Volume 4, Issue 7, July – 2019 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165

How Foreign Aid Effect on Education and

Development
Shukri Nur Farah
Istanbul Aydin University

Abstract:- The aim of this paper is to analyse how organizations to poor nations, as well as military,
foreign aid effect on education and development. humanitarian, and economic aid.
Education plays a fundamental role in developing
human capital and escalates economic growth by However, the first and the most successful foreign aid
increasing productivity, improving skills, and in the human history was the European Recovery Program
competency. Education brings benefits to individuals (ERP) after the Second World War commonly known as the
and a society as whole. Education plays an important Marshall Plan. At the end of 1940s United States’ secretary-
role in development and growth as per capital income, general George Marshal announced that it is time of
and it reduces poverty removes income and social rebuilding Europe. During the Second World War the
inequalities. European economy was destroyed. Due to the combination
of the natural disaster in Europe at that time such as drought
Keywords:- Aid, Education, Development, Humanitarian. and blizzards, and the man-made disaster of war, it let
increasing unemployment rate, poverty, widespread
I. INTRODUCTION starvation, wretched and homeless in the whole of European
countries.
Education is one of the most significant aspects that
plays a huge role in the modern, industrialized world. Highly developed nations in Western Europe, New
Society needs a good education system to be able to survive. Zealand, Austria, Japan, North America, oil-rich nations in
Fortunately, today society realize that how education is the Middle East, as well as the middle-income nations like
important for the future generations. At the same time, many South Korea, Brazil China, and India, all have established
countries are spending a lot of money on a good education foreign aid programs. The importance of foreign aid as a
system, and people are actively encouraged to win foreign policy tool was substantiated by the fact that foreign
scholarships and continue their high level of education. aid recipient nations were also foreign aid donors.
People need a high level of education to have a better life in
the future. Historically, most of the foreign aid is given directly
from one government to another as bilateral assistance.
Education play its role in development, economic Also, Donor nations provide indirect aid as multilateral
growth and benefit the society and individual as well. For assistance, which pools resources together from many donor
individual education increases employment opportunities nations. The major multilateral institutions included the
and higher income and improved life quality and decrease World Bank, the International Monetary Fund; the African,
unemployment. Education is the backbone of the society. Asian, and Inter-American Development Banks, and
The objective of this study is to determine the impact of different United Nations agencies like the United Nations
foreign aid on education, and development. Development Programme (UNDP). The United States has
been one of the largest donor countries in the world, when it
II. THE IMPACT OF FOREIGN AID ON comes to foreign aid.
EDUCATION AND DEVELOPMENT
In the period of 2004, the United States has provided
Foreign aid is given to developing and third world over $19.5 billion in ODA with Create Britain, France,
countries to facilitate their economic growth, improve Germany, and Japan. When foreign aid donor countries are
human welfare, and reduce poverty. Aid is contributed to measured, the most donor nations are Sweden, Netherlands,
world security by tackling threats to human security, like Norway, and Luxembourg. However, each of these donor
disease, human trafficking, population growth, human rights nations has provided between 0.79 - 0.92 percent of GDP in
violations, peace-making, environmental degradation, and the year 2004. Saudi Arabia also is one of the world donors
the growing gap between the north and the south. and it has provided aid equivalent to about 0.69 percent of
its income. The United States was one of the smallest donor
Poverty and inequalities are often cause of internal nations by this measure at about 0.17 percent of its income
conflicts, social instability, which in turn, can produce flows in 2004.
of refugee, migrants and acts of terrorism. Therefore,
foreign aid helps in building a more peaceful, a safer place The aim of aid is thought to fit within these rationales:
and a more secure world. Foreign aid is resources given by The main objectives of foreign aid include promoting
rich to poor countries. Foreign aid can be food, money, development, economic growth, reducing poverty,
loans from the government to governments or from protecting the environment, improving governance,

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Volume 4, Issue 7, July – 2019 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
promoting trade interdependence, promoting stability in the
regions, expanding access to health care and basic
education, addressing population growth, protecting human
rights, limiting weapons proliferation, bolstering allies, and
addressing trafficking and drug production.

