Foreign Aid

Added: 04-23-2019

The blog post defines the concept of foreign aid and lists five forms of aid, namely Bilateral Aid, Multilateral Aid, Tied Aid, Project Aid and Military Aid. Furthermore, some advantages as well as disadvantages of foreign aid, in general, are discussed.

international development military military humanitarianism definition humanitarian aid obligation development project foreign aid intergovernmental organizations

Type Reading Time Author Date Source
blog 4 minutes PRATEEK AGARWAL 11-27-2017 https://www.intelligenteconomist.com/
Type Reading Time
blog 4 minutes
Author Date
prateek agarwal 2019-04-23 00:00:00 UTC
Source
https://www.intelligenteconomist.com/
Key Takeaways
  • Foreign aid describes any voluntary transfer of resources from one country to another; usually from a more industrialized to a less industrialized nation.
  • The five categories of foreign aid described are bilateral, multilateral, tied, project, and military aid. 
  • Aid can be hailed as a humanitarian intervention, may improve the donor country’s image, build better relationships with other nations, and promote peace and stability. 
  • On the other hand, aid does not necessarily lead to faster growth, may increase inequality and inflation in recipient countries, and constitutes an intervention in another country’s political and economic affairs.

Summary 

This blog post defines and categorizes the concept of foreign aid, as well as listing a number of its advantages and disadvantages. 

Foreign aid describes any voluntary transfer of resources from one country to another. Typically, aid concerns flows of capital to "developing countries" - described as those countries whose economies lack a strong industrial base, and are often characterized as scoring low on the Human Development Index*. Aid can be extended for several reasons: to support military allies, strengthen diplomatic ties, extend cultural influence, or further commercial interests such as providing infrastructure used for resource extraction in the receiving country. 

The author distinguishes five types of foreign aid: 
  • Bilateral aid flows from one government directly to another government; often for strategic political or humanitarian goals such as promoting democracy or development. 
  • Multilateral aid is the combined assistance of several governments funding international institutions like the International Monetary Fund (IMF), World Bank or United Nations (UN); while trying to fight poverty in ‘developing nations.’ 
  • Tied aid is disbursed on the condition that some of the resources are used to purchase goods or services from the donor country, or in some manner desired by the donating government. 
  • Project aid usually targets a particular project like building a school or hospital. 
  • Military aid is assistance used for the purchase of military equipment or training (often purchased from the donor nation itself). 
 Among the advantages of aid are: 
  • Offering basic humanitarianism.** 
  • Improving the donating country’s image. 
  • Building a positive relationship with other governments. 
  • Promoting the conditions for peace and stability. 
Whereas the disadvantages mentioned are: 
  • Foreign aid may hold back countries instead of promoting faster growth. 
  • Aid often focuses on “the modern sector...in Third World countries;” adding to inequality. 
  • Aid invested in unproductive sectors may increase inflation. 
  • Donor countries intervene in other countries’ economic and political affairs. 

Notes 

*Human Development Index - an index that assesses the social and economic development levels of countries: http://www.investopedia.com/terms/h/human-development-index-hdi.asp 

**Humanitarianism - the doctrine that humanity's obligations are concerned wholly with the welfare of the human race: http://www.dictionary.com/browse/humanitarianism