It is much more than that, I suppose. They are quite interested in the in the so-called 'civil society' (a network of various civic organizations, foundations, coops, even labor unions) - judging from the phone calls our research unit receives from them.
I guess at stake is not as much seducing the natives (the ordinary armstwisting works just fine), but the prevention of theft and mismanagement mentioned in the original Doug's posting. Various forms of corruption and mismanagement ranging from ordinary embezzlement, to kickbacks, to misguided projects have always plagued development aid. In the recipient countries, corruption usually increases exponentially toward the top echelons of society, and bypassing or at least keeping the high-ranking crooks in check was the oft-cited solution to the devlopmend aid problems.
Whether that works or not is another question. For example our study of NGOs in Ghana (Attingdui, Anheier, Sokolowski, and Laryea, 1998) suggests that Ghana is under considerable pressure to build its NGO sector. Most of the foreign aid (both government and private) to NGOs goes to a few large agencies with close ties to the government. At the same time the country has a myriad of tiny self-help groups and rural coops that usually do do not show on statiscal radars. These organizations are an important aspect of rural development, although they are funded mostly by the local government, and if they receive any of the foreign development aid (13% of the country's GDP in 1991) at all, it is being transmitted to them via government channels.
In a word, the problem these organizations were supposed to solve apparently still persists. Or rather it seems that the NGO development is the efect of the Rawlings administration's efforts to curb corruption, rather than the other way around.
I hear, however, that direct foreign aid (i.e not channeled through local gov't) is the major fundimng source of many NGOs in Latin America, especially in the area of environmental protection (a rather low priority on the local agenda) or reproductive health care.