Every year United States spends billions of dollars on

direct military aid to foreign countries and substrate groups
(USAID 2009). The US government expresses a wide
variety of objectives motivating their use of military support
as a foreign policy tool. Since the terrorist attack on
September 11 in 2001 the military assistance from the
United States to other countries was increased. In the war
against terror, the United States sent military aid to more
countries including Pakistan, Oman, Armenia, Azerbaijan,
Uzbekistan, Tajikistan, Yemen, Columbia, Ethiopia, and
Fig 1:- Development aid reached the highest in 2017
Nigeria among other nations.
Sources: OECD sources 2017 DAC statistics
Economic Aid is also one of the foreign aids that
Foreign aid to African countries increased by 3%,
affect poor governments. The United States controls its
more than $28 billion within the Sub-Saharan Africa
economic aid provided to other countries. Recipient
countries, aid was also increased 3%, that is over $24
countries may use their economic aid to increase military
billion. Humanitarian aid also raised by 6.1%, $15.5 billion.
spending. IMF supports low-income countries through
Another method of aids comes from Christians. Christian
observation and capacity building activities, also provide
aid is an independent organization within the global
financial assistance to help them reach, achieve, and sustain
movement of organizations and individuals to fight poverty
maintainable macroeconomic as well as a position with
in the global area. Their work is inspired by Christian values
enough strong and durable economic growth and poverty
and believes that everybody regardless of faith, race, gender,
reduction. The International Monetary Fund is also one of
and ethnicity, as well as identities is entitled to have a good
the international organizations which provide aid to
life free from poverty and injustice.
developing and poor countries. It shares expertise with
member countries to provide technical assistance and
Oxfam is one of the international organizations that
training in a wide range of areas, such as monetary and
works with more than 20 organizations within 90 nations to
exchange rate policy central banking, official statistics, and
reduce poverty and famine. Heavy rain is another factor that
taxes policy and administration.
destabilize the livelihood in some countries. Over 20 million
people were affected by drought and famine in some parts in
The purpose of foreign aid is to help improve the
Africa particularly in East Africa countries, also more than
design and implementation of members' economic policies,
15 million faced hunger strike, remaining only on what they
including strengthening skills in institutions such as finance
can find to eat. The drought caused crops not to grow and
ministries, statistical agencies, and central banks. Also, IMF
cattle to die, while the access of clean water decreases thus
gives advice to the countries that have had to re-establish
leading to a threat of cholera and other diseases. However,
new government institutions following severe internal
Starvation is another issue with disastrous effect. Women
conflicts and or wars. The IMF offers financial support for
and children are the worst affected people by drought and
balancing the payments needs upon request by its member
famine in the society. In East Africa, particularly Somalia,
states. (IMF Website).
over 800,000 people are on the brink of malnutrition and
almost 400,000 children are severely malnourished.
According to the Development assistance aid (OECD,
2017) in 2017, development aid reached the highest level.
Education is universally acknowledged as a primary
That is, over $142 billion were spent as foreign aid.
tool which promotes development and economic growth in
According to the official data collected by the Development
every nation. It plays a fundamental role in developing
Assistance Cooperation (DAC) and OECD organizations,
human capital and escalates economic growth by improving
the rise in aid expansion on refugee in donor nations was
skills, increasing productivity, and competency. Education
boosted, and the cost spent on refugee increased by 7%. On
brings benefits for individuals and the society as well. For
the of 4th April 2018, there was report on the official page of
example, in developing countries, education plays an
OECD that foreign aid was totalled over $145 billion in
important role in poverty reduction and removes income
2017.
inequalities.

