Left Behind: Who Will Rescue the Israeli Foreign Aid Agency?

Left Behind: Who Will Rescue the Israeli Foreign Aid Agency?

29/5/2018

Despite its small size and enduring security concerns, Israel has many relative advantages that enable the provision of effective foreign aid and economic development to other countries. However, MASHAV, Israel's agency for overseeing foreign aid, is underfunded and outdated. To sustain itself financially and reassert its historic role as a prominent actor in Israel’s foreign service, it must be restructured to pursue a modern approach to foreign aid

Commune village established in Côte d'Ivoire with MASHAV assistance, 1966 | Photo: Moshe Pridan/GPO

 

In November 2017, Israeli Prime Minister Benjamin Netanyahu led a large delegation on a formal visit to Africa, meeting with leaders from eleven African nations. During the visit, Netanyahu announced the opening of a new Israeli embassy in Rwanda, which he claimed represented "Israel's expanding presence in Africa and deepening cooperation with African countries."

 

Israel's renewed interest in Africa began in 2009 with then-Foreign Minister Avigdor Lieberman’s trip to Ethiopia, Kenya, Ghana, Nigeria and Uganda. To a certain extent, this heightened engagement echoes Israel’s prior diplomatic overtures to the continent in the 1950s and 1960s. During this period, Israel labored to create a network of connections in African capitals. Diplomatic alliance with Africa was seen as a means of “leaping over” the ring of hostile Arab states that encircled the young nation.

 

Israel’s primary strategy to strengthen its ties with African states was leveraging economic development and foreign aid. In its early years, Israel displayed unique expertise in hydrological and agricultural technology, both areas in high demand throughout the continent. MASHAV – Israel's Agency for International Development Cooperation at the Ministry of Foreign Affairs – sent hundreds of instructors and consultants to the continent to share this knowledge with communities in target countries.

 

Currently, however, Israel’s overall investment in foreign aid is declining. A study conducted by Aliza Belman-Inbal and Shachar Zahavi of Tel Aviv University, found that Israel's spending on foreign aid accounted for 0.2% of gross domestic product (GDP) in the 1970s. In contrast, Israel’s spending on foreign aid dropped to 0.1% of the gross national product (GNP) in 2017, according to the OECD. In other words, although Israel was a leading provider of foreign aid several decades ago, its ranking has dropped dramatically. When considering the percentage of national income donated to foreign aid, Israel lags near the bottom of the list of donor countries in the Western world.

To become relevant again, MASHAV must adopt new models for foreign aid and development that seek to generate a return on investment, or ROI

Yet Israel is hardly the only state currently struggling to invest and execute foreign aid programs. An unofficial report by the European Union’s Budget Control Committee found that more than 900 development and aid projects, totaling approximately 15 billion euros in funding, are suffering from serious delays and shortfalls. A significant percentage of these projects are likely to fail. This means that close to half of the EU's foreign aid budget will most likely fail to meet aid and development goals. In a world suffering from myriad political and economic crises, failures like these make it increasingly difficult to justify investments in foreign aid.

 

The gradual withdrawal of governments from development and foreign aid projects has created a vacuum, and this is particularly true for Western governments whose contributions have historically formed an essential part of overall aid and development activities. In recent years, this shortfall has been taken up by alternative actors: civil society organizations, research institutes, and corporations. In the current climate of intense external competition and dwindling budgets, several nations have devised new models for foreign aid and development that seek to generate a return on investment (ROI), in order to ensure positive outcomes and the efficient distribution of funding. To become relevant again, MASHAV must follow their pioneering example.

Recent Trends Among Foreign Aid and development Agencies
Foreign aid and economic development programs can be perceived as efforts to create a better world. However, these programs are fundamentally soft power diplomatic mechanisms aimed at influencing states and non-state actors, which use carrots rather than the stick. From the perspective of donor countries, foreign aid is successful if it yields social, economic, and political returns and increases donor state influence within the target country.

 

A recent report by the OECD shows that although the overall foreign aid spending of donor countries peaked in 2016, the sum sent to recipient countries has shrunk. Funding has been redirected primarily towards immigration management in donor countries, and to security in general, while aid to recipient countries in other areas has declined. According to these figures, the international community is not making sufficient progress in meeting the UN’s 2030 Agenda for Sustainable Development.

 

In addition to the marked decline in Western states’ foreign aid to target countries, new actors are emerging in the realm of foreign aid and economic development. China and the Persian Gulf countries, alongside non-state actors such as philanthropists, multinational corporations, and cross-sector partnerships, are now prominent in the field. In the past, power in the donor-recipient relationship rested securely in the hands of the former. However, the increasing number of available donors, and the growing economic strength of recipient countries, have empowered the latter and strengthened their bargaining positions. Many of these countries now seek to become major trade partners of their traditional donors, and have become increasingly assertive in setting their goals and objectives – making it more difficult for their donor countries to convert their investments into tangible gains.

