Live debate tonight on international aid

The Canadian Newspaper the Globe and Mail will have live streaming tonight on a debate about international aid. The debate will discuss the good and the bad of foreign aid practices in governments around the globe. Professor of Economics at Oxford University Paul Collier will be participating in the debate.

As a preview of the debate, Paul Collier wrote a piece on Canadian aid for the Globe and Mail. With Canada's recent promise of making their international aid dollars more targeted and effective, Professor Collier has one suggestion that could help Haiti.

The Canadian opportunity to assist this effort lies in Haiti, where Canada is the second-largest aid donor, and which is a classic country of the bottom billion. What's more, much of the heavy lifting has already been done - the Brazilians have provided 9,000 peacekeepers, ensuring stability, and the Americans have provided Haitian exporters privileged market access, opening new economic opportunities.

The government of Haiti has recently decided to seize this rare chance to create jobs by attracting foreign firms into light manufacturing. The key bottleneck to this effort is infrastructure, without which firms cannot produce competitively.

Is private finance queuing up to provide this infrastructure? No, it is looking to public agencies to provide the necessary finance and guarantees that would make the remaining risks acceptable. To do so, they need immediate outside financial support. They need strategic aid. And here is where Canadian aid can play an immediate, tangible role.

Bureaucracies hate change and are good at avoiding it. But either the Canadian aid program is speedily refocused to meet the new infrastructure priorities of the country it is intended to assist, or it is business as usual disguised by a fog of well-meaning words.

There is a simple reason why aid matters for fragile, impoverished countries: They are extremely short of capital, and private finance is reluctant to take the risks. During the 1990s, the World Bank scaled back lending on infrastructure in Africa on the expectation that private finance would fill the gap. Instead it was filled by the government of China on contractual terms that were opaque and potentially disadvantageous. On three different measures the rate of return on private investment shows up as being higher in Africa than any other region of the world, yet even at the height of the global boom private capital inflows were modest. Now is the time for public capital.

The case of Canada in Haiti provides an ideal example of the modest but serious role that foreign aid can play. Put simply, it is to reinforce positive local forces for change.