Today’s NYT has an interesting oped on ‘rogue aid’, giving a neat Nigerian example:
The Nigerian government operates three railways, which are notoriously corrupt and inefficient. They are also falling apart. The World Bank â€” where my friend works â€” proposed a project based on the commonsense observation that there was no point in lending the Nigerians money without also tackling the corruption that had crippled the railways. After months of negotiation, the bank and Nigeriaâ€™s government agreed on a $5 million project that would allow private companies to come in and help clean up the railways.
But just as the deal was about to be signed, the Chinese government offered Nigeria $9 billion to rebuild the entire rail network â€” no bids, no conditions and no need to reform. That was when my friend packed his suitcase and went to the airport.
Another reason why studies of the relationship between aid and growth need to distinguish between ‘good aid’ and ‘not so good aid’.