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“Foreign AID Scenery in

Bangladesh”

1

Report
On

Foreign AID Scenery in Bangladesh
Submitted To:
Jannatul Ferdous
Senior Lecturer
Department of Business Administration
Prime University

Submitted By: Group - D

1.
2.
3.
4.
5.

Name
Md. Shakil Ahmed (L)
Sabuj Sheik
Tanvir Rahaman
Kamrul Hasan
Tania Khatun

ID
131020101069
131020101105
131020101074
131020101064
131020101084

Batch: 32nd
Bachelor of Business Administration
Department of Business Administration
Prime University
Date of Submission: 09 December, 2015

2

we firmly believe that. On behalf of Group Members. So. We have tried hard to fulfill your expectations by sharing details of each and every topic and avoiding unnecessary amplification of the topics. these knowledge and experiences will help us in our professional life.Letter of Transmittal Date: 09 December. This a great pleasure to submit our report on "Foreign AID Scenery in Bangladesh”. It was a golden opportunity for our knowledge and practical experiences regarding the procedures and functions while working. Sincerely yours. Prime University. 2015 To Jannatul Ferdous Senior Lecturer Department of Business Administration Prime University Subject: Submission of Report on “Foreign AID Scenery in Bangladesh”. Dear Sir. Shakil Ahmed ID: 131020101069 Batch: 32nd Department of Business Administration. ----------------------Md. 3 . Therefore. we will be very much glad to hear from you for further clarification.

Shakil Ahmed ID: 131020101069 Batch: 32nd Department of Business Administration. Md. hereby declare that the report titled " Foreign AID Scenery in Bangladesh” is prepared by our group after completion of two week works from internet and various books. ………………… Md. the report is prepared exclusively for academic purpose not for any other purposes. I also would like to confirm that. 4 . Prime University. On behalf of Group Members.Declaration I. Shakil Ahmed.

related initiatives are primarily spearheaded by the Economic Relations Division of the Ministry of Finance through its Aid Effectiveness Unit (AEU). programming and budgeting process has been limited. In fiscal year (FY) 2009/10. its reliance on these forms of aid gradually decreased so much so that. in 2000-2010. Different surveys and assessments have come to the conclusion that the development assistance provided by a wide range of partners could produce much better results should they be better coordinated. in the light of the unit’s capacity and institutional arrangements. however. it has been pointed out that strong government leadership. food aid and commodity aid together accounted for only 6% of total aid. On the Government side. The effectiveness of foreign assistance as a means to contribute to sustainable development in the country has. The pattern of foreign aid has undergone a striking transformation in Bangladesh during the last four decades. improving aid effectiveness is a joint responsibility of the Government of Bangladesh and its development partners. at times. progress towards integrating aid and development effectiveness considerations into the national development planning. steadily grew over the years.3 billion over the 40-year period. One has to be realistic. Despite laudable achievements at the policy level. been the subject of debate. This report presents the findings and recommendations of a review of policies and procedures relating to aid management in Bangladesh. concerning the AEU’s ability to instigate and manage the related change process. The assessment is based on the analysis of relevant studies and other documents as well as discussions with a number of government officials. involved directly or indirectly. as well as more harmonized and aligned with national priorities and systems. as well as effective and efficient government institutions are crucial to ensure that foreign aid is effectively utilized. the amount of foreign aid disbursed was US$ 2. The share of project aid. it constitutes almost 50 percent of the country’s annual development budget. Hence.2 billion. 5 . from 26% during 19711980 to 94% during 2000-2010. In FY 2009/10. As the country developed. The Government of Bangladesh (GoB) has taken considerable steps towards local implementation of the global aid effectiveness agenda (Paris Declaration principles and Accra Agenda for Action) in recent years. with aid management. Similarly.Executive Summary Foreign aid plays an important role in Bangladesh. Although aid only accounts for roughly 2 percent of GNI. on the other hand. The average yearly aid totaled US$ 1. project aid constituted 96% of total foreign aid.

