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Foreign Aid, Foreign Debt, and Development: The Muslim World Scenario

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The Muslim World in the 21st Century

Abstract

This chapter deals with foreign aid—a major tool of external influence on countries in Africa and Asia, including the Muslim majority countries (MMCs). The chapter, in three major sections, deals with the concepts and parameters of studying foreign aid and economic development, facts and issues related to foreign aid and debt servicing in the MMCs, and the issues related to foreign aid and national economic development in the MMCs to show the relationships between aid dependency, debt servicing, and the HDI ranks. It concludes that foreign aid had no or minimal effects on the national development of the recipient countries, and that debt servicing expense of many MMCs is higher than the aid receipt and public expenses in education, health, or poverty alleviation program. The chapter highlights the importance of restructuring the MMCs’ economies to reduce aid dependency for higher HDI.

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Notes

  1. 1.

    Four MMCs (Afghanistan, Iran, Saudi Arabia, and Turkey) did not face European colonization, and six countries (Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan) spent few decades under the Soviet system to become independent in 1991 (for more please see Chap. 1 in this Volume).

  2. 2.

    According to the 2009 World Bank classification, 16 of the 40 low income economies (US$995 or less) in the world, 17 out of 56 lower middle income economies (US$996–3,945), 8 out of 48 upper middle income economies (US$3,946–12,195), and 6 out of 69 developed economies (US$12,196 + ) are MMCs in Africa and Asia.

  3. 3.

    Afghanistan, Burkina Faso, The Gambia, Mali, Niger, Senegal, Sierra Leon, Chad, Comoros, Guinea, Guinea Bissau, Eritrea, Kyrgyz Republic, Somalia, and Sudan.

  4. 4.

    Often about 10% of development assistance is channeled through the NGOs with notification to the government. However, regional and country specific agencies (e.g., Nordic Development Fund), not any international financial institutions, channel funds through the NGOs. Funds channeled through the NGOs, however, are added in the consolidated multilateral flows.

  5. 5.

    Out of the 47 MMCs, Brunei, the GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and UAE), and Libya are not aid recipient. Further, due to unavailability of data another seven countries (Afghanistan, Comoros, Djibouti, Eritrea, Iraq, Maldives, and Somalia) are excluded from this study.

  6. 6.

    There are thus claims that, the US aid program in the 1960s called the ‘Alliance for Progress to Latin America’ or the US PL480 food aid program were to strengthen relations with friendly countries in the region to counter the Soviet influence; and the Soviet aid to Cuba and Egypt in the 1950s and 1960s was to counter American influence in the regions (Ball and Johnson 1996).

  7. 7.

    Readers may like to look at many interesting works related to the issue published recently, in particular (Chang 2008; Easterly 2006; Stiglitz 2002, 2007); also Chap. 8 in this Volume.

  8. 8.

    These studies adopted the so-called two-gap model referring to savings gap and foreign exchange gap (Chenery and Strout 1996).

  9. 9.

    Readers may like to look at two very interesting works, Chomsky (1992, the new edition of an earlier work offering, among others, an elaborate analyses of political use of foreign aid); Reinert (2008, offers an analyses of the commercial roles of ‘aid conditionality’).

  10. 10.

    This is because “declining prices of traded goods increase the opportunity cost of loan repayment … which in turn has implications for the future real costs of debt repayment for loans from all sources” (Potts and Chung 2008,p. 1033).

  11. 11.

    After almost 50 years of aid politics the World Bank published in 1998 an important self-evaluative report entitled Assessing Aid: What Works, What Doesn’t, and Why (World Bank 1998).

  12. 12.

    South Asia = Bangladesh, Pakistan; West Asia = Iran, Jordan, Lebanon, and Yemen; Southeast Asia = Indonesia and Malaysia; North Africa = Mauritania, Morocco, Senegal, and Tunisia; Sub-Saharan Africa = Chad, Gambia, Guinea, Guinea-Bissau, and Niger.

  13. 13.

    According to regional ordering—Iran; Egypt, Sudan; Burkina-Faso, Mali, Nigeria, Sierra-Leone; Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.

  14. 14.

    According to regional ordering—Bangladesh, Pakistan; Lebanon; Malaysia; Sudan, Tunisia; Burkina-Faso, Chad, Gambia, Guinea, Mali, Morocco, Niger, Nigeria, Senegal, and Sierra-Leone; Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan.

  15. 15.

    According to regional ordering—Bangladesh; Jordan, Lebanon, Yemen; Indonesia; Egypt, Sudan, Tunisia; Chad, Gambia, Guinea, Guinea-Bissau, Mauritania, Morocco, Nigeria, Niger, Senegal; Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan.

  16. 16.

    According to regional ordering—Indonesia; Jordan, Yemen; Iran, Turkey, Uzbekistan; Egypt; Mauritania, Guinea.

  17. 17.

