Giving Compass' Take:

• Efosa Ojomo explains how Taiwan leveraged aid by matching it with on the ground capabilities in order to create sustainable development. 

• How can philanthropy help to model development elsewhere of this success? Have other countries found similar success?

• Learn about the role of trade in sustainable development.

Taiwan’s relationship with foreign aid provides an excellent example of how aid can lead to sustainable development outcomes. In 1949 Taiwan was very poor. It had gained its independence from Japan after World War II, but simultaneously lost its largest trading partner—Japan. As such, the tiny island of roughly eight million people found itself in a politically liberating, but economically precarious, situation.

The average per capita income of Taiwan was $100 and 60% of the population engaged in agriculture, most of which was for subsistence. In addition, with the exception of some textile factories, sugar refineries, and food processing plants, Taiwan practically had no industries. Taiwan, at the time, looked similar to many poor nations today, but fairly quickly, its economy began to change for the better.

Foreign aid, especially aid from the United States, is often cited as a critical factor that helped Taiwan develop. And indeed it was. On average, each year between 1950 and 1965, Taiwan received roughly $100 million in economic aid from the United States. That accounted for approximately 10% of the small nation’s GDP. By 1965, however, Taiwan had successfully weaned itself off foreign aid and was well on its way to becoming one of the most successful 20th-century economic transformations.

Taiwan’s story often serves as evidence that foreign aid works, but we must understand that the purpose of aid in Taiwan was similar to that in South Korea: to end aid.  In order to do this, Taiwanese officials had to match many of the aid projects in their nation with their local capabilities.

Many innovations, as well as foreign-aid projects, fail not because of some fatal design flaw or for a lack of planning. They fail because the responsibility to execute and sustain them is given to people, organizations, and governments that are not capable of succeeding due to limitations in their capabilities. Understanding what capabilities are and how they can impact the result of a project even before the project begins can help many development organizations predict the likelihood of success—or failure—in the work that they do.

Read the full article about sustainable development by Efosa Ojomo at Christensen Institute.