donor-dumping (n.) - This is when a donor or development agency introduces products below the market price in competition with local businesses. Due to their financial resources, donors are able to out-compete local businesses and force them out of the market. Examples of products that are commonly “donor-dumped” on developing markets are: EU/US clothes donations, EU/US food aid, policy consultancy services, financial services and UNIDO infrastructure projects. Donor-dumping is widespread amongst all development aid organisations. In simpler, grass-roots development initiatives, donor-dumping tends to be directly visible in the form of goods or services sold at dumping prices. In more complex development projects, such as grants for infrastructure, donor-dumping can only be seen in the indirect effect on the price of services delivered by the subsidised infrastructure.
Donor-dumping not only leads to competition with local businesses. In cases where subsidies go to social infrastructure such as health centres and hospitals, donor-dumping can also lead to unfair competition with state-run infrastructure. In a heavily donor-funded state, this leads to a parallel state-system run by donor/NGO funding and management structures.
Almost all donor-funded projects have activities which can be classified as donor-dumping. This is a result or poor project design and the Mittelabflussproblem (the use of cash disbursement as the main success indicator for development projects).