A strategic framework for using Japanese official for using Japanese official development assistance development assistance in Sub-Saharan Africa

Abstract

Foreign aid in Africa is at a crisis stage. The economic literature is divided on usefulness of aid in Africa, and some research in this area has argued for its curtailment, falling short of recommending cancellation. Amidst this controversy, Japan has substantially increased its development assistance in Africa. Over the period 1994-98, Japan gave development grants and loans to some 20 SubSaharan African countries regularly. There is need, therefore, to examine the effectiveness of this aid in reducing poverty, and in supporting sustainable development. There is an emerging consensus that foreign aid may be an effective instrument for sustainable development and for improving the plight of the poor in countries with good policy environments. A good policy environment comprises macroeconomic stability; incentives for investment, accumulation and for participation in local and international markets; social inclusiveness; a viable social infrastructure (public utilities, transport and communications, rule of law); decentralized governance, and a political system supportive of economic reforms. However, research has not provided guidance on how to achieve good policy environments. Reforms to change policy environments have in the past been directed towards aid recipients. It is argued in the report that aid policies of donors need to be changed also, to realign them with needs of beneficiaries. Thus, a good policy environment is broadened to include desirable elements of donor policies as well. Lack of research information on how to create good policy environments, under which to deliver assistance to the needy, is one reason why aid in Africa has not been effective in reducing poverty or in initiating sustainable growth. The report argues strongly that foreign assistance in itself is not bad for African development. It finds no sound basis for calls to reduce aid, other than the economic hardship of donors. The root cause of aid ineffectiveness in Africa is joint failure of African governments and donors to design and implement viable systems of delivering assistance to the poor. Existing top-down mechanisms for aid delivery in Africa leak substantial aid to non-poor, and tend to create or perpetuate dependency. Another principal argument in the report is that reform of policy environments and aid delivery systems is not sufficient for aid effectiveness. A further condition is that aid must be allocated and used strategically if it is to reduce poverty on a sustained basis; or, if it is to create an environment for doing so. As to strategic allocation, donors and governments can play a critical role in directing aid to broad sectors of the economy where it is likely to have the greatest payoffs, both in terms of human development, and in terms of stimulating economic growth. In Africa, where the development of human resources is exceedingly low, there are large benefits from investing aid resources in education, health care, AIDS prevention and cure, and in water and sanitation facilities. Outside the social sectors, additional resources from foreign aid can be invested in agriculture – to provide for food security and promote production of high value farm exports; in industry – to create opportunities for high wage employment and to lay the foundation for industrialization; in regional integration institutions – to enhance regional markets and diffusion of technology; in civic institutions – to create conditions for social inclusiveness in the development process; and in research – to build capacity for generating development ideas locally. As to strategic use of aid, this can be achieved at local levels by involving communities in the delivery of emergency aid – to ensure its proper targeting; in identification of projects to be funded with aid money – to avoid irrelevant investments; and in operations of aid-supported projects – both to build management capacity via learning-by-doing, and to promote local ownership of the projects. Poverty in Sub-Saharan Africa is so generalized that it is unrealistic to expect foreign assistance to turn around the living conditions of the people in a few years. Thus, aid policies of donors should take a long-run view of needs and development priorities of the region. Moreover, given the diversity of the continent, uniform reforms or aid delivery systems cannot be expected to work well in every country. Aid policies and delivery mechanisms have to be country specific. Thus, background information on potential beneficiaries should inform aid policies. The main thrust of the report is that development cannot be taken to a country via foreign aid. Development must come from within a country through design and implementation of locally owned and sustainable programs. Foreign aid is to be seen as a mechanism for facilitating, accelerating, or just supporting country-driven development initiatives. The priority areas for JODA support identified in the report include education and health; agriculture development (including rural non-farm sector); physical infrastructure in rural and urban areas, especially the facilities needed for new information and communication technologies; research & development activities; institutional reforms; and regional integration programs, especially that fall under the umbrella of NEPAD (New Partnership for Africa’s Development)