Foreign Aid- Behind the Curtain


By Chandrasena Maliyadde,
Former Secretary, Ministry of Plan Implementation

I have a vested interest (or is it sentimental) in the subject of Foreign Aid as I cut my teeth as a Planner in External Resources Department (Then a Division). The total outstanding external debt and liabilities by end of 2012, was US$ 33.7 billion (Table 1).

Increase in foreign aid flow after 1977 was dramatic. According to the Central Bank report produced on the occasion of fifty years of Sri Lanka’s independence, "Sri Lanka received very little aid from the donor community during the period prior to 1977. The total outstanding aid to Sri Lanka from the IBRD/IDA as at end 1976 amounted to US dollars 65 million." In addition to rising the external debt and liabilities in more than 500 times during a period as short as 35 years, sources, conditions attached, forms and types of aid have changed significantly.

None would disagree that this massive quantum of foreign aid received has immensely contributed to overall development and to improve the quality of life. There are many monumental infrastructure projects built with foreign aid. In addition to physical infrastructure Foreign aid was instrumental in transferring and enhancing knowledge, introducing systems and technologies, building up the capacity and adopting new concepts and working culture. The foreign aid has helped to maintain a high capital investment ratio; it has helped to bridge the savings-investment gap; it has helped to bridge Fiscal deficit. The impact in comparison to the amount is adequate or not is another question and is left to borrowers, users and beneficiaries. These benefits are visible, tangible and obvious. This is what one would see on the stage of Foreign Aid. What is happening behind the curtain of foreign aid is known to a few. With my association of many donors I wish to share a part of my "behind the curtain" experience.

At the time we joined the public service most we got, at a meeting, was a cup of tea. Attending meetings was a part of our job. Today some snacks are going round the table in addition to the cup of tea along with an envelope which contains the attendance fee. So, attending meetings has become additional work which needs compensation. This culture was first introduced in foreign funded projects. Foreign funded project work was not in the duty list. To perform duties outside the list, officers starting from a Ministry Secretary to a Development Assistant need to be compensated. "Additional work" means "additional money".

The financial norms and ceilings are relaxed and made more flexible for Project staff. Although this is introduced in good faith, in my opinion, this has led to deterioration of financial discipline and control in the public service. The Project staff for donor funded projects is selected outside the normal government recruitment process and is remunerated lavishly. Treasury has issued a separate Circular for this. This has created distortion, discrimination and a wedge between project staff and non-project staff. Once the project is terminated there are many to receive the assets and whatever the remnants but none to take over the responsibilities and liabilities.

Foreign aid has introduced a culture of "Projects" at the expense of "Programmes". These projects are not integrated to programmes and are working in isolation. Project staff is more allegiant to the donor. Donor contribution is more in designing and even identifying projects. The Projects operate according to their own rules and regulations. More often than not financial disbursement is the priority concern of donors, Treasury and Project Execution Agencies. One has to show performance and efficiency in absorptive capacity to get more and give more. When it comes to foreign aid "more the merrier" is working efficiently. Project provides vehicles, instruments, new office buildings, quarters, international tours and many other perks. Those involved in negotiations, designing and evaluations are influenced by such benefits rather than national interest. Once I was negotiating with a donor for a project. Donor was keen in getting an expatriate consultant. I suggested that we use that money to buy a few bicycles for community workers. There was no agreement and at the end donor invited me to attend a workshop in his country. I attended and the matter came up. What I agreed for or not is left for the reader to judge.

The foreign aid provides funds for construction and rehabilitation but not for maintenance responsibility for which is left to the Government. Invariably, there are no funds allocated or arrangements made for maintenance. This has resulted negligence of assets created under foreign funded projects. We built up many primary health care centers, community centers and other village infrastructure under donor funded Projects. The equipment, material such as drugs, staff was to be providing by the Government. Initially they were there but over the time neglected. These buildings have turned into archeological monuments or cattle sheds. Neither the Local Authority nor the community was financially sound or equipped to take over the responsibility. In fact when we negotiated with Local Authorities to hand over the assets, they retorted "what assets, they are liabilities".

There is a process of appraisal, evaluation and approval for a new project. An agreed strict evaluation criteria and appraisal procedure is applied in the process. One has to pass the entire test to secure the approval. At the end the source of funding is verified. If the response is foreign aid the project passes the test irrespective of the rest of the criteria. Ah! If foreign funded yes.

Largest beneficiary of foreign aid is the public sector. Private sector has got only a fraction of the cake. Private sector even a Provincial Council has no authority to negotiate with a donor. Main decisive factor is the public sector. Private sector is benefitted through providing goods and services. But it is only trade. They are no direct beneficiaries.

Foreign funded Projects have introduced a group of new service providers who were not heard prior to 1977.One set is known as "Project Promoters" They are none but commission agents. They come up with ideas for unheard, unknown projects. .Once the Project is in place they disappear sometimes with the company. They reappear after a while with a new company and another donor. Late President Premadasa was keen in strengthening the Divisional Secretary System. He wanted them to be in regular contact. When this was known a commission agent appeared. He displayed details of a remote village in India on his computer and suggested introducing a computer based (GIS) information system. Later President realized that the agent was only a salesman and trying to sell computer hardware but in the absence of software the computer is unable to deliver the data he wanted.

Foreign funded projects introduce a new culture; that is consultancy. Since the public sector lacks the capacity and time services of outside Consultants are required in all stages of a project. More often than not they are ex-public servants except for those few who come from abroad or outside the public service. Projects have made those who are incapable while in service capable and who are unthinkable are thinkable after retirement. This has become a lucrative business. New consultancy companies were established. Projects disappear but they sustain.

Every new project has a component for capacity building. Training, orientation, exposures, workshops, seminars are all part of capacity building. This is a never ending process. Capacity building is expanded beyond the project staff covering public sector, politician, local authority and community. No sooner this list will include by-standers. The process covers an array of subjects. Once I asked at a seminar as to where all this capacity built up gone?

Donor funded Projects have introduced many a new concepts into what you call Jargon. Gender balance, women empowerment, Rapid Rural Appraisal, Social Mobilization, Participatory Approach, Group Formation and the list can go on. Some of them are alien to culture, habits, beliefs and traditional systems and organizations. This has led to division, disintegration, confusion and collapse and breakdown of village socio economic structures. A new society or a group is formed with the arrival of a new project in the village. One would find same members in such different groups. They rally round to ensure that they get project give-outs.

Foreign aid is useful, beneficial and serves a multi-purpose role. It has become something without which the country cannot move on. My mission is not to assess whether we are in a debt-trap or a death-trap. It is a solely an attempt to show the picture behind the curtain of Foreign aid. Benefits of most Projects disappear before the Project does.

(The writer can be reached on

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