What Is Foreign Aid?

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The end of World War II and with it the start of the Cold War marks the beginning of the use of foreign aid as an instrument to transfer resources between economies (Ruttan, 1996). An important characteristic of foreign aid has been that most aid transfers have taken place on a government-to-government basis. This characteristic emphasises the political dimension of foreign aid. In reality, foreign aid had already been provided for the reconstruction of Europe after World War II and to an extent under colonial improvement schemes. It was the first government program (in the United States) namely the Marshall Plan in 1948 to help restore the devastated and destruction of the war in Western Europe. The number of programs and their diversity, …show more content…
The Colombo Plan was officially launched in July 1951, however, the idea was started in January 1950 as Australia with the other six Commonwealth nations, which were Canada, Sri Lanka (was Ceylon at the time), India, New Zealand, Pakistan and the United Kingdom initiated The Colombo Plan for Cooperative Economic Development [The Colombo Plan] which proposed to help the low income members of the British Commonwealth in the region (India, Pakistan and Sri Lanka known as Ceylon at the time) (Oakman, 2004, 2010). The background of Colombo Plan as part of the importance of foreign aid will be discussed further in Chapter 4.

Lumsdaine (1993) pointed out that voluntary agencies played a very significant role in the overall aid effort in the early background of aid provision. During much of the colonial period, it was voluntary associations, often non-profit based agencies and not rich country governments which were the main providers of key services to poor or needy people within and across most poor countries (Lumsdaine, 1993:
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This is due to the donors’ agreement at the United Nations General Assembly in 1970 to provide foreign aid to a minimum of 0.7 per cent of their GNP to the recipient countries by 1975 (Pearson Report, 1969). However, the target is still remains promised by the donors. Apart from that, few donors are really committed as much as to achieve the target. For example, Australia in the Australia’s International Development Assistance Program 2012-13 (2012), stated Australia remains committed to increasing aid effort to 0.5 per cent of GNI by 2016-17 for their commitment to achieving MDGs. In 2000, GNP was replaced with the similar Gross National Income (GNI) which includes terms of trade adjustment (Anup, 2011). Despite such promise, donors have rarely met their promised target. As Millennium Development Goals (MDGs) hoped to be achieved in 2015, the promised target should reach as promised as well (Anup,

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