Using aid

Is there aid to use? It is obvious how much harder it is today to get our share of global aid. The rich world's attention span when it comes to lending money to the poor world is often just as short as a child's. Why else does the world cheer a Bono, or a Buffett, or the Gates couple? Why has philanthropy by the rich become news? Why else is Africa such a raging sore?

Traditional lending institutions have become ineffective, partly because they are not getting enough of the product they are supposed to sell: money. The money of the world's rich countries is going to wars, to armaments, to their own industrialists. Can we still get money from the world's rich?

Do we need to? I go to my hometown, which now calls itself a city, more often these days. Such a different hometown now: mud and water and dirt on the streets, floods at high tide and during the typhoon season, dirty and polluted rivers, nonstop growth of squatter communities surrounded by garbage and rickety shanties.

I doubt that we can get aid from anybody to fix my hometown. I doubt even that my hometown needs aid money. What it needs are: a vision; a determination to realize that vision; and a willingness to work hard to improve, create, and produce, not for the benefit of individual pockets, but for the benefit of the place and its residents.

Sadly, the now-city's leaders since the '70s, when I left my hometown, have been totally deficient in all those.

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Editorial Page column, The Evening Paper
Issue of 17 October 1995

It is not only in food supply, especially of grains and cereals, where the world's people can anticipate major shortages as we approach the next millennium. There is one other resource crucial to development, especially of the world's poorest nations, where a shortage has already started to break: global aid.

The semiannual meeting of the International Monetary Fund and the World Bank, the world's two largest lending institutions, last week in Washington D.C. presented the disheartening prospect of huge reductions in contributions for the International Development Association (IDA) from the United States and other rich countries of the West. The IDA is the World Bank affiliate that provides interest-free credit to very poor countries.

Funding shortfalls from donor countries to the IDA "present a very serious risk to poverty reduction and economic growth in the world's poorest countries," said members of the joint development committee of the IMF-WB in a statement released during the meeting, a signal--if ever there was one--of a threat approaching crisis proportions for the two organizations.

World Bank President James Wolfensohn, who calls the IDA the "very linchpin" of aid for the world's poor, one that serves as a foundation for other assistance, said a "weakened IDA would greatly reduce the possibility of having a stable world ... This is a very dangerous moment for IDA."

Wolfensohn's anxiety is firmly anchored. The IDA's $18-billion pool of funds set aside by rich nations for poor countries has emerged as one more political symbol in the budget battle between the Clinton administration and the Republican-controlled US Congress.

United States President Bill Clinton has asked Congress for $1.386 billion in foreign assistance funds for the fiscal year that began October 1. The House is offering only $575 million; the Senate is willing to go up to $775 million. The difference will be discussed by a conference committee, which should settle the issue before the month is over. Very few expect Clinton to get what he is asking for.

And if the United States decides to cut back on its IDA commitments, will the 233 other donor countries decide to play the same tune? After all, it would be only too easy for IDA donor countries to protest that they have their own funding problems, too, and that it is time to start focusing on their own domestic hearths and disadvantaged sectors.

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Even in Asia, the region's--and also the world's--largest donor, Japan, has already set a ceiling on any expansion of its overseas aid budget. Suffering from periodic convulsions spawned by a recession-hit economy, natural and man-made calamities, and a runaway banking sector, Japan has deemed it prudent to cut costs.

One of the areas to get a new ceiling: the government's overseas development assistance, its ODA.

In 1995, Japan's ODA growth cap stood at 7.7 percent. In fiscal year 1987, it hit its lowest--7.5 percent. Fiscal year 1996 will set a new low: 7 percent.

What's more, the Japanese have become more discriminating about the purposes and practices resorted to by recipient countries. In effect, the Japanese are saying--oh so politely, as is their wont--that their money is being abused in many Third World countries.

Setting new guidelines of severity in the utilization of ODA funds, the Japanese have issued at least three specific policies: grants cannot be used for military purposes, there will be a definite shift away from unquestioning support for economic growth, and more allocations will go to programs that include population control and environmental protection.

These policies are intended to inhibit "inappropriate development" and persuade recipients of Japanese aid to place "greater emphasis on issues such as human rights, environmental protection, and social welfare."

New guidelines, this time issued by Japan's Overseas Economic Cooperation Fund (OECF), mandate that countries receiving yen credits submit environmental assessment reports, including studies of ways to limit the displacement of local residents and consultations with affected communities. Yen credits from the OECF carry minimal interest rates of 1-3 percent and are earmarked for infrastructure development in recipient countries.

Although admitting that many developing nations have protested against the guidelines, calling them "a form of political conditionality," Japan has remained steadfast. In September of this year, in fact, it submitted a 14-page policy paper to a 185-member UN Working Group meeting on a global economic plan of action.

The Japanese were adamant in their stand: Development aid should be "conducive to the peace and stability of a recipient country."

What would convince Japan that a borrower will use the loan money wisely? Accepting the limited--and widely divergent--capacities of the least developed countries, particularly those in Africa, the Japanese require that aid recipients improve their own domestic development resources first.

In very concrete terms, Japan wants recipient countries to cut their military budgets, collect taxes efficiently and effectively, and combat corruption in the government bureaucracy.

"This, in turn, is likely to produce an increased flow of development funding," promises the Japanese policy paper submitted to the United Nations.

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Japan's more developed approach to aid applications was also a subject of intense deliberation by the Asian Development Bank, which depends heavily on Japanese aid for the bulk of its loan packages to member countries.

The ADB notes with increasing alarm the falling allocations in rich nations for aid and assistance. Total aid from the industrialized world fell 8 percent in 1993 to $56 billion from $61 billion in 1992. The trend does not appear ready for a change, according to ADB President Mitsuo Sato in July of this year.

With development resources for poor countries becoming "increasingly scarce," Sato stresses the need for their efficient use. ADB itself, he said, will be keeping a tighter watch on how aid money is spent by the recipient and whether it achieves maximum development impact.

But there's the rub: How can development aid be utilized to achieve maximum impact?

M. Adil Khan, an ADB consultant from Australia's University of Queensland, provides answers from a specialist's viewpoint. "Recent experiences of development management in most developing countries suggest there are growing gaps" between what is planned and what is implemented, between what is intended and the actual outcome.

Even in cases where implementation of aid-funded projects was satisfactory, such projects may not fare well in sustainability. Khan urged recipient countries to look beyond implementation and completion of aid-funded projects to their "full development impact and sustainability."

The IMF-World Bank joint development committee expressed basically the same sentiments, but in simpler, easier-to-understand terms. Their statement is something developing countries should take to the drawing boards to determine how best they can be accomplished.

IDA funds, said IMF-WB, should go to social spending and poverty-reduction programs that increase access by the poor to land, credit, and basic services that, in turn, promote broad and escalating growth and create many new jobs.

In the long run, only such aid- and assistance-funded projects can guarantee sustained development for recipient countries.

-- NBT