Foreign Aid Analysis - Essay Example

Section/# A Foreign Aid Analysis and Dis Essentially, there are four different types of foreign aid. Each one of these forms is intended to affect a given result for the nation or nations that are giving it as well as the nation or nations that are receiving it. These four different types of foreign aid are contingent upon the following: bilateral aid, multilateral aid, tied aid, and project aid. In essence, bilateral aid is contingent upon when capital flows from a developed nation to a developing nation. Similarly, multilateral aid is contingent upon a situation in which capital flows to a developing nation from a world agency or entity that is responsible for dispersing the eight. Furthermore, tied aid occurs when monies are utilized in order to buy imports from a donor country or for a specific project. Lastly, project aid occurs when funds are utilized to finance a particular project. As can relevantly be understood, different financing structures and mechanisms are utilized in each of the four different approaches towards foreign aid that have been listed above. As a function of seeking to understand this to a greater degree, the following analysis will engage the reader with an interpretation and discussion of which financial instruments should be used to provide foreign aid, and which represent the right balance among the utilization of different instruments. From the information that has been discussed above, it is clear and apparent that within these four different types of foreign aid there exists only to potential means of affecting them. Firstly, a nation can provide foreign aid in return for either monetary or other financial incentives or access to given markets within the nation in question. Secondly, foreign aid can be conducted as a means of seeking to benefit developing nations with no expectation of long-term economic gains by the donor country. Naturally, the secondary scenario that has been listed is in fact the one that is practiced the least; with most nations seeking to benefit their own economies or their own trade balance via financial instrumentation involved within the process of foreign aid (Rena, 2013). Accordingly, one of the most common instruments that is utilized as a function of performing foreign aid is to do so as a means of a cooperative agreement that in turn provides the nation that is performing the foreign aid to capital markets within the nation in question. For instance, taking the recent case of China operating within Zimbabwe and elsewhere, a great deal of foreign aid has been distributed to these countries with the expectation that Chinese firms will have access to markets within Zimbabwe, as well as elsewhere, and be considered as fully competitive with domestic or other international firms that are currently in operation (Spence, 2014). This approach is effective with respect to infrastructure development; however, Unitarian issues and health related problems that humanitarian aid is oftentimes directed towards accomplishing is oftentimes left untouched. The underlying reason for this is of course the fact that the nation that is performing the foreign aid is uniquely interested in an economic benefit and does not have a direct focus on improving the lives, educational standards, or well-being of the populace (Gibler & Miller, 2012). An alternative approach to accomplishing foreign aid that is also practiced to a great level has to do with the provision of loans in exchange for a reduced rate of resource cost (Ali, 2013). For instance, nations such as the United States might very well provide a given developing nation with loans that have a below-market average interest rate. However, this is not done in the hopes that such a low interest rate can encourage loan repayment and reduce the risk of default. Instead, it is performed as a function of the fact that the benefit of providing the loan is affected as a result of the availability and access that the providing loan originator will have within the nation in question (Wamboye et al., 2014). This third and final instrument that is utilized as a function of providing financial aid/foreign aid to a nation in need is contingent upon a given country forwarding resources and/or supplies/money directly to a multilateral aid agency that seeks to implement a broader goals of a given collection of nations towards a given region, area, or country (Congressional Review, 2013). Not surprisingly, this level of foreign aid provides for the very least level of control with respect to what is actually done/accomplished with the money and how the nation that provided the original funding for it is able to benefit based upon such an approach. It is likely this very determinant that creates a dynamic by which the majority of all foreign aid that is provided around the globe comes from other avenues; and is not contingent upon multilateral foreign aid (Alvi & Senbeta, 2014). The direct potential for benefit and the ability to coalesce goals between two partners is one of the reasons for why multilateral aid only represents a very small percentage of the total aid that is distributed around the globe. It is this author’s understanding that even though all forms of foreign aid had distinct drawbacks and difficulties, the overall level and extent to which foreign aid is expected to benefit a nation that provides it is a fundamental flaw that currently exists within the system (Mawdsley et al., 2014). Instead of a nation providing foreign aid as a function of seeking to benefit their own economy and/or otherwise achieve access to markets were resources at a reduced cost, this should be constrained to business development and issues relating to economic sustainment; therefore having no relation whatsoever with the way in which foreign aid is directed or the manner through which foreign aid objectives are accomplished. In seeking to divorce these two processes, the overall extent to which multilateral aid and the financial institutions that are responsible for the distribution are represented should necessarily increase dramatically. Although this is something of an idealists point of view, it nonetheless could potentially create a dynamic by which foreign aid would be directed solely towards seeking to improve the quality of life and economic reality of a given region; not predicated upon benefiting the donor nation. 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