US foreign assistance and the changing aid architecture.

• Author: Andreopoulos, George
• Position: Report

1. INTRODUCTION

   Traditional US multilateral aid has experienced a long period of stagnation, but at the same time it has been accompanied by structural changes in its allocation of funds to multilateral agencies. The literature focuses on the increasing fragmentation of US multilateral aid, the overlapping responsibilities between the different agencies, and the new aid architecture (Kharas, 2010; and Fengler and Kharas 2011). The issue of the new aid architecture is a critical one; it refers to the growing trend in the delivery of official development assistance, whereby such development assistance flows through public-private partnership-based global and regional programs (Lele, Sadik and Simmons). In addition, in both the literature and in the media a growing dissatisfaction with multilateral aid has emerged for its lack of transparency, accountability and efficiency. In our paper, we analyze the relative stagnation of traditional US multilateral aid not in isolation, but in connection with US bilateral aid and multilateral aid in other western countries. For this purpose, we conduct an empirical investigation by using data from OECD, as well as US Official Development Assistance Database.

   The structure of the paper is as follows. Section one provides an introduction, section two deals with US aid, section three discusses the role of global programs, and section four summarizes the main conclusions.

2. US AID

   We begin by analyzing total Official Development Assistance, ODA, coming from all 22 DAC (Development Assistance Committee) donors over 1960-2008 period. For this purpose we use comparable data from OECD. ODA simply means aid from the governments of the wealthy nations and does not include private contributions, or private capital flows and investments.

   To find out the most important donors, we look at selected countries' data from the OECD. Donors' performance can be measured by two indicators: the total amount of money, at current prices, transferred each year, or total aid as percentage of Gross National Income. Figures 2 and 3 present both performances for the top donors.

   As figure 1 clearly shows, the US is by far the largest donor over the 1960-2008 period. However, between 1992 and 2001 there was a drop in the aid and Japan became the top donor. After 2001, the US increases its assistance leaving other donors far behind. The other key players are in ranking order Japan, France, Germany and UK. The picture that emerges from figure 2 is quite different from our expectations because the US ranks extremely low in terms of ODA/GNI ratio donating only 0.08% of its GNI, while Sweden, Norway, Luxemburg, Netherlands and Denmark ere at the top donating almost 1% of their GDP.

   A more detailed investigation of US aid is provided by figure 3 which presents the data for US ODA over the 1968-2008 period divided by bilateral and multilateral flows:

   The two following phenomena can be observed:

   * Bilateral aid shows a much higher level and faster growth than multilateral aid.

   * Following a period of modest growth, traditional multilateral aid has been relatively stagnant over the whole 1982-2008 period

   Thus, the very fast growth of US aid is mainly due to the growth of bilateral aid which, as discussed in a previous contribution (Andreopoulos et al., 2010) was extremely high from 2005 onward mainly due to the aid to Iraq and Afghanistan. This clearly reflects Washington's strategic priorities in the context of the global "war on terror".

   It is worth emphasizing here that the relative stagnation in multilateral aid is...