International Aid

Written 14 July 2021

I didn’t follow yesterday’s debate in Parliament closely in which the Government won the vote to move away from the 0.7% of GDP target. I doubt I missed much.

I’m writing something down on this because I have spent a few years up close and personal with International Aid (in Egypt in the mid-1990s) and never really quite got to the bottom of what I think of it all. I’ll see if writing my thoughts down gets me any closer to a conclusion or a more settled position. I suspect it will help but I doubt very much that there is a single landing area and I’ll end up with as much of a yes but no but position as I have been in for a number of years. It could also bring back some memories as I returned to the UK in 1998 and apart from a brief work-related trip in (I think) 1999 have not been back to Egypt in the nearly quarter of a century since. Just writing that makes me feel very old!


I arrived in Egypt in 1993 as a newly qualified Chartered Accountant fascinated by the Middle East and wanting to spend some years in the area. I went to Egypt with a view to learning some Arabic in a country I liked and had low living costs. I imagined that in a few months I’d find a job somewhere else in the region (probably the Gulf) but to my surprise and delight I managed to land a job in Cairo and spent more than five years there. I worked firstly for Price Waterhouse and then for Coopers & Lybrand and throughout my main clients were the United States Agency for International Development (USAID), recipients of USAID funding and some smaller development agencies (the Dutch and Danes).

The nature of the development work going on in Egypt in the 1990s when I was there was still a product of big power politics and geopolitical considerations. Winding back slightly, in order to make peace with Israel in the late 1970s, President Sadat had to move away from the rest of the Arab League (Egypt’s source of external finance) and cut his remaining ties with the Soviet Union (Egypt’s military supplier). The US effectively underwrote this decision, promising huge amounts of military and non-military assistance to Sadat once he signed up. The US knew it was making a huge strategic investment in Sadat and Egypt and was prepared to put its money where its mouth was. Egypt was rearmed with US equipment and massive amounts of US money was put into upgrading Egyptian infrastructure and supporting its economy. Huge amounts were committed to aid, which was (and maybe still is) administered through USAID’s office Downtown.

By the time I arrived in 1993, huge amounts of development work had already been done and lots was still in process. I remember a massive ring main for Cairo’s overburdened sewage system was just being completed, the Americans had done the Cairo side of the Nile, the Brits had done the Giza side. There were also huge schemes to promote family planning drawing to a close. While I was there the big schemes were to build schools throughout the country and to develop water management and agriculture. There would have been lots more too but that’s what I can remember. The shape of these projects was to channel funds through the relevant Ministry which then fed down to the Governorates and with oversight principally it seemed from USAID in Cairo. We would audit expenditure on these big projects and to say that the governance was shonky would be an understatement. Generally the further one got from Cairo the more funnies would show up. Nevertheless, lots of money did make it to build schools and so on, and I’m sure lots of local builders and government officials made a few bob too. To be fair, I think USAID knew exactly what was going on but accepted it as a fact of life as long as it wasn’t too egregious. While I was there it also seemed to be pivoting away from big national projects through the Egyptian government towards putting funds through US charities (I worked with CARE International and Plan) to try and direct funds better to smaller projects at a more local level (institution building, channeling small amounts of funds through small local NGOs, some microfinance type stuff etc).

One interesting aspect of the structure of the USAID programme was how explicitly it was seen as an important part of US trade export financing. Funds weren’t just sent to projects, rather, a lot of money was allocated to effectively take a spin through the US economy before landing in Egypt in the so called special accounts from where it was disbursed locally to ministries and projects. The way this worked was through cheap export guarantees, which served to provide extremely low risk import finance to the Egyptian economy and export finance to US industry. If, for example, an Egyptian business wanted to make a large investment in plant, it could approach an Egyptian bank for finance. The Egyptian bank would organise a letter of credit to a US business which was underwritten by USAID. The US supplier would be paid (USAID repaying the Egyptian bank). USAID would accept repayments via the Egyptian bank in local currency (Egyptian pounds) with the Egyptian bank taking no risk. In this way the Egyptian business had easy finance with no exchange risk, the Egyptian bank took no risk, US businesses sold lots of kit. Quite niftily, Caterpillar would be paid a million dollars for its bulldozers (say), the contractor buying them on cheap finance in local currency with the repayments going to the USAID programme in Egypt.

Looking back on the approach of USAID it’s very easy to throw stones at big lumbering bureaucracies, and to an extent it’s fair to do so. But given where Egypt was, its strategic importance and political volatility (Sadat of course was assassinated shortly after making peace with Israel), the US and Egypt need to demonstrate results from jumping into bed with the US and the hated Zionists, and the huge size of the projects then I think it was probably OK. But there are important effects of this development programme that strike me more now, and only really became apparent after spending a few years there, which are less obvious. Firstly, of course the US spent gargantuan sums of money in Egypt, and I think this probably cost Egypt as much in its political development as it gained through becoming a bit wealthier. Large amounts of the Egyptian government were very explicitly spending US money and had little input in what it could be spent on. I am sure there were nice meetings to liaise between US and the Egyptian ministries to decide priorities, but if there was capital expenditure it had to be on US kit, and if push comes to shove he who pays the piper always calls the tune.