Donor countries need to design foreign aid programs that generate positive outcomes for them on multiple fronts: political, diplomatic, public image, and economic

Israel’s current foreign aid strategy has failed to adjust to these transformative shifts in the foreign aid and development landscape. An effective and sustainable foreign aid framework must adopt the ROI model to remain relevant, steadily generating gains for donors and beneficiaries according to established benchmarks and standardized measures.

 

This return encompasses many different forms of positive change. While recipient states typically focus on economic gains, donors should design programs that produce a range of positive outcomes - and ROI - on multiple fronts: political, diplomatic, public image, and economic. The OECD found that an efficiently designed foreign aid project has the capacity to yield a return of between $104-150 for every $100 spent. This reliable economic potential is underscored by expanding interest in foreign aid projects by private-sector entities such as multinational corporations and investment firms.
 
Thinking ROI: Denmark and the Netherlands as Leading Examples
In recent years, several donor countries have recognized that traditional foreign aid and development policies are demonstrably outdated and unsustainable. As the shockwaves of two global economic crises still reverberate throughout many regions of the world, it has become ever more difficult to justify foreign aid programs that are not efficient and lucrative to skeptical electorates back home.

 

Against this backdrop, these governments have begun to implement the ROI approach to establish more innovative and efficient models of foreign aid and economic development. This approach includes a rigorous selection process, in which areas of cooperation are prioritized according to predetermined criteria. Under this framework, resources are directed only to projects capable of yielding substantive economic, political, and diplomatic returns.

 

Denmark’s aid agency (DANIDA) prioritizes projects under a geographical differentiation standard that classifies recipient countries according to a hierarchy of needs. Afghanistan and Somalia, for example, belong to the first circle of poor and unstable countries; Kenya and Uganda are categorized as poor but stable; and South Africa and Pakistan are included in the circle of countries with growing economies. Having defined four objectives of strategic importance for development policy - security, migration, sustainable development, and liberty (democracy, human rights, and gender equality) - DANIDA develops its programs in partnership with target countries. It provides financial support, planning and implementation tools, etc. in accordance with its tiered system for investing foreign aid and development funds.

 

Denmark-Kenya partnership webpage on DANIDA's website | Screenshot: DANIDA

 

Another example is the Netherlands. Like Denmark, the Dutch foreign aid agency has developed a prioritization system comprising three circles of countries eligible for aid. In the first circle are fragile and struggling countries such as Afghanistan, Yemen, and South Sudan. Dutch projects in these countries seek to remove development barriers and establish essential infrastructure.

 

In the second circle are more developed countries, such as Bangladesh, Benin, Ethiopia, Ghana, and Indonesia. These countries receive a mix of aid and trade deals, introducing them to local and global markets by setting up investment funds for small and medium-sized businesses. The agency also provides support to Dutch companies interested in entering into partnerships in these markets.

 

The third circle includes stronger economies such as Colombia, Vietnam, and South Africa. In these countries, the Dutch agency focuses its efforts on trade and investment through mutual funds and initiatives, providing support to small and medium-sized businesses.

Revitalizing Israeli Foreign Aid
MASHAV is responsible for Israel’s worldwide foreign aid and international cooperation programs. Currently, most of these initiatives are aimed at providing technical and technological know-how, capacity building, training conducted in Israel and abroad, and advisory services in professional fields where Israel has a comparative advantage. MASHAV focuses on agriculture, community development, education, environment, and the development of small and medium-sized businesses. Additional areas of activity include gender equality, management, medicine and public health, rural and urban development, and science and technology.

 

MASHAV’s current policies are dated and are failing to keep track of global trends in the foreign aid and economic development domain. As a result, its ability to promote Israel’s political, economic, and diplomatic interests is sharply reduced. We can identify three main gaps.

 

First, there is a clear financial gap. Israel’s foreign aid and development budget is far below the OECD standard, which is set by the Organization’s Development Assistance Committee (DAC). Currently, the development budget benchmark for member states is set at 0.7% of GNP. However, according to OECD data, in 2017 Israel allocated only around 0.1% of its GNP to foreign aid (roughly $319 million). It is important to note that this budget encompasses bilateral and multilateral aid funds (payments to international organizations, including international development banks), as well as payments due under international agreements. MASHAV’s annual spending is in fact just over NIS 30 Million ($8.5 Million), a third of which is contingent upon income.To cash in on its foreign aid programs, Israel must start by meeting the international spending standard.


