Foreign Aid in Bangladesh: Ways to go for participatory development

Sarkar Mohammad Khairul Alam
Deputy Director, FAPAD)

Foreign Aid has been started its journey long before having multidimensional motivations like political, economic and moral allegiances on humanitarian movements. In 1930, colonial power countries expanded aid to develop the infrastructure of subordinated countries. Of course, it would be injustice if we forget few noble hearts who established Ford and Rockefeller Foundations at that time.

During the cold war, the world splitted into First World: Western democratic countries; Second World: Soviet Union and its communist alliances/satellites; and former colonies that just got independence become the Third World. Less powerful third world got a diplomatic way out of being on both sides to get aid from first and second worlds by forming non-aligned movement in early 1950.

In the post war decades, USA started to rebuild Europe by Marshal Plan. At the end of 1960’s Robert McNamara influenced the purpose of aid into a new dimension to meet people’s basic needs in health, education, water and sanitation. He accelerated that idea being the head of WB in 1968.

In 1980, basic needs disappeared off due to oil shock of 1970 which led a global recession. The donor countries started to lend money in order to manage debts to restructure economies called “structural adjustment”, which is now called “austerity programs”.
At this scenario, Bangladesh emerged as a new independent country which was deprived of development accompanied by a distorted economy. The country’s industrial production was almost stopped, agricultural output declined and trading activities was virtually ceased. Bangladesh needed ‘structural adjustment’ and fortunately at that time the international donors moved from ‘austerity programs’ to ‘social services’.
By the great leadership of the Father of the Nation Bangabandhu Sheikh Mujibur Rahman a war destroyed country started to fight back to being rebuilt. That was possible for immense support of international communities and massive inflow of foreign aid. In Bangladesh foreign aid can be characterized in two ways, 1) official development assistance by developed countries and multilateral institutions; 2) unofficial aid through non government charitable foundations.

Bangladseh gets aid in the form of Grants, Loans and Suppliers/Buyers credit categorized as Food aid, Community Aid and Project Aid. According to Wahab’s article, the Aid genesis of Bangladesh can be briefed as 1970s: Post-war rehabilitation and infrastructure, NGOs; 1980s: infrastructure and technical assistance, NGOs, Community based development and service delivery; 1990s: Sector-wise approach (e.g. health, education, governance etc.); 2000s: Sector-wise, and multi-donor joint funding for service delivery and governance; 2010s: Sector-wise, multi-donor, supporting government programs (move away from NGOs).
This huge aid (loan) has been contributing to achieve development but creating liability on every present citizen and the infants yet to be born in future. Every year we have to spare huge money from the annual budget to repay the loan. Here let me remind that this loan and interest is a charged expenditure (mandatory expenditure) as per constitution.

We have been graduated to develop country, so this is the high time to look into the effectiveness and accountability of foreign aid. Bangladesh finance Minister AMA Muhith in his 2018-19 budget speech perfectly articulated the importance of improving the utilization of net foreign assistance (foreign aid).
Since we refund the money with interest it is essential to ensure the transparency and accountability of the money. Aid transparency is important for good governance because aid fund is a strong instrument of financing the budget. In the budget year 2018-2019, among the projected resources 13% is expected from foreign loan and grants. The Constitution of Bangladesh has empowered the Comptroller & Auditor General (CAG) to ensure transparency and accountability of every spending. The office of CAG is the supreme audit Institute (SAI) of Bangladesh.

Internationally, Bangladesh is a signee of Paris Declaration committed to ensure effective aid. There is a high level forum in aid effectiveness. The continuous efforts toward modernizing and deepening development cooperation the disbursement of aid has been marked four notable events, like high level forum on aid effectiveness in Rome 2003; Paris 2005; Accra 2008 and Busan 2011.

Busan (2011), the agreement rooted the formulation of principles for maximizing the impact of aid. The first high level Forum Rome (2003) was the first attempt to find out the principles for aid effectiveness. The Rome declaration emphasized the priority on recipient country’s priority agenda and timing. Second high level forum Paris (2005) is a practical, action oriented road map to improve the quality of aid and its impact on development.

To make the aid more effective these declarations outlines five fundamental principles mainly focusing on taking corruption, development results and measurement of results. Third high level forum Accra (2008) mainly tuned the definition of five pillars of Paris declaration. Forth high level forum (Busan, 2011) focused on strong, sustainable, inclusive development; South-south cooperation; private sector development and combating with corruption.

So, donors and recipients are accountable for accountability, transparency and development results. On behalf of the Comptroller & Auditor General (CAG), Foreign Aided Projects Audit Directorate (FAPAD) is working to ensure accountability and transparency to measure development results. Despite of having many limitations this directorate is trying its level best to scaling up the personnel with international practice to achieve the desired goal.
The figures shown in the tables extend the idea of money recovered through the audit observations of FAPAD. For effective aid utilization, transparency is important. It can help the utilization of aid spending and getting benefits. The state must ensure participatory development having the people on board letting them understand the development loan details how a mega project can influence a distressed person actively. Development information along with its accountability, transparency should be disseminated among the people. Only then the development will be pro-people participatory development.