The Effects Of War And Peace On Foreign Aid

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Jennifer LeClair
Prof. Nikolas Roberts

The Effects of War and Peace on Foreign Aid

Foreign aid is an important part for financing the developmental programs of the developing countries. It Is currently considered as an important instrument of the foreign policy of states. It acts as a major source of foreign exchange earnings for developing countries. After World War II, developed economies have been providing hundred billions of dollars in terms of foreign aid to the developing world with welfare. Before the First World War, foreign aid was used as a profitable investment. However, it was only in the post-war period that the flow of foreign aid began in a planned way, when developed Western countries started contributing primarily for the development of infrastructure, alleviation of poverty, emergency relief, peace – keeping efforts and socioeconomic reconstruction programs of their war allies. 

It has been observed that the role of foreign aid may be beneficial in the case of certain countries and may not be beneficial for others. It may therefore be observed that geographical condition, economic policies, political policies of the ruling elite, bureaucratic efficiency, role of institution, the level of socioeconomic development and level of technological advancement are some of the conditions in which foreign aid has to functions. These factors differ across region, which are responsible for the variability found in the role and achievement of foreign aid from country to country. 

Some proponents of foreign aid claim that overseas capital inflow is necessary and sufficient for economic growth in the less developed countries. They argue that it is theoretically justified because it closes the gap between investment and domestic savings, overcoming shortages of capital and low levels of skills, it supplements export earnings to finance imports generally and capital goods more specifically, and helps to close the foreign exchange gap. These conclusions are confirmed with the experience of individual countries such as India where foreign aid appears to have played an important role in the development process. In India, foreign aid has financed over 8 percent of the domestic investments and about 15 percent of imports. 

polls suggest India’s aid program in Afghanistan has been generally well-received by Afghans — perhaps no surprise given the two countries’ long-standing cultural ties. As Afghanistan braces for reduced aid levels in light of the NATO drawdown, there are some signs demand for Indian development engagement is growing in the country. he Indian government emphasizes that its aid activities in Afghanistan and elsewhere are demand-driven, a claim which has been supported to some extent by Indian aid experts. A particular area of focus is to engage more with NGOs, small enterprises and academia involved in the conceptualization and delivery of socioeconomic programs in India, so that we can replicate the success of such programs in other developing countries.

India's aid commitments have soared in recent years as the country seeks to improve its strategic, political and economic clout on the world stage, especially as China extends its hand. The move has been welcomed by policymakers who say a central agency will halt leakages, curb delays, slash operation costs and prevent projects being rushed through by individuals misusing their discretionary powers. Furthermore, aid would no longer be driven by territorial divisions and regional interests, making way for a cohesive aid strategy. Aid has already helped foster India's interests in countries such as Afghanistan, Bangladesh and some African countries including Somalia and Ethopia. Pakistan and India have long been jostling for influence in Afghanistan, and, in May 2011, India pledged $500m to Afghanistan in addition to its existing commitment of...
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