PHA-Exchange> Aid dependence and the Millennium Development Goals

[Claudio]

> From: "David Werner" <healthwrights at igc.org>
> From  pambazuka-news at pambazuka.org.
>
> > AID DEPENDENCE AND THE MDGS
> > Demba Moussa Dembele
> (excerpts)
> >
> > The present focus on the Millennium Development Goals (MDGs) has
> > reignited the debate on the need for more aid to developing countries
> > to help them meet the MDGs by 2015. However, this has inevitably
> > rekindled the parallel debate as to whether more aid is really the
> > answer. Will extra money simply shore up inefficient governments and
> > feed government corruption? One response to this is to say we must
> > bypass government and make money available directly to NGOs and other
> > organizations. At the same time, others claim that what is needed is
> > not more aid, but a fundamental transformation of international power
> > relationships, especially reform of international trade and finance
> > rules to allow African and other developing countries to sell their
> > goods and services at a fair price.
> >
> > A number of ideas for raising more money to meet the MDGs have been
> > floated recently. While the UN Millennium Project's report, Investing
> > in Development, calls for an overall huge increase in aid, the
> > Commission for Africa report calls for a doubling of aid to Africa.
> > The French government's Landau Report suggests a number of
> > innovative sources of financing, while Gordon Brown's
> > International Finance Facility proposal envisages selling bonds
> > issued by industrialized countries with a view to raising money in
> > financial markets to finance development.
> >
> > A central misconception about aid:
> > But before going into the debate on whether aid does encourage
> > dependency and inefficiency, we need to address a particular
> > misconception: that aid to developing countries  is an act of simple
> generosity towards poor countries in dire need of capital to invest in
> education, health, infrastructure, and so forth, and that it comes with no
> > strings attached. Development assistance is neither value-free nor
> > benevolent. It has served and continues to serve the economic,
> > political and strategic interests of 'donor' countries.
> >
> > The Millennium Challenge Account (MCA), for instance, the Bush
> > Administration's main tool for foreign 'aid', is laden with
> > ideological, political and economic conditions. Eligible countries
> > should support, or not oppose, US foreign policy; they should adopt
> > 'free market' reforms, good governance practices, and so forth. It
> > could also be added that so far, not a single dollar from the MCA has
> > been delivered to African countries.
> >
> > An instrument, not a gift:
> > So aid is an instrument, not a gift. For many Western countries and
> > institutions, it plays a key role in their overall strategy to
> > maintain and even expand their influence in Africa. This is
> > particularly true for former colonial powers such as France and
> > Britain. This  type of aid does create dependency and it is often
intended
> to shore up regimes that are 'friendly' to Western countries.
> >
> > Giving with one hand ...
> > Another problem with aid is that it mostly benefits donor countries.
> > Despite the formal end to the practice of 'tied aid', the money
> > disbursed as aid goes mainly to foreign-controlled enterprises and
> > aid flows are used to buy goods and services from donor countries.
> > The prices of those goods are often higher than the market price of
> > similar goods.  A recent report by ActionAid
> > pointed out that for every dollar disbursed by France and the US in
> > the form of aid, 89 per cent and 86 per cent return home,
> > respectively.
> >
> > More strings attached:
> Since the 1980s, aid from Western countries has been conditional on
> recipient countries implementing policies dictated by the IFIs.
> > Even aid from former colonial powers to their former colonies is now
> > conditional on signing an agreement with the IMF. But it has become
> > clear that these policies have done more harm than good. A recent
> > report by Christian Aid indicates that over the last 20 years, the
> > imposition of trade liberalization has cost African countries a
> > staggering $272 billion, a sum that could have paid back the
> > continent's debt.
> >
> Trade liberalization and deregulation, have also cost the
> > continent deteriorating terms of trade and increased capital
> > flight. UNCTAD observes that, had Africa's terms of trade remained at
> their 1980 level, the continent's share in world trade would have been
twice
> its current share; per capita income could have been 50 per cent higher;
> > and annual growth would have increased by an additional 1.4 per cent.
> > This deterioration led to a net transfer of real resources
> > from Africa to the rich countries!
> >
> > Unfair trade and aid dependency:
> African countries' have seen their food deficit and dependency increase.
By
> flooding African markets with cheap, subsidized food, industrialized
> countries destroy domestic food production and increase African countries'
> dependency on food imports, which are paid for through new loans or 'aid'
> from the same industrialized countries.
