Foreign aid has come a long way since the end of World War II, when the US launched the Marshall Plan to help rebuild the war-torn European continent and to anchor post-war West Germany firmly into a new European system. Many Germans remain grateful to the Americans for Bonn's rapid revival, and rightly so. Germany's economic miracle in the 1960s and 1970s also transformed the country from an aid receiver to one of the biggest international donors.

Today, foreign aid only plays a much greater role in improving the quality of life in the under-developed countries, not less.

Perhaps the downside of this scenario is that the donor money does not usually come free, but with strings attached. A United Nations study on African countries whose economies are heavily dependent on foreign aid shows that the actual value of the amounts received goes down by 25% to 40% on average, an immediate result of having to purchase imports from the donor countries. Some of these countries even require the Africans to buy anti-Aids drugs from them instead of the cheaper alternatives from elsewhere.

The successive governments of Japan have taken pride in the fact that Tokyo has long been a consistent and committed international donor, thanks to its official development assistance (ODA) programme. Last year, Japan allocated US$8.86 billion for aid purposes, making it the world's second most generous donor. Still, one must also not lose sight of the fact that the majority of the ODA grants are tied.

There is a close relationship between ODA and trends in Japanese foreign direct investment. Private-sector investment in developing countries is often preceded by ODA funded projects, especially in infrastructure.

In fact, the UN study only identifies Norway, Denmark, the Netherlands and the United Kingdom as virtually condition-free donors, as more than ninety per cent of their pledged aid is untied.

Phenomenal generosity

When the tsunami struck the Indian Ocean and brought disastrous consequences to the regional countries, there was an outpouring of international sympathy. The generosity was indeed phenomenal, for want of a better word. No doubt, in a time of catastrophe like this, it is not enough for the donor countries to just have a good heart. Fortunately, they have the money as well.

And many honestly believed their governments to be sincere in doling out billions in foreign aid. They must now be utterly dismayed to learn that much of the aid pledged by a good number of countries has yet to reach the target recipients.

ActionAid, a global pressure group, recently revealed that as much as sixty per cent of all announced international aid exists in name only. It is simply "phantom".

Of the US$65 billion aid pledged by the international community in 2003, US$50 billion has come from the G7 countries, the world's rich men's club in every sense of the word. However, the actual amount that reached the receivers in that year was only US$27 billion. As much as 90% of the cheques promised by the United States and France was un-cashed.

The most worrying development in the politics of foreign aid is no doubt the diversification for military purposes. In this respect, ActionAid highlights the increasing trend of international aid being used to buy arms and ammunition over the last two years, as stipulated by the donor countries, in particular the US after 9/11.

Washington is undisputedly the biggest donor on earth in 2004, as the country doled out US$19 billion in foreign aid. However, the Bush administration appears to favour military aid and weapons sales over other forms of aid, relegating humanitarian, health or development assistance, which is badly needed by the citizens of the recipient countries and could create long-lasting and as well as constructive impact.

Worse, many of the US' target countries happen to be ruled by authoritarian governments, ranging from Pakistan to Algeria. In its hasty response to the threat of global terrorism, the Pentagon increased the Foreign Military Financing programme by some 34% since 2001, reaching US$4.6 billion in 2005.

Contradicting policies

Paradoxically, President Bush has allowed countries such as Uzbekistan and Uruguay to receive US military aid, despite that they had previously been barred from the eligibility list due to human rights abuses or suspicion of their harbouring of terrorists.

It is hard to see how Washington can sustain its two mutually contradicting foreign policies: hardening the hands of the autocrats and popularising democracy in the Muslim world and beyond. The vow by Bush to "stop the rise of tyranny and terror" and "replace hatred with hope" during his State of the Union Address last January may ring hollow.

China is another problem. Since the demise of the former Soviet Union and the drastically changed international environments in the 1990s, Beijing has been actively engaging neighbouring countries in its effort to vie for influence in the region of Southeast Asia, especially Burma. While China's diplomatic charm offensives with Malaysia, Thailand and Singapore are more pronounced in economic form, its cosy foreign relations with the military junta in Rangoon are characterised by military aid.

In the 1990s, an arms deal of US$1.4 billion was signed between the two countries, and the arms thus purchased enabled Rangoon to expand the armed forces to the current 450,000 from less than 180,000 in the previous decade. Given the incessant conflicts with the various ethnic-based militant groups, the military junta's eventual goal is to create a well-equipped force of 500,000, and more arms-linked aid from China is in the offing.

Margaret Thatcher once famously said: no one would remember the Good Samaritan if he'd only had good intentions - he had money, too. But it is high time the world awaken to the reality of twisted foreign aid politics and discard the nave assumption that it is nothing more than a diplomatic tool used to win friends and buy one's international credit. Many a Good Samaritan of the modern age is no longer just kind-hearted and generous, but more sophisticated than Maggie can ever imagine.