No.1 1.3 1.4 1. Recommendations & Conclusion Findings Recommendations 3 4 5 7 8 9 9 9 9 10 11 12 17 18 20 22 23 24 25 Concluding Remarks Reference & Bibliography 26 27 6 .Two: Foreign AID Scenery in Bangladesh Definition of foreign Aid Historical Background of foreign aid Foreign AID Scenery in Bangladesh Overview of Aid Flows to Bangladesh Economic Effects of Foreign Policy of Bangladesh Advantages and Disadvantages of Foreign Aid Chapter. Letter of Transmittal Student Declaration Executive Summary Chapter.5 2.2 3.3 Page No.Table of Contents Sl.2 2.3 2.2 1.One: Introduction Introduction Origin of the report Objectives of the Report Methodology of the Report Limitation of the Report Chapter.1 3.Three: Findings.1 2.6 3.4 2.5 2. Topic name 1.

ONE INTRODUCTION 7 .CHAPTER .

reconstruction of the newly independent country. Bilateral aid is given directly by a donor to a recipient country whereas multilateral aid is channeled through an international organization. famine. The life expectancy at birth its people is only 65 years. to promote economic development or to finance Military expenditures (Black. 8 . The current (2014) GDP of this country is $116. pp. it also gets external assistance in form of food and commodity aid for various purposes in different years from the donors. 1997. Bangladesh is considered as one of the poorest and most densely populated countries in the world. Over the period of time. or untied and available for Expenditure anywhere. namely. cyclones etc. Bangladesh is a foreign aid recipient country since its independence in 1971. It receives foreign assistance mainly to finance the budget or trade deficit and the annual development program (ADP) over the period of time. namely. without direct contact between donors and particulars recipients. commodity. While a Military government ruled this country for eight years (1982-1990). and the adult literacy is only 57. project or Technical assistance. 20022006). to overcome the various natural disasters such as flood. 2010).09).4 billion with per capita GDP $ 859.1 Introduction Foreign aid is one of the important sources to finance the development Program in developing countries. The aim of this paper is to examine the effect of foreign aid on the economic growth of Bangladesh. 20092012). whether the foreign aid has any positive effect on the economic development of the recipient countries.91 percent (BBS. Aid may also be given in form of food. Mainly for. grants and interest based loans. Moreover. Bangladesh is not exception to this. Aid fund is divided into two parts. Foreign aid can be defined as the economic assistance from one country to another country. this is a topic of intense debate that. Bangladesh is a low income country with yearly 6. Aid may take the form of outright gifts of Money. intended either to provide Humanitarian relief in emergencies. BAL (Bangladesh Awami League) government for two terms (1996-2001. Different democratic governments have been ruling this country since 1991.1. which may be tied to purchase from the donors. More than 154 million people lives in this country with 47 million poor people. BNP (Bangladesh Nationalist Party) government for two terms (1991-1995.03 percent GDP growth and most of its income is generated from the industrial sector followed by agricultural sector (GOB 2013).

Jannatul Ferdous.it are given below: i) Primary ii) Secondary Discuss are given below: i) Primary: We are not use in primary methodology. which is a part of the program. different website etc. To fulfill this requirement we work as an intern in Foreign AID. I proposed the “Foreign AID in Bangladesh” and my institution supervisor at Prime University.  To know about the Economic Effect of Bangladesh through Foreign AID.4 Methodology: There are two types of methodology .5 Limitation: While preparing the term paper. ii) Secondary: We are using secondary methodology such as internet. we had to face some difficulties such as: *Lack of experience to prepare a term paper about Foreign AID Scenery in Bangladesh. 1. 1.3 Objectives of the Report: The objectives of the study are as follows:  To know about the Foreign AID. books. it helped us a lot of to compare theoretical knowledge with internet used. 1. it is a requirement after the attending all the required courses the “Foreign AID in Bangladesh”. *Lack of sufficient knowledge *lack of information and documents to support our study.  To know about the Foreign AID Scenery in Bangladesh.  To know about the Historical Background of Foreign AID in Bangladesh. 9 . Besides.  To learn about the advantages and disadvantages of Foreign AID.1.2 Origin of the report: For student of BBA. duly approved it. A PART FROM THAT.

