Aid flows made huge impact through the Marshall Plan of the US to reconstruct war-ravaged Europe immediately after World War II. After the war, the global political structure underwent change enormously. Having been freed from the shackles of colonialism, many countries of Asia and Africa got independence but also with empty coffers and stagnant economies. Aids started flowing mostly from the ex-colonial masters to shape up the economies of the nascent nations. With no necessary infrastructure or weak infrastructure, many newly independent countries could not utilize aids. Rather an oligarchic class had emerged siphoning off the bailout assistance and thus became ruling class also with money power. From then on, many countries became aid- dependent and also highly indebted countries mostly in Africa.
With passing of decades, the question of aid effectiveness and utilization came in as agenda of discussion in the 'Aid Clubs". Busan Aid Effectiveness Dialogue, Addis Ababa Action Agenda and the Paris Principles on Aid Utilization concentrated how aid could be better utilized and development cooperation made more effective and country-focused. To handle aid mobilisation and procurement in Bangladesh, a separate ministerial division was created titled Economic Relations Division (earlier External Resources Division) in Bangladesh. Of course, Bangladesh never became a highly-indebted country nor heavily dependent on aid supports. The country's share of ODA is less than 2 per cent of the GDP and external debt GDP ratio is around 14 per cent and that is meagre relating to aid recipient countries of Asia and Africa. The country considered whatever it received as aid how best it could be used. That leads to creating an enabling environment from development partnership. This is one of important topics in High Level Meeting at Nairobi which was joined by 5,000 delegates from Kenya, countries of Asia, Africa, Europe, Latin America and Caribbean. The delegates were mostly from Africa continent.
Dwindling aid flow is now a challenge. Promises given should be kept to incentivize governments to look for avenues of investments, I recall this with memories of international cooperation during the MDGs regime. Governments seek cooperation of all the stakeholders, particularly all market actors for public and private investments if they have resources to utilize. SDGs are the latest outcome of the promise of universal cooperation. In the SDG era, promises need to be translated to ensuring aid flows, facilitating trade and sharing of knowledge and best practices. Now-a-days, bilateral loan agreements are more forthcoming than multi-lateral loans and grants.
Governments feel the urge for looking for development cooperation if aid flows and technical supports continue. This is I should say the political aspect of development cooperation, plainly speaking. In Bangladesh, in early 2000s we received more than 5.6 per cent of the share of ODA to GDP. It has come down to 1.57 per cent of GDP. This is less than 40 per cent of what was needed to implement the full course of the MDGs. The question is what will happen to SDGs, which are more comprehensive and all inclusive. Development discourse is futile if provision of resources domestically and internationally cannot be made.
Lack of resources for capacity building is a big constraint. Multi-sector stakeholders also suffer from this. As a result, any meaningful multisector synergy is lacking or may not be forthcoming. Aid recipient countries are many. They are at their different stages of economic development ladder. These countries need to be heard more frequently by regional or economic groups to motivate them for concerted efforts for actions with particular emphasis on creating competitive market structures. In competitive stable market structure, every stakeholder is most benefited. Benefited stakeholders are more prone or eager to listening. Long-run economic sustainability can be attained ensuring competitive market structures with competitive political landscape.
Therefore, aid flow should be at least conditional on market reforms towards competitive environment. Aid utilisation is more in the countries where markets are purely competitive with freedom of press. Aid use is fragmented where markets are non-integrated and freedom of press is suppressed.
GPEDC (Global Partnership for Effective Development Cooperation with Bangladesh being one of the co-chairs) may emphasise and put priority to directly involved market actors among the multi-stakeholders who should be more vibrant, involved and most revenue generating. Multi-stakeholders' roles are different and different in magnitudes in terms of contribution to markets and services. Democratic polity can best exploit the roles of the multi-stakeholders and accountability also can be ensured and as a result, misappropriation of project funds tends to minimal.
Only talk about aid is very partial in approach while referring to development resources. After the 90s through trade liberalisation, low income and least developed countries began to grow enormously through trade and exports. Bangladesh raised export earnings to US$34 billion (2015) from mere around $1 billion in early 90's. That helped (including remittance) to boost economic growth from around 4 per cent to 7 per cent + in 2015. That tempo has to be continued and supported. Trade facilitation has to continue. The globalisation is being threatened by rising new nationalism/jingoism. Economic partnership has been challenged and operation of free market principles constraining trade and mobility of people may be restricted. Aid is not only the growth driver; rather remittance is now an influential growth driver for many low income/ middle income countries. That has to go on in declining ODA era. Trade facilitation and intensifying trade among nations may substitute ODA. Aid dependency thus can be overcome by trade and receipt of remittances.
GPEDC may not be immune from the new trend that has been developing, challenging the trade liberalisation/ globalisation/ people's mobility. It must have a say on this for effective development partnership. More focused and frequent dialogues are needed between development partners and the recipient countries for innovative financing, market liberalisation and aid effectiveness. These are all important ingredients for enabling environment for partnership. Of course, trade partnership is more endurable than 'aid dependent partnership'.
The article is adapted from a paper Professor Shamsul Alam, Member (Senior Secretary) General Economics Division, Bangladesh Planning Commission,presented at the High Level Meeting-2 of the Global Partnership for Effective Development Cooperation, held in Nairobi, Kenya on November 28-December 01, 2016.