THE EFFECTS OF FOREIGN AID ON ECONOMIC DEVELOPMENT IN AFGHANISTAN (2001-2015)

Year 2019, Volume: 3 Issue: 2, 110 - 138, 27.10.2019

Müjgan Deniz Zubeyr Ghulam Haıdar

Abstract

The aim of this study is to realize the issue of foreign aid disbursements as practiced in Afghanistan by using objective perspective to specify the effects of foreign aid on economic growth. This research study will recognize the impacts of foreign aid disbursements on economic development as affected by the political and strategic considerations and also by corruption levels which could have significance to future foreign aid programs in developing and post-conflict countries similar to Afghanistan. This research uses secondary data and both qualitative and quantitative methods which is conducted by collecting information from books and articles also collecting socio-economic statistics from reports and surveys to analyse the conditions in Afghanistan. The study examines both advantages and disadvantages of foreign aid on economic development using theory, as well as empirical analysis of transnational countries. The results indicate that foreign aid programs alone are not sufficient and efficacious for the economic growth of post-conflict states like Afghanistan. However, after two decades of foreign aid inflows to Afghanistan, the socio-economic conditions has not been improved, in order to make contribution to development process of poor countries, the potential advantages assists as providing resources to improve infrastructure, agriculture, education and transfer of technology. The GDP growth of Afghanistan has been declined, level of corruption has been increased, poverty rate has been risen and unemployment has been increased in this period. The intended conclusion is to provide recommendations to make foreign aid programs in Afghanistan useful and beneficial to its economic development.

