The value of aid instead of the cost of aid
September 24, 2008
Mr. Rutte is right when he says that the international aid is inefficient and not effective enough. A root cause for this problem is the lack of coherence and harmonization between the different players (Western countries, NGOs) in the field of international development. All have their own vision on development issues and start off realizing their own ideas without realigning with others. And moreover; international aid is often influenced by political objectives of the governments that fund the aid programs, which has a negative impact on rational, effective decision-making.
However, Mr. Rutte is wrong when he says this is a reason to cut the development budget by 50%. I believe that we shouldn’t cut the budget, because poverty alleviation as a cause is too important and 0.8% of the total Dutch GDP is still a very small part of the total budget of the Dutch government. It is not about spending less money, it is about spending the money in a different way. And this is where politics can learn two lessons from the private sector.
Firstly, change the approach on aid from a cost-based perspective to a value-based perspective. We shouldn’t look at the cost of aid, but at the added value of it. We should indeed not put money into projects that do not have an added value for the local society and put more money into those that show real value added.
A second lesson to be learned from business is to create a pull from demand-side rather than a push from the supplier. Business people know that their product will never be successful if there is no true demand for it in the market. Well, the same rule can be applied to aid; let developing countries speak out on what they need. Create a pull by listening to them and subsequently; make a business case and involve them in the execution of the projects.
A leading example of this corporate business approach to aid is the famous partnership between TNT and the World Food Program. This company manages its involvement in this program like a proper business. The company first conducted a needs assessment among WFP staff which identified exactly those activities where TNT could be of real added value to the WFP instead of just some help that any other organisation could offer. TNT wanted to focus primarily on the output and effect of its involvement rather than the input and process. And interestingly enough, TNT saves WFP much more money in operational costs than it invests as a sponsor. This might be common practice to business people, but it is revolutionary for donor organisations and NGOs.
Given our favourable position in the world’s economy, the Dutch approach to invest 0.8% of its GDP in international aid is a noble cause that should not be neglected. However, our government owes it to its tax payers that their money is spent as efficiently and effectively as possible.
This value-based approach would create a transparent and useful platform for a discussion between the supporters and the critics of international aid. Let’s agree on pack of objectives that we want to realize for the poor countries in the world and later discuss on how to reach those goals. And don’t you agree that it is then up to Mr. Rutte and Mr. Koenders to discuss how much money there is needed to reach those targets, efficiently and effectively?
Share this article with :
Comments on this blog
There are no comments on this blog