Technical Aid In Developing Countries

Donors have supported developing countries in the field of program, technical and project assistance (White 1998:69). Ouattara (2005) use disaggregated forms to test the impact of the various forms of aid on the recipient countries and produced interesting findings. The impact or the effect of technical aid on savings may be different from how project aid affect savings (Ouattara 2005:1).

PROJECT AID

Good quality infrastructure is a big challenge to the economies of developing countries. Financial constraints make it difficult for government to implement its manifesto. Donors therefore stepped in and provide direct financial assistance to these countries. Among the projects mostly financed through aid include educational facilities, healthcare

In donor countries, citizens support and encouraged their governments to support poor countries. The US and the Soviet Union during the cold war used aid to win the support of developing countries and to bring them under their influence. For instance, in the 1980’s, the US government provided substantial amount of aid to Egypt and Israel as a support for the Camp David Peace Accord signed in 1979.

Many donor countries such as France and Great Britain also provide aid to their former colonies so they can retain political influence over them (Alesina and Dollar, 2000).

Bilateral aid is mostly tailored supporting the economic interests or some sectors or firms of the donor country. A lot of donors tied aid some parts of their aid and make sure that the recipient country purchase some goods and services from their firms. When aid is tied, the donor country received political support as it would boost their economy. It must be emphasized that tied aid increased the cost of production. For example, the US policy on tied aid on food stipulates that food must be purchased and shipped by the US navy carriers to the recipient country. The number of weeks spent to transport the food would increase the marginal cost of production and therefore would defeat the purpose of

This retards the economic growth of the country (Holis, et al. 2005). To fill the vacuum, there is therefore the need to generate enough external help through foreign aid. The two- gap analysis of foreign aid is that loans, grants, credits must be transferred from developed countries to complement the efforts of developing countries in their development process. The two- gap model explains three processes that countries must pass through to develop. These are the absorptive capacity, savings and trade constraint stages. The absorptive capacity stage is characterized as the primitive stage where the country lacks technical knowledge necessary. Foreign aid in the form of technical aid should be provided to recipient countries to help them in their development effort. At the savings constraint stage, low wages make it difficult for people to meet their basic needs let alone to save. Foreign aid is therefore needed to boost savings and investment activities. The final stage is the trade constraint. Developing countries are fragile and have worsened terms of trade with high trade deficit. Foreign aid is needed at this stage to fill this