Countries Most in Need of Aid Are Less Likely to Get It – Owen Barder

Summary

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Podcast Summary

The CGD Podcast

Episode: Countries Most in Need of Aid Are Less Likely to Get It – Owen Barder
Date: February 1, 2016
Host: Rajesh Merchandani (B)
Guest: Owen Barder (A), Senior Fellow, Center for Global Development

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Overview

This episode investigates global aid distribution, focusing on the paradox that the poorest countries are receiving a declining share of rising aid budgets. Owen Barder explains recent aid data, highlights national differences in aid quantity and quality, and discusses what donor countries can do to optimize their impact. The conversation also explores the broader context of international development, including policy changes beyond aid and visions for the future of global cooperation.

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Key Discussion Points & Insights

1. Rising Aid Levels, Falling Proportion for the Poorest

• Global Aid at a Historic High: In 2014, aid from OECD countries reached $137.2 billion, a record amount and a 1% increase over the previous year.

  • [00:05]
  • “Sounds a great deal of money, right? ... despite a new high total, the proportion of aid going to the poorest countries has fallen.” — Rajesh [00:17]

• Declining Proportion to Least Developed Countries (LDCs):

  • The share of aid to the poorest countries decreased from 0.33% to 0.3% of total aid and is down in absolute terms as well.
    • [01:44]
  • These are “countries which arguably need aid most ... ought to be getting more aid and if anything, we're giving them a little bit less.” — Owen [01:52]

2. Factors Behind the Shift

• Refugee Crisis:

  • Aid is being diverted to support refugees, especially those from Syria, primarily in middle-income countries like Turkey and Lebanon. This pulls resources away from the very poorest nations.
    • [02:56]
    • “Money ... used mainly in middle income countries, not in the poorest countries, to look after ... Syrian refugees. But that doesn't count as aid to least developed countries.” — Owen [03:03]

• Aid for Economic Growth:

  • Donors favor investments in middle-income countries with better growth prospects, such as Indonesia or Vietnam, over LDCs like Mozambique or Malawi. [03:33]

• National and Strategic Interests:

  • Countries align aid with their own commercial or strategic objectives, focusing on nations where they have greater stakes (e.g., China, India, bordering states of EU).
  • The European Commission spends only 27% of its aid on LDCs, prioritizing neighboring countries. [04:49]

3. What Makes for “Good” Aid?

• Different Aid Objectives:

  • There's tension between using aid to spur broad economic growth/private sector investment, and its use to help those who’d otherwise be left behind.
    • “If you think the job of aid is to reach people that nothing else is going to reach, then this is probably not spending aid in the best possible places.” — Owen [05:44]

• International Target for LDC Aid:

  • The global target is 0.15–0.2% of GNI; currently, rich countries provide only about 0.1%. Hitting the target would require a 50% increase. [06:13]

4. Aid Rankings: Quantity vs. Quality

• Commitment to Development Index (CDI):

  • CGD's CDI ranks countries by the development-friendliness of their policies, including but not limited to aid. [06:32]
  • “One of which is aid. We also have trade, migration, finance, environment, security and technology.” — Rajesh [06:49]

• Who Does Aid "Best"?

  • Top performers:
    • Denmark: most generous and effective.
    • Ireland: high quality of aid despite lower volume, ranking second. [08:16]
  • Quality Metrics:
    • The Quality of Aid Index (“Quoda”) uses 31 indicators to assess factors like recipient-country alignment, predictability, transparency, burden, and lesson learning. [08:22]
    • “Irish aid is the only bilateral donor that does better than the World Bank.” — Owen [09:29]

• Quantity vs. Quality Correlation:

  • Some correlation exists, but notable outliers:
    • Luxembourg and Norway: High quantity, lower quality.
    • Ireland and Canada: Lower quantity, higher quality.
    • “[T]here are outliers in both directions.” — Owen [09:57]

5. Lessons and Future Directions

• Improving Aid Quality:

  • With tight budgets, improving effectiveness is vital:
    • “There is an awful lot that we can do to improve the quality of the aid we're already spending.” — Owen [10:49]

• Risks:

  • Shift toward national-interest-driven aid may undermine effectiveness (“unlearning hard-won battles of the last decade or so ...”).
    • Country ownership remains essential: “If you don't have ownership of aid programs in developing countries, that aid will be ineffective.” — Owen [11:22]

• Aid's Place in the Broader Development Picture:

  • Aid is shrinking as a proportion of overall development finance but is still crucial for the poorest countries. [12:40]
  • Many impactful policies are non-aid: trade, migration, intellectual property, environment. [13:11]

6. Evolution and Future of Global Development

• Changing Mindsets:

  • There’s been major progress: from a “rich countries giving aid to poor countries” view to more complex, interconnected global cooperation as reflected in the SDGs.
    • “[T]he set of objectives ... are not merely those where we can provide aid to finance better public services ... now we’re looking for sustainable, prolonged economic growth, rising prosperity, ... tackling inequality and improving the quality of people’s lives.” — Owen [13:54]

• Looking Ahead 15 Years:

  • Hope for near-eradication of absolute poverty, but ongoing need for global frameworks to support those still vulnerable.
  • Envisions a “global safety net” as a new normal:
    • “[W]e'll be thinking about how the world's richest people can make a small contribution to ensure that everybody has some basic minimum to live on... in 15 years’ time.” — Owen [16:59]

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Notable Quotes & Memorable Moments

• On shifting aid priorities:

  • “Most rich countries have more at stake commercially and strategically in countries like... China, India, Indonesia than they do in some of the poorest, least developed countries.” — Owen [04:16]

• On effectiveness:

  • “The more I study aid, the less I feel I understand it. But ... aid programs that are not really driven by countries themselves... will be ineffective.” — Owen [11:00]

• On non-aid levers:

  • “There are many things that wealthy countries can do that impact on the poorest countries that are not to do with development finance at all. They're to do with trade policy or intellectual property or migration.” — Owen [13:00]

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Key Timestamps

• [00:05] Aid at record levels but declining proportion for LDCs
• [01:44] Poorest countries getting less aid
• [02:56] Impact of Syrian refugee crisis and middle-income countries
• [04:49] EU aid allocation example
• [06:32] Introduction of the Commitment to Development Index
• [08:16] Denmark and Ireland’s aid performance
• [09:29] Multilaterals vs. bilaterals on aid quality
• [10:49] Lessons for improving aid quality
• [12:40] Aid’s relative importance for development finance
• [13:54] SDGs and evolving development paradigms
• [15:46] 15-year future vision and the idea of a global safety net

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Closing Reflection

Owen Barder and Rajesh Merchandani provide a nuanced look at both the promise and pitfalls of international aid. While total aid is rising, its impact risks diminishing for those who need it most—a challenge compounded by political, strategic, and economic shifts in donor countries. Quality, not just quantity, matters; country ownership and effectiveness need to remain at the forefront. Broader international policy coherence—across trade, migration, the environment, and more—is essential for meaningful, sustainable development.

Transcript

[A]

Foreign.

[B]

Merchandani and welcome to the CGD podcast. Today, which country's aid is the best and who is giving what to whom? Recent statistics from the rich country club of the OECD tell us that the amount of aid given to poor countries was at an all time high. In 2014, the latest year for which we have figures, the amount was $137.2 billion, up by just over 1% on the previous year. Amazing numbers. Yes. Sounds a great deal of money, right? Well, a quick analysis, however, shows that despite a new hire total, the proportion of aid going to the poorest countries has fallen. Today on the CGD podcast, Owen Barda, our senior fellow who leads our Europe program, joins me to discuss who does it best when we're talking about giving aid and what else countries should be doing beyond aid to improve development. Owen, welcome.

[A]

Thanks very much. Richard.

[B]

Let's start with those OECD figures because I know you wrote a blog about this a couple of weeks ago when they came out a record high of $137.2 billion in 2014. Is that a good thing or not?

[A]

I think it is a good thing. Not everybody, as you know, amongst our colleagues, is as much of a supporter of foreign assistance as I am. I think it up unquestionably does good around the world. We're still a long way from the international target of rich countries providing 0.7% of their national income as aid.

[B]

Yes, I think so. These figures suggest it was 0.3.

[A]

It comes out on average as 0.3. So there are some countries like the UK and the Scandinavian countries that are meeting the 0.7% target, lots of countries that are not. But it's a good thing that it's.

[B]

Gone up in total, unequivocally a good thing.

[A]

These numbers, well, within the numbers there are, of course, there's a lot where we could do better. And one of those most striking numbers this year is that the amount of aid we're giving to the poorest countries, the least developed countries, has actually gone down. It's gone down from 0.33% to 0.3% of total aid. So it's under a third and it's gone down in real terms and cash terms. So these are the countries which arguably need aid most. These are the countries that are least likely to be getting aid from investment or remittances from other sources where the jobs are not being created at the moment to finance public services. So these countries ought to be getting more aid and if anything we're giving them a little bit less.

[B]

How is that possible when all the talk last year around the SDGs was of, yes, the importance of unlocking domestic resources in countries that are growing, but the continuing importance, the increasing importance of aid for the poorest and most vulnerable. So how can we find ourselves in a situation where the amount of aid actually going to those countries has gone down?

[A]

So there are various things going on here. One, a big part of the story here is money that's being used to pay for refugees, particularly from the crisis in Syria. So that money is being used mainly in middle income countries, not in the poorest countries, to look after a group who are very vulnerable and need our help, the Syrian refugees. But that doesn't count as aid to least developed countries. So for example, places like Turkey and Lebanon are receiving a lot of foreign assistance. So that's part of the story. Another part of the story is the growing move to use aid to promote economic growth and prosperity. And people are looking for places they can invest, they can invest in productive businesses. And most of those opportunities are in the faster growing middle income countries rather than in the very poorest countries. So as countries like Germany look to make more loans and that's increasing, they're mainly making them in places like Indonesia or Vietnam rather than places like Mozambique or Malawi. And another part of the story is that countries like the UK are more self consciously using aid not only to reduce poverty around the world, but to promote their own national and strategic interests. Now, aid has always been used by countries to promote their national interests, but the truth is that most rich countries have more at stake commercially and strategically in countries like, like China, India, Indonesia than they do in some of the poorest, least developed countries.

[B]

So a country could be giving generously, but yet, if you like, skewing its contributions towards areas that don't just help the poorest countries, but that reflect its own national priorities. Are there kind of examples of that that you would particularly pinpoint?

[A]

Yes, I mean, an obvious example is the aid that is being spent by the European Commission on behalf of the European member states, of which only 27% goes to least developed countries. So a lot of that aid is going to places like Turkey, Serbia, Morocco, places on the border of the European Union in which the European Union has an interest in promoting their stability and economic well being, but which are not the poorest countries in the world. Now that doesn't mean that it's a bad, bad idea to be doing that, but it does mean that within the overall aid budget there's less money available for the least developed countries.

[B]

So in a way, by doing it that way, they're not doing aid as well as they could do aid.

[A]

Well, it depends what you think aid is for. And if you think that part of what makes aid successful is mixing in with private enterprise in promoting growth and jobs, then maybe they're spending it in places where it's going to have the biggest impact. If you think the job of aid is to reach people that nothing else is going to reach, then this is probably not spending aid in the best possible places. So you can't just look at the income status to see whether it's going to be effective there. But if you think that we're going to live by our commitment to leave nobody behind, then we do need to be spending a higher proportion of aid in the poorest countries. And in fact, there's an international target. Rather bizarrely, the target is 0.15 to 0.2% of GNI should be spent in the least developed countries and we're down at 0.1%. So we would have to increase aid by 50% in the least developed countries to hit the international target.

[B]

Now, each year your team publishes the Commitment to Development Index CDI Index. It's a ranking of countries based on how development friendly their policies are measured across seven different indicators, one of which is aid. We also have trade, migration, finance, environment, security and technology. I think I got all seven there, didn't I?