TWO “Foreign AID Scenery in Bangladesh” 10 .CHAPTER .

military. without direct contact between donors and particulars recipients. Aid may take the form of outright gifts of Money. Aid may also be given in form of food. Bilateral aid is given directly by a donor to a recipient country whereas multilateral aid is channeled through an international organization. which may be tied to purchase from the donors. Foreign aid can be defined as the Economic assistance from one country to another country. The resources can take the form of grants or concessional credits (e. intended either to provide Humanitarian relief in emergencies. or untied and available for Expenditure anywhere.. goods. export credits). The most common type of foreign aid is official development assistance (ODA). to Promote economic development or to finance Military expenditures. project or technical assistance. 11 . Aid can be economic. or emergency humanitarian (e. aid given following natural disasters). commodity.. which is assistance given to promote development and to combat poverty.g.2. Foreign aid can involve a transfer of financial resources or commodities (e.1 Definition of foreign Aid: Foreign aid the international transfer of capital.g. Aid fund is divided into two parts. food or military equipment) or technical advice and training. grants and interest based loans. or services from a country or international organization for the benefit of the recipient country or its population. namely..g.

which were now all independent and that formed themselves into the non-aligned movement in the early 1950s. or to provide programs that directly meet people’s basic needs.2. Latin America and Asia. An ideological battle has been playing out for decades over whether foreign aid should be used to facilitate economic growth. as well as a growing humanitarian movement. they were the goal that everybody else had to reach. the United States became the world’s biggest aid donor. foreign aid structures that began with European colonialism have become tied to shifting economic and political interests. and they began to talk about why are people poor. economic growth that focused on reducing poverty rather than just assuming that if you had growth everybody would ultimately benefit. In the post-war decades. the two super powers and their allies would use aid to encourage political allegiances. a third 'horizontal' structure is now being discussed based on mutual self-interest. roads. During the Cold War. that Western Europe and countries like Australia.' says Ms Eyben. Rich countries started giving money to poorer countries in the 19th century. Colonial powers used their money to build infrastructure—ports. and by the 1920s and '30s countries like Germany. Even after the colonies gained their independence. starting with the Marshall Plan to help Europe rebuild. People began to talk about poverty. Canada and North America were developed. the second world which was the Soviet Union and its Communist satellites. As the Cold War developed. As new global powers emerge as donors.. railways—and wealthy American industrialists were also involved in development aid through the Ford and Rockefeller Foundations. and then what became known as the third world. and how emerging global powers are changing the game. which were the former colonies and countries that had come under imperial influence.’ Ms Eyben says. ‘Within a few years the world had split into what were called three worlds: the first world. dramatic shifts in political. Howard White. Western democratic countries. 'There was the idea that countries had to catch up. economic and moral allegiances emerged. France and Britain were providing regular aid to their colonies in Africa. executive director of non-profit organization 3ie.. foreign support continued to focus on economic development. says the assumption during this period was that the old colonial powers would gradually phase out their direct financial 12 . Investigates the competing motives behind foreign aid. and whether it was possible to have economic growth that was more equitable.2 Historical Background of foreign aid: Over the past 100 years.

started to recognize the need for aid on humanitarian grounds and so also adopted these targets and started to develop aid programs in particular focus countries. He promoted the idea of using donor-funded programs to meet people's basic needs in health. ‘That was a decade where people began to talk about poverty. who became head of the World Bank in 1968.’ says Mr White. economic growth that focused on reducing poverty rather than just assuming that if you had growth everybody would ultimately benefit. and they began to talk about why are people poor. Steve Radelet.’ The collapse of the Soviet Union in 1991 and the end of the Cold War led to a return to democracy in many countries and the increasing participation in development projects by both non-government organizations and wealthy philanthropists like Bill Gates and George Soros during the 1990s.7 per cent target of countries giving 0. the World Bank and the International Monetary Fund took over development work. and to particularly stop spending so much money on social services. But many poor countries were still staggering under impossible-torepay debt. ‘It was really through the 1960s that the aid programs started to formulate and take shape and become a more definite commitment. and it's very similar to what is happening in Europe at the moment with what we are calling austerity programs. Many developing countries were heavily indebted as a result of the recession.’ says Ms Eyben. but on the basis of them having to restructure their economies.aid as colonies became independent and multilateral organizations like the UN. water and sanitation. And it took off from there. and donor countries lent them money in order to manage their debts. ‘The northern European donors like Sweden.7 per cent of national income in development assistance. ideas about the purpose of aid began to change under the influence of Robert McNamara. an academic and former chief economist for the US Agency for International Development. ‘In the 1980s basic needs disappeared off the agenda as a result of the global recession that was a result of the oil shock of the 1970s. That's where you see the start of the evolution of a 0. and whether it was possible to have economic growth that was more equitable.’ At the end of the 1960s. He says that ironically the first countries that were able to get out from under 13 . it's a constant theme in discussions about development. which historically hadn't had colonies. That discussion about what kind of growth is one that is alive and very well today as well. worked in the US Treasury on international debt relief deals from 1999 through 2002. so it didn't have the reason to be giving money to ex-colonies in the way that Britain and France did. education. This was called structural adjustment.

