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The Problem with Foreign Aid and How Businesses Can Help?

Foreign aid refers to a voluntary movement of resources—usually monetary—from one state to another with the goal of helping with development goals or alleviating disasters. However, on closer inspection, some problematic issues arise: foreign aid often has a hidden political agenda, where aid givers aim to influence the receivers’ government. Besides, foreign assistance is often unsustainable, as no accountability is established to track where the aid goes. If foreign aid does not always work, what else can be done?

NO MEASUREMENT = NO IMPROVEMENT Foreign intervention carries political implications. The foreign bodies often demand return from those receiving the benefits—whether it be resources or extraterritorial rights, such as setting up military bases or gaining judicial or trading privileges. Research from Université libre de Bruxelles notes that this resulted in aid money going not to those in need, but to the people in charge of the resources instead. Along with the fact that there are few to no systems to determine its utilization, foreign aid, in many cases, amounts to almost nothing. According to an article in the Diplomat, one particular Asian country which has received foreign assistance since the 1950s is still largely underdeveloped due to "bad governance." It is almost impossible to see how foreign intervention is used. Also, dependency on aid has rendered this country's government in-operational unless support is duly received. It cannot live without external assistance—an epitome of unsustainability.

AN ALTERNATIVE TO FOREIGN AID? This is not to say that foreign aid should cease. There are many examples where help given in good faith resulted in some degree of development. However, apart from government-to-government (G2G) aid, the business sector can also play a crucial role in improving international development. A study from Harvard Kennedy School of Government suggests that multinational companies also hold the key to global development via their building of the local economy and creating new jobs. In other words, companies' goals and developmental agendas can align, bringing betterment to all. While G2G aid usually involves moving the capital to the target area without much consideration of the logistics of how that capital is utilized or measured, businesses have more reasons to fill these potholes.


The operations of a business require tangible results and measurements to prove to shareholders of the firm's value creation. Apart from that, firms benefit from the economic growth and well-being of the ecosystem in which it operates. This is because stronger regions mean a higher quality workforce, a sustainable environment to sustain business operations, and more economic power to generate transactions. As such, when firms spearhead development in impoverished areas, they come with the tools to measure the result of their action and the intention to carry this development through. For example, Nestlé has, for decades, provided jobs for tens of thousands, educated and fed millions of children, and brought more than $2.4 billion to the African economy in 2004 alone. Foreign aid may be problematic, but there are ways to improve it. For governments, aid should be given with a global developmental, politics-free goal in mind, and systems should be developed to track progress. For businesses, they hold the key toward GREAT international development—when people in the region thrive, companies also thrive. Therefore, firms are uniquely positioned to bring capital to previously impoverished areas, thus raising living standards, educating people, and creating jobs—growing all parties together inclusively.

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