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How Foreign Aid Affect Developing Countries: The Case of Ethiopia

Year 2018, Volume: 53 Issue: 1, 7 - 38, 08.05.2018

Abstract

Foreign aid has been an
essential tool for the socio-economic development of developing countries since
1960s. It is described by OECD as the financial, technical assistance and
commodity flow to the countries that are in the list of DAC (Development Assistance
Committee). US’s Marshall Plan is a well-known development
assistance program, which was established between 1948 and 1951 under the European
Recovery Program to support Europe in economic crisis after a war became
successful in reducing poverty while increasing economic growth. By taking the
Marshall plan as a model, developed countries have been supporting the
developing countries since then. Recently, the Millennium Development Goals was
also launched in New York in 2000 to finance economic growth of poor countries.
New actors from other parts of the world took their places in providing
development assistance. Despite receiving more than 600 billion USD in the
context of foreign aid, large part of Africa has still remained underdeveloped
and in an extreme poverty. In this paper, we study the impacts of foreign aid
to socio-economic development to Ethiopia. After
reviewing the development and foreign aid literature from primary and secondary
sources, this study benefited from data gathered from World Bank Database,
Transparency International and Freedom House, and then time series data were evaluated
by regression analysis. Our findings indicate that foreign aids do not have
a major influence on GDP growth; but it has a considerable influence on FDI (foreign
direct investment) and unemployment rate in Ethiopia. However, it is observed
that foreign aid has negatively correlated with democracy and corruption levels
in the country. Although, the amount of foreign aid has been continuously
increasing, Ethiopia has remained one of the most corrupt and authoritarian African
countries according to related indices. Consequently, our study concludes that
foreign aid should be redesigned to encourage and reward receiving countries to
advance their democracy and eliminate corruption within the context of recent
philosophy and principle of collaborative governance for long term development.

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Dış Yardımların Gelişmekte Olan Ülkelere Etkisi: Etiyopya Örneği

Year 2018, Volume: 53 Issue: 1, 7 - 38, 08.05.2018

Abstract

Dış yardım, 1960'lardan bu yana gelişmekte olan ülkelerin sosyo-ekonomik olarak kalkınmaları için vazgeçilmez bir araç olmuştur. OECD, bu yardımları DAC (The Development Assistance Committee/Kalkınma Yardımı Komitesi) listesinde yer alan ülkelere finansal, teknik yardım ve emtia akışı olarak tanımlanmaktadır. 1948-1951 yılları arasında Avrupa İyileştirme Programı kapsamında uygulamaya koyulan ABD'nin Marshall Planı, Avrupa'daki ekonomik büyümeyi arttırırken, yoksulluğun azaltılmasını sağlamıştır. Marshall planını örnek alan gelişmiş ülkeler, 1960'lardan bu yana gelişmekte olan ülkeleri desteklemektedirler. Buna ek olarak, yoksul ülkelerin ekonomik büyümesini finanse etmek amacıyla 2000 yılında New York'ta Milenyum Kalkınma Hedefleri ortaya çıkmıştır. Afrika’ya yapılan dış yardım miktarının 600 milyar doları aşmasına rağmen, bu kıtadaki ülkelerin büyük kısmı az gelişmiş ve aşırı derecede fakir kalmıştır. Bu çalışmada, dış yardımın Etiyopya'ya olan sosyo-ekonomik
etkileri incelenmiştir. Kalkınma yardımları ve dış yardım türlerine dair
literatür incelendikten sonra, Dünya Bankası Veri tabanı, Şeffaflık Örgütü ve
Özgürlük Evi gibi resmî kurumlardan edinilen veriler incelenmiş ve daha sonra
bu zaman serisi verileri regresyon analizi yöntemi ile değerlendirilmiştir.
Araştırma bulgularımız, dış yardımın GSYİH üzerinde önemli bir etkisi
olmadığını göstermektedir; ancak dış yardım Etiyopya'da doğrudan yabancı
yatırımlar (FDI) ve işsizlik oranı üzerinde önemli bir etkiye sahiptir. Ancak,
ülkedeki demokrasi ve yolsuzluk seviyeleri ile dış yardımlar arasında anlamlı
bir negatif ilişki olduğu görülmektedir. Her ne kadar dış yardımların miktarı sürekli
artsa da ilgili endekslerde Etiyopya en
yozlaşmış ve en otoriter Afrika ülkelerinden birisi olarak kalmaya
devam etmiştir. Bu nedenle, dış yardımın alıcı ülkelerin demokrasilerini
geliştirmelerini ve yolsuzluğu ortadan kaldırmalarını teşvik eden bir ödül olarak
görülmesi gerekmektedir.

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  • Hansen, Henrik and Finn Tarp. “Aid and growth regressions,” Swedish Economic Policy Review, No. 13, 2006, pp. 9–61.
  • Hansen, Henrik and Finn Tarp. “Policy Arena, Aid Effectiveness Disputed”, Journal of International Development, Vol. 12, 2000, pp. 375-398.
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  • Karras, Gitaru. “Foreign Aid and Long-Run Economic Growth: Empirical Evidence for a Panel of Developing Countries”, Journal of International Development, Vol. 18, No. 1, 2006, pp. 15–28. http://doi.org/10.1002/jid.1187
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There are 68 citations in total.

Details

Primary Language English
Journal Section Research Article
Authors

Ali Mohamed Farah This is me

Murat Önder This is me

Emrah Ayhan This is me

Publication Date May 8, 2018
Published in Issue Year 2018 Volume: 53 Issue: 1

Cite

APA Farah, A. M., Önder, M., & Ayhan, E. (2018). How Foreign Aid Affect Developing Countries: The Case of Ethiopia. Avrasya Etüdleri, 53(1), 7-38.
AMA Farah AM, Önder M, Ayhan E. How Foreign Aid Affect Developing Countries: The Case of Ethiopia. Avrasya Etüdleri. May 2018;53(1):7-38.
Chicago Farah, Ali Mohamed, Murat Önder, and Emrah Ayhan. “How Foreign Aid Affect Developing Countries: The Case of Ethiopia”. Avrasya Etüdleri 53, no. 1 (May 2018): 7-38.
EndNote Farah AM, Önder M, Ayhan E (May 1, 2018) How Foreign Aid Affect Developing Countries: The Case of Ethiopia. Avrasya Etüdleri 53 1 7–38.
IEEE A. M. Farah, M. Önder, and E. Ayhan, “How Foreign Aid Affect Developing Countries: The Case of Ethiopia”, Avrasya Etüdleri, vol. 53, no. 1, pp. 7–38, 2018.
ISNAD Farah, Ali Mohamed et al. “How Foreign Aid Affect Developing Countries: The Case of Ethiopia”. Avrasya Etüdleri 53/1 (May 2018), 7-38.
JAMA Farah AM, Önder M, Ayhan E. How Foreign Aid Affect Developing Countries: The Case of Ethiopia. Avrasya Etüdleri. 2018;53:7–38.
MLA Farah, Ali Mohamed et al. “How Foreign Aid Affect Developing Countries: The Case of Ethiopia”. Avrasya Etüdleri, vol. 53, no. 1, 2018, pp. 7-38.
Vancouver Farah AM, Önder M, Ayhan E. How Foreign Aid Affect Developing Countries: The Case of Ethiopia. Avrasya Etüdleri. 2018;53(1):7-38.