Expected to be high on the agenda of the G20 meeting in Seoul this week is the international aid that rich countries spend on efforts to lift conflict-affected states out of violence, economic collapse, human and material ruin. While many of the problems that these states suffer are homegrown, they are often exacerbated by an ineffective international aid industry that delivers chronically poor results. Yet there's a promising new approach to transforming the international aid system now in play -- and the world's greatest recipients of international aid are already calling for it.
The counterpoint to the G20 is the g7+ group, established in 2008, which consists of Afghanistan, Burundi, the Central African Republic, Chad, Cote D'Ivoire, the Democratic Republic of the Congo, Haiti, Liberia, Nepal, the Solomon Islands, Sierra Leone, Southern Sudan, and Timor-Leste. The g7+, an independent forum of fragile and conflict-affected states, seeks to communicate the concerns of the bottom billion to the top billion. No topic is more important to them than reforming international aid systems, be it in disaster relief, peace operations, or development assistance.
According to the World Bank, net official development assistance and aid globally is approximately $130 billion USD/annum. But are we getting good value for our money? The Associated Press reported in 2009 that after ten years of comprehensive aid, Timor-Leste had slipped on all major indicators. Why is this? A significant amount of aid money, in Timor-Leste and other aid recipient nations, is in the form of expensive technical assistance (i.e. western advisers) or goes toward goods and services purchased outside of the assisted country. As a result, a great deal of aid money does not ultimately go to the country for which it's been designated. Instead, the aid agenda should focus on the generation and equitable distribution of wealth within the targeted country. Successful countries have successful economies, end of story.
Leaders of the international community burn through much of its resources trying to recreate states in their own images. American legal experts, for example, often seek to build American-style legal systems in countries that have never had them. But this can take years and eat up scarce aid money, often to disappointing results.
This fascination with democracy and governance programming often comes at the expense of the "missing middle," the underdeveloped working and middle classes. They want order, good infrastructure, basic governments services, and above all economic prosperity and jobs. Though they are often overlooked by the aid community's emphasis on top-level reforms and assistance for the poorest of the poor, the assisted country's fate will ultimately rest with them. Emerging economies such as Brazil, India, or Indonesia, for example, have risen on the waves of growing and vibrant middle classes, driven by small and medium business.
One of the ways that the international community can best help the missing middle is by directing its massive aid budgets into local business. Business is efficient; its winners survive and create jobs. It is also sustainable; what is more self-sustaining than a profitable, popular enterprise?
Since 2006, there has been a rising groundswell in support of the idea that procuring goods and services locally will create wealth and jobs and build private sector capacity. The United Nations pioneered research in these ideas in 2005-2006, and in 2008 the United Nations Integrated Mission in Timor-Leste endorsed the approach, though they failed to follow through. In 2009, the United Nations Assistance Mission in Afghanistan pushed the international community to buy locally. The United Nations Procurement Division recently signed an agreement with the International Chamber of Commerce to get more local-businesses access to aid money. More recently, NATO, the United States government, and General David Petreaus have all publicly embraced an "Afghan-first" approach in Afghan aid policy. Canada, the U.S., Australia, Norway, and others are now funding local procurement projects in Afghanistan, Timor-Leste, and Haiti.