    According to regional ordering—Pakistan; Malaysia; Azerbaijan, Iran, Turkey; Burkina-Faso, Gambia, Mali, Senegal.

  18. 18.

    Azerbaijan, Lebanon, Egypt, Iran, Morocco, Tunisia, Nigeria, and Pakistan.

  19. 19.

    Algeria, Bangladesh, Egypt, Iran, Nigeria, Pakistan, Tunisia.

  20. 20.

    Six poor economies in sub-Saharan Africa (Guinea, Guinea-Bissau, Mali, Niger, Senegal, Sierra Leon), the poorest in West Asia (Yemen), and Egypt, Iran, Kyrgyzstan, Pakistan, Tajikistan, Uzbekistan.

  21. 21.

    Six small countries (Gambia, Jordan, Kyrgyzstan, Lebanon, Tunisia, Turkmenistan), and Indonesia, Malaysia, Mauritania, and Nigeria.

  22. 22.

    South Asia—Bangladesh, Pakistan; West Asia—Iran, Yemen; North Africa—Egypt, Sudan; Sub-Saharan Africa—Burkina Faso, Chad, Guinea, Guinea-Bissau, Mali, Morocco, Niger, Nigeria, Sierra Leon; Central Asia—Azerbaijan, Tajikistan, Turkmenistan, Uzbekistan.

  23. 23.

    Algeria, Bangladesh, Indonesia, Sudan, and Syria.

  24. 24.

    Sub-Saharan Africa—Burkina-Faso, Chad, Mali, Mauritania, Nigeria, Sierra Leone; North Africa—Egypt, Tunisia; West Asia—Lebanon and Yemen; Central Asia—Kyrgyzstan.

  25. 25.

    South Asia—Bangladesh, Pakistan; South East Asia—Indonesia; West Asia—Syria, Turkey, Yemen; North Africa—Algeria, Egypt, Sudan; Sub-Saharan Africa—Chad, Guinea, Nigeria, Morocco; Central Asia—Azerbaijan, Kazakhstan, Tajikistan, Turkmenistan, Uzbekistan.

  26. 26.

    South Asia—Bangladesh, Pakistan; Southeast Asia—Indonesia, Malaysia; North Africa—Algeria, Sudan; West Asia—Syria, Turkey; Central Asia—Tajikistan and Turkmenistan.

  27. 27.

    South Asia—Pakistan; Southeast Asia—Malaysia; West Asia—Jordan, Lebanon, Turkey; North Africa—Sudan, Tunisia; Sub-Saharan Africa—Burkina Faso, Mali, Morocco, Nigeria, Senegal, Sierra Leone; Central Asia—Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan.

  28. 28.

    Southeast Asia—Malaysia; West Asia—Iran, Turkey; North Africa—Algeria; Central Asia—Azerbaijan, Kazakhstan, Tajikistan, Turkmenistan, Uzbekistan.

  29. 29.

    Southeast Asia—Indonesia, Malaysia; West Asia—Iran, Syria, Turkey; North Africa—Algeria, Egypt, Tunisia; Central Asia—Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan.

  30. 30.

    Egypt, Jordan, Senegal, Sudan, and Yemen.

  31. 31.

    Chad, Guinea, Kyrgyzstan, Senegal, Sudan, and Tajikistan.

  32. 32.

    Algeria, Iran, Kazakhstan, Tunisia, Turkey.

  33. 33.

    Egypt, Indonesia, Jordan, Lebanon, Morocco, Pakistan, and Yemen.

  34. 34.

    The data for these factors are taken mainly from the Islamic Development Bank (IDB 2009).

  35. 35.

    Algeria, Bangladesh, Burkina Faso, Chad, Egypt, Gambia, Iran, Jordan, Kyrgyzstan, Mali, Mauritania, Morocco, Niger, Nigeria, Pakistan, Senegal, Sierra Leon, Sudan, Tajikistan, Tunisia, Turkmenistan, Uzbekistan.

  36. 36.

    Gabon, Guinea, Guinea Bissau, Indonesia, Lebanon, Malaysia, Syria, Turkey.

  37. 37.

    Guinea-Bissau, Kyrgyzstan, Niger, Sierra Leone, and Tajikistan.

  38. 38.

    Though HDI ranking of the MMCs in 1992 and 2008 was based on 160 and 182 countries respectively, the overall position in the ranking apparently did not change in 2008.

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Authors and Affiliations

  1. Department of Political Science, International Islamic University Malaysia, Kuala Lumpur, Malaysia

    M. Moniruzzaman

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  1. M. Moniruzzaman
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Correspondence to M. Moniruzzaman .

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  1. School of Management, United Arab Emirates University, University Road, Al Ain, 123, Utd.Arab.Emir.

    Samiul Hasan

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Moniruzzaman, M. (2012). Foreign Aid, Foreign Debt, and Development: The Muslim World Scenario. In: Hasan, S. (eds) The Muslim World in the 21st Century. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-2633-8_9

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