Keywords

Afghanistan, Foreign Aid, Economic Growth

References

• Aikins, Matthieu (2012, October). Contracting the Commanders: Transition and the Political Economy of Afghanistan’s Private Security Industry. Center on International Cooperation, New York University.
• Alesina, A., Weder, B. (2002). Do Corrupt Governments Receive Less Foreign Aid?. American Economic Review, 92(4), 1126-1137.
• Alesina, A. & Dollar, D. (2000). Who Gives Foreign Aid to Whom and Why?, Journal of Economic Growth, 5(1), 33-63.
• Atr Consultıng (2018). Aid Effectiveness in Afghanistan. Swedish Committee for Afghanistan (SCA) Oxfam, p.7(Accessed): https://swedishcommittee.org/sites/default/files/media/aideffectiveness in afghanistan march 2018 0 pdf., 3 July 2018.
• Barfield, T. (2010). Afghanistan: A Cultural and Political History. Princeton University Press.
• Bissio, R. (2008). Paris Declaration on Aid Effectiveness. Presentation at Human Rights Council, Session of the Working Group on the Right to Development, High Task Force on the Implementation of the Right to Development, Geneva, p. 7-15.
• Bjelica, J. & Ruttig, T. (2018). The State of Aid and Poverty in 2018: A new Look at Aid Effectiveness in Afghanistan. Afghanistan Analyst Network, 17 May 2018, (Accessed) https://www.afghanistananalysts.org/the-state-of-aid-and-poverty-in-2018-a-new-look-at-aid-effectiveness-inafghanistan/ , 6 September 2018.
• Boone, P. (1996). Politics and the Effectiveness of Foreign Aid. European Economic Review, 40 (2), 289-329.
• Bräutigam, A. D. & Knack, S. (2004). Foreign Aid, Institutions, and Governance in Sub-Saharan Africa. Economic Development and Cultural Change, 52 (2), 255-285.
• Burnside, C. & Dollar, D. (2000). Aid, Policies, and Growth. The American Economic Review, 90 (4), 847- 868.
• Chenery, H. B. & Strout, A. M. (1966). Foreign Assistance and Economic Development. The American Economic Review, 56 (4), 679-733.
• Corruption Perception Index (2015) Transparency International, (Accessed) https://www.transparency.org/ cpi2015#results-table , 26 March 2018.
• Cullather, N. (2002). Damming Afghanistan: Modernization in a Buffer State. The Journal of American History, 89 (2), 512-537.
• CSO – Central Statistics Organization (2017). Afghanistan Living Conditions Survey 2016-17, Kabul, (Accessed) https://cso.gov.af/Content/file/ALCS/ACLS%202016-17%20Analysis%20report%20 Fullcompressed.pdf, 2 June 2018.
• Deniz, M. & Haidar, Z. G. (2018). The Effects of Foreign Aid On Economic Development in Afghanistan (2001-2015). Basılmamış Yüksek Lisans Tezi, İstanbul Üniversitesi SBE.
• Durbarry, R., Gemmell, N. & Greenaway, D. (1998). New Evidence on the Impact of Foreign Aid on Economic Growth. CREDIT Research Paper, No. 98/8.
• Easterly, W. (2003). Can Foreign Aid Buy Growth?, Journal of Economic Perspectives, 17 (3), 23-48. Eknayake, E. M.& Dasha, C. (2010). The Effect of Foreign Aid on Economic Growth in Developing Countries. Journal of International Business and Cultural Studies, 3, 1.
• Hansen, H. & Tarp, F. (2001). Aid and Growth Regressions. Journal of Development Economics, 64 (2), 547- 570.
• Hopkins, N. & Warren, Z. ed. (2015). Afghanistan in 2015: A Survey of the Afghan People. Asia Foundation, (Accessed) https://asiafoundation.org/resources/pdfs/Afghanistanin2015.pdf, 10 March 2018. Yabancı Kaynaklı Yardımların Afganistan’ın Ekonomik Gelişimi Üzerindeki Etkisi (2001 2015) 137 Intelligent Economist. Types of Foreign Aid, (Accessed) https://www.intelligenteconomist.com/ foreign-aid/, 24 February 2018. Integrity Watch Afghanistan. Aid Effectiveness: Making Aid Transparent in Afghanistan, (Accessed) https://iwaweb.org/wp-content/uploads/2015/12/1-Aid-Effectiveness Making-Aid-Transparentin- Afghanistan.pdf , 22 February 2018.
• Islam, A. (1992). Foreign Aid and Economic Growth: An Econometric Study of Bangladesh. AppliedEconomics, 24 (5), 541-544.
• Lancaster, C. (2008). Foreign Aid: Diplomacy, Development, Domestic Politics, University of Chicago Press,9.
• Livingston, I. S. & O’hanlon, M. (2015). Afghanistan Index. The Brookings Institute, (Accessed) https://www.brookings.edu/afghanistan-index/ , 2 March 2018.
• Lumsdaine, D. H. (1993). Moral Vision in International Politics: The Foreign Aid Regime, 1949-1989,Princeton University Press.
• Martens, B. (2005). Why Do Aid Agencies Exist?. Development Policy Review, 23 (6), 643-663.
• Mobariz, Ahmad (2016). WTO Accession of Afghanistan: Costs, Benefits and Post-Accession Challenges,South Asia Economic Journal, 17 (1), 46-72.
• Morgenthau, H. (1962). A Political Theory of Foreign Aid. American Poltical Science Review, 56 (2), 301-309.
• Mosley, P. (1986). Aid Effectiveness: The Micro-Macro Paradox. Ids Bulletin, 17(2), 22-27.Ministry Of Finance (MoF), News: Delivery Aid Through the Country System. Afghanistan Aid Bulletin, 1 November 2011, (Accessed) http://mof.gov.af/Content/files/ Afghanistan%20Aid%20Bulletin.pdf ,25 February 2018.
• Radelet, S. M. & Clemens, R. B. (2004, February). Aid and Growth : The Current Debate and Some New Evidence. Center for Global Development.
• Radelet, S. (2006). A Primer on Foreign Aid. (Accessed) http://www.who.int/hac/techguidance/training/ analysing_health_systems/a_primer_on_foreign_aid_06.pdf 8 March 2018.
• Rajan, R. G. & Subramanian, A. (2008). Aid and Growth: What does the Cross-Country Evidence Show?. The Review of Economics and Statistics, 90(4), 643-665.
• Rose-Ackerman, S. (1975). The Economics of Corruption. Journal of Public Economics, 4(2), 187-203.
• Rubin, B. R. (2000). The Political Economy of War and Peace in Afghanistan. World Development, 28 (10), 1789-1803.
• Shah, S. M. & Garner, R. (2009). Afghanistan National Development Strategy (ANDS) Formulation Process: Influencing Factors and Challenges, Afghanistan Research and Evaluation Unit, (Accessed) https://areu.org.af/wp-content/uploads/2016/01/904E-ANDS-Formulation-web.pdf. , 6 March 2018.
• Taylor, R. N. (2008, 25 March). 40 % of Afghan Aid Returns to Donor. The Guardian, (Accessed) https:// www.theguardian.com/world/2008/mar/25/afghanistan.internationalaidandddevelopment, 20February 2018.
• OECD (2018, February). Net Official Development Aid (ODA), (Accessed) https://data.oecd.org/oda/netoda.htm, 13 March 2018.
• OECD (2009, May). Evaluation Report Country Programme Evaluation Afghanistan. P.11 (Accessed https://oecd.org/countries/afghanistan/47107291.pdf, 26 February 2018.
• Samim, M. (2016, May). Afghanistan’s Addiction to Foreign Aid. The Diplomat, 19 May 2016, http:// thediplomat.com/2016/05/afghanistan – addiction-to-foreign-aid/ , 12 February 2018.
• Shleifer, A. (2009). Peter Bauer and the Failure of Foreign Aid, Cato Journal, 29, 379. Müjgan DENİZ • Zubeyr Ghulam HAIDAR 138 SIGAR – Special Inspector General to Afghanistan Reconstruction (2018, April). Private Sector Development and Economic Growth, p. 13-5. (Accessed) https://www.sigar.mil/pdf/lessonslearned/SIGAR-18- 38-LL.pdf, 5 July 2018.
• Svensson, J. ( 1999). Foreign Aid and Rent-Seeking, The World Bank.
• The Economist (2012, 14 July). Afghanistan’s Economy, the Hands that Feeds: More Aid is Pledged, but It will not Solve Afghanistan’s Many Problems. The Economist, (Accessed) https://www.economist. com/node/21558635, 22 February 2018. The Government Of Afghanistan – MOMP. Turkmenistan – Afghanistan-Pakistan-India (TAPI) The Pipeline. (Accessed) http://mom.gov.af/en/page/4717, 7 June 2018.
• Torabi, Y., & Delesgues, L. (2008). Afghanistan: Bringing Accountability Back In: From Subjects of Aid to Citizens of the State. Integrity Watch Afghanistan. (Accessed) http://iwaweb.org/wp-content/ uploads/2015/11/02-bringingaccountabilitybackin.pdf , 5 March 2018.
• U.S. Government Accountability Office. (2013, February). Afghanistan: Key Issues for Congressional Oversight. (Accessed) https://www.gao.gov/assets/660/652075.pdf, 10 March 2018.
• World Bank. https://data.worldbank.org/indicator/NY.GDP.MKTP.KD. ZG?locations=AF , 16 March 2018.
• World Bank. World Development Indicators. (Accessed) http://databank.worldbank.org/data/views/ reports/reportwindget.aspx ReportName=CountryProfile&Id=b40fd57&tbar=y&dd=y&inf=n&z,26 May 2018.