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National Development Agencies and Bilateral Aid

Updated on December 28, 2011

The term bilateral aid refers to lending and development assistance done between governments (government to government aid). Stephen Brown’s article delves into the concept of foreign aid or what we will come to know as Official Development Aid (ODA) and how it applies to a government’s economic wellbeing, the main aim being the welfare of developing countries. To qualify as an ODA the main purpose behind your funding must be the improvement of socio economic status of a developing country, funding must be supplied by the government.


Bilateral aid can be traced back to the Second World War, nearing its end, organizations originally created to contribute to post-war reconstruction sought to do this with international actions. The International Bank for Reconstruction and Development (an offshoot of the United Nations) made its first donation to a developing country in 1950 to Columbia. Since then multiple nations have sought to help out developing countries in need with a bid to stabilizing or improving them economically.

Politically and strategically influenced dispositions such as access to military bases and natural resources and diplomatic relations have been prominent features of aid policy for the governments. A good example is the United States of America at the time of the cold war provided aid to the Soviet Union with a view to strengthening their alliances and gaining access to new territories in times of war. These gains arise depending on the peculiar needs of the government and act as incentives which are most times hidden, take For example, “Japan concentrates its aid in the Asian region; Britain and France give much of their aid to former colonies; political and cultural relations are evident in OPEC’s aid allocations”


The countries targeted for aid can be selected according to how the “need-effectiveness” index assesses their level of poverty (for need) and the quality of their institutional environments for effectiveness. This is to ascertain the degree to which the funds will function or achieve its specific target. It includes the country’s score on the Human Development Index, this would reflect the country’s GDP per capita, life expectancy and adult literacy rates. The idea behind this being that in a country that has a low GDP per capita, a low life expectancy and low adult literacy, there will be a greater need for foreign aid.

The largest ODA recipients as of 2005 are

Country Billions US$

Iraq 21.7

Nigeria 6.4

Afghanistan 2.8

Indonesia 2.5

Ethiopia 1.9

The largest ODA recipients as of 2005

In recent years, the DFID of the United Kingdom (department for international development) has been the best bilateral development agency. This is as a result of continued engagement, sensible reviews, and their targets as to what they aim to achieve in developing countries.

In 2008/09, 140 countries received some form of UK bilateral aid. This included 18 countries where DFID only provided pension payments, and 35 countries in which the only bilateral aid was provided by other UK Government Departments and bodies.

Their targets being:

Wealth creation;

Direct delivery of the Millennium Development Goals (MDGs):

Health; education; poverty, hunger and vulnerability, and water and


Governance and security;

Climate change; and

Humanitarian assistance


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