Topic 9: Foreign Aid and Remittances

ECODEV Topic 9: Foreign Aid and Remittances

foreign aid

* started after the world war II, especially in Europe
* there was a need to rebuild a severely devastated region that be restored by other countries like the United States of America

World Bank

In 1944, this was formed with the aim of rebuilding and starting reconstruction of Europe

United Nations

In 1945, this was founded with the intention to maintain and secure peace among nations

International Monetary Fund

started to stabilize and oversee the international monetary system

International Monetary Fund

In 1944, an agreement was signed in Bretton Woods, New Hampshire, USA that created this

International Monetary Fund

It set the rules of exchange rate behavior and created a pool of common currencies, thereby making the IMF the world’s “lender of last resort”

foreign aid

it is the donation or transfer of help in the form of money, goods, and services to a country that needs it

foreign aid

it aims to foster peace and security among nations, assist in the growth and development of one country, enhance the health and education systems, share technological advances, protect the environment, adjust the effect of inflation and help in the time of disasters like earthquakes, tsunamis and wars

ODA and NGO

two forms of foreign aid

Official Development Assistance

is one of the government’s sources of funds to finance programs or projects that promote social and economic development in the form of loans or grants

Non-governmental organization

is established to work toward public or social welfare goals. They could focus on human rights, voters’ right, healthcare, helping the poor, and preventing cruelty to animals. They can be funded by donations and grants

Humanitarian aid

it helps managing short-term sufferings providing assistance to those who are affected from a recent typhoon or hurricane, flooding, earthquake and other disasters.

development aid

the more permanent aid which is like long-term loans provided to build infrastructure programs

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

corruption

foreign aid may encourage more ____, as government officials in some countries tend to use the funds for their gains, like for reelection purposes

dependency

because of foreign aid, ______ becomes more evident, and effort for economic development tends to be neglected.

negatively

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 ________ affect the recipient's own people’s benefit

weak governance

A study published in the African Journal of Governance and Development in 2019 suggested that in general, **foreign-aid had a negative impact** on the African economy that has **________**

negative impact

Furthermore, foreign aid from the USA has a **detrimental, _______** on the African economy **compared** to that of European Union countries.

George Marshall

Who said, “it is logical that the US should do whatever it is able to do to assist in the return or normal economic health to the world, without which there can be no political stability and no assured peace. our policy is not directed against any country, but against hunger, poverty, desperation and chaos”

European Recovery Program

The United States under the leadership of then-President Harry Truman signed the Marshall Plan, also known as the ________, which aimed to rebuild Europe that was devastated by the war.

Marshall Plan

helped legitimized and lay the groundwork for US foreign aid programs that have come since

Truman

In 1949, President ____ effectively extended the Marshall Plan to other developing countries around the world

5%

●A substantial __ of the US GDP was allotted to this recovery program at that time, | mainly to restore production, boost and expand trading, and of course, keep communism from spreading in Europe



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●It was believed that salvaging these big countries will eventually be beneficial to the US and the world but not all countries in Europe devastated by war were recipients of the said foreign aid.

3%

●Those who fought with the Axis power, such as Germany  and Italy, as well as the neutral Switzerland, received smaller amounts as compared to the members of the Allied Powers.



●The European Recovery Program lasted for four years, but there are some economists who believed that the impact of which was immaterial as the aid was estimated only to be ___ or less of the national incomes of the receiving countries.

peace and security

There is a link between foreign aid in the form of food security and peace, especially in some countries in Africa and South Asia.

conflict-sensitive development

A **_________** aid allows peacekeeping-activities and those that reduce the inflation of an affected nation, hence fostering peace among the people.

peace and security

●Since the creation of the United Nations in 1945, it has been their  objective to maintain international ____ __and__ ____ by deploying peacekeepers in various  areas that are susceptible to conflicts.



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●Foreign assistance awards by certain US agencies have reported aid specifically aimed for peace and security, counter-terrorism, transnational crime, and combating weapons of mass destruction.

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.

World Health Organization (WHO)

●As an active arm of the United Nations, the _________  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

World Health Assembly

●The _______ is the decision-making body of the WHO led by member states of the United Nations.

Remittances

●______ 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.



●Some countries may even have remittance as a huge chunk of their GDP like Nepal and some countries in Eastern Europe.



●The advantages of this are quite obvious, like contribution to the buying capacity of the families left behind, allowing them to participate in economic activities like buying more goods and services

P211.9 billion; P157.9 billion

●In the 2019 Survey on Overseas Filipinos, the total remittance sent by Overseas Filipino Workers (OFWs) during the period April to September 2019 was estimated to be P_____, sent as cash and in-kind, P______ of which was cash and remitted through banks, money transfers, agency, local office, and door-to-door or delivered by friends or co-workers.

9%

●On average, the remittances of overseas Filipinos amount to around ___ of the GDP of the country, undeniably a material amount to sustain economic activities of the Philippines.”

positive effect of remittances on the home country

* poverty - decrease
* health and education - increase
* technology - increase
* child labour - decrease

remittances

* can foster dependency on outside money
* they dis-incentivize growth in the home country
* and make it overly susceptible to the global economy

Dutch disease

exhibits the following two chief economic effects:



●It decreases the price competitiveness of exports of the affected country's manufactured goods.



●It increases imports.



Both phenomena result from a higher local currency.

In the long run, these factors can contribute to unemployment, as manufacturing jobs move to lower-cost countries. Meanwhile, non-resource-based industries suffer due to the increased wealth generated by resource-based industries

The United Nations Children’s Fund (UNICEF)

is a social welfare organization present in  192 countries and territories aiming to develop children in developing and underdeveloped countries

International Red Cross and the Red Crescent Movement

with 97 million volunteers to address human suffering and help improve the health conditions of those who are sick

World Food Program

●The ______ is an organization under the United Nations that is focused on hunger and food security. They are also the biggest provider of school meals in impoverished nations

Doctors Without Borders

a French-based organization in conflict zones that treats the wounded in those territories with endemic diseases

exempt

●These organizations are tax _____ in most countries around the world, and their funding normally comes from a few investors who believe in their goals that are mostly aiming for human development.

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●However, we are cautioned about the real intent of some institutions as some may be fraudulent or at least poorly managed, which is such a waste of donation funds.