05 July 2006

Aid provided by rich governments needs to target poverty. Instead, one quarter of their aid – $20bn a year – funds expensive and often ineffective western consultants, research and training.

This is the key finding of ActionAid’s new report, Real Aid 2, the second detailed accounting of global aid money that the agency has produced.

By drawing on international statistics, and carrying out its own investigations in four developing countries, ActionAid shows how rich countries’ technical assistance – consultants, research and training – too often promotes donor interests and inappropriate northern solutions instead of the alleviation of poverty.

Spending on western consultancies forms a major part of technical assistance. In the UK, for example, almost half of technical assistance spending goes on consultants and other experts, the vast majority of them British.

A typical cost of an expatriate consultant will be in the region of $200,000 a year. According to the OECD, in typical cases more than one third of this is spent on school fees and child allowances – spending which would not be needed if local consultants were used. 

Findings show that in Cambodia, consultants’ fees were $17,000 a month while government salaries were only $40. In Ghana, even relatively inexperienced consultants earned per day what government officials earned in a month. In Sierra Leone, according to one former UK-funded consultant, daily take-home pay was the same as the Auditor General’s monthly salary.

Consultancies often fail by ignoring local knowledge and imposing hi-tech solutions.

In Tanzania, Japanese consultants on an irrigation project introduced the use of diesel pumps that have become too expensive for local farmers. A massive increase in fuel costs have made them three times more expensive than other alternatives. The pumps now lie idle and farmers are worse off than before.

Report author Romilly Greenhill said: "Aid needs to help the poorest, not line the pockets of western consultants.

"Too much aid continues to be identified, designed and managed by donors. It is tied to their countries’ own firms, is poorly coordinated and is based on a set of assumptions about expatriate expertise and recipient ignorance."

Real Aid v phantom aid: the continuing story
In addition to technical assistance, ActionAid finds that much of official aid is swallowed in administration costs, double counting of debt relief, tied aid, donor aid that is allocated to geopolitical and commercial priorities and domestic refugee spending in donor countries. In total, ActionAid estimates that almost half of all aid fails to directly target the poor.

ActionAid calls all such aid, phantom aid. Phantom aid is tied to donors’ objectives at the expense of poor people, while real aid directly and demonstrably reduces poverty.

Caroline Sande Mukulira, South Africa Country Director for ActionAid said:  "It is important that the money rich countries give in aid is used to the best effect. Not only more but better aid is needed."

Since last year’s Real Aid report, ActionAid shows that real aid levels have risen slightly, but donors still fall far short of the UN target of 0.7% of national income and would have to increase their real aid spending fivefold to meet their international obligations.

ActionAid says that for their part, southern governments need to draw up plans that set out their needs, establish transparent procurement systems and ensure that assistance falls within this framework.

"Real aid can reduce poverty by helping educate children and providing patients with drugs. If more aid was real, so much could be achieved. Instead, too much of current aid pushes identikit reforms designed in Washington and other major capitals. It is used to control, rather than to help," said Caroline Sande Mukulira.