1. TIED AID
By Emma and Amber

2. DEFINITION:
In this type of aid the giving (or donor) country also benefits economically from the aid. This happens as the receiving country has to buy goods and services from the donor country to get the aid in the first place. In building a dam, for example, the Britain may insist that their companies, experts and equipment are used. Whether the aid is given may depend on the receiving country agreeing to buy e.g. military jets from the donor. Some people believe that this type of aid can be harmful if it supports governments that oppress their people.

3. EXAMPLES:
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 1994.
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.

4. MOTIVATIONS FOR THE AID:
In the OECD report The Tying of Aid it was found that the motivations for tying aid were both economical and political. From the economic point of view, the donor country aims to raise its own exports. However, the study found that the exports related to tied aid were minimal. It referred to an earlier study that looked at the relation between exports from nine representative European donors and 32 representative developing countries. That study found that exports connected to tied aid only constituted about 4 percent of the total. The Tying of Aid thus concluded that the more important reason for the practice was political. Historical relations, trade relationships, geopolitical interests and cultural ties, all are examples of the political motivations behind the tying of aid, but according to Jepma, they all boiled down to the same thing:
Although most donors give aid to quite a wide variety of recipients, the importance they attach to individual recipients clearly differs: donors support countries with which they have, or hope to have, strong ties.

5. PROBLEMS OF THE AID:
The tying of aid is a form of protectionism; however, the literature on this particular subject is rather scanty. One of the major problems in the untying of aid is the donor dilemma. Those donors that want to abolish the practice will see their own interests damaged if the other donors do not follow.
In 2001, the donor members of the Development Assistance Committee (DAC), a subcommittee of the OECD, agreed to virtually untie all aid to the Least Developed Countries. That Recommendation entered into effect on January 1, In addition, Australia, Finland, France, Germany, Ireland, Japan, the Netherlands, Norway, Portugal, Sweden, Switzerland and the United Kingdom have untied their aid beyond the requirements of the Recommendation.
Further progress on this particular issue is being implemented as part of the Paris Declaration on aid effectiveness. However, of the 12 indicators included, the untying of bilateral aid is the only item without a deadline for its competition.