COST EFFECTIVENESS OF FOREIGN AID PROGRAMS IN THE BALTICS

After the upheavals in Central and Eastern Europe in the late 1980s and early 1990s, the Western world has given considerable aid to the fledgling democracies. In this paper we draw a summary from Baltic experience in the fields of educational programs, scientific and environmental programs, and commercial projects in banking, taxation and energy. We analyze the motivation and identify different possible effects of foreign aid. We signal possible inefficiencies arising from the lack of coordination of foreign aid, deal with possible waste as being a form of loss in cost-effectiveness, and address the policies followed by aid providing agencies. Finally, we suggest ways that can help to achieve cost effectiveness by assisting the donor and recipient in maximizing benefits gained and possibly reducing costs.