’ ‘Finally in 1998 the big movement forward happened when the World Bank and the IMF finally decided that it did not make sense for them to demand repayment of these old loans because countries were really stagnating under the weight of the burden of repaying it. many more years went by until those donors were willing to recognize that they were going to have to write their debts down. it varied by country. that it's not the old vertical relationship that the former colonial powers have with their erstwhile colonies who are now aid recipients. ‘The commercial banks pretty quickly figured out that they weren't going to get fully repaid and were willing to go in and do a deal where they would accept a write-down in order to get some things repaid. ‘On the philosophical side. ‘Those that had borrowed from Citibank and other commercial banks were able to do deals in the late '80s and early '90s under a program called the Brady bonds were essentially the commercial banks would swap old debt for new debt at 70 per cent of the face value or 50 per cent or 30 per cent. Sudan is another.’ Over the past decade. Some former aid recipient countries have now become important economic and political powers in their own right. The shift in global power relations that has occurred over the past 10 years has also been playing out in aid relationships. these new sovereign powers stress that the corporation is horizontal. One of the most prominent examples of this is the relationship between China and Africa. a set of methodologies that allows agencies to determine how effective development programs are for the people they are trying to reach. not from aid agencies. This has included the rise of impact evaluation.their debt burdens were the ones that had borrowed from commercial markets. Zimbabwe is another. says Ms Eyben. and they are tough cases. and by the World Bank and the IMF.’ says Mr Radelet. which they describe as development cooperation on the basis of mutual self-interest. more attention has been paid to working out the most effective way to spend aid money. and the progress on debt relief there is frankly waiting for a transition to a government where the donor countries are more willing to move forward with debt relief.’ ‘Most of the really poor countries that had built up a lot of debt have now had that debt forgiven. But for loans that were made by donor governments.’ she says. and in return becomes the privileged buyer of African raw materials for China's growing economy. Somalia is one. There's really only a few countries remaining with large debt burdens.’ 14 . These ‘rising powers’ have a different approach to aid. which is important here because it influences how people think about what they are doing. ‘China provides a lot of economic infrastructure and support for social development.

3 Turkey 3.’ Top 10 aid recipient countries (2012) Main article: List of countries by foreign aid received Foreign aid received in millions of US dollar Country 2012 Afghanistan 6.115. then most of the money will go on supporting the growth of markets. supporting the infrastructure that helps markets work better.7 Ethiopia 3.831. 2.8 15 .0 Vietnam 4.725.1 Congo.261.’ says Ms Eyben. Rep.859. a number of observers believe is not much different from what the old donors were doing in the 1960s when they emphasized support for economic development. ‘When the emphasis shifts to development being understood as greater human wellbeing.3 Tanzania 2. supporting the attainment of gender equality. ‘When development is primarily understood as economic growth. putting more money into education and health and so on and so forth.While this is an attractive philosophical position. Dem.033. then donors have been spending more money on supporting the strengthening of civil society.

93 billion.152.0 Côte d'Ivoire 2.Foreign aid received in millions of US dollar Country 2012 Kenya 2.635. Foreign aid received in millions of US dollar Country European Union 2012 $86.66 16 .73 billion and EU Institutions gave a further $15.6 Bangladesh 2.9 Top 10 aid donor countries (2013) Main article: List of governments by development aid Official development assistance (in absolute terms) contributed by the top 10 DAC countries is as follows. European Union countries together gave $70.096.0 Mozambique 2.654.