Secondly, USAID was really detached from the broader Egyptian economy. As I said, I worked first for Price Waterhouse and then for Coopers & Lybrand (their merger was announced just as I left) and we only lost employees to USAID itself or projects financed by them which would use their pay scales. I don’t think a situation where many of the brightest young people in a country find that their best financial prospect is working in lower/middle in development projects is healthy. Related to this is the fact that American USAID staff only really dealt with Egyptians who had attended prestigious (usually English speaking) universities who were definitely not representative of the country they were dealing with. Needless to say, there was a lot of revolving door stuff going on, you’d just finish one job and start on the next and the same people would pop up. It was a small world, lots of insider mentality, and this aspect really did bring to life the old saying that lots of aid is really a way of transferring money from poor people in rich countries to rich people in poor countries.

As I say, USAID was definitely the biggest fish in the Cairo pool; others were doing some work too, but on a much smaller scale. To be honest I can’t even remember much about what projects they did, but I think the Dutch and Danes did quite a lot on education and birth control but concentrated on individual governorates rather than trying to do the whole country. Other big donors were the Gulf countries but we had nothing to do with that (the project I went back in 1999 to see was a waste water plant being built by Balfour Beatty just outside Cairo financed by Sheikh Zayed of Abu Dhabi). One part of the development landscape that I don’t remember coming across was big UK/European charities. I don’t remember Oxfam, Save the Children, etc etc being a factor in Egypt at all. They may have been there, but I didn’t come across them.

It’s worth saying that while I spent most of my time in Egypt, I also went to look at UN stations in Tunis and Khartoum, and spent quite a bit of time in the West Bank and Gaza after the Oslo accords as USAID geared up to spend money there. I also worked with Egyptological organisations who were recipients of USAID financing. All of this was fascinating and great fun but not really to the point.

In summary, I didn’t expect to focus so much on USAID but perhaps it’s right that I did. The work was important but also inseparable from the long term, strategic and trade goals of the US and it made perfect sense in those terms. I think there were significant amounts of corruption and waste built in, not just in the projects themselves but also as big Egyptian families would have exclusive licences to import particular goods and they would have made out. In the interests of honesty, I’d add that we billed USAID handsomely for the work we did. I have no issue with that; they didn’t approach things very commercially at all and we did. As a profit making venture, we weren’t starry eyed in any way about the industry that was our client. Still, I enjoyed working with lots of young Egyptians and I hope helping them in their careers. I worked with people that I believe have been and will continue to be assets to their country and that makes me proud.

Anyway, where was I?

I don’t know! I’m not sure my experiences in Egypt are strictly relevant to the debates in Parliament yesterday which have got people very hot and bothered but it’s worth diving in I think.

Obviously I’m now looking at the question from the other direction as the UK is a donor country and I am not as familiar with the details of the work it finances, but it’s worth touching on a few things that strike me. Firstly, I’d say the fixed target of a percentage of GDP is rather silly: successful policies are adaptable and I’m entirely happy to move away from a fixed percentage of GDP as a target. I’d much rather have things framed more loosely (“between 0.5% and 0.7% of GDP”, “at least 0.5% of GDP”, “to be in the top quartile of OECD countries” etc). Fixing at a figure and having debate centre on that sounds like a recipe for sclerotic policy. It has certainly led to impoverished political debate, but what’s new. We have a government with almost No Idea and few even half thought out ideas set against an opposition even more bereft of intellectual clout that can only do politics through outrage and histrionics. Don’t get me started.

I’ve taken a look at the Tracker here that shows where funds are spent (it seems to be the best geographical measure available but I think it’s incomplete and doesn’t pick up all the spend by any means). My impression is that it all looks rather scattergun. There’s a graphic at the top and it does look like the UK is financing or has financed programmes in every single country in Africa, Asia (excluding Japan) and South and Central America. Granted, some is very small and is funding scholarships and the British Council, others are tiny (environmental assistance of £113k to Georgia) but nevertheless this doesn’t convey much of a sense of focus. Do we really have strategic interests or insight into Latin America: wouldn’t we do better to concentrate on sub-Saharan Africa and parts of Asia? I suppose the criticism might be that this reflects the Empire, but it would make sense to me to identify where we can deliver and really add something. The top level information seems to show quite a bit of sprawl (possibly an effect of focussing on a 0.7% target). Anyway, I’m sure that a lot of the work that is financed and carried out is worthwhile, and there will be some dross too. It’s wide ranging and I think the aid target includes money spent on the British Council, the BBC World Service as well as more obvious development activities.

