Development; p. 81

The history of development cooperation shows that donor countries tried one strategy after another, from simply giving countries the capital needed, then to sponsoring infrastructure projects, moving then to demanding balance-of-payments equilibrium through strict policies, to finally making political demands (see Table 1). All these different strategies certainly all inherit a part of the truth, but donors should realize that they cannot fight on all fronts. The history of development cooperation shows that neither colonialism nor exploitation or state-regulation succeeded in explaining and eliminating underdevelopment. There are former colonies which are now among the developed countries (Hong Kong, Singapore, South Korea and Taiwan) while the dependency theory failed to explain why some countries could grow out of their dependence and develop, while others could not.[38] The structural adjustment programs were widely employed and seen as the cure but could not show the expected results either. Underdevelopment is the result of a variety of reasons, as is the failure of development strategies so far. Development strategies could not be successful because they were entirely based on western assumptions on what developing countries need. But who says that we Westerners know best what developing countries need? What has led to development in Western countries does not necessarily have to lead to development in developing countries. Their different culture may need different preconditions for development to occur. The impact culture has on development will be illustrated in more detail in Chapter II. There is one certainty: There is not one cure that fits all developing countries and therefore a clear needs assessment has to be the basis of all development efforts. Development cooperation during the Cold War was entirely driven by national interests and thus aid was given to known despots without demanding any positive developments. The majority of this money went to the foreign accounts of the leaders without improving the situation of the poorest at all. This unquestioned distribution of foreign aid has also led to the accumulation of huge debt burdens which successive governments now try to pay off. As a result, the challenges development cooperation faces today need to be closely analyzed and new strategies to alleviate world poverty need to be implemented.

When looking at the development of today’s wealthy countries, one realizes that development occurs intermittently. Yet this does not mean that we should lean back and just wait. Developed countries need to focus on providing developing countries with a good basis to grow their own way out of poverty, namely by employing better conflict-prevention strategies; acknowledging the impact culture has on development; actively fighting corruption and HIV/AIDS; and creating a free and fair global trade environment. All these factors influencing a country’s ability to develop will be illustrated in Chapter II.


Factors Influencing a Country’s Ability to Develop

Development does not only depend on financial transfers, but also strongly depends on the internal policies of developing countries. There are some factors (internal and external) that influence a country’s ability to grow and can even hinder it. Examples are conflict situations; corruption; unfair global trade rules and the ravaging effects of HIV/AIDS.

“[…] Since its inception in the early postwar years, the central argument for foreign aid has been that without it Third World countries could not progress at a tolerable rate, if at all. In fact external donations have never been necessary for the development of any society anywhere […]. Economic achievement depends on personal, cultural, social, and political factors, that is people’s own faculties, motivations, and mores, their institutions, and the policies of their rulers. In short, economic achievement depends on the conduct of people and that of their governments […].”[39]

This statement clearly emphasizes that the keys to development remain in the hands of the developing nations themselves and cannot be taken over by outside development agencies, meaning that economic achievement still depends on the conduct of people and their governments. As long as the government does not aim at providing basic education, health facilities, and respect for the rule of law, development will not be sustainable. However, the governments of developing nations need the help of donor countries to provide the necessary financial requirements as well as knowledge and technology. There are some factors that influence a country’s ability to develop which need to play a more important role in development cooperation since they are usually neglected. In order to fight corruption and conflict in developing countries, a concerted action by developed countries is needed. Corrupt governments need to be threatened with the withdrawal of all actions in development cooperation (financial, technical, knowledge) and only emergency relief to help ease the suffering of the poor population should continue. In order to better prevent conflict, better conflict-prevention strategies are needed but also peacekeeping and post-conflict measures need to be strengthened. In addition, developing countries need support to combat HIV/AIDS. Yet maybe the most important prerequisite to allow developing countries to grow out of poverty would be the creation of free and fair global trade rules.

Introducing Better Conflict-Prevention Strategies

Conflict is severely hindering development in many developing countries. The international community is frequently active in peacekeeping and post-conflict management, but since these measures are very expensive, more efficient conflict-prevention strategies need to be sought. In 2001, a report by the UN Secretary General reemphasized the importance of conflict prevention by quoting several studies which show that UN interventions were much more expensive than conflict prevention would have been.[40] The international community has been rather weak in conflict-prevention yet recently interesting initiatives have developed: NATO for example enhances cooperation between scientists in Central Asia and the Caucasus as confidence-building measures and as a means of enhancing security in the region. This might not seem too promising but having an Armenian and an Azerbaijani working together is already an achievement. Conflict-prevention strategies need to start on a small-scale to slowly penetrate the whole society if suspicion and even hate dominate the majority of the population. Cooperation in the area of environment is another interesting initiative by NATO, this year even supported by an environmentalist from Kenya (Ms. Wangari Maathay) winning the Nobel Peace Price. The environment is an important area of conflict-prevention because many predictions indicate that future wars will be about natural resources, namely energy (including water) and natural resources. If these conflicts are to be prevented, cooperation in these areas needs to be fostered today. Africa especially needs cooperation between its many countries in order to avoid future wars. The long period of peace in Europe is also a result of enhanced cooperation between European States after World War II, starting with the European Coal and Steel Community in the early 1950s. This enhanced cooperation between former hostile countries can start in every sector, trade, science, environment, combating HIV/AIDS, etc. as long as it fosters cooperation and mutual understanding it will certainly help prevent future conflicts.