06 Japan –billion $11.88 Germany $14.Foreign aid received in millions of US dollar Country 2012 United States $31.85 2.58 Netherlands $5.3 Foreign AID Scenery in Bangladesh: Bangladesh is considered as one of the poorest and most densely populated Countries in the world.91 Australia $4. The 17 .38 Norway $5.79 France $11.44 Canada $4.55 United Kingdom $17. More than 154 million people lives in this country with 47 million poor people.

and (2) are provided as either grants or subsidized loans. the technical assistance given to the developing countries comprises the fourth type of foreign aid. Denmark. Japan. In Bangladesh. 2002-2006). Sale of surplus products to a country in return for payment in the country's local currency. the longterm loans usually repayable by the recipient country in foreign currency over ten or twenty years. meet every year to review development in the economy of Bangladesh. is the third type and finally. Foreign aid is a major means of financing the country's economic development. Sweden. the soft loans repayable in local currency or in foreign currency but over a much longer period and with very low interest rates. France. also takes decision on the amount of aid. and as such. comprising of 14 affluent nations and 12 international development agencies. BNP (Bangladesh Nationalist Party) government for two terms (1991-1995. Finland. the Ford Foundation and Asia Foundation 2. Norway. USA. technical assistance.g. International Development Association (IDA). Switzerland. Firstly. The standard definition of foreign aid comes from the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD). foreign assistance) as financial flows. food aid from the USA under PL-480. foreign aid serves to bridge the gap between savings and investments and make up the deficits in the balance of payments. Netherlands. Italy. 2010). Secondly. While a Military government ruled this country for eight years (1982-1990). which defines foreign aid (or the equivalent term. 2009-2012). and commodities that are (1) designed to promote economic development and welfare as their main objective (thus excluding aid for military or other non-development purposes). Canada.91 percent (BBS. an international consortium of donors. Belgium. International Fund for Agricultural Development (IFAD). Asian Development Bank (ADB). aside from prescribing courses of action for the economy. and the adult literacy is only 57. Economic literature generally classifies foreign aid into four main types. namely. The Bangladesh Aid Group.current (2014) GDP of this country is $116. Foreign Aid is any capital inflow or other assistance given to a country which would not generally have been provided by natural market forces. Germany. It receives foreign assistance mainly to finance the budget or trade deficit and the annual development program (ADP) over the period of time . UN agencies. e.. The life expectancy at birth its people is only 65 years. The softest are the straight grants often given to the less developed countries. Bangladesh is a foreign aid recipient country since its independence in 1971. BAL (Bangladesh Awami League) government for two terms (1996-2001. Members of the Aid Group include Australia.4 Overview of Aid Flows to Bangladesh: 18 . UK.03 percent GDP growth and most of its income is generated from the industrial sector followed by agricultural sector (GOB 2013).Bangladesh is a low income country with yearly 6. European Union EU. Different democratic governments have been ruling this country since 1991.4 billion with per capita GDP $ 859.

67 billion US Dollars (OECD 2013).000 locally registered NGOs.org).9%). the IDA/The World Bank (30%). the U. over 2. ODA Gross Disbursements in USD$ millions (OECD/DAC Statistics) 19 . Globalhumanitarianassistance.5%). According to 2013 OECD DAC data. with 12 UN agencies. the IMF (7%) and the Asian Development Bank (6%). due to climate change impacts as well poor preparedness and lack of infrastructure to mitigate or respond to these impacts. From a 10-year perspective the largest donors to Bangladesh were IDA. the Asian Development Bank Special Funds and the United Kingdom.20 Other bilateral donors were Canada (3. followed by Japan. the largest donors in Bangladesh in 2013 were Japan (32%). Bangladesh is one of the 10 most vulnerable countries to natural disasters. over 70 international NGOs.Bangladesh is the 22nd largest recipient of foreign aid globally (based on 2010 information obtained from the website. Overall official development assistance (ODA) commitments to Bangladesh were $5. Table 1: Overview of Aid to Bangladesh by top 10 Donor. (3. and over 60.6%).S. The country hosts the world’s largest humanitarian aid community. and the Netherlands (1.000 community based organizations. Net ODA received per capita was $14 US Dollars (World Bank 2012).38 billion US Dollars and net ODA received was $2.

9 368.5 131.2 1.8 Germany 65.0 1.8 328.8 United States 134.3 78.1 81.6 Netherlands 84.6 310.3 356.6 159.8 253.5 352.1 41.759.9 128.3 79.1 128.0 AsDB Special 0 Funds United Kingdom (Concessional Trust Funds) EU Institutions 20 .9 188.6 142.5 TOTAL 2.1 250.0 77.0 194.5 201.7 229.4 50.6 99.7 IMF 0 0 0 0 140.124.8 151.7 70.2 Australia 45.501.4 2574.3 120.Donor 2008 2009 2010 2011 2012 IDA 836.7 1.6 77.5 142.5 0 286.545.6 449.7 66.9 73.1 65.0 288.4 364.9 215.9 Japan 886.7 703.

