An Easterly Wind Blows Out of Canada
From the March 15, 2007TechCentralStation.com
March 19, 2007
by Jeremiah Norris
In 2000, the then-Secretary General of the United Nations, Kofi Annan, succeeded in passing a unanimous Resolution in support of the Millennium Development Goals (MDGs). These ambitious aims called for, among other things, halving world poverty by 2015. Then, in 2005 at the G8 Economic Summit in Scotland, Prime Minister Tony Blair, in his position as Chair, presented a report which stated that the world had fallen behind on its pledges to the poor in it had made five years earlier. He went on to comment that nowhere is this clearer than in Africa, where the world "is furthest behind in progress to fulfill those solemn promises." He proposed a doubling of aid to Africa through 2015, and in turn African leaders promised to designate 15% of their national budgets to health.
Last month, G8 Member Canada made a stand on an inconvenient truth. After two years of study, and taking testimony from 400 witnesses in the U. S, Europe and Africa, a Standing Senate Committee of Foreign Affairs and International Trade, issued a report on issues related to African aid. In unsparing language, the Committee determined that after 40 years of aid, little has been done with its $12.4 billion in bilateral assistance to propel Africa from economic stagnation or to improve the quality of life on the continent. "Development assistance has been a holding pattern for Africa at best, and a direct facilitator of poor governance and economic mismanagement at worst."
It went on to find that the country's own development arm, the Canadian International Development Agency (CIDA) "has failed to make a foreign aid difference in Africa ... it is ineffective ... costly ... and unresponsive to conditions on the ground." An immediate policy review was ordered of CIDA, with the view that either it be abolished or merged into some other department of government.
To drive its point home to readers, the Committee printed a graph on the front cover of: "Overcoming 40 years of Failure." After an allocation from all other donors of $570 billion, it showed the per capita GNP in Sub-Saharan Africa at 17.1% of the world average in 1965, falling to 9.7% in 2004. In many areas the people are worse off than before and "ordinary citizens have paid the highest price for these failures."
The Committee determined that it was unrealistic for the international community to expect African countries to make economic gains without shifting its focus towards the things that African citizens and leaders actually want—assistance in generating investment, creating jobs, and facilitating trade. Donor countries must deliver aid to Africa in partnership with the private sector and civil society groups in Africa as much as possible. It went on to state that the international community itself must radically change its approach to development and re-direct its assistance towards building stronger economies on the continent. Equally important, donors should only give assistance to countries that are instilling a pro-growth business environment. Rather than a focus on providing social welfare programs, such as education, Canada should re-direct its assistance on economic development and agricultural productivity.
The Committee recommended that Canada target all bilateral assistance on a select number of countries, and focus the assistance that is given on governance and economic development. Moreover, Canada should orient its foreign policy to assist only those African countries that are making a real effort to strengthen their political and economic governance, to build healthy private-sector economies, to improve their economic infrastructure, and to generate employment opportunities for their citizens.
The Committee also concluded "that international development assistance is not the long-term answer for Africa. Vibrant economies and good governance are the answer for Africa. These are the conditions that can only be generated and sustained from within Africa, not from without."
Since the MDGs were endorsed by the UN in 2000, the flow of Official Development Assistance (ODA) from rich to poor countries has almost doubled. In 2000, ODA was $53.7 billion, rising to $106.8 billion in 2005. Yet, none of the African countries which promised to dedicate 15% of their national budgets to health at the G8 Summit of 2005 has done so. In the period 2002-2005 alone, Africa was the recipient of $108 billion in ODA funds.
Whether through the MDGs or the G8 Summit, there are fiscal and institutional implications associated with large aid increases, particularly since almost all are destined for the public sectors of developing countries and thus will be used for consumption rather than investment. These aid increases are referred to as the "Big Push." In 2005, the Center for Global Development (CGD) in Washington, D. C., published a report on the potential institutional impact of the "Big Push" in 52 low-income countries. The CGD found that nearly half of these countries are receiving aid worth more than 50% of government expenditures and more than one-fifth are above the 75% level. It went on to comment that "Big Push" aid flows can give governments even less of a reason to go through the tedious task of building and improving tax administration if they can get more resources from donors than their own citizens. Finally, the report found that as donor financing of national budgets increase, the budget process becomes directed more towards satisfying donors rather than domestic preferences.
Back in 2004 the International Monetary Fund (IMF) expressed its concerns when reviewing large resource flows of $8 billion for HIV/AIDS alone. It found that there are macroeconomic risks associated with them, including high inflation, which retards growth and acts like a tