Foreign assistance is funding from one country to other countries for the purpose of security, development, humanitarian relief and/or bolstering of global diplomacy. Moreover, foreign assistance is an investment in global trade to increase the vitality of a country’s domestic economy through the support of the global economy. The following 10 facts about foreign assistance will paint a clearer picture of the history and scale of foreign assistance in the global economy.
10 Facts About Foreign Assistance
- The Marshall Plan: The Marshall Plan paved the way for the modern foreign assistance framework in 1948, financing more than $15 billion in assistance to help rebuild a war-ravaged Europe. Emerging from the Marshall Plan and the Conference of Sixteen, the Organization for European Economic Co-operation (OEEC) emerged in April 1948. The OEEC established an organization to work on a recovery program and a way to supervise the distribution of aid.
- Creation of the Development Assistance Group (DAG): In January 1960, the Special Economic Committee of the OEEC created the Development Assistance Group (DAG) to serve as a forum for a consultation to aid donors. In September 1961, the Organization for Economic Co-operation and Development (OECD) superseded the OEEC and the DAG became the Development Assistance Committee (DAC). Since then, the DAC has been the foreign assistance venue for the world’s major donor countries and the leading authority in foreign aid statistics. The DAC currently consists of 30 country members, such as Australia, Canada, Japan, Korea and the United States along with other more developed nations. Without the OECD’s DAC, this list of 10 facts about foreign assistance would be dramatically different.
- The Official Development Assistance (ODA) Standard: The DAC defined and adopted the Official Development Assistance (ODA) in 1969 as the gold standard metric for foreign aid. The OECD maintains a list of developing countries and territories that receive ODA. If foreign assistance goes to a country or territory not on the list, people do not consider it ODA. The list is periodically updated and currently contains over 150 countries or territories with per capita incomes below $12,276, as of 2010.
- ODA Contributions: From 1960 to 2017, DAC countries contributed $29 trillion in ODA. In 2017 alone, DAC countries contributed $162 billion in ODA and the top three recipients were India, Afghanistan and Syria.
- Contribution Rates: People measure the contribution rate for each DAC country based on the country’s ratio of ODA to Gross National Income (GNI). The United Nations outlines in Sustainable Developments Goals, Goal 17 to revitalize the global partnership for sustainable development with a target contribution rate of 0.7 percent. In 2018, only three DAC countries exceeded this benchmark including Sweden (1.04 percent), Luxemburg (0.98 percent) and Norway (0.94). Averaged among the 30 DAC countries, reports determine that ODA is 0.31 percent of GNI.
- Africa and Global ODA: Between 2010 and 2017, African countries received the largest share of Global ODA, receiving over $27 billion. Ethiopia, Nigeria and Tanzania were the top three recipients of this foreign assistance. Within African foreign assistance, social sector investment receives the highest volume of commitments typically falling between 30 to 50 percent of the total ODA. Social sector commitments include investments for education, health, population, water quality, civil society and infrastructure services. These investments work to alleviate poverty and improve less developed country’s abilities to participate in the global market.
- China and ODA: Over the last three decades, China has transformed from a recipient of aid to one of the most influential foreign policy players in the world. Although not measured as ODA, China has contributed an estimated $354 billion in foreign assistance between 2000 and 2014, in comparison to approximately $394 billion in U.S. foreign aid (USAID). China has remained non-transparent in its funding of overseas projects, creating an informational black hole for those trying to understand where the country’s money goes.
- The United States and ODA: The United States of America currently and historically ranks as the highest-grossing ODA contributor of the DAC countries, investing $34 billion in 2018. Today, the U.S. maintains foreign assistance programs in over 100 countries across the globe through the oversight of more than 20 different U.S. government agencies. These investments further America’s foreign policy interests on issues ranging from free-market expansion, ensuring stable democracies, combating extremism and confronting the root causes of poverty, while simultaneously fostering global goodwill.
- USAID and Foreign Aid: By sector, USAID devotes the most spending to Emergency Response, HIV/AIDS and Operating Expenses. Since 1986, USAID’s HIV/AIDS program has been at the forefront of the global AIDS crisis. As a key implementer of the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR), more than 13.3 million people are on life-saving antiretroviral treatment; 85.5 million people receive HIV testing and counseling, including more than 11.2 million pregnant women; 6.4 million orphans and vulnerable children receive care and support; and more than 250,000 health care workers have received training to deliver HIV and other health services.
- USAID Spending: By country, USAID spent the most ODA on Jordan ($815 million), followed by Ethiopia and Afghanistan. USAID devoted $519 million of this ODA to Government and Civil Society. Its development strategy focuses on programs in education, water, economic development and energy, democracy, rights and governance, health, gender equality, female empowerment and addressing challenges resulting from the influx of refugees.
These 10 facts about foreign assistance illustrate the international history of investing in other countries’ welfare as an extensive and time tested practice. Without ODA and other avenues of foreign investment, the global economy would likely be a less robust and democratic market. Foreign assistance is not simply charity, but a viable avenue for sustainable global development and international diplomacy. For these reasons, the Borgen Project advocates for the acknowledgment and expansion of USAID for the sake of the world’s future prosperity.
– Adam Weaver