During the recent protests by Team Anna, Arundhati Roy sought to discredit Anna’s initiative by pointing out that Anna’s organization had received funding from the Ford Foundation and was pursuing a “copy book World Bank” agenda. Madame Roy obviously hadn’t done her homework. Whatever other faults Team Anna may be accused of, a fondness for World Bank values cannot be among them. (Click here for a video of Anna’s right-hand man, Arvind Kejriwal, ripping in to the World Bank.)
Roy and Kejriwal are not alone. Aid agencies like the World Bank have long been the favourite whipping boy of the left in developing countries. And, indeed, they have made their fair share of mistakes and misguided initiatives, though we believe the most strident critics grossly exaggerate these negatives while failing to recognize aid’s successes (Disclaimer: both authors have worked for the World Bank and other aid agencies). Debating aid agencies’ records misses the point, however. The question should no longer be “what should aid agencies do?” but rather “what should the Government of India make aid agencies do?”
A file photo of Team Anna members Arvind Kejriwal and Kiran Bedi.
Critics of aid agencies in India often portray the agencies as ruthless promoters of a hidden, neo-liberal agenda and the Indian state as a weak and easily-manipulated recipient of funds. This couldn’t be further from the truth. While aid agencies may have been in a position of power over India in the past, today it is our government which holds the reins. India no longer needs aid money. Despite its large deficits, the government has no trouble borrowing money and the current share of the budget coming from aid is relatively small (around 3.5%). Nor, with its large number of excellent academics and other experts, does it particularly need their advice. Rather, it is the aid agencies which need India – whether to foster greater bilateral ties so that India may stand as a bulwark against the perceived threat of a rising China (as USAID does) or simply as a source of profit from lending (as the World Bank does). And even those aid agencies with no political motives are often under intense pressure to get money out of the door to recipients.
The problem is that India does not sufficiently exercise this power. The government has taken positive steps in barring all tied aid (in which the funds received must be spent on goods or services from the donor country) and in limiting the number of bilateral donors to a reasonable number through a policy announced in 2003, but much more could be done to ensure that aid is spent effectively and in line with national priorities.
First, the government should take a more proactive approach in defining which sectors, and even which projects, donors should focus on. Given the number of large-scale national schemes in place, this should not be a problem. Currently, the government often adopts a reactive approach when working with donors, accepting their priorities as given. While donor agencies face political constraints of their own and the Indian government cannot simply dictate strategy to them, there is scope for far greater government involvement in this decision-making process. By targeting it to clearly identified focus areas, it is possible to improve the effectiveness of aid.
Second, the central government should require donors to conduct independent, rigorous evaluations of all projects they fund – either directly or through local non-governmental organisations (NGOs) and academic institutions. Such a policy would likely face significant resistance not from the donor agencies, but from other agencies within the government itself. Those responsible for implementing the project may rile at the thought of their efforts being subjected to the scrutiny of external evaluators, Indian or foreign, funded using external aid. Still, such a policy would do much to provide the central government with accurate information on which types of projects are effective and also to foster a culture of evaluation within the government. This idea would find support from experts such as NC Saxena, who have previously called for foreign aid to be focused on monitoring and reviews. Conducting a rigorous, independent evaluation from within the government itself is extremely difficult. Engaging aid agencies to conduct evaluations may allow the government to tie its hands and commit to allowing a truly rigorous evaluation. Further, several aid agencies have developed specialized competencies in conducting rigorous evaluations in recent years.
Third, the government should require donors to coordinate more with each other in their assistance to NGOs. Currently, the government takes a hands-off approach to the assistance foreign donors provide to NGOs and other non-governmental entities, only requiring that the recipient have approval under the Foreign Contribution Regulation Act. The government should continue this hands-off policy but mandate that donors increase the amount of information they share with each other to avoid duplication of effort. Sceptics may point out that “donor coordination” has long been a goal in the aid community and, for just as long, has proved nearly impossible to achieve. But, today, the Indian government has the means to make it happen. In each sector, the government should assign one large bilateral donor the responsibility of maintaining a database of all assistance provided by donors to non-government entities.
The above are merely three ways in which India can take control of the external aid that comes its way. India is no longer dependent on aid. Paradoxically, this very independence may allow India to get more out of the aid it receives. It has only to ask.
Suvojit Chattopadhyay is a development professional with over six years of experience in India, UK and Ghana. Doug Johnson is a development consultant with experience in microfinance, impact evaluation, and payment solutions. Doug has worked in China, India, and Nepal.