CHAPTER 12

FOREIGN AID AND REMITTANCES

 INTRODUCTION

The idea of foreign aid started after the Second World War,
especially in Europe. There was a need to rebuild a severely
devastated region that must be restored by other countries
like the United State of America. Hence, international
organizations were formed to start taking back with what
was lost.
 Post-war
reconstruction
WW2

1944- World Bank

1945-
USA is 1944-Birth of IMF
founded
by WB 1945-IMF
became the
Signed by: Worlds
Bretton Woods &
"Lender of
New Hampshire
last resort"
 FOREIGN AID

Foreign aid is the donation or transfer of help in the form of

money, goods, and services to a country that needs it. This is
regardless of the economic status, depending on the purpose
of the aid.
THE AIMS OF FOREIGN AID
Donation or Transfer of Help
Foster Peace and Security among Nations
Assist in Economic Growth and Development
Enhance Health and Education Systems
Share Technological Advances
Protect the Environment
Help in Times of Disasters
Adjust Effect of inflation to Some Economies
Form Alliances for Geo-political Intentions
Push Democracy or Eliminate Opposing Political Idealism
CONCEPTS OF FOREIGN AID
Foreign aid is there to promote economic and social
development, as it tends to increase a recipient bag of
resources such as money, food, medical supplies, etc.
CONCEPTS OF FOREIGN AID
Foreign aid is not all the time "good" in the real sense of the word, at least on
behalf of the recipient country to some cases.
This may encourage more corruption, as government officials in some countries
tend to use the funds for their gains, like for re-election purposes. Because of
foreign aid , dependency becomes more evident , and effort for economic
development tends to be neglected.
Long-term loans may hinder the real growth of the country because there is still
a promise to pay it back with interest, which would have to be repaid in the future.
Lastly, there can be an underlying motive in giving foreign aid; it can be used to
push for economic policies that may be favorable to the donating country that
may negatively affect the recipient's own people's benefit.

Two Forms of Foreign Aid

Offically made in between Done usually through

countries or more popularly Nongovernmental
known as the Official Associations (NGOs) and
Development Assistance unofficial aids.
(ODA)

Between countries or Voluntarily provided

International Institutions Relief goods, poverty, healthcare,
Concessional Loans & Grants education assistance.
Government to Government aid People to People aid
AFRICA US

- suffers - Government provided

from Poverty grants (funds)
ODA to aid poverty
AFRICA US

Provides:
- suffers - Cash or relief goods
from Poverty - Professional Services
NGOs - Livelihood Support
The Solow Model: Foreign Aid
The foreign aid is pushed
back to a steady state
level of investment that
is equal to the capital if
there is no improvement
of fundamental factors
such as technological
advances.
 MARSHAL PLAN
According to a 1947 speech made by George Marshall, who
is one of the recipients of the prestigious Nobel peace
Prize, "It is logical that the US should do whatever it is able
to do to assist in the return of normal economic health to
the world, without which there can be no political stability
and no assured peace. Our policy is not directed agaisnt
any country, but against hunger, deperation, and chaos"
 5% of USA
GDP
Marshall Plan

Pres. Harry Truman

Allied
Powers

Axis Powers
 PEACE AND SECURITY

There is link between foreign aid in the

form of food security and peace,
especially in some countries in Africa
and South Asia.
 PEACE AND SECURITY
Since the creation of the United Nations in
1945, it has been their objective to maintain
international peace and security by
deploying peacekeepers in various areas that
are susceptible to conflicts.
 PEACE AND SECURITY

The General Assembly complements

the UN Security Council to sustain
peace and security.
 PUBLIC HEALTH

One of the main goals of foreign aid is to eradicate certain

diseases that cause an economic disruption, like HIV-AIDS.
malaria, and dengue, to name a few. More about this topic
later on in the chapter when we discuss. 'The United
Southeast Asia in a COVID 19 World: A New Start"
 PUBLIC HEALTH
As an active arm of the United Nations, the World Health
Organization (WHO) promotes the attainment of the highest level of
health and safety. It is the organization that directly responds to
health emergencies worldwide, like what we are experiencing: the
COVID-19 pandemic. The World Health Assembly is the decision-
making body of the WHO led by member states of the United
Nations. They all unite to battle harmful diseases in a scientific
manner and come up with health management solutions to finally
eradicate the illness.
 REMITTANCES
Remittance is the sum of money that is sent by a worker to
his/her own country, predominantly developing countries
such as India, China, the Philippines, and Mexico, among
others.
Advantages and Disadvantages of Remittances

Advantages Disavantages

a. contribution to the buying a. too much dependency

capacity of the families left behind
b. increasing cost of fund transfers
b. contribution to the GDP of the
country. c. The Dutch Disease Paradox
THE DUTCH DISEASE

The Dutch Disease means something that is generally

beneficial becomes an opportunity for negative exploitation
and may harm the larger part of the economy.
 INTERGOVERNMENTAL
NONPROFIT ORGANIZATION
We may consider some non-
governmental organizations
The United Nations
(NGO's) and intergovernmental Children’s Fund (UNICEF)
organizations that foster the Red Cross or Red Crescent
same aim in the nature of Movement
foreign aid. These charitable World Food Program
Doctors without Borders
institutions do similar activities
as foreign aid by the
government, but the funding
comes from predominantly
private investors.
Question
Time