Why foreign aid must strengthen local systems


Here’s what happens when US foreign aid doesn’t strengthen local systems:

  • It costs more. In Ethiopia, 30 to 40 percent of aid for capacity building on HIV/AIDS stays with US organizations. In Liberia, US-based consultants cost the government nearly twice as much as the competition. An official with the Liberian Ministry of Education noted: “The cost of contracts for any consultant takes a chunk of aid. [But] sometimes you can find some local consultants, very skillful, and you would save costs.”
  • It duplicates efforts. In Kenya, while other donors use the procurement system set up through the Global Fund to Fight AIDS, Tuberculosis and Malaria, the US uses its own system to buy HIV/AIDS test kits and antiretroviral drugs—a system that costs about four times as much as the Global Fund’s.
  • It’s unsustainable. In Kenya, the US uses its own organizations to manage an indoor spraying program for malaria, instead of working with the government. Says a health official: “You make it harder for [Kenyans] to do it for [ourselves] the next time. And with malaria control, annual spraying isn’t the only thing you do—[fighting malaria is] about monitoring as well.”
  • It reduces accountability for results. In Liberia, US-based government contractors are responsive to their contracting arrangement with US aid agencies, not to what local governments need. A Liberian government official explains: “Contractors have a huge incentive to deliver today, rather than building up systems for tomorrow—that’s what they’re going to be evaluated on.”
  • It drains talent away from local institutions. In Kenya, an official in the Ministry of Health noted that the US President’s Emergency Plan For AIDS Relief (PEPFAR) draws qualified staff away from the government by paying them three times as much as the typical government salary.
  • It’s inflexible. In Cambodia, local organizations note how the long chain of command from USAID to contractors to subcontractors makes it near impossible to make even small budget changes, thus eliminating possible creativity and flexibility to change the scope of their work or take advantage of new opportunities.

Here’s what happens when US foreign aid does strengthen local systems:

  • When donors invest in citizens, they can root out corruption and demand accountability for aid dollars. In Guatemala, a citizens group with support from a local civil society organizations and external donors used community advocacy, adverse publicity, legal action, and petitions to root out the corruption of their mayor and remove him from office for taking money intended for public purposes. [1]
  • According to the organization Building Markets, the local impact of aid doubled when donors locally spent their resources in Afghanistan. [2]
  • In Liberia, the US Treasury Department’s Office of Technical Assistance helped create an electronic link between the country’s Ministry of Finance and the Central Bank in 2005. The change eliminated reliance on easily forged paper receipts and provided for electronic cross-checks between accounts. This step reduced the potential for fraud and offered taxpayers a one-stop tax preparation and payment option.

[1] Oxfam America, “To Fight Corruption, Localize Aid,” 2015.

[2] USAID, USAID Forward Progress Report (2013).

Note: Oxfam America does not take US federal funds, but we do support effective development programs.

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