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Fads, Fashions, Fluctuations and Functionality in Foreign Aid

Fads, Fashions, Fluctuations and Functionality in Foreign Aid. Robert W. Herdt 41 st Annual Meeting of the Association for International Agriculture and Rural Development Washington, D.C., June 5-7, 2005. Fads, Fashions, Fluctuations and Functionality in Foreign Aid.

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Fads, Fashions, Fluctuations and Functionality in Foreign Aid

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  1. Fads, Fashions, Fluctuations and Functionality in Foreign Aid Robert W. Herdt 41st Annual Meeting of the Association for International Agriculture and Rural Development Washington, D.C., June 5-7, 2005

  2. Fads, Fashions, Fluctuations and Functionality in Foreign Aid • Aid is beset by fads and fashions – The Silver Bullet Syndrome • Politically driven from the top – Democracy • Effectiveness and impact > evaluation • Functionality – Does aid work? • Does agricultural aid work? What kind? • Need more agricultural aid that works!

  3. Fluctuations: Where does aid go? (from all OECD countries)five year moving averages, million 2001 $

  4. Functionality: Meta-analysis of Impacton rate of economic growth • “First generation studies”: few variables, single equations relating aid to savings 18 of 39 studies showed positive effects • “Second generation studies”: Many variables, several equations; relate aid to growth 40 of 72 studies showed positive effects • “Third generation studies”: multiple equations; many countries, many years; many conditioning factors examined

  5. Fluctuations: Aid to Agriculture (From all OECD countries) • AgAid peaked in 1983 at $9 billion • Fell to less than $5.0 billion by 1997 • Multilaterals went from $4 billion to $1.2 billion • US aid to ag was 17.5% of US aid in 1980-81 and 3.9% in 2000 • Aid to agricultural research is 3-4% of total • Agriculture sector has no convincing story

  6. Fluctuations: Aid to ag sub-sectorsOECD 5-year moving average, million $, deflated

  7. Fluctuations: Agricultural Aid: US, Bilateral, World Bank 2002 constant $ million

  8. Fluctuations: US aid to Agriculture Current $ million

  9. Functionality: Agricultural Growth? • Multi-country studies (Hayami-Ruttan, etc) show • Agricultural growth depends on: • Inputs – explain 25-40% of outputs • Intangibles – explain 50-75% • Intangibles • Technology • Markets • Human capital • Institutions

  10. Functionality: Aid impact on InputsWorld Bank irrigation and drainage • 208 projects 1950-1993: $31 billion • Summary evaluations • 70% to Asia (85% of irrigated land) • “benefits of most projects reached the poor” • median beneficiaries: 2 ha. • average ROR: 15% • 67% >10% ROR (satisfactory) • All bank projects: 76% satisfactory

  11. Functionality: Aid impact on InputsWorld Bank multiple-goal water projects • 336 projects completed 1988-99 • Evaluated against multiple goals: outcomes in agriculture and health, institutional development, sustainability • 1988: 40% satisfactory • 1991: 75% satisfactory • 1996: 53% satisfactory • No reference to ROR or impact on agricultural or economic growth

  12. Functionality: Aid impact on TechnologyResearch • 3 to 4% of AgAid since 1980 • Few evaluations of aid for ag research • But: Many evaluations of agricultural research And many assessments of CGIAR • Alston et. al. meta-analysis of 292 studies reporting 1,886 rates of return • Median ROR on research was 48% • Median ROR on research+extension 37%

  13. Functionality: Aid impact on Technology Crop varieties & CGIAR • Crop varieties in developing countries • 8000 varieties released 1965-1998 • # releases/year in: 1970s 1980s 1990s 160 240 350 • % of area covered: 1970 1980 1990 1998 9 29 46 63 • 36% were CG crosses + 17% one CG parent

  14. Agricultural technology can not be transferred across agro-ecologies Adaptation Capacity is vital Practical, widely usable machinery depends on: • Farm size • Financing capacity • Relative labor/machine cost • Dealer support (engineering & marketing capacity);

  15. Agricultural technology can not be transferred across agro-ecologies 1800 Growing Degree Day Corn Hybrids Corn varieties The six maps show the latest recommended planting week for corn hybrids based on their growing degree day requirement and climatological data for the state developed from 30 year weather station records throughout the state. Penn State | College of Agricultural Sciences | Department of Crop and Soil Sciences 2200 Growing Degree Day Corn Hybrids

  16. Functionality: Impact on Human CapitalHigher Education • World Bank 68 institutions, 25 countries ’64-’90 • Strong support in 1970s; apologetic in 1980s; reversed to strongly positive in 2000 • USAID: 70 institutions in 40 countries 1960s $40 mil, India; $10 mil, Indonesia; $18 mil, Nigeria Support evaporated in ’70s: 18 in ‘74; 10 in ‘78 • Dozens of evaluations in 1980s (after the fact!): • India: >1000 MS& PhDs: teaching capacity, not research • Nigeria:>44,000 students, lack financial support • Not Land Grant model – teaching base

  17. Functionality: Impact on InstitutionsAgricultural credit 1950-80 • Major component US AgAid: cheap credit; fertilizer tied to credit; created new government agencies; required bank credit to agriculture • Results: • OK initially, Price, Weather reverses => skyrocketing default • Governments intervene to ‘forgive’ loans • New agencies or programs initiated • Cycle repeated • Evaluations: • “disappointing”; “serious default” “poor farmers unable to get loans;” “lenders floundering” Adams 1984 • “Impossible to assert that an intervention in the credit markets is justified” Besley 1998 • Is “micro-credit” headed in the same direction?

  18. Functionality: Impact on InstitutionsIntegrated Rural Development • “Integrated” provision of advice, soil testing, farm planning, credit, fertilizer, marketing assistance • # World Bank RD projects: 1971-73 1974-76 1977-79 1979-82 1983-85 5 17 24 21 18 49% successful; average 10.4% ROR • USAID: 1970s to 1987 over 100 IRD projects 1985 evaluation summary: “no longer encouraged” too complex to manage; extra-institutional

  19. Functionality: World Bank loans

  20. Functionality: USAID Summary evaluation, McClelland,1996

  21. Aid to Agriculture: What works? • Aid to agriculture “intangibles” speeds growth • Evaluations: Agriculture aid: effective as any • WORKS: Irrigation, Research, University development (fellowships) • DOESN’T: Integrated rural/area development, Subsidized credit, Land reform • Complex institutional requirements • SHOULD: Price information systems, Cheap internet access, Cell ‘phones

  22. Building capacity takes a long time and steady support • Rockefeller Rice biotechnology program: 1986-2001 • Strategic research $31 mil; Applied $45 mil; Fellowships $26 mil; Meetings $5 mil; Management $7.5 mil Accomplishments • Crop molecular map • Genetic transformation • “Golden rice” • 400 trained scientists • Anther-culture derived rice varieties • Capacity in Asia for informed debate & policy making • Ongoing work w/local $

  23. How to give effective aid • Choose an appropriate strategy – 20% • Suited to the problem and available resources • Carefully identify opportunities beforehand – 20% • But don’t let analysis to lead to paralysis • Find trustworthy, able grantees – 25% • Provide the funds and get out of the way – 5% • Evaluation – 30% • Maintain support 10-15 years or more, until either • The strategy has succeeded; OR • It becomes clear it will not succeed • Universities do Education Best - Fellowships

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