Latest News

Commentary: $40 billion in foreign aid may be wasted each year

About $40 billion in global foreign aid may be wasted each year – failing to reach the poor people of the world – due to inefficient, political and nationalistic obstacles set up by aid donors, top aid officials have admitted.

Foreign aid has grown into a vast, unregulated industry in which more than a million workers spend $130 billion donated by the United States, Europe, Japan and the World Bank.

Yet there is too little oversight of all this cash, personnel and investment. And aid experts who know how to educate, heal, irrigate and build roads are routinely overruled by political concerns at the State Department and other foreign ministries.

“There are some estimates that we may be wasting 30 percent of the $130 billion in foreign aid each year” spent by all donor nations, said Brian J. Atwood, former administrator of the U.S. Agency for International Development (USAID).

Atwood, who served under President Clinton, is currently head of the Development Assistance Committee (DAC), a group of aid donors based in Paris that is part of the Organization for Economic Cooperation and Development.

Atwood helped organize a meeting in Busan, South Korea in December of the rich donor countries to try and coordinate and improve aid. You might think it would be an easy target to hit: cut corruption, measure the aid impact, coordinate giving and share the latest techniques in agriculture, health and economic development.

But instead, the Busan forum, like others before it, is still hoping to resolve differences and reform aid.

After all, it is in the least developed countries of the world that the threats to the entire world – rich and poor alike – are emerging. Islamist terrorists like Al Qaeda breed and multiply in lawless, dirt-poor places like Afghanistan, Pakistan, Yemen, Somalia, Nigeria and Mali.

Illnesses such as polio, TB, malaria and HIV/AIDS, also hide in places without law or development. Conflict spreads in places like Sudan and Congo where foreign aid has been unable to bring enough education, jobs, opportunities, food or medicine to make people feel they have a way of life worth defending.

In recent talks at the World Bank in April, Atwood said that only one of the 13 goals for improved aid were met by the world’s donors since they were issued seven years ago.

The barriers to improved aid are deeply entrenched in the politics, budgets, foreign policy and many other goals of the United States and other donors. Aid efficiency that might get the maximum bang for the aid buck seems too often to be overtaken by other concerns.

For example, millions of North Koreans are currently hungry and in danger of death by famine. So the U.S. pledged 240,000 tons of food for women and children – a noble gesture especially since the North Koreans are an irascible group, governed by a dictator, threatening its neighbors with occasional shelling, mines and rocket rattling.

As another former USAID administrator, Andrew Natsios, pointed out in the mid-1990s, when U.S. food aid was blocked by Congress, the U.S. does not let a million people starve to death because we don’t like the cut of their jib or the uniform of their dictator.

But in March, after North Korea moved to test a long range missile – it fizzled out in a few minutes of flight -- Hillary Clinton and Barack Obama simply stopped delivery of the food they pledged.

Some $30 million in U.S. aid to the poor people of Honduras was also stopped in 2009 by Clinton after the country tossed out its pro-Chavez would-be strongman Manuel Zelaya and rejected U.S. entreaties to restore him.

The U.S. also cut financial aid via the International Monetary Fund to Sri Lanka when it refused to end its final offensive against the bloody Tamil Tiger guerrillas who had paralyzed that island nation for three decades.

Foreign aid also shifted away from dealing with hunger, disease, irrigation and education to champion the mania for free markets that swept the Washington consensus. Unfettered, raw commercialism replaced humanitarian concern as the engine of development. This is the same flawed logic that left many of us in the West with shredded retirement funds, houses under water, and pink slips from work.

Countries with most success in development such as Brazil made sure to ignore the social Darwinism pushed by foreign aid wizards and instead offered subsidized food and cash to lift millions from poverty.

Among the major reforms sought by the DAC and other aid experts:

* Coordinate aid so that Malawi or Sri Lanka does not have to deal with 20 different donor aid programs, wasting its narrow pool of experienced domestic administrators on managing a circus parade of visiting experts and dignitaries seeking to be photographed with grateful farmers.

* Get newly wealthy countries such as Brazil, China and India to coordinate their investment and aid with the traditional U.S. and European donors. Instead, there’s been a mad free-for-all by the South bloc to secure sources of food, minerals, resources, power, labor and land.

* Country ownership – to prevent wasting money on white elephants chosen by donors, let recipient countries decide what to do with aid. However they quickly learn to pick only projects acceptable to donors who in the end still control decisions on what to fund.

* Stop tying aid and allow each country to buy machinery, seed, water pumps and other technology on the world market instead of limiting use of Japanese aid to Japan’s products and U.S. aid to U.S. products. Let USAID use cash to buy emergency food in countries of the Third World near a famine, stimulating farmers to grow more, and cut down the huge cost of shipping U.S. food in U.S.-owned ships.

* Predictability – each aid project should not stop each time the donor’s budget year ends. But aid agencies still must implore Congress each year to add the cash to complete projects.

* Halt subsidies to U.S. and other Western farmers because it lets them export wheat, corn and beans cheaper than farmers in Mexico and Africa can grow them.

* Stop using food such as 40 percent of the U.S. corn harvest to make ethanol fuel. This has created a panic shortage of food globally and hunger has risen to afflict one billion people.

* Transparency – The Busan summit did agree to improve transparency but in many countries aid still vanishes into the quicksand of corruption, self interest, politics, tribal rivalries and semi-feudal relationships between farmers and speculators who buy and then market crops. Countries with state run and controlled media can hardly become transparent on use of aid funds.

The Busan forum on aid effectiveness in December was a mega meeting with the UN Secretary General Ban Ki Moon, Hillary Clinton, USAID administrator Rajiv Shah and dozens of aid directors, or heads of state. But the impact of the meeting was “more promise than reality,” according to Atwood. He said he hoped the Busan process and follow up would help political leaders focus on aid reforms and would “hold their feet to the fire.”


Ben Barber has written about the developing world since 1980 for Newsday, the London Observer, the Christian Science Monitor,, Foreign Affairs, the Washington Times and USA TODAY. From 2003 to August, 2010, he was senior writer at the U.S. foreign aid agency. His photojournalism book — GROUNDTRUTH: The Third World at Work at play and at war — is to be published in 2012 by He can be reached at

McClatchy Newspapers did not subsidize the writing of this column; the opinions are those of the writer and do not necessarily represent the views of McClatchy Newspapers or its editors.