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The myth of NGO superiority – debunked

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Recent research suggests that non-governmental organisations (NGOs) from donor countries do not provide better targeted or more efficient aid than state-run development agencies. They do not seem to even try to outperform the latter by focussing on the neediest or by working in particularly difficult environments.

[ By Peter Nunnenkamp ]
It is easy to lament the stinginess and selfishness of official donors, as Kishore Mahbubani did in D+C/E+Z 2/2008. Those donors provide critics with the data needed to expose the flaws of official development assistance (ODA). It is different with non-governmental organisations (NGOs). NGO aid is certainly relevant, but its allocation has hardly been mapped, let alone explained. The main reason is that sufficiently detailed data are hard to come by. After all, NGOs probably do not want critical analysis to tarnish their image of being superior donors.

NGOs are often believed to provide well-targeted aid. They are said to be particularly close to the poor, as many of them directly cooperate with local target groups, circumventing recipient governments with a reputation of corruption. Accordingly, the argument goes, they are better aligned to poor people’s needs, and suffer from less leakage. Moreover, it is said that NGO aid is less distorted by donor governments’ commercial and political interests, such as export promotion or political alliances.

Donor governments seem to share that favourable view. To a large extent, they channel ODA through NGOs. In some donor countries, the share of such ODA is as high as 20 %. The total of aid granted by NGOs from OECD nations amounted to almost $ 15 billion per annum in 2005 and 2006. That sum exceeded bilateral ODA from every individual donor country except for the USA.

Some critics, however, suspect that the case for NGO aid largely rests on ideological grounds. The view that NGOs have a clear focus on the poor first came under attack in the 1990s. Critics believe that NGOs probably prefer the quiet life of implementing their national governments’ agendas to risking failure in attempts to outperform state agencies. This seems all the more likely as some NGOs financially depend on official “backdonors”.


The cases of Sweden and Switzerland

Such criticism is hardly supported by empirical research so far; and that is something it has in common with the wide-spread faith in high NGO performance. NGOs only rarely support scholars who collect data. Doing research on German NGOs, for instance, therefore tends to be frustrating. By contrast, two relatively small donors – Sweden and Switzerland – offer reasonable data to compare NGOs and state agencies by analysing the following three questions:
– Do NGOs focus more strongly than ODA on those countries where need is most pressing?
– Do NGOs engage in particular where the policy environment is difficult, so government-to-government transfers are unlikely to work?
– Do NGOs behave more altruistically than state aid agencies, which may be pursuing hidden agendas?

Research done at the Kiel Institute for the World Economy in cooperation with the KOF Swiss Economic Institute in Zurich and the Radboud University in Nijmegen has led to only preliminary results so far, but they do reinforce the sceptics’ view on NGO aid. The answer to the first question is clearly “no” if one judges recipients’ need for aid by average per-capita incomes. The increase in Swiss NGO aid for countries with lower average income, for instance, was slightly less pronounced than the increase in Swiss ODA. In striking contrast to Swedish ODA, Swedish NGOs completely ignored the income position of recipients, spreading their aid almost equally over low and middle-income countries. The poorest 25 % only received 27 % of Swedish NGO funds, whereas the wealthiest 25 % received 22 %. The picture is more favourable for Swiss NGOs if need is measured in terms of absolute poverty (share of the population living on less than one or two dollars per day). Swedish NGOs hardly differ from state agencies in this respect.

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