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"Transforming the Aid Environment"
AidMarket 2007

This report is about the aid environment.

It identifies the purpose of aid, which is to promote and secure basic human rights, to alleviate poverty and to reduce global inequality. It is important that the objectives of aid projects reflect the purpose of aid. However, the current aid system fails to efficiently accomplish the set objectives and it enables individual donor nations to dictate allocation in accordance with domestic preferences. This organization persists because the poor are not the real customers -- the rich-country politicians and voters are.

In an aid environment where national powers seek their own desired ends, aid is delivered without much oversight, without genuine interest in evaluating developmental impact, and with limited disclosure. The entrenched aid system has been manipulated to serve as a political tool. With respect to Donor governments that are using aid as a political tool to enforce change, there are two leading schools of though.

The first disposition believes that impoverished nations are in a poverty trap and in need of much more aid as a means to invest and promote economic growth. The other believes that the governments of impoverished nations are incapable of helping themselves and that aid should only be provided under certain conditions that are enforced by the donor government. Although these two schools of thought share the objective of democratization, both approaches prove to have negative affect on the rules and development of democracy, as opposed to promote democratic ideals.

Aid assistance for the sake of development, whether it is for personal development or that of the nation's economy, can be channeled either through governments or through the private sector. With respect to resources that flow from governments, this report finds that aid is often used as a political tool and concluded that politicians who are representing the interests of donor nations ought not to have decision-making authority on the allocation of funds that are collected for the sake of universal human rights. This report also finds that resources that flow to governments are utilized less efficiently than resources that are channeled through the private sector and aid funds are more likely to break down democratic rules as opposed to promote democratization.

AidMarket promotes a transformation of the aid environment so as to emphasize the role of the private sector and address prevailing problems. The private sector has steadily been increasing its involvement in international development and assistance with positive results. Remittances the funds sent back by migrant workers, both legal and illegal, to the country they call home are also an effective form of assistance. The private sector has proven to work most effectively to promote economic growth, but still faces criticism for the lack of coordination, independent evaluation, and high transaction costs.

People must recognize that just like any other individual, the aid official has an incentive to seek personal gain and that an aid system that presents these officials with opportunities, time and time again, to act on behalf of themselves and not on behalf of the poor and unfree, must be restructured. The aid environment within which development agents operate must be transformed so as to limit inefficiency and corruption.

AidMarket is purposefully designed to address the most serious of problems identified within the aid environment. AidMarket will enhance the impact of aid on poverty reduction by promoting coordination, supporting independent evaluation, and transforming the financing of aid projects. AidMarket will incorporate the beneficial impact of person-to-person aid and facilitate Donor-Agent partnerships; cutting red tape for Agents and offering Donors a new way to help achieve the objectives prescribed by a global-community of free people in a transparent market so as to ensure accountability, as well as to improve both decision-making and aid effectiveness.

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