A Nexus between Effectiveness of Development Assistance and Governance System of Developing Countries

Abstract

While many countries escaped poverty with the help of increasing development assistance, much part of the developing world showed little progress and still remained poor over the past several decades. In this regard, there is rising doubts on the effectiveness of the conventional top-down way of giving foreign aid. Also, discussions on discrepancy between aid effectiveness of macro and micro approaches of development assistance are becoming more and more heated. Based on this trend of the world of development assistance as a research background, the thesis tries to find out under what conditions each macro and micro approach of development assistance is more likely to be successful. After reviewing literature on macro approach—top-down approach of giving foreign aid—and micro approach—bottom-up approach of giving external assistance to specific needs, mostly conducted at the community level, hypotheses claiming that there is a nexus between effectiveness of development assistance and governance system of developing countries were made. In detail, micro-level development assistance should be applied prior to the macro approach in countries with bad government, while most of developing countries with good governments need macro-level assistance first. The case studies of Bangladesh and Botswana by reviewing and analyzing their government conditions, amounts of ODA received, and in-depth analysis reports on aid effectiveness in each country eventually proved the hypotheses that condition of government influence the degree of effectiveness of the macro approach, and it is better to apply the micro approach prior to the other method when aid recipients government is bad. The findings of the case studies also explain the general trend among the other complementary cases of developing countries. In conclusion, the macro-level development assistance is more likely to be effective and influential on growth of developing countries with good government that is capable of managing aid resources effectively and transparently. On the other hand, the micro approach is more effective in directly meeting the needs of the poor in countries with bad governments. Therefore, when urgent needs of individual citizens in developing countries with bad governments are considerably met by micro-level foreign assistance, macro-level assistance should intervene and assist to spread the positive impact of the bottom-up development assistance approach.