> >
> > The debt crisis and aid dependency:
> All this helps explain, among other things, the worsening of the
> > debt crisis, which in turn has meant greater dependency on foreign
> > aid. In the 1980s and 1990s, the average debt service was roughly
> > equal or even higher than foreign aid to African countries. Part of
> > that aid was even used to pay back old debts. Sub-Saharan Africa's debt
> soared in the 1980s and 1990s, the peak years of structural adjustment.
> >
> > Internal factors:
> > Uganda depends on international donors for 50 per cent of its budget.
But
> the Uganda Revenue Authority collects only about 57 per cent of taxes due
> because of institutional weaknesses in tax administration and because 'the
> rich
> > and politically powerful don't pay taxes'.  To break aid dependency,
what
> Uganda needs is to improve its tax administration, clamp down on tax
> evaders, and abandon its corrupt and profligate military and public
> administration expenditure.
> >
>  In several countries anti-corruption NGOs are working
> > tirelessly to raise public awareness and expose corrupt officials and
> > practices. This is part of our struggle for more democratic,
> > accountable and transparent governments.
> >
> > But, once again, the problem of corruption has two sides: the
> > corruptor and the corrupt. However, Western governments and
> > multilateral agencies tend to focus exclusively on African
> > governments and overlook the role of foreign companies and banks in
> > maintaining corruption.
> >
>  The best way to fight corruption is through democratic scrutiny and
> accountability of elected officials.
> >
> > African economies are very vulnerable to external
> > shocks, such as commodity price fluctuations and higher interest
> > rates. In addition, these economies depend to a large extent on trade
> > and financial flows with former colonial powers. This also tends to
> > foster aid dependency: when exports fall.
> >
> > The costs of aid dependency:
> > The dependency on foreign aid has political as well as economic
> > costs. It is obvious that a country that depends on foreign
> > assistance for up to 40 per cent of its budget cannot control its own
> > policies. Instead, as the IMF and World Bank's structural adjustment
> > programmes show, donors dictate economic and financial policies,
> > based on their own world view and interests.
> >
> > In short, much of the so-called aid given by Western countries and
> > the loans made by multilateral institutions are not based on
> > developing countries' real needs, nor on any performance criteria,
> > but primarily on the interests of 'donors'. It's time, now, to
> > consider some possible alternatives.
> >
> > What is the alternative?
> > Obviously, there is no easy solution to the problem of aid
> > dependency. There are no quick fixes nor a general policy applicable
> > to all countries. However, we think that the following proposals
> > should be explored by African and Western countries as a basis for a
> > lasting solution to the problem.
> >
> > - Cancel unconditionally the debt of all African countries.
> >
> > - Repatriate stolen wealth kept in Western countries.(estimated  at
> > 70 per cent of private wealth, excluding land).
> >
> > - End IMF and World Bank policies. (Trade liberalization,
> > deregulation, fiscal austerity and privatization).
> >
> > - Abolish unfair trade policies and promote fair trade (rather than
'free'
> trade). Fair trade would keep in place special preferences for African
> exports, especially agricultural exports. Subsidies in Western countries
> which
> > make African imports prohibitively expensive would be abolished. It
> > would stop the dumping of subsidized products in African markets to
> > the detriment of local production. Finally, it would support
> > proposals for international agreements aimed at stabilizing commodity
> prices so as to limit, if not eliminate, the decline in African terms of
> trade.
> >
> > - Change internal policies (eliminating wasteful
> > spending and fighting corruption more effectively, more transparent
> decision-making and more accountable governments and
> > institutions.
> >
> > Summing up:
> > Does aid create dependency? The short answer is that, on the terms on
> > which it has generally been given, it does, but it need not. Aid
> > dependence is the result of both internal factors and deliberate
> > external policies. Aid has been made to serve both the foreign
> > policies of Western states and their wider economic interests.
> >
> > On the other hand, aid which is consistent with African countries'
> > needs and priorities can certainly be a positive factor. The solution
> > to aid dependence does not lie in a further privatization of that aid.
It
> lies
> > rather in fundamental policy changes, both at the international and
> > internal levels, which will rebalance many of the transactions, both
> > economic and political, between Africa and the richer countries. More
> > fundamentally still, Africa needs to put its own house in order and
> > count first and foremost on its own resources. No amount of foreign
> > aid alone will ever develop the continent.
> >
> > * Demba Moussa Dembele is Director, African Forum on Alternatives,
> > Dakar (Senegal). He can be contacted at dembuss at hotmail.com or
> > forumafricain at yahoo.fr
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