More than two-third (67.17 percent of total assistances in 2001-2012. During 1971 . despite the much vaunted rhetoric’s for economic diplomacy. Conversely.5 Economic Effects of Foreign Policy of Bangladesh: The foreign assistance received by Bangladesh is constituted mainly by the grants and interest based Loans. gas. power. the share of loans in total aid rose from 49 percent in 1971 to 69 percent in 2012 respectively. Most of the aid has been spent in power. oil. education.7 percent) of the total aid was disbursed in the form of project aid during 1971-2012 period while commodity and food aid accounted for 21 percent and 12 percent respectively.78 percent of all foreign assistance. commodity aid and project aid accordingly. planning. In the first decade after Independence (1971-1980). the share of grants and loans in total aid changed over time. But economic diplomacy has remained the major foreign policy concern through successive regimes. 21 . infrastructure and health sector. from 26 percent during 1971 to 94. transport. rural development. the shares of the three forms of aid have changed over time. Because of such dependency. industry. On the contrary. BFP.2. the donors provided the highest amount of Commodity aid (42 percent) and food aid (32 percent) for the poor people of Bangladesh. Likewise share of LoanGrants. rural development and agriculture sector respectively.2012 periods. the amount of grants was more than half (51 percent) of all foreign aid and this share goes down consistently over the next three decades (1981-2012) and recorded as less than one third (31 percent) of total aid during 2001-2012. Alarmingly. has so far not been able to be independent in the real sense of the term. mineral resources. water. In the first decade (19711980) after independence. Being one of the 48 less developing countries Bangladesh has always been an aid dependent country. The net result of economic diplomacy over the years is that Bangladesh has received around $ 24 billion worth of external aid and the country’s dependency amounts to 87% of the annual development budget. Over the period of time the dominant figure of Commodity and food aid steadily declined due to the reduction of dependency on these forms of aid and both together recorded as only 5. transport. the share of project aid progressively increases over the years.83 percent in 2012. education. Bangladesh spends the foreign assistance in almost twenty sectors including agriculture. Bangladesh receives its external assistances mainly in three forms as food aid. loans occupied the large portion (58.22 percent) of the total external assistance while grants made up 41. and such concern has become more pressing in the post-cold war period.

those with intermediate levels of development tended to be ‘transitional state. Lower growth rate certainly suggest lower development rate.7 percent growth rate and Cambodia 6 percent. the rate was 4. The share of the socialist bloc and India stood at 21%. In appears therefore that economic diplomacy over the years has been successful in making Bangladesh overwhelming an aid dependent which however are the major concern of BFP. On top of everything. The recent overtures made by the Hasina Government for sub regional cooperation in South Asia and becoming a member of BISTEC are in reality geo-economical means to geopolitical ends. The OPEC share stood at a meager 5%. But despite the paramount importance attached to economic diplomacy by Bangladesh. The proportion of aid disbursement was 76% as against 66% during the previous regime. The economic imperatives compelled Bangabandhu to diversity foreign policy and make it donor-oriented. Consequently. During the Zia regime Bangladesh was successful in inducting China as a major donor.5 percent which increased to 4. and augment aid inflow from the Western and OPEC sources. In 1995. and those with low level of development tended to be ‘inactivedependent’ states”. the recently released least developed countries report indicate that Bangladesh’s growth rate was lower than regional standard. Bangladesh fits into a category somewhere in between the latter two types. this is perhaps the foreign policy sector that is characterized by largest number of disquieting news items. 22 . The results of analysis were the states with highest level of economic development tended to be “active-independent states.The enormity of aid dependence impacts negatively on the type of foreign policy a country pursues. The average annual commitment of aid was $1218 million as compared to $828 million during the previous regimes. the western developed countries emerged as the dominant by 31% by the international organizations.