Second, MASHAV does not sufficiently exploit Israel’s position as a leading site for “start-up” tech companies. This predominance in a cutting-edge area of technological research and development is a major asset in promoting Israel’s foreign aid objectives. In fact, the most recent World Economic Forum highlighted ways in which technological developments and foreign aid programs can be used to reduce social and economic disparities in many regions throughout the world. Despite Israel's clear comparative advantage as a "start-up nation," MASHAV has not laid down clear goals and detailed benchmarks in promoting this field.

 

Third, MASHAV's operational strategy is incompatible with modern foreign aid trends. Its strategy has not evolved since the 1970s. The agency's approach centers mainly on training and providing knowledge, neglecting the development of economic tools that will benefit both Israel and recipient countries. Furthermore, MASHAV struggles to create durable inter-agency relationships, a deficit that limits its cooperative endeavors within the government as well as with other sectors of Israel’s economy. Most critically, this lack of cooperative capacity hinders the agency in its efforts to build long-term relationships with the countries it supports.

 

To remedy this problem, Israeli civil society organizations, international financial institutions, and multi-national corporations – who are already active in the foreign aid and development spheres - should be seen as viable partners in developing new projects. Through partnerships, consulting, joint bids, field coordination, and other cooperative activities, MASHAV can involve itself in a wider array of projects, magnifying the impact of its activities and facilitating more expansive and more lucrative foreign aid programs.
 
Marching to the 21st Century
Implementing effective and efficient foreign aid has become a more challenging task than ever. This field is replete with numerous governmental and non-governmental actors; budgets are tightening; and spending and results are constantly subjected to intense scrutiny on all sides. To maximize its achievement of foreign policy objectives through foreign aid and economic developments, Israel must use the resources at its disposal more deliberately and with greater emphasis on efficiency.

 

A study by the Abba Eban Institute for International Diplomacy at Interdisciplinary Center Herzliya, to which I am affiliated, surveyed the world's leading models of foreign aid. States that have adopted those models are already strengthening their economies with ROI-based foreign aid policies that generate hundreds of millions of dollars on an annual basis. Additionally, the study explored ways in which those successful models can be adapted to the Israeli governmental and financial ecosystem.  

Only decisive structural reform can streamline and optimize Israel's economic diplomacy, and allow it to achieve the UN's 2030 development goals

The study concluded that Israel’s foreign aid framework requires comprehensive reform. MASHAV should become an independent agency responsible for designing and implementing ROI-based projects, generating political, economic, and diplomatic returns. The strategy will essentially be based on a "win-win" equation – providing aid, trade, and investment only when both sides are guaranteed to gain from the arrangement.
The revamped agency will formulate new policies for aid, trade, and investment; tailor the types of support and development Israel offers to fit and mirror strengths and national goals; initiate new projects and partnerships; and prioritize target countries for assistance and development.

 

In addition, it will design tools to promote Israel's development goals in target countries, and simultaneously boost domestic economic growth (based on the models developed by Denmark and the Netherlands). For example, it can offer financial support to businesses willing to engage in foreign aid and development activities, including contractual opportunities for Israeli companies in areas that promote the country’s development goals; forge commercial partnerships that encourage economic growth and sustainable employment; and establish a dedicated fund that supports investments by small and medium-sized Israeli businesses in developing countries.

 

An old maxim says that there is no such thing as standing still – either you go forward, or you fall behind. Foreign aid was once a source of pride for a young nation establishing itself on an international footing, and it yielded significant diplomatic benefits. Today, Israel’s foreign aid efforts are slipping backwards.

 

These outdated practices harm Israel's foreign aid and development strategy, and have deprived Israel of crucial political and public image gains, along with hundreds of millions of dollars in potential income. These losses must be added to countless missed opportunities to strengthen struggling economies in target countries in the developing world.

 

Still, it is not too late to reverse this decline. Only decisive structural reform can streamline and optimize Israel's economic diplomacy, ultimately elevating it to the status of global leader in achieving the UN's 2030 development goals.

Lea Landman heads the "Diplomacy 2030" desk at the Abba Eban Institute at the Interdisciplinary Center (IDC) Herzliya. She is a policy consultant for the public and private sector, specializing in public policy, defense, and foreign affairs for over 15 years.

Previously, she was deputy manager of the Herzliya Conference Series on Israel National Security, a research fellow at the Institute for Policy and Strategy at the IDC Herzliya, and worked as a defense consultant in the UK.

Lea is also the Co-Founder and Chairperson of "Women in International Security (WIIS) – Israel", an organization working to increase the number and influence of young women in foreign, defense, and security-related affairs in Israel.

She is a commentator in the public, private, and defense sectors in Israel and abroad, and hosts the "Les Ambassadeurs" weekly television broadcast on i24News in French.

She holds a BA in History and Political Science from Tel-Aviv University, and graduated with an MSc in International Relations from the London School of Economics and Political Science.

(Photo courtesy of the author)

 

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