The last couple of weeks have seen a flurry of articles from diverse media outlets, pointing out that a share of aid is going to for-profit consultancy firms in the UK and to big British multinationals; yet aid plays a crucial role in reducing poverty and in supporting development processes, as shown in a recent Save the Children and ODI report.
For this reason, a constructive dialogue about aid needs to put the spotlight on how we can make aid deliver more, and to a higher standard – to ensure that aid delivers the best value for the needs of people living in poverty.
1. Value for money revisited. Current aid debates, warmly embraced by DfID, suggest – and rightly so – that we as taxpayers and the beneficiaries of aid should be getting the best value for money. Technical assistance services are sometimes needed to transfer knowledge and exchange experiences. However, using international consultants from donor countries is not always the cheapest option. According to an OECD study, goods and services bought in developed countries can be 15% to 40% more expensive than those bought in developing countries. This is due to limited competition, which allows providers to charge monopoly prices, or due to high transportation costs, compared to goods and services purchased locally in poorer countries.
In order to get more value for money, goods and services paid with aid should be bought – when and where possible – in developing countries. There is a wealth of expertise in these countries that aid-funded technical assistance could be tapping.
2. Double impact of aid. In addition, by setting targets for aid funds to buy goods and services produced in developing countries, we could not only get better value for our money, but trigger a double impact of aid. Aid provides a good or a service directly, while indirectly it also contributes by creating the job of the person who delivers this good or service. Companies and consultants in developing countries increase their access to markets and business opportunities which, in turn, has the potential to boost local entrepreneurship and created sustained growth and jobs in these countries. In India, the Karnataka Government decided to buy the textiles required for government programmes from local weavers ensuring business opportunities for local producers. There is no reason why aid agencies should not do the same (when and where possible).
DfID has been at the forefront of international debates and practice on how to make aid more effective. We are now faced with the historic opportunity to make our aid both bigger and better, so that in 2013 the GREAT campaign can add an extra line to its great slogan: AID is GREAT Britain.