[A]

Well done. Great.

[B]

Thank you. This is measuring the policies of rich countries, I must add. So what you've done is that you've delved deeper into the aid data to figure out which countries do aid the best. Going off on what we were just talking about, about, you know, whether they can do aid better, whether aid is being spent in the right place, what the priorities are for aid. Given all that and what you've been working on, the numbers, you've been crunching, who comes out well, who does aid best.

[A]

So we've got a paper coming out on this that will set out the details. And as you say, what we're looking at is both the amount of aid that each country gives, which is what we normally see in rankings, with the Scandinavian countries that are spending 0.7% come top and we've been looking at aid quality and we've taken the two together. Now, rather boringly, it's still a Scandinavian country that comes top. Denmark, which has both very generous aid budget and is very effective, comes, comes top of the rankings. But there are, interestingly, a Country like Ireland, which does not meet the 0.7% target in terms of aid volume, is much further down the pack, but it has such an outstandingly high quality of aid on our measure that that actually comes second to Denmark on our overall ranking.

[B]

And how has that worked out? When you say an outstanding quality of aid, what's that base?

[A]

So we have a separate CGD publication called Quoda, which we do with the Brookings Institution, which is the Quality of Aid Index. And that looks at 31 different measures of aid quality. And what we've done with the Commitment to Development Index is we've taken those 31 different indicators and we've put them together to produce an overall score for the quality of each country's aid. And we can do it both for countries and for individual institutions like Irish Aid or the World Bank. And those measures look at things like whether we're imposing a big burden on recipient countries, whether we're aligning with recipient country priorities, whether the aid is predictable, whether it's transparent, whether there are good mechanisms in place for learning and further for lesson learning and evaluation and so on. So we have these 31 different indicators, most of which are taken from international agreements about what makes aid effective. And what we're doing is we're looking to see whether countries are living up to the commitments they've made to make their aid more effective.

[B]

And Ireland comes out really well.

[A]

And Ireland comes out extremely well on that. Irish aid is the only bilateral donor that does better than the World Bank. The World bank also does extremely well on that measure of aid effectiveness. In fact, in general, the multilateral institutions do better, marginally better, than the bilateral institutions on that index.

[B]

Is there a kind of correlation, apart from Ireland, between countries quantity of aid and their quality of aid? Would you expect better aid from countries that are more generous or not necessarily?

[A]

There is. If you were to plot the monograph, you'd see a kind of broad upward trend. The countries that do best in of terms terms of quality on the whole, have a higher quality, but there are big outliers. So a country like Luxembourg or Norway, both are very generous in terms of the amount of aid they provide, but actually do pretty badly on our aid quality score. And countries like Ireland and to a lesser extent Canada do much less well on the quantity of aid they give, but well on the quality of aid they give. So there is. Statistically, I think you'll find there is a correlation, but there are outliers in both directions.

[B]

Is there a lesson for countries here to be learned about how to do aid.

[A]

I think there is, I think it is important that given that budgets are tight and that we're spending far less than we've committed to spend on aid, that there is an awful lot that we can do to improve the quality of the aid we're already spending. And in particular that we can look and see how some countries do this well and we can spread those best practices around the world. And I think there is a worry that the current moves that we, that we're seeing across donor countries towards aid that is more targeted around those countries own national interests. I think we're unlearning some of the hard won battles of the last decade or so of what makes aid effective. The more I study aid, the less I feel I understand it. But one of the things that we've really learned is that aid programs that are not really driven by countries themselves, the phrase is, country ownership is a terrible phrase. But if you don't have ownership of aid programs in developing countries, that aid will be ineffective. And as we move more to aid that's driven by our commercial interests or our worries about migration, or our desire to tackle the refugee crisis, we seem to be moving away from country ownership aid. And that's bound to make aid less effective. So I think one of the lessons is that we need to concentrate not only in making sure that aid, the amount of aid we give stays high, but we really need to keep the pressure on to make sure that the quality of that aid stays high.