Conflict and underdevelopment reinforce each other: conflict hinders economic growth and, as research indicates; economic growth and the level of wealth reduce the likelihood of a civil war.[41] As the following chart shows, a country with a GDP per person of just $250 has a probability of war of about 15 percent, even if it is otherwise considered an “average” country. This probability decreases by half for a country with a GDP of just $600 per person and reaches a chance of less than one percent in countries with a GDP per person of over $5000.

illustration not visible in this excerpt

Figure 1 . The Relationship between Wealth and Conflict.

Source: UN Millennium Project Interim Report, p. 28

Conflicts increased tremendously in the last decade: there was the disintegration of Yugoslavia, the genocide in Rwanda and the collapse of Somalia, to name just a few. In the 1990s about 43 major conflicts occurred, of which 17 took place in Africa.[42] They include inter-state as well as intra-state conflicts, while the latter represents the majority of conflicts. Of course there were also conflicts and genocide before, but the tremendous increase of mainly intra-state conflicts in the 1990s indicates decline in conflict management in many societies. Aid and conflict are connected in numerous ways: aid is used as emergency relief in or after conflict situations, aid is used for reconstruction, aid can be used as a sanction or an incentive (food aid to North Korea to neutralize tensions), etc.[43] But even more importantly, aid can contribute to avoid conflict by reducing inequality to reduce social tension and violence; help countries to use their institutions to deal with conflict; and support countries in their conflict prevention mechanisms to be able to deal with conflicts peacefully.[44]

Conflict also includes displacement and since 1990, about 70 million people have become international refugees and 15 countries have had more than 20 percent of their population displaced.[45] These figures are alarming. Aid is needed to ease the suffering of refugees of conflict situations as well as of refugees of natural disasters (floods, drought, El Nino, hurricanes, etc.). However, aid can also prolong and even intensify conflict, when it falls into the wrong hands. In Somalia in 1993, for example, only 50 percent of UN relief reached the population, the rest went to warlords and thus prolonged the warfare.[46] Humanitarian aid can also support rebels based in refugee camps. These are main challenges for humanitarian organizations and have led some commentators to reach the conclusion that “most humanitarian aid in Africa is useless or damaging and should be abandoned.”[47] However, since poverty is a root cause of conflict, it needs to be addressed and poverty reducing reconstruction and growth are critical to sustaining peace. If conflicts could be prevented, aid could be concentrated on other, more important areas than for refugees and post-war reconstruction. Donor countries should realize this and develop flexible, non-bureaucratic conflict-prevention strategies while developing countries need to understand that conflict severely hinders their development.

Unfortunately, most conflict situations would not even be possible without foreign aid: Many African countries spend more on military than on agriculture, health and education combined because they are in one way or another involved in conflicts in their own or in other countries (e.g. Uganda in the civil war in the Democratic Republic of Congo). Since most African countries are dependent on foreign aid, their military budgets are funded by international donors. This is illustrated by Bangladesh’s decision in 1999 to buy eight new MiG-29 jets from Russia for more than $120 million while remaining one of the poorest countries in the world, heavily dependent on foreign aid.[48] International donors were quite irritated by this decision to rather spend foreign aid on military equipment rather than on providing basic support to their poor population to live in dignity. These practices need to be eliminated for development cooperation to be more effective. Also military spending in developed countries needs to be carefully assessed: “Today, the developed countries spend just over $50 billion on aid to developing countries. By comparison, they spend about $900 billion on defense. If the numbers were reversed, there probably would be no need to spend more than $50 billion on defense.”[49] This statement is questionable because I do not believe in a tremendous increase of the level of foreign aid as a prerequisite for development cooperation to be more efficient but the statement clearly illustrates the relative importance of development cooperation for developed countries.

Unfortunately, the 1990s demonstrate the incapacity of the West to address conflict situations: the slow reaction to ethnic cleansing in the former Yugoslavia, the collapse of the US-led “Operation Restore Hope” in Somalia, the failure to prevent the genocide in Rwanda despite alarming signals and the ethnic cleansing in Sudan, just to mention a few. After the debacle in Somalia, the United States concentrated its activities on areas in which it has a strategic interest and created a hierarchical ordering: ‘A’ list threats to American survival (e.g. tensions in US-China relations), ‘B’ list ‘imminent threats’ to US interests but not to its survival (e.g. North Korea and Iraq) and a ‘C’ list of situations to get media attention but without immediate threat to US security (Kosovo, Bosnia, Somalia, Rwanda, Haiti, etc.).[50] After the end of the Cold War, Africa is now unimportant to the major powers and leaves its conflicts certainly at the bottom of any list of US priorities. Peace is the basis for every development effort and if developing countries are not in the position to implement effective conflict-prevention mechanisms, developed countries ought to help them.

