Tied Aid By Brona, Vicky, Josh and Georgina

Defining tied aid Tied aid is foreign aid that must be spent in the country providing the aid, the donor country, or in a group of selected countries. A developed country will provide a bilateral loan or grant to a developing country, but mandate that the money spent on goods or services produced in the selected country. From this it follows that untied aid has no geographical limitations. However some say that the money is inappropriately spent on extravagant projects such as dams or road - building which does little to reduce poverty

An Example of tied aid A scandal erupted concerning the UK funding of a hydroelectric dam on the Pergau River in Malaysia, near the Thai border. Building work began in 1991 with money from the UK foreign aid budget. Concurrently, the Malaysian government bought around £1 billion worth of arms from the UK. The suggested linkage of arms deals to aid became the subject of a UK government inquiry from March In November 1994, after an application for Judicial Review brought by the World Development Movement, the High Court held that the then Foreign Secretary, Douglas Hurd had acted ultra vires (outside of his power and therefore illegally) by allocating £234 million towards the funding of the dam, on the grounds that it was not of economic or humanitarian benefit to the Malaysian people. In 1997 the administration of the UK's aid budget was removed from the Foreign Secretary's remit with the establishment of the Department for International Development (DfID) which replaced the ODA. Tied aid is now illegal in the UK by virtue of the International Development Act, which came into force on 17 June 2002, replacing the Overseas Development and Co-operation Act (1980).

Early criticisms The practice of tying aid has been known for almost 40 years. One of the first studies to address the problem was undertaken by the UNCTAD secretary in the preparation for the Second UN Conference on Trade And Development, held in New Delhi in The following year the final report of the Pearson commission also condemned the practice because it reduces the overall value of aid.

Criticisms of tied aid The UK has also pledged to raise its contribution to eliminating world poverty to 0.3% of GDP, from the current level of 0.26% International Development Secretary Clare Short says "If the poorest people and countries can be included in the global economy on more beneficial terms, it could lead to a rapid reduction in global poverty... if we go on as we are, the poor will become more marginalised.“ The Conservatives criticised the proposals as half-hearted and lukewarm.

Why Christian aid organisations agree Charities such as Christian Aid and Action Aid welcomed the government's move to untie aid, which they said would release up to $8bn more for international development. The practice of aid tying, when aid is committed on the condition that the recipient country uses the money to buy goods and services from the donor country, wastes vast amounts of money that could be spent on poverty reduction and health and education services for the world's poorest children.

links between the developed and underdeveloped countries Many LEDC’s produce natural resources which the developed world rely on. In giving aid to these countries the developed world can ensure a steady supply of these natural resources. If there were a shortage then those countries which have given aid would likely to have priority to the scarce resources.