and stabilize their economy. Governments that receive aid become dependent on steady flow so that while still being able to support the people of its nation. Aid money that is being given to government officials is being put straight into their own pocket rather than in the country to solve its problems. Nations such as China GDP growth rate increased 9. Nations that receive money invest it into their economy which helps to create more jobs for the people. Corruption is a big disadvantage of foreign aid. Disadvantages: A disadvantage of foreign aid however is an increase in dependency from recipient nations.6 Advantages and Disadvantages of Foreign Aid: Every year billions of dollars are given as aid to under-developed nations who are seeking help with their economic growth. better infrastructure. saving lives and providing civilians with shelters. 23 . (In this case the only people who benefit from the money are government officials rather than the nation and its people).65% from the investment of the foreign aid into their nation’s economy. clean water and medicine. Donor nations are able to control the funds that they give to the nations by asking for or requiring certain gains in return such as use of military bases and other resources the nation is in need of.2. Foreign aid is also a benefit the donor. Foreign aid has other advantages. such as fighting hunger. The gains in return create a strong economical. Giving aid to foreign countries does consist of many advantages and disadvantages of which are:- Advantages: Economic growth is a main advantage. cultural and or political bond between recipient and donor nations. Pharmaceutical drugs are dispensed free or subsidized to that in need and training is given to doctors and nurses which will ensure they know the correct way to deal with a patient’s health. they can begin putting the money into the sectors of the country which need the assistance.

Conclusion and Recommendations 24 .THREE Findings.CHAPTER .

foreign aid has positive effect but diminishing return on the economic growth of Bangladesh. This research concludes that. Aid mobilizing and executing institutions of Bangladesh including public administrations have capacity constraints. poor structure and planning. mainly for.1 Findings: The findings of the study are as follows: Bangladesh depends on external aid to finance the development budget. corruption and political instability.3. Foreign aid has positive effect on the economic growth of Bangladesh 25 . The government must take initiative to overcome these shortcomings to gain the maximum and efficient output from aid.

38 percent. 1.05 percent. 26 . it will decrease the chance of corruption in the country. 4. If more nations monitor and control their funds and help government officials with placing the money in the useful sectors. The square term depicts that. International Aid must have long-term benefit for poor countries.3. it is only the question of time when developed countries would not be able to maintain growing number of people in the third world.2 Recommendations: Foreign Aid is declining over the period of time. 1991-2001.8 percent and 4. It has 7. the return of aid is diminishing for a country having the absorptive capacity constraints. Otherwise.43 percent contribution to GDP of Bangladesh during 1980-1990. Furthermore it will eradicate dependency of aid by the recipient nations. 20022012 and 1980-2012 correspondingly. Bangladesh is not exception to this.

The estimated results also indicate that.3 Concluding Remarks: This study explores that foreign aid has positive role on the economic growth of Bangladesh and it is statistically significant in only two cases out of eight cases. if the Bangladesh government utilizes its aid funds more efficiently by reforming its institutions and policies. This finding is not statistically significant for the entire period (1980-2012). due to the lower level of capacity constraint of Bangladeshi institutions to use the foreign aid effectively. 27 . Foreign aid can contribute to the national economy more effectively. the aid provide diminishing returns in Bangladesh.3.

Economic Relation Division Government of Bangladesh. University Press Ltd.oecd. Schedule I of the Rules of Business 1996 (Revised up to February 2009). PRS-HAP Cell.html http://www. Bangladesh Harmonization Action Plan.com/topic/foreign-aid https://en. Dhaka. Flow of External Resources to Bangladesh. Government of Bangladesh.com/weo/CBGD. 2004 ODI. August 2006. 2007. (2005).htm http://vahesgoodblog. Rahim M. Centre For Policy Dialogue. the Journal of Developing Areas .org/newsroom/aid-to-developing-countries-rebounds-in-2013-to-reach-anall-time-high. Ministry of Finance.econstats. Allocation of Business among Different Ministries and Divisions. Dhaka.wikipedia. 2007. Cabinet Division. Government of Bangladesh. Oslo. 38(2) .Reference & Bibliography: Quazi. August. http://global.org/wiki/Aid http://www. Effects of Foreign Aid on GDP Growth and Fiscal Behavior: An Econometric Case Study of Bangladesh.htm 28 . Revisiting Foreign Aid: A Review of Bangladesh Development 2003. Support Models for CSOs at Country Level Bangladesh Country Report.com/2012/05/advantages-and-disadvantages-of-giving. Economic Relations Division.britannica.blogspot.