Foreign aid: effectively advancing security interests.(weapons of market destruction: ECONOMICS OF SECURITY)

Aid projects must avoid the common problem outlined by Oxford University economist Paul Collier in his recent book The Bottom Billion. In this book, Collier traced a donor's grant to Chad for the construction of rural heath clinics. After deductions for transaction costs, legal and illegal, the percentage of funds that were actually used for the clinics amounted to less than 1 percent. By insisting on local contributions and real partnerships, US government aid can pass a crucial "market test" by funding only those projects that have proven to be successful.

USAID should operate like a foundation, where outside groups--public or private--can bring their ideas to the table and receive funding if they have met the criteria for local partnership. In this way USAID can become more flexible in its responses to local problems.

USAID has had some notable successes using this new type of business model, both in its programs in Eastern Europe and through the Global Development Alliance (GDA) started in 2002. Agriculture production has improved in Angola under a GDA public private partnership with USAID, Chevron, and NGOs. The GDA has also launched a successful public-private partnership in Mindanao with a private US energy company, the Winrock Foundation, and a local NGO. For the first time in 2007, nearly 7,000 households in 227 villages in Mindanao rang in the new year with a light source other than candles. All these partners brought their own time and money into the alliance, thus helping to assure for project success.

While these USAID efforts are without a doubt laudable, they constitute a miniscule part of its multi-billion dollar program. The new partnership model should be the main mode of delivering development assistance if foreign aid is to be effective and relevant. By involving more local individuals, development assistance has a greater chance of working. At the same time, using government aid to motivate more US citizens to engage in partnerships with developing countries can improve US image and national security.

When organizations such as Rotary and Lions Clubs, the YMCA, and United Way International establish indigenous organizations in developing countries, US citizens are helping to improve civil society in developing countries. This approach stands a better chance of helping poor societies than the typical top-down project, which is constrained by a straitjacket of USAID earmarks that may or may not be useful in a particular country.

Operating in new ways in the new developing world will be a tall order for US government aid institutions that are used to old business models and the same universal prescriptions for every country. But if the United States is serious about motivating substantial development in poor countries and enhancing its national security interests in the process, it will need to relinquish these outdated policies and embrace a new kind of aid that encourages local participation and domestic initiative.

CAROL ADELMAN is the Director of the Center for Global Prosperity at the Hudson Institute. She has headed foreign aid programs to Asia, the Middle East, and Central and Eastern Europe at the Office of Economic Opportunity, and she is vice chair of the Presidential HELP Commission to reform aid.

RELATED ARTICLE: ASSISTING THE WORLD

Top Recipients of U.S. Economic Assistance, 1995-2004

(annual average, millions USD at 2004 prices)

United States economic assistance comprises the Child Survival and Health Fund (15% of total aid), development assistance (15%), and international disaster assistance (5%).

Official Development Assistance, 2005 (billions USD)

National Priorities Project; OECD DAC

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