The Economic Impact and Effectiveness of Development Aid - Economic Affairs Committee Contents

CHAPTER 2: The Global Aid Context: Who Gives What?

5.  Mr Roger Riddell, author of "Does Aid Really Work?" told us that "aid began in the 1940s."[4] The British Government's ground nuts scheme in Tanganyika was an early example.

6.  When former colonies reached independence, economic progress often lagged, and former colonial powers maintained development programmes. Aid programmes became an important strand in relations between Western developed and developing countries, coupled until the fall of the Soviet Union with a Western desire to limit Soviet political influence in the developing world.


7.  The main established donors are members of the Development Assistance Committee (DAC) of the Organisation for Economic Cooperation and Development (OECD).[5] Set up in 1960, the DAC serves as a consultative forum. Its statistics give the global picture of member-states' Official Development Assistance (ODA). Other OECD member-states are now donors also.[6] Non-OECD countries such as China, India and Brazil are becoming significant donors, although still recipients of British aid. Private foundations are also now active in development aid. The arrival of all these new entrants means that sources of aid are more diverse. Whereas in 1970 75% of recorded aid to poor countries came from the US, the UK and France, by 2010 their collective share had fallen to 44%.[7]

8.  In 2010, the United States was by far the biggest single DAC donor followed by the United Kingdom, France, Germany and Japan in that order. Only Norway, Luxembourg, Sweden, Denmark and the Netherlands met the UN target of spending 0.7% of GNI on aid.


DAC Donors: Who gives what?[8]

Source: OECD Development Assistance Committee Statistics on Resource Flows to Developing Countries


9.  From 1960 to 2010 net development finance from DAC members rose from about $40 billion to over $125 billion a year in real terms. The proportion of donors' Gross National Income (GNI) devoted to aid fell over the same period from about 0.5% to 0.3%. Although the US is the largest DAC donor, it nonetheless allocates only 0.2% of its national income to aid. Excluding the US, the average contribution of DAC donors is about 0.4%. If all DAC donors gave 0.7% the annual total of development finance would more than double to $270 billion.[9]


The Long View: Net ODA from DAC Members, US$ billions and share of Gross National Income (GNI)

Source: OECD Development Assistance Committee Statistics on Resource Flows to Developing Countries

OECD Development Assistance Committee net ODA is measured in constant 2009 prices and includes debt relief, which was particularly high in 2005 and 2006 as a result of the relief of £2.7 billion owed by Nigeria to the UK's Export Credit Guarantee Department.

10.  While global aid spending by member states of the OECD's Development Assistance Committee (DAC) has risen steadily over the past fifty years, its share of donors' Gross National Income fell from 1960 to 1970 and again in the 1990s (when aid declined in absolute terms). Today, aid accounts for about the same share of donors' Gross National Income as it did in the early 1970s.

11.  ODA remains a significant strand of international economic relations and is the means by which donor governments contribute directly to development. Total aid grew fast—8% a year—in the first decade of this century.[10] In 2010 net DAC aid was $128.5 billion, the highest ever total in real terms.[11] But developing countries' income from other external sources was much higher. In 2010 private capital flows from DAC members to developing countries—which have surged in the last couple of decades—totalled over US$1 trillion and remittances were $321 billion (Table 1). Trade is even more important; the export earnings of all developing countries in 2010 were more than 40 times the level of official aid flows.[12] Professor Paul Collier of Oxford University, author of "The Bottom Billion"[13], said "supporting development is very much more than aid. Aid is almost a sideshow in the portfolio."[14]


Aid and Private Capital Flows to Developing Countries 2010
US$ billions
% of total official and private flows
Total Official Flows (net ODA)
Total Private Flows (including remittances)
Foreign direct investment
Portfolio Investment
Net private long-term debt

Source: Aid Data: OECD Development Assistance Committee Statistics on Resource Flows to Developing Countries Table 1; Private flows: World Bank Global Development Finance Definitions for Private Capital Flows: Net Inflows on Foreign Direct Investment (US$ millions); Net Inflows of Portfolio / Equity Investment (US$ millions); Net flows on private non-guaranteed long-term debt (US$ millions); Workers remittances received from overseas. Developing countries defined as all low and middle income countries that are DAC eligible

Since private capital flows to developing countries are now so much greater than official aid flows it seems clear that private spending has become a much greater contributor to development than official aid.


12.  Some countries, for example the "Asian Tigers" such as South Korea, have graduated over time from eligibility or need for aid, while other long-term aid recipients such as Botswana have achieved impressive growth.[15] In others, such as Bangladesh, aid as a proportion of national income has fallen sharply over the years.[16] But there are still many poor people in a range of recipient countries. 148 countries remain eligible for aid by DAC criteria.[17]

13.  The main destinations of DAC aid in 2010 were Sub-Saharan Africa (44%), which also received more aid per head than other regions, followed at some distance by South and Central Asia (19.5%) and Middle East and North Africa (10%).


Aid by destination: DAC donors 2010

Source: OECD Development Assistance Committee Statistics on Resource Flows to Developing Countries Table 27


Aid by destination: UK 2010

Source: OECD Development Assistance Committee Statistics on Resource Flows to Developing Countries Table 27

Note: UK Aid to South and Central Asia is dominated by aid to India, Bangladesh, Pakistan and Afghanistan. Major recipients in Sub-Saharan Africa are Ethiopia, Tanzania, Nigeria, Uganda, Mozambique and Rwanda.

Sub Saharan Africa remains by far the main destination of global and British aid flows. It seems likely that an even higher share of British than of overall DAC aid goes to the region because of the UK's links to its former colonies.

4   Q 9 Back

5   Appendix 5 Back

6   Appendix 5-6  Back

7   DFID 1, para 71 Back

8   China and India are not included since they are not members of the Development Assistance Committee. But their programmes are substantial and growing.  Back

9   Carter and Temple, para 11 Back

10   Riddell, Q 20 Back

11   OECD DAC Back

12   Calculated using data from World Bank, World Development Indicators, Exports of Goods and Services Back

13   Paul Collier, The Bottom Billion (OUP, 2007) Back

14   Q 333 Back

15   DFID 1, para 22, table 1 Back

16   Q 287 Back

17   OECD, The DAC List of ODA Recipients, Factsheet-January 2012 Back

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