Saturday, May 13, 2017

When aid is not aid

As the world’s third largest donor of foreign aid  after the U.S. and Germany, the U.K. may be tempted to follow a trend of using aid funds to pay for hosting refugees.

 The Organisation for Economic Co-operation and Development’s Development Assistance Committee (DAC), the organization that coordinates the activities of Western aid donors, sets the guidelines on what can be counted as aid – or “official development assistance”, to use DAC jargon. Most people would assume that what is reported as foreign aid by a donor actually goes to support development projects in poor countries. In reality, however, a number of expenditures can be classified as foreign aid, giving donors large scope in how to organize their international development activities. Expenditures such as membership fees of certain international organizations, peacekeeping, promoting the peaceful use of nuclear energy, scientific cooperation, and even debt relief can all be classified as foreign aid. A donor’s administrative costs related to aid delivery, and the promotion of development awareness within the donor country can also be reported as aid, and so can the costs of caring for refugees in the donor country (during the first year following their arrival).

NGOs have been highly critical about reporting refugee costs, debt relief and donor administrative expenses as foreign aid. Some have been running a campaign to exclude these expenses from aid-eligible costs, and force donors to focus on “genuine” aid. They define this as aid that is actually spent in a recipient country, rather than the donor country. Since 1988, donors have been able to include the costs of caring for refugees – such as costs for housing, refugee camps, education and living allowance for asylum seekers – as part of their aid. Europe’s refugee crisis has led to a significant increase in this practice.

Germany’s foreign aid, for example, jumped from almost $18 billion in 2015 to more than $24.5 billion in 2016, mainly due to an increase in refugee costs. In-country donor refugee costs accounted for 38 percent of all aid in Austria in 2016, and 34 percent, 25 percent and 22 percent in Italy, Germany and Greece respectively. The average for all Western donors was close to 11 percent in 2016. The U.K. has so far been among the few donors who have tried to keep their foreign aid as “genuine” as possible, and did not include many refugee costs in these statistics.

Historically, refugee costs made up around 0.1 to 0.3 percent of all U.K. aid, and while an upward trend began after 2013, it was still among the lowest among Western donors at 2.2 percent in 2015. This means that there is considerable scope for the U.K. to divert a part of its aid budget to fund the costs of hosting new refugees. The government should not do even more to undermine it by cutting genuine aid to spend it on hosting refugees in the U.K. Diverting a part of the aid budget to fund refugee costs could embolden other demands for diverting aid. Some of these, such as the foreign secretary Boris Johnson’s idea of buying off Eastern European E.U.members to support U.K. demands during the Brexit negotiations.

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