Results Report 2009: Aid and economic development: Ripples in the water or a drop in the ocean?

Aid and economic development – ripples in the water or a drop in the ocean ?

Development assistance is small, both in size and as a force for change. Other capital flows to and from developing countries are both larger and more important. Most important of all are the political and economic actors in developing countries – from government leaders to small farmers.

Development assistance improves the political and institutional conditions for economic development. Examples from Malawi, Uganda and Vietnam show that the way aid is used, is more important than the amount.

The fear of mixing aid and business has vanished. But aiding individual companies and individual investments is expensive. We get more for our money by investing in framework conditions that facilitate investment and draw poor people fully into the economy. Norway’s development policy has followed international trends, with a decline in aid for infrastructure and agriculture, but has supported fisheries for many years. Aid for public financial management has improved economic governance in many countries. The conditions are in place for Norway to once again focus on aid for economic infrastructure, as Norfund and SN Power are doing in the field of hydro-electric power.

Norway has consistently supported women as economic actors through micro-financing and vocational training. These measures mean a great deal for the living conditions of individuals, and with other initiatives, such as support for girls’ health and education, they create better societies in the long term. In the short term, however, these womenoriented measures do not leave clear traces in terms of economic growth; they are too few and too small for that.

This is Norad’s third report on the results of Norwegian development cooperation. In 2007 we asked if aid works, and answered: “Yes, but not well enough”. In 2008 we examined the complex international aid system and found no clear differences in the results from the various channels for Norwegian aid.

The 2009 Results Report investigates the private sector as a target, channel and partner in development cooperation. The findings are often encouraging, with many examples of positive contributions to economic development. The Report collates international research, which rejects claims that aid is wasted and undermines economic growth. The Report shows that the economic impact of Norwegian aid varies. Major initiatives, in areas such as clean energy, women-oriented programmes, climate-adapted agriculture and forestry, as well as efforts to fight corruption and the depletion of natural resources, will improve both the direct and the long-term impacts of Norwegian aid for economic development.

Poul Engberg-Pedersen
Director General of Norad