[B]

Bearing in mind at the same time that I know we've spent an entire podcast talking about aid, and a lot of work is done on aid, but aid is a small and declining proportion of development finance these days.

[A]

Aid is two things. One is it's not the biggest part of development finance, although for the very poorest countries it is still very important. And that's why this focus that we were discussing earlier for least developed countries is so important. The other thing is there are many things that wealthy countries can do that impact on the poorest countries that are not to do with development free finance at all. They're to do with trade policy or intellectual property or migration. The list that you rattled off earlier.

[B]

So the importance of policies beyond aid is something that CGD has been talking about for many years. This is now actually our 15th year. We're celebrating our 15th anniversary, as you know. Do you think over those first 15 years of CGD's history, our adolescence, if you, if you like, that countries have come to see development differently? Or do we still have many, many decades worth of work ahead of us to change the mindsets of governments, rich country governments and institutions about how to help people in poor countries.

[A]

Best I think the world has come a long way and it's really embodied in the Sustainable development goals, the SDGs or the global global goals that were agreed last year, where it's really clear that the set of objectives that we're trying to achieve are not merely those where we can provide aid to finance better public services in poor countries, but we're looking now for sustainable, prolonged economic growth, rising prosperity, greater emphasis on not only environmental sustainability at tackling inequality and improving the quality of people's lives. And I think everybody realizes that those are changes in the economy and society that you can't buy with foreign aid. This will come about through, for example, greater trade, greater sharing of technologies, more movement of people around the world. These are the kinds of change in public policy that we need to see. And we also need to work together better on global goals, on being able, for example, to protect the planet from climate change. And again, that's not something you can do with foreign assistance. That's something you do by agreeing changes in policy. So I think the world is recognizing that we have to improve our policies in all these areas if we're going to meet these global development targets. So when CGD began fiscal 15 years ago, you could think of the world as a group of rich countries that were handing over some aid to a group of very poor countries. Today it looks very different. The spectrum is much broader from poor, through middle income countries to rich. Thank God, that's a lot of people who've been lifted out of poverty by economic growth. And it means, I think now we have to think in terms of global cooperation across all those countries to meet these shared goals.

[B]

What's it going to look like in 15 years from now when CGD turns 30?

[A]

So one of the things I hope that in 15 years time we will have either eradicated absolute poverty or come very, very close to doing so. But we've got to remember that absolute poverty, measured as a dollar or a dollar 25 or $1.90 per day, is still a very, very low bar. Much of the world will still be living on three, four, five dollars a day. And that is an amount of money that you and I couldn't live on. Actually this is a purchasing power parity. So this is you, you shouldn't be thinking to yourself, well, if I lived in India, I could live on $5 a day. This is measured at what $5 would buy you in America. So we will still have an enormous amount of work to do to make sure that everybody in the world has a decent standard of living, has access to public services, decent health care. We'll still be trying to figure out how to solve problems of global cooperation, ensuring peace, ensuring environmental stability, ensuring financial stability. All these issues, I think, will still be with us, but we will, I think then be dealing with far fewer very poor countries. But we will still have pockets of poverty and marginalized people across the world who will need some kind of help. I think perhaps in 15 years we'll be thinking much more in terms of a global safety net for everybody. So instead of thinking of national safety nets entirely, we'll be thinking about how the world's role richest people can make a small contribution to ensure that everybody has some basic minimum to live on. I think that will be a much more commonly accepted idea in 15 years time.

[B]

Okay, well, in 15 years let's come back and review our progress when we're both more grey and more haggard. Owen, for the moment, thanks very much.

[A]

Thanks, Rajesh.

[B]

You can find out about Owen's new paper which asks the question who does aid best? It's going to be on our website. Also, if you don't know about the quality of aid quota that Owen was referencing, that was a product developed by Nancy Birdsall and also Homie Karas of the Brookings Institution. You can find out about that on our website as well as everything else we're doing that. Address cgdev.org and remember to join me, Rajesh Merchandani, for the next podcast from the Centre for Global Development.