Making Canada's Foreign Aid Work: Lessons from the Bangladesh Tragedy

TORONTO, Nov. 27, 2013 /CNW/ - Canada's foreign aid could be more effective, were strategies in place that addressed the problem of weak host-country governance, which currently renders aid inefficient or even counter-productive, according to a report released today by the C.D. Howe Institute. In "Diplomacy, Trade and Aid: Searching for "Synergies," author John Richards proposes a mix of corporate social responsibility for Canadian firms engaged in trade with low-income countries, diplomatic involvement in aid projects, and aid projects designed to address problems of "weak" host-country governance.

"The dilemma of weak host-country governance belongs front and centre in our aid strategy," commented John Richards, "This approach would combine better corporate social responsibility on the part of Canadian companies with better tactics in the delivery of aid." Such an approach would be complementary to the federal government's new Global Markets Action Plan, released November 27, 2013.

The Canadian International Development Agency's (CIDA's) aid strategies have been criticized by the Auditor General - and many others - as being too broad, with results that are difficult to measure, noted Richards. CIDA's merger with the (renamed) Department of Foreign Affairs, Trade and Development, announced last spring, presents an opportunity for improvement by involving diplomats in the design and implementation of projects.

The death of 1,100 workers in a collapsed Bangladesh garment factory early in 2013 is a prominent example of poor host-country government safety regulation. In the past, major garment importers from Canada and other high-income countries largely ignored regulatory failures in Bangladesh. In the last six months Canadian firms, notably Loblaw, have played a prominent role in new initiatives to improve worker safety.

Using Bangladesh as an example, Richards discusses the potential for corporate social responsibility in a context of weak host-country governance. He asks: How can aid be made to work in countries with weak governance? How can firms engage in trade with such countries in a responsible way?

When it comes to trade, promoting corporate social responsibility by companies is an essential part of the solution. The potential for aid and trade "synergies" is greater, Richards argues, in the manufacturing than in the resource sector.

"Given its new mandate and the present crisis in the Bangladesh garment sector, CIDA could, for example, support reputable garment importers or those working within the Bangladesh government, and construct a credible industrial safety regime," said Richards.

The author recommends three development-aid tactics to address weak host-country governance: delivery of aid via NGOs as opposed to host governments; cash-on-delivery aid, which focuses on flexible contracts and aid for high-level, medium-term outcomes; and high-profile monitoring of the quality of health and education services by civil society organizations.

For the report go to: http://www.cdhowe.org/diplomacy-trade-and-aid-searching-for-synergies/23591

SOURCE: C.D. Howe Institute

John Richards, Professor, School of Public Policy, Simon Fraser University and Fellow-in-Residence, C.D. Howe Institute, 778-782-5250; or Finn Poschmann, Vice President, Research, C.D. Howe Institute. 416-865-1904.