Aid industry stifles innovation, creates dependency

DEC 03 -

Curing cancer is much easier than engineering development, says Thomas Dichter, author of Despite Good Intentions: Why Development Assistance to the Third World Has Failed. Dichter, who was recently in Kathmandu for a first-hand view of how foreign aid operates in Nepal, opined that development is an exceedingly complex endeavor. The Post’s Gyanu Adhikari caught up with Dichter for his views on the development sector and the aid industry.  

How did you start in the development sector?

I joined the Peace Corps inspired by John F Kennedy in 1963. I was a student then. I wanted to save the world like many idealistic young people. My basic disappointment is that after almost half a century I haven’t seen very much progress that can be attributed to what I call the aid industry.

What is the aid industry?

I may be sugarcoating the matter but in the 1960s aid was still very much moved by the notion of a good cause. Many of the people working in it were committed to working ourselves out of the job. That was the motto at the time. We would transfer technology and transfer knowledge and poor countries would then pick themselves up and become like us. But, this was obviously naïve. Aid has become an industry. One of its fundamental reasons for being is to keep itself alive.

Who profits from the industry?

In a country like Nepal when you talk to young educated people, and  if you ask them where would you like to work, they will say working with a donor or an INGO is the most exciting and remunerative thing. It’s usually not the government or the private sector that has become attractive. Aid industry is more lucrative.

But, what is wrong with that?  If USAID comes to Nepal and employs 1,000 people, at least some unemployed folks get jobs.

Morally speaking, when the industry’s sole reason for existence is to perpetuate itself, it creates conflict of interest. The result is

that one begins to falsify the objective so

that keeping many projects going, ensuring

that there are more and more agencies involved in funding and managing those projects, becomes the goal. Whether the projects

produce any long-lasting results becomes

less important. So development begins to

fade out of the picture. So you get a game,

and I do believe it’s increasingly become a game that is about producing a lot of numbers, not development.

There is a strong rhetoric especially coming from the nationalist camps that Nepal has become a playground for the development industry. Is this a valid concern?

I have quite the opposite view; I would be happier if real experiments in development were taking place in Nepal. I don’t see radically new or thoughtful innovation. Everybody is doing the same thing being done elsewhere in the world. I don’t see creative linkages being undertaken between the private sector, the government and the INGO sector. And there’s a lot of dependency creation.

Can you explain?

You are creating dependency at the local level. I quote one of them we met: we are totally donor dependent. We hear this in variations from many groups that we have met with. The government itself is dependent. A significant part of national budget comes from aid. But dependency is at its worst at the level of the people themselves. We have learned over 60 years of official developmental aid that dependency undermines sustainability.  

Aid industry is primarily based in the West and the INGOS are run by mostly by Westerners. At the receiving end, however, does a particular group benefit more than others? Aid is generally meant for the poor, but is the money going to the poor?

Well, I sense that you want to move in the direction of an imperialistic agenda here, and I do not agree with that. First of all I don’t agree with the term West. I’d use the term North because you have to include China and Japan which are not Western.

Ok. Let’s say developed countries.

Well, developed countries are becoming less developed and moving towards underdevelopment. We have huge poverty problems in the US, in China, in Europe. Second, while many of the objectives of the industry are poverty eradication, the development agenda is ultimately also about economic development, which must involve the private sector. It must become to a certain degree capitalist because capitalism, with all its faults, does actually solve the problem of economic development, competition, markets, products and consumption. This is what drives the world, for good or bad, although I don’t like many of its effects.

There is lot of negative perception about aid industry because it is seen as benefitting the elites.

 It depends on how you define the elites. The people who run local NGOs the ones who

have the most contracts and deal most

with international donor and INGOs are the ones who have good connections, and speak English the best, and the ones who have solid education — peoplel like yourself. If those people are what you call the elite then yes. It doesn’t mean they are rich.

Some critics allege a lot of the aid money actually goes back to the giving country. True?

True. Look at me for example, were I working here as a consultant, I would be paid money that would go back to my country. But that money would be part of a package that is supposedly for a Nepali project.

Can you give us a sense of proportion what stays here?

If you take a common US approach, which is to give two million dollars for a three-year project, and the primary project manager is a US-based NGO or INGO, that is going to take the biggest piece of the pie. Much of that goes to cover the overhead of that organisation in the US. Some of it will cover travel costs for consultant, so some of that money goes to US travel agencies  and so forth. Then let’s say there are four partners within Nepal who are subcontractors to the project, each one takes its 5-6 percent for its overhead and then it’s quite possible that somewhere between 40-50 percent leaves the country or stays in the country but does not get to where it would do good.

But you do in fact need have to have some management. So yes, there is no question that this layered approach is outdated and it needs to come to an end, particularly in a country like Nepal, which is poor but at the same time is a talented country. There are a lot of human resources, a lot of knowledge and a lot of capacity. There is no reason why a professionally run Nepali organisation cannot be a primary contractor for an aid agency. That is a tension that I see here that needs to be resolved in favor of the Nepali agencies. But the INGOs have a lot of power with their constituencies and this is a tense conflict area. I do believe the day will come when the international and expatriates and the foreigners will start being pushed out of the picture. I hope so, because they are really not adding a lot.

They don’t add a lot but take a lot, do they?

They are taking a bit and this is the self-interested part. They think they all say that they are adding a lot, they all say well there is no substitute for the perspective that an experienced outsider can bring. Many Nepalis also say the same thing. But that will change because more and more Nepalis are spending time abroad and bringing back ideas.

Nepal is probably are one of the most mobile countries in the world. Nepalis are in Middle east, South-east Asia…

If you go to Africa or South-east Asia, there are Nepalis who are running the development projects in those countries.

Let’s change tracks.  You must have seen lot of countries say no to aid.

India and china don’t need aid. They’re still getting aid. I think it’s human nature not to refuse something that is offered to you. I cannot think of a country that has said no to aid.

In Nepal, whenever the government tries to bring out policies to regulate the aid industry, the reaction is that government is turning authoritarian. Do you think that donors need to be regulated better?

Let’s put it this way, as an American, I cannot imagine my government allowing a Nepali NGO to operate projects in Arkansas without regulating it. In fact, I don’t think we would permit foreign NGOs to operate in our country.

Why not?

We would say it’s not your business. I think many countries should say no. There is a movement in Africa, there is an economist in Kenya who has written a lot of articles and publicised himself a lot. His message to the donors is go home and leave us alone and, until you do that we will not develop. And I think at some level, he is quite right. But that’s a movement that is catching on a bit here and there.

You’re saying that there is no INGO operating in the United States?

We consider ourselves as a developed country. INGOs like OXFAM have offices, but that office is there to raise money and not to do

projects. What people in poor countries and people in the development industry need to get a better understanding of is history. The US developed without aid, as did Britain, France, Germany and Japan. And it took time. If you look at US in 1910 or 1930 there were many parts without paved roads, clean water or electricity. And there was a lot of poverty. So development is relatively new, but it occurred with internal resources.

What would be a big benefit of saying no to aid?

One would be more encouraged to rely on one’s own resources. It would force people to be more creative, innovative, and more experimental. They will find ways to get things done. I think there are examples of that in Nepal. We have heard about the small hydropower project which didn’t take a rupee of outside money, which took 10 years to get off the ground and is a functioning profit-making entity. Aid tends to stifle creativity and entrepreneurship.

What’s the substitute for aid?

We need to get back to a state of being  where the exchange of knowledge and exchange of ideas is the basis of development, not the pouring in of money.

Posted on: 2012-12-03 08:47