Costs To The Recipients of Aid
It is difficult to make a correct estimate on the related costs to the recipient for various reasons. One of these, is that even though a donor ties its aid, it might be that the donor has the most competitive prices in any case. Another factor is the ability a donor has to enforce the tying of aid in the recipient country. Even so, the OECD has made some general remarks on the costs:
Aid tying by OECD donor countries has important consequences for developing countries. Tying aid to specific commodities and services, or to procurement in a specific country or region, can increase development project costs by as much as 20 to 30 per cent.
If donors claim that 42 percent of bilateral aid is untied, one can assume that the remaining 58 is tied. In 2004, total bilateral aid amounted to USD 79.5 billion. In the worst case scenario of OECD, the tying of aid can reduce its value by as much as 30 percent. If that was true in all cases, that translates into a USD 13.9 billion reduced value of aid for the recipients. If the value on an average only is reduced by 20 percent, it would equal USD 9.2 billion.
Read more about this topic: Tied Aid
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