Generally, it can be said that education can affect

economic growth due to it is considered as one main factor
of improving income and human capital. Basically, there are
difference between researchers whether education has a
positive or negative relationship with development and

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Volume 4, Issue 7, July – 2019 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
economic growth, or in some cases, the studies indicate no economy better because Pakistan spent a lot of money in the
impact of education expenditure on economic growth. Barro war on terror. Ali obtained that the impact of aid on
(1991), finds that a positive relationship between economic education and growth. (Muhammad Ali, 2016)
growth, education, and expenditure. On other hand De
Meulmester and Rochet (1995), also concludes that the Young men get more education than young women in
relationship between growth and education is not always almost every country. Currently, World Bank study found
positive. Spiege and Benhabib (1994), acknowledged that that in the last three decades, the average of women who
human capital development as a source of economic have the chance of schooling in developing countries has
growth” (Khan Zubeer, Jawad Khan, 2011). increased by about 0.6% more than male have, but despite
this increase, female’s enrolment in secondary and primary
Some of those who made good analyses of the effect grade is lower than that of male by about ten percentage
that the differences between educational levels on the points in 66 of 108 nations and is higher in only 8 countries.
development and growth of a country were Cristian and In the world, the female-male gap is the highest in North
Laura (2009).They have observed that in the circumstance Africa, the Middle East, and Latin America countries
of the primary schools, one percent of advance in the school (World Bank, 1990: 9)
rate decides that rising two percent of GDP per capita from
developing nations to developed ones. Rising one percent of The new concept of economic growth and
the enrolment rate in the secondary level would determine development highlights the fact that education has a strong
rising over 2.5% for the developing nations and up to 1,5 impact on development and economic growth. Educated
percent for the OECD ones. countries are developing faster because the school enables
the labour force to modernize new technologies and to adapt
The impact of the rising educational rates, on different the existing ones to the local production. Consequently, the
levels of education, different from 1 nation to another. more the country has technological frontiers the more
According to the level of growth and development, there is a opportunities to develop faster than others (the economies
positive correlation between growth rate, development, and that are inside the technological frontiers have greater
the human capital accumulation at the primary education for opportunities to develop faster).
the low-income governments, at the secondary education for
the medium income government, and at a superior level for The level of education is not influencing only the
the rich countries (Laura and Cristian, 2009, 446). development of a nation but also influencing the economic
productivity of a nation. The countries with a rapid growth
In many developing countries, the formal education is in the number of people that enrolled in schools have more
the greatest consumer and the largest industry in the public experienced on a rising productivity and an enhancement in
revenue. Poor countries have invested a lot of money on the quality of the labour force. Popescu Cristian, Diaconu
education. There are different reasons accounting to this. Laura (2009)
Educated farmers with a primary education can be more
productive and more responsive to the new agricultural The growing gap between the developing countries
technologies than uneducated farmers. Particularly trained and developed countries has dominated in international
artisans and mechanics who can read and write are assumed relations and diplomacy for a very long time. This gap has
to be better able to keep up to date with changing materials led to constant capital inflow from the rich nations to those
and products. in the Third World including Africa and Asia, with the aim
of supporting them overcome their problems and reduce this
Secondary school graduate people with some gap. However, there is evidence that many years of foreign
knowledge of arithmetic and clerical skills are needed to aid have done very little in changing the destinies of many
perform technical and administrative functions in growing Third World nations, most of them are now experiencing
public and private bureaucracies. In the former colonial low growth rates.
power, many people also needed such skills to replace
departing expatriates. University graduates, people with Since foreign aid can be observed as foreign capital,
advanced training are also needed to provide the early theories analyse its effects on development resorted to
professional and managerial expertise necessary for a traditional economic growth theories and the role of flows
modernized private and public. (World Bank, World and capital stock in development. Most of the work done
Development Report, 1991). assigns progressive way as the independent variable and aid
as one of the dependent variables in addition to the
The role of foreign aid is strongly discussed in traditional variables assigned in different development
different studies. However, the results are very ambiguous. models. It also run regressions to evaluate the importance of
The total foreign capital inflows had a negative and the relations between aid and development.
noteworthy effect on national reserve funds yet did not
fundamentally influence the local investments. Similarly, Development aid may provide for several purposes,
Ali also argues that debt plays a negative role in the case of such as strategic, economic, political, humanitarian, and
developing nations, though the US contributed a lot of aid to others. There are some possible channels through which
the economy. On the other hand, Ali also argues that US foreign aid may distributed. The most common way is to
should give more support developing nations to make its provide through institutions of the recipient nations. It is

