Ireland’s overseas assistance generosity may yield longer-term economic benefits for the country

20/05/2013 at 10:30 am Leave a comment

** Guest blog by Dr. Pat McCloughlan

The 2006 White Paper on Irish Aid placed the fight against world poverty at the heart of Ireland’s foreign policy and set out the guiding principles of the aid programme. A Review of the White Paper was announced in June 2011 and its terms of reference included examination of the progress made by Irish Aid, and the changing national and international context.

There are a number of strands to the debate on overseas assistance – including whether such a small, heavily indebted nation as Ireland should be devoting apparently so much money to the developing world in these times of unprecedented economic challenges at home.

It is therefore instructive to step back and take a dispassionate view, with an eye on the facts, and to understand the bigger, longer-term picture of Ireland’s role in overseas assistance and the potential benefits to the country as the world economic order changes during the century ahead.  For example, some of the fastest growing economies in the world with strong development potential are in Sub-Saharan Africa.

The form of overseas assistance most commonly discussed in the media is Overseas Development Assistance (ODA).  This is official assistance to developing countries channelled through government (i.e. from taxpayers).  ODA forms the basis of the United Nations’ target for developed countries to donate 0.7% of their gross national income to developing countries by 2015.  However, of the 23 largest aid donating countries in the world, which include Ireland, only five achieved this threshold in 2011 – Sweden (1.02%), Norway (1%), Luxembourg (0.99%), Denmark (0.86%) and The Netherlands (0.75%).

The corresponding figure for Ireland was 0.51%, ahead of the figure for all developed countries (0.31%) but still short of the 0.7% target in 2015.  In absolute terms, Ireland’s ODA amounted to €639m last year, or less than 1% of general government expenditure.  The amount is down substantially on the figure in 2008, reflecting the economic crisis.

It seems unlikely that Ireland, or most other developed countries, will meet the 0.7% target by 2015, which may be pushed back to a later year (again) or re-considered (the UN Millennium Development Goals were recently discussed at the world hunger conference in Dublin).

Nevertheless, there is another form of assistance to the developing world and one which no other developed country comes close to Ireland relative to gross national income – a fact that is little-known.  The specific aid in question is termed by the Organisation for Economic Cooperation and Development (OECD) (which compiles the data) as ‘Gross Outflow from Private Sources’ and basically constitutes aid from Irish residents (of their own free will) to the developing world, in which non-governmental organisations (NGOs) play a key role in the channelling process.

The ratio of Gross Outflow from Private Sources to gross national income was highest among the world’s principal aid donating countries in Ireland, where we attained a ratio of 0.22% in 2011, equivalent to roughly €300m.  The corresponding figure for the total of the aid-donating countries was 0.07% (there is no UN target for this form of overseas assistance).  Ireland has led the international league table in this regard for many years and the 0.22% figure achieved in 2011 represented an increase on the 0.18% and 0.16% observed in 2010 and 2009 respectively, in turn illustrating the generosity of the Irish people even in these most austere times and remembering that this non-official aid is given by choice.

Looking at the bigger picture, Ireland’s commitment to overseas assistance over many decades (from both official and private sources) can be viewed as a further manifestation of the country’s openness, which has earned for Ireland significant ‘goodwill’ internationally.  Through its overseas assistance networks across the developing world, Ireland is well-positioned in respect of realising new trade and investment opportunities likely to emerge in the years and decades to come, as the world economic order changes and newly emerging markets become more apparent.

These opportunities are being recognised by the Department of Foreign Affairs and Trade, and by NGOs, who together are beginning to lay the foundations for a more economically mature relationship between Ireland and developing countries having the potential to benefit all concerned.  The traditional donor-recipient model of the past is coming under review and greater recognition is being given to partnership-based approaches based on economic impacts at home as well as abroad.

Initiatives in this regard include the Africa-Ireland Economic Forum and Winning Business in Africa, which estimates opportunities totalling €12 billion for Irish firms over the next five years.  The most significant opportunities for Ireland are expected to occur in agri-food, consumer products and infrastructure – sectors in which Ireland possesses comparative advantages internationally and which can help Irish entrepreneurs to create and sustain jobs at home.

The business case for a more mature relationship between Ireland and the developing world is strong.  The generosity of Ireland and its residents puts it in a strong position to realise the opportunities now presenting themselves.  Reducing assistance, whether official or private, in the short-term may prove myopic and counter-productive when the bigger, longer-term picture of the changing world economic order suggests otherwise.  Perhaps this is what Microsoft founder and philanthropist Bill Gates had in mind on his recent visit to Ireland when he expressed hope that EU countries would not cut their overseas assistance budgets.

* Dr. Pat McCloughan‘s full economic commentary on this topic, entitled Thinking Strategically about Overseas Assistance, is available at www.pmca.ie/wp-content/uploads/2013/05/May-2013.pdf

** Dr. Pat McCloughan is Managing Director of PMCA Economic Consulting and the views expressed in this article are his own and not necessarily those of PMCA Economic Consulting.

Entry filed under: Government, MDGs, NGOs, Overseas aid. Tags: , , , , , , , , , , , , , .

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