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Chakravarti, A. (2005). Aid, Institutions and Development: New Approaches to Growth, Governance and Poverty. Northampton, MA: Edward Elgar Publishing.
isbn:1845421906

The foregoing analysis has shown that aid has had a weak impact on key macro-economic, institutional and governance-related variables. It has not been an effective instrument for bringing about economic and social change in the developing world, and, to a large extent, has been a waste of scarce resources. Aid has been channelled to developing countries primarily through their respective governments who have predominantly used these resources to finance consumption or unproductive public investment. (158)

These attempts to induce or 'buy' reform through the liberal provision of aid have failed for reasons we have already discussed. Nevertheless, in my view, the principle of using a contractual or conditionality-based approach to engage developing countries is an appropriate one. However, the framework that is adopted needs to be one that is more binding on developing countries and must be based on measurable and well-defined outcomes rather than on the flow of reforms. (162)

Contractual agreements with major implications for the political economy of a country have been used successfully in other fields of multilateral interaction, such as trade, ... (162)

What is important is that, ... , they need to be negotiated in advance, the parameters, penalties and benefits must be known, and they must be strictly enforced. (162)

Since policy decisions are largely determined by the alignment of domestic political forces, it follows that if aid is to influence developmental outcomes, international donors must accept that their activities have a political dimension. (163)

Components of Tecnical Assistance

• short- or long-term experts, generally expatriate, who are provided for managerial or advisory purposes
• funding for shor- and long-term training to locals through workshops, seminars or regular courses
• related equipment, mainly vehicles and some computers
• local supporting staff
• funding for headquarters administrative overheads, evaluations, mission and so on (53)

However, if they [institution and human capacity building] are to respond to attempts that try to accelerate the process, for example, with aid-funded technical assistance, the discussion above suggests that certain conditions need to be in place before any efforts can be effective. These conditions determine the absoptive capacity of a system to technical cooperation activities and can be characterized as follows:

• A stable institutional environment with well-defined and transparent systems of recruitment, transfer and promotion.
• An established organizational framework with clear terms of reference, including overall and sectional objectives.
• Favourable incentive structures, in particular adequate salaries and benefits to ensure the retention of qualified staff and reward good performance.
• The existence of appropriate formal or other training programmes which result in an adequate supply of the base-level manpower required for accelerated skills formation and institutional development. (68)

Governance, Ethics of Development
Secondly, there needs to be greater debate in international forums about modifying the present status of international law to deal more effectively with repressive regimes and failed states ... . The sovereignty and legitimacy of a regime should be a matter that can be scrutinized by the international community based on criteria enshrined in the Universal Declaration of Human Rights and similar documents, rather than something that is absolute in international law. It is a reflection of the lack of clarity on this issue that, while many intellectuals, non-governmental and international organizations call for a more human-centred process of development, when it comes to confronting regimes that are suppressing the choices, opportunities and capabilities of their own peoples, such groups eventually give precedence to sovereignty, a line in the sand that has emerged from wars and colonialism, rather than to the inalienable rights of man. Even worse, by denouncing as neo-imperialist any 'intrusive' efforts by more enlightened sections of the international community to deal with such regimes, many such groups end up becoming party to the repression themselves. To move this agenda forward, therefore, it would be most appropriate if groups committed to democratic principles, whether they are the G7, the OECD, the EU or like-minded developing countries, took greater initiative in raising awareness of issues of governance, and eventually formulated a concrete programme of action in this area. (156-157)

Seeking for linkage between aid and nature of public spending of recipient governments
To get better understanding of why the studies we have considered obtain these results, it is necessary for us to disaggregate aid into its various component parts. This is an area that has not been adequately explored in the empirical literature. In particular, existing studies do not provide us with much guidance because they use reduced form equations, and these cannot capture the extent to which different types of aid contribute to what are considered the proximate determinants of growth. In this sense, an essential characteristic of aid has not been adequately considered by previous studies on the effectiveness of aid. (47-48)