Not only conflict situations can seriously threaten every development effort and even hinder development at all, but also cultural differences are today seen as an explanation of why some countries develop and others do simply not. The impact culture has on development will be presented in the next section.


[1] UN Website:

[2] Messner, Dirk. “Armut und Reichtum in der Welt.“Bundeszentrale für Politische Bildung. Bonn: March 2002. p. 37-38.

[3] Harrison, Lawrence E. “Why Culture Matters.” Culture Matters. p. xviii.

[4] Kegley, Charles W. Jr. and Wittkpf, Eugene R. World Politics. p. 139.

[5] Messner, Dirk. p. 36.

[6] Herz, Dietmar, et. al. Die Vereinten Nationen. Entwicklung, Aktivitäten, Perspektiven. p. 125.

[7] Harrison, Lawrence E. p. xix.

[8] Harrison, Lawrence E. p. xix.

[9] Kegley, Charles W. and Wittkopf, Eugene R. p. 144.

[10] Nugent, Neill. The Government and Politics of the European Union. p. 15.

[11] Degnbol-Martinussen, J. and Engberg-Pedersen, P. Aid. Understanding International Development Cooperation. p. 8.

[12] Thorbecke, Erik. “The Evolution of the Development Doctrine and the Role of Foreign Aid, 1950-2000.” Foreign Aid and Development; p. 19-20; Dichter, Thomas W. Despite good intentions. p. 56.

[13] Thorbecke, Erik. p. 22.

[14] Thorbecke, Erik. p. 23.

[15] Dichter, Thomas W. p. 59.

[16] Ibid. p. 57.

[17] Mosley, Paul and Eeckhout, Marion J. “From Project Aid to Programme Assistance.” Foreign aid and development. p. 133.

[18] Viotti, Paul R. and Kauppi, Mark V. International Relations Theory: Realism, Pluralism, Globalism, and Beyond. p. 348.

[19] Tarp, Finn and Hjertholm, Peter. Foreign Aid and Development; p. 30; Stern, Geoffrey. The Structure of International Society. p. 293.

[20] Kegley, Charles W. and Wittkopf, Eugene R. p. 146.; Viotti, Paul R. and Kauppi, Mark V. p. 349.

[21] Stern, Geoffrey. p. 293.

[22] the 1974 policy resolution in the UN that called for a North-South dialogue to open the way fort he less developed countries of the Global South to participate more fully in the making of international economic policy.

[23] Stern, Geoffrey. p. 293.

[24] Thorbecke, Erik. p. 28.

[25] Ibid. p. 32.

[26] Degnbol-Martinussen, J. and Engberg-Pedersen, P. p. 46.

[27] Thorbecke, Erik. p. 33.

[28] Andersen, Uwe and Woyke, Wichard. Handwörterbuch des politischen Systems. p. 171.

[29] Thorbecke, Erik. p. 37.

[30] Earthwatch. “What is Sustainability?” Accessed online: p.7.

[31] Agenda 21 is a comprehensive, global plan of action to be taken by organizations of the UN System, Governments, and Major Groups in every area in which human impacts on the environment.

[32] Dichter, Thomas W. p. 67.

[33] Degnbol-Martinussen, J. and Engberg-Pedersen, P. p. 49

[34] Ibid. p. 31.

[35] Degnbol-Martinussen, J. and Engberg-Pedersen. p. 31.

[36] Dichter, Thomas W. p. 74.

[37] Sen, Amartya. “Development as Freedom.” p. 283.

[38] Harrison, Lawrence E. p. xx.

[39] Dichter, Thomas W. p. 128.

[40] Degnbol-Martinussen, J. and Engberg-Pedersen, P. p. 214.

[41] UN Millennium Project Interim Report. p. 27.

[42] Addison, Tony. “Aid and Conflict.” Foreign Aid and Development. p. 392.

[43] Ibid. p. 392.

[44] Ibid. p. 393.

[45] Addison, Tony. p. 393.

[46] Ibid. p. 394.

[47] Ibid. p. 394.

[48] The Economist. “Heavens above.” July 15, 1999.

[49] Wolfensohn, James. “The Growing Threat of Global Poverty.” International Herald Tribune, April 24-25, 2004, p. 6.

[50] Addison, Tony. p. 402.

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The Challenges of Development Cooperation: How to Increase the Efficiency of Aid
Schiller International University
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Katrin Lenz (Author), 2004, The Challenges of Development Cooperation: How to Increase the Efficiency of Aid, Munich, GRIN Verlag,


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