Press Responses - June 20, 2002
With Africa as a focus of next week?s G8 Summit in Kananaskis, donors are seeking ways to get the biggest bang for their buck.
Billions of dollars have been transferred from rich countries to poor in the form of official development assistance, yet at least 1.2 billion people live on less than $1 dollar per day. More than two million African infants die annually before their first birthday. Gross inequalities remain. 25 individuals have wealth equivalent to the entire GNP of Sub-Saharan Africa.
Recent World Bank reports on the issue of development effectiveness suggest that aid would be more effective if recipient governments would commit to good governance and good policies. Donors would then target aid to these good performers. Other donors, including Canada, echo these recommendations.
Implicit in these recommendations are two assumptions. The first assumption is that developing countries are solely to blame for misspent aid dollars. The second assumption is that donors can identify which policies will result in poverty reduction and reward countries accordingly.
Even in the most clear-cut cases of corruption, donors have aided or abetted. Take Zaire, now the Democratic Republic of Congo (DRC), as one example. Both the World Bank and the IMF lent to for years to the former dictator, Mobuto Sese Seko, although they knew that he was appropriating 30-50 per cent of the national budget. The government of DRC is now paying these loans, estimated at US$12 billion dollars, back with interest.
Donors abet corruption by creating conditions in which corruption flourishes. Rapid privatization, liberalization and public sector reform contribute to poor governance. Joseph Stiglitz, former World Bank chief economist, has called the World Bank insistence on privatization, ?briberisation?. An external evaluation of the IMF structural adjustment facility noted that the privatization process has always begun before an appropriate legal framework or state enterprise law is passed. Donors seem to have little understanding of the political context in which privatization would move forward and the extent to which their insistence on privatization fuels corruption.
Donors also push liberalization. Even the World Bank has conceded that ?economic liberalization can open new avenues for corruption?. In the case of Russia, Stiglitz noted that open borders for capital turned out to be an invitation to strip assets and ship wealth abroad. Yet, the draft report on governance prepared for a UN meeting in preparation for the World Summit on Sustainable Development, defines good governance as market-oriented policies and an enabling environment for investment.
Public sector reform, another donor insistence, primarily means downsizing. A review of World Bank assistance in the area of civil service reform noted in 1999 that civil service reforms were eroding governance. The ratio of civil servants to population in Sub-Saharan Africa is now one per cent compared to seven per cent in richer countries. In many poor countries, civil servants continue to receive wages just above the poverty thresholds, increasing vulnerability to bribe-givers.
Bribe-givers, according to George Soros, international financier, are often international business. Business based in rich countries pay huge amounts of money to win friends, influence and contracts from developing country governments. According to the OECD, these bribes are conservatively estimated to run to US$80 billion a year. Yet, donor anti-corruption campaigns are aimed more at bribe-takers than bribe-makers. For example, a number of companies involved in the World Bank dam project in Lesotho have been taken to court for corruption. Convictions in court, the World Bank stated, will have no bearing on the Bank's future dealings with any of the companies.
Aid, after all, can be used to advance the commercial and political interests of the donor. Donors citing examples of misspent money talk about the road built that goes to nowhere or the palace, also likely in the middle of nowhere. Donors rarely mention, however which construction firm got those contracts.
It is also important to consider, when discussing development effectiveness, that the same donor conditions that foster poor governance have a poor record at reducing poverty. Policies of liberalization and privatization, small government and big business have had negligible to negative results in reducing poverty and inequality in developing countries. Donors talk about their failure resulting from lack of ownership. As Finance Minister Paul Martin put it in a speech last month on development effectiveness, ?imposing donor views without recipient country buy-in is a recipe for failure?. Or as another donor representative put it ?ownership exists when they do what we want them to do, but they do so voluntarily?. By selecting countries that are good performers as aid recipients, donors leave themselves defining norms of good policies and indicators of development effectiveness. It also puts donors in a position they have been in the past, a position where they are overly concerned with compliance to policies or conditions and not the quality or the legitimacy of the advice.
Donor countries have agreed to a Development Compact, based on mutual responsibility at the UN Financing for Development conference. The G8 is developing an Action Plan for Africa. If the G8 is serious about assisting Africa, if they are serious about taking responsibility, they need an Action Plan, but for themselves and other donors. In the Action Plan, the G8 should commit to good governance. The G8, its governments, and the institutions they control, namely the World Bank and the IMF must be fully transparent in their operations. They should change decision-making at the Bank and the Fund to ensure that 7 out of 180 member countries do not control 50 % of decision-making. Donors should untie aid, put an end to expert visits by the World Bank and the IMF and technical assistance requirements in aid contracts.
Donors should also take responsibility for their role in hampering development through corruption by canceling debts that are illegitimate. Governments should take strong measures to ensure its companies do not engage in bribery. Donors should de-link aid from all types of externally-imposed conditions, pre-conditions to aid. It is this last aspect of the proposed action plan for the G8 that may prove to be most difficult for these governments, as donors, and the businesses they represent, have the most to lose by policies that reflect a strategic rather than full integration into the global economy.
Pamela Foster is Coordinator of the Halifax Initiative, a Canadian coalition of development, environment and labour groups. The Halifax Initiative formed at the eve of the G7 meeting in Halifax in 1995.
To contact the Halifax Initiative: (613)-789-4447