I think the character of the UK programme differs substantially from what I saw in Egypt: the UK won’t work at the scale of USAID, it looks like it puts a great deal through large international NGOs. This is a huge sector and it is worth touching briefly on the sheer size of some of the organisations that appear to receive very large amounts of funding from the UK government to deliver its programmes. When we talk of the charitable sector it’s important to draw a distinction between on the one hand very large organisations that draw their funding (or at least nearly all of it) from government, philanthropic billionaires or both and on the other hand smaller, local organisations running on volunteer power. I suspect the majority of UK development money given to NGO charities is to the former; we really are looking at some gigantic organisations with revenues sometimes in the hundreds of millions of pounds. I’m not entirely against these organisations, I’m sure they have lots of capable people working for them but they’re really businesses in all but name. I wouldn’t want the same work done by civil servants but, nevertheless, I find it impossible to believe that this world is not something of a rent seekers paradise full of insiders, favours, revolving doors with politicians on the eye out for a soft landing once they’re booted out of office and so on. The UK Government will grant funds for programmes worked up between civil servants and the organisations managing the funds (who will also receive a chunk of to cover London overheads). If you write the rules of the game, determine the parameters by which success is measured, receive the funds and also run the projects I’m afraid that is all a bit crony-rent-seeky for my taste. The sort of central London chumocracy we see at play between these NGOs and the UK government will be replicated in recipient countries too with the creation of a permanent class of pretty well off welfare workers who I suspect could often be doing more important things for their countries. I probably let preachy progressives on six figure salaries get under my skin more than I should, that’s just me, but I do think it is a genuine issue with optics. But reflecting on what I’ve said above a bigger issue might be a closed shop on policy formulation: it would be just yet another area where group think and institutional capture leads to low performance and ideas not being tested.

Now, perhaps a certain amount of this sort of thing is unavoidable, but I’m not going to get dewy eyed about CEOs and staff in London who compare their packages with equivalents in the private sector having a bit of a shake up. If the work they are carrying out is so very important they need to raise their fundraising game. Many of the biggest of them seem to concentrate on billionaires’ charitable foundations. Well, they can ask for more and they could also appeal to the public. Bill Gates didn’t pay much tax here, he can chip in a bit more for the prestigious organisations he enjoys funding. I don’t know what an alternative to the big NGO model looks like, but by instinct I don’t like the big-NGO model very much and think pressing against it is fair enough. They’ve done pretty well and had a few scandals, I think they probably are going to need to do better in communicating why they’re important and looking for more funding from the UK public might give them a renewed sense of mission and be an opportunity for them.

The other thing I think that it’s worth touching on is domestic politics, as ultimately the UK’s policy in this area as in any other must at some point make contact with public opinion and us pesky voters. Boris Johnson won his vote and part of the reason for that will be that MPs know what’s in their postbags. Much is made of the fact that the UK gives money to India, which has a space programme. It’s a bit of a trope, and I’m sure provokes much eye rolling in aid establishment, but there’s usually a bit of truth in cliches. Generally the British public has pretty good instincts on stuff like this. The UK has been, and will continue to be, a generous donor of international aid. As I said in a separate piece here, it’s time we started listening to people with unfashionable and uncredentialed opinions a bit more: as a group they are right more often than they are wrong.

I’ve concentrated very much on the politics surrounding aid and the structure of NGOs and the environment in which they operate than on the deliverables on the ground. But turning to “outputs” (eugh, what a term, perhaps there’s a better one) then disaster relief and vaccination programmes seem to me to be unarguable goods that should be protected and probably significantly increased: this would indeed be “helping the world’s poorest”. But when it comes to work that surrounds broader economic development then I think we move on to shakier, more political and more contentious ground. There are good cases to be made for focusing efforts on North Africa for example, it borders Europe and its future is entwined with Europe’s. But Algerians are not “the world’s poorest”; Haitians are far poorer, nevertheless it would be perfectly sensible to argue that Egypt, Algeria and Libya are much more sensible places for the UK to spend its budget. And when it comes to work beyond getting jabs in arms and dealing with the aftermath of natural disasters all sorts of statistics and measures will be thrown out by people vested in increasing, decreasing or abolishing pet areas of expenditure. I’ve deliberately steered clear of this because I don’t have the expertise or time to research them. More importantly I have no doubt that the data selected will be partial, ignore all sorts of important second and third order effects and likely be pretty unreliable: economists and social scientists too often just aren’t very good at measuring things.

A conclusion? I’m not sure I’m much further on, though writing through what I saw in Egypt was helpful for me; I think it was a programme of a particular type and needs to be assessed as such. But starting from the ground up and looking at the UK I’d say a fixed target is silly and has assumed an unwarranted totemic status. But then again changing it from to 0.5% falls down on similar grounds. I think putting work through the NGO industry (for want of a better term) is unavoidable, but I think it’s also fair to call out its rent seeking behaviours and the impact that has on our politics here as well as in recipient countries. I think with the cut to 0.5% there is the opportunity to have a real discussion on how the money can best be used, and to improve its focus to serve recipients better within a sensible, well articulated foreign policy that is appropriate to the UK’s place and standing in a rapidly changing world. Having said that it’s difficult to see any debate avoiding the usual catcalling, grandstanding and histrionics, but that’s UK politics at the moment I suppose.

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