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Volume 4, Issue 7, July – 2019 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
usually used to fund expenditures for more development. [4]. Michaelowa, K., and A. Weber (2007). ‘Aid
Most of it is used to finance discrete investment projects Effectiveness in the Education Sector. A Dynamic
such as building schools, roads, providing education, Panel Analysis. In S. Lahiri (ed.). Theory and Practice
training, and family planning, etc. (Gregl, Logožar 2017) of Foreign Aid, Amsterdam: Elsevier, 357–85.
[5]. OECD 2017 http://www.oecd.org/dac/development-
There is an argument that foreign aid does not always aid-rises-again-in-2016-but-flows-to-poorest-countries-
contribute in a substantial way to the economic growth, and dip.htm Accessed 26 July 2018
development of developing nations. Foreign aid which is [6]. Popescu Cristian C, Diaconu Laura. (2009). The
supposed to promote growth and development turns out to relationship between the levels of education and the
be an opportunity for some of governments to spend a lot of development state of a country
money on non-productive activities. Foreign Aid is a lost in https://www.google.com.tr/search?q=the+relationship+
governments that have no technical or good administrative between+education+and+development+pdf&oq=the+&
skills thus leading to poor management or poor use of the aqs=chrome.0.69i59j69i60j69i57j69i60j35i39j0.8083j0j
aid. Furthermore, foreign aid recipients use it to fund 7&sourceid=chrome&ie=UTF-8 Accessed August 20,
projects that are conceived and poorly planned. For 2018
example, they may build unused roads, or other projects that [7]. Raci Amarda, 2014). Advantges and disadvantages of
get destroyed in less than one time, and unproductive foreign assistance in Albania. Forum Scientiae
resources. (Reci Amarda, 2014). Oeconomia Volume 2 No. 3 P. 126.
[8]. World Bank (1990). Education and Development
However, the first half of the 1990s, the amount of http://documents.worldbank.org/curated/en/871111468
foreign aid decreased, mainly due to political change and 739527551/Education-and-development-evidence-for-
inner socio-economic challenges in the donor nations. But new-priorities Accessed September 5 2018
this amount started increasing during the second half of [9]. World Bank Education and Development
1990s and reached $80 billion in 2002. According to a https://www.google.com.tr/search?q=the+relationship+
survey by the World Bank, about $130 billion of aid will be between+education+and+development+pdf&oq=the+&
given by DAC in the next years. Education is the second in aqs=chrome.0.69i59j69i60j69i57j69i60j35i39j0.8083j0j
the list of the Millennium Development Goals program 7&sourceid=chrome&ie=UTF-8 Accessed August 21,
(MDGs). According to these MDGs, donor countries are 2018
committed to support developing nations in achieving a
universal primary education in the upcoming years. So, they
allocate more resources to the education sector of
developing nations (Anwar Mumtaz, 2010: 358)

III. CONCLUSION

Education is indispensable to development and

economic growth. Without good quality education system,
economic growth and development is impossible. A
balanced education system promotes productivity, economic
development, and generates individual per capita income.

Education plays its role in development, economic

growth. For individual and society education increases their
job opportunities, higher income, and improve their life
standards. Education is the backbone of the society.

REFERENCES

[1]. Anwar Mumtaz. (2010). Aid Effectiveness in the

Education Sector of Pakistan. Pakistan Journal of Social
Sciences Vol. 30, No. 2, P. 358
[2]. Gregl Marko, and Logožar Klavdij. (2017) The
Impact of Development Aid on the International
Migrations in the African, Caribbean, and Pacifi c
Group of States, Zagreb International Review of
Economics & Business, Vol. 20, No. 1, pp. 103.
[3]. Khan Zubeer Jawad Khan. (2011). Journal of
International Academic Resaech Relationship between
Education and Economic Growth in Pakistan: A time
series analysis Vol.11, No.1. P. 27.

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