The American University of Beirut (AUB), from which tens of thousands of Arab leaders have graduated over the last 140 years, is a shining example of foreign aid put to good use. What distinguishes the graduates of AUB is not only leadership and a sense of service to the Arab world; graduates of this New York-chartered university are often also strong believers in American culture and ideals.

But foreign aid to poor countries is not always put to such good use. Donors can reach the hearts and minds of recipients when aid creatively addresses human needs such as education, employment, gender equality or health. Unfortunately, however, aid has also been used as compensation for damage done in punitive wars, and has often been squandered through corruption on the side of the donor or recipient. In Iraq, for instance, the Center for Global Development’s Commitment to Development Index (CDI) of 2008 calculates that only 11 cents of every dollar actually goes to aid because of wide scale corruption — a great disappointment for the Iraqi people.

Regrettably, in Iraq, as in many other countries in the Middle East and South Asia, the bulk of foreign assistance is military-based. Military aid encourages developing countries to depend on weapons to achieve security. Israel, Egypt, Iraq, Pakistan and Turkey receive the lion’s share of U.S. foreign assistance, mostly for defense contracts that ultimately benefit U.S. companies and dull the sensitivity of the recipients to peace and reconciliation. Israel and Egypt alone consume over half of the U.S. foreign aid budget.

In absolute volume — over $25 to $30 billion dollars annually — America spends more than any other country in foreign aid. Despite the impressive quantity, however, American aid is scant in relation to its national wealth. America donates about 0.016 of its gross national product, according to Robert McMahon at the Council on Foreign Relations but, according to international standards, every donor country is expected to spend about 0.7 per cent of its gross domestic product.

Over the past decade, though — especially in the wake of 9/11 — the United States has realized that the status quo must change. As a result, there has been serious progress reforming the process of American foreign aid delivery. New literature on state building, such as Carnegie Endowment for International Peace’s foreign and humanitarian aid expert Thomas Carother’s “Aiding Democracy Abroad,” has challenged the dominance of politics in foreign aid. Think tanks and economists that favor trade and foreign investment as strategic methods for wealth building and poverty reduction argue that foreign aid is of no real long-term value to donor or recipient countries. Development experts are also speaking up about the need to improve the level and effectiveness of humanitarian aid while improving other avenues of development.

The new U.S. approach to foreign aid parts with the practice of linking help, first and foremost, to U.S. “strategic” needs, which often translates to rewarding autocratic regimes with humanitarian or military assistance for political compliance.

The Millennium Challenge Corporation, a U.S. government agency that started in 2003 under the George W. Bush administration, ties massive foreign aid that comes from tax dollars to the competitive performance of the recipient country. Only countries that invest in human development, respect the rule of law and exercise free market principles are eligible to receive large government grants in human investment.

The popularity of the MCC has increased U.S. commitment to development and improved the quality of empowerment initiatives. Reform-oriented countries like Mali, Senegal, Gambia, Morocco, Jordan, Malaysia and Indonesia are among the Muslim-majority countries which have received MCC support or are expected to be awarded large U.S. grants in the future.

While America tries to improve its image in the Muslim world, it is slowly realizing that providing aid for programs that will benefit a country’s people, not just the state, can help immensely.

Extricating the United States’ development-oriented assistance fully from its strategic political and military objectives will take time, but U.S. investment in agencies like the MCC — and the countries it benefits — demonstrates that it is on the right track.

Dr. Ghassan Rubeiz (grubeiz[at]comcast.net) is an Arab American commentator on issues of development, peace and justice. He is the former secretary for the Middle East of the Geneva-based World Council of Churches. This article is part of a series analyzing Western policies in the Muslim world written for the Common Ground News Service (CGNews). Reprinted with permission.