Breaking cycle of foreign aid, corruption

While the hundreds of billions of dollars in US foreign assistance spent over the years have dramatically improved many people’s lives and livelihoods around the world, too often the United States’ approach to foreign assistance failed to advance US interests, failed to spur systematic development and enabled and perpetuated dependence and corruption by leaders in recipient countries. 

Since 1991, the United States has provided more than $200 billion in foreign assistance to Africa, yet the African Union reports that African countries lose an estimated $88 billion each year through tax evasion, money laundering and corruption.

Too often, what is needed for economic growth and development is not more money but sound reforms that incentivise enduring private investment and growth.

Instead of insisting on mutual accountability to use US assistance to address the causes of poverty and underdevelopment, too often we funded outputs to allay the symptoms. In doing so, we failed both the American taxpayer and the citizens of developing countries who looked to their governments and ours to help create the conditions to realise a better future.

For decades, the United States did not have a consistent policy as to even whether assistance was charity or a foreign policy tool. We did not require a committed partner, a coherent business plan, equity collateral at risk or funding subject to performance-based disbursements. We infantilised recipient governments instead of having candid discussions on mutual performance expectations. 

Too often our approach to developing countries – frequently perpetuated by the excuses of those same governments – reflected the soft bigotry of low expectations. We excused the lack of political will as “capacity constraints,” dismissed it with “we shouldn’t expect too much,” and did not challenge them when governments acted in contrast to their professed commitments.

Too often, we were content to confuse governments’ commitments for actions. We misinterpreted our access to leaders as influence with those leaders. We mischaracterised aid projects’ outputs as outcomes and programme objectives as results. We misconstrued governments’ permission for us to expend aid as evidence that they shared a commitment to advance professed objectives. 

Perhaps worst, we failed to acknowledge when leaders of aid recipient countries demonstrated over and over through their actions that they prioritised their personal interests over at the expense of the interests of their own country and citizens. 

We virtually never withheld assistance funds because host governments failed to deliver on their commitments, instead we responded by providing even more aid “because they have needs.” By trying to save people from bearing the brunt of the bad governance and corruption of their leaders, we helped perpetuate that very same corruption and bad governance.

Quite simply, we violated the central maxim of international development: the donor cannot want development more than the recipient. By doing so, we fueled moral hazard.

From the pure greed of Malawi’s “Cashgate” scandal under Joyce Banda to the systematic kleptocracies of Bangladesh or South Sudan, by back filling health and social service needs recklessly created by bad governance, we have enabled and underwritten government corruption. 

In the worst cases, such as the predatory abuses of Mali’s Ibrahim Keita or Guinea’s Alpha Conde against their own populations, corruption and the failure to deliver basic public services needs led to military coups and incursions by terrorist organisations.

American foreign assistance is not charity but a tool to advance American diplomacy, security and prosperity. To accomplish these goals, we must focus our assistance and insist on administering it with the host-government buy-in and mutual accountability for outcomes. 

This, in turn, will leave space for market driven growth that will also help close off the means by which malign international actors exploit developing economies and workers. 

We should not be dissuaded by detractors who will attempt to vilify a more transactional approach as “neocolonialism.” Quite the opposite is true. 

insisting on systematic reforms that spur transparent and accountable growth and allow governments to retain funds to support their people, the United States can do more to catalyse actual economic development and the upliftment of developing countries’ societies – and advance tangible US interests – better than we have in recent decades. It is the dependency-oriented, NGO-driven old model of development that is fundamentally colonial in mindset – refusing to respect development nation sovereignty, determinism or agency.

Operationalising this approach involves adopting investment-oriented goals, requirements and incentives:

A serious host nation: Secretary Rubio has been clear, “Americans should not fund failed governments in faraway lands … we will favour those nations that have demonstrated both the ability and the willingness to help themselves.” If a government is not already taking steps to stem corruption and grow the economy when its own funds are at stake, we should have no expectation that they will be better stewards of US funds. Without an aligned host-government, we should focus our resources elsewhere.

The right focus: Our purpose is not to give money away but to catalyse systemic reforms that enable sustainable growth and opportunities for the US and a recipient country. Neither governments nor donors create growth; instead, our roles are to foster conditions for the private sector to invest, create jobs, spur growth and pay taxes to fund public services. Hence, US foreign assistance should focus on curbing corruption and overcoming and remediating binding constraints to growth to lay the foundation for a transparent, level and accountable business enabling environment.

Confidence in the business plan: Most developing countries have national development plans but too often they are unresourced and unprioritised works of fantasy and seldom do governments enforce accountability for their actual implementation. What President Trump explained in clearly delineating America’s national interests in this year’s National Security Strategy is equally true of developing countries: when everything is supposedly a priority, nothing really can be. We should help sincere host governments develop focused, realistic strategies based on core sectors and targeting key constraints that are founded on candid analysis and include specific, tailored tactics.

Skin in the game: If a country is not going to put its own resources behind an effort, it is either not really a priority, they are not really serious or they don’t have confidence in their plan. Few investors would engage where the owner hasn’t put collateral down or his own equity at risk. Why should foreign assistance not require the same? 

Here, the Millennium Challenge Corporation (MCC) has demonstrated two key best practices that ensure buy-in. The first is a requirement for co-financing by the host government. The second is conditions precedent: tangible reform actions a host government takes before funding even begins, to enable the success of the project outcomes.

The right resources: Again, our purpose is not to give assistance away and the history of both corruption and assistance has shown that money is not what is most lacking to spur development. So, building on an analysis of binding constraints to growth and a business plan that we have confidence in, it is incumbent on the United States and the recipient government to craft a bespoke package of technical assistance interventions to inform and enable the reforms needed. 

This should not be an approach of letting a thousand flowers bloom and it must not be built around the question of “how can we help?” Instead, we must start with the questions “what are the outcomes we want to achieve in the American interest and what needs to happen to realise them?” and build an assistance program around that.

Have a contract: Unlike the Development Objective Agreements (DOAGs) of USAID that bound the US to fund sectors but seldom included host governments’ performance commitments, the MCC model again provides a best practice. Explicitly detailing shared objectives and commitments by both governments – typically ratified by the legislature to carry the force of law – reduces uncertainty and improves accountability by enshrining the binding obligations of both parties.

Performance-based funding: Too often, once development projects were approved, donors’ focus turned inward to implementation, achieving outputs, and keeping funds flowing even if receiving governments actively undermined them. 

Gradually, funding agencies have begun shifting to performance-based disbursements. By requiring a host government to demonstrate – through its actions, not merely its rhetoric – that it remains politically and financially committed to achieve professed objectives, we ensure that US assistance achieves greater impact.

By restructuring our approach to foreign assistance and engaging developing countries based on national interest, we can help curb the corruption that deprives families of the hope of a better future. We can deliver lasting and systematic growth alongside recipient countries. And we can deliver tangible value for the American people through a more secure and prosperous world.

Michael C. Gonzales is the US Ambassador to the Republic of Zambia and the US Special Representative to the Common Market of Eastern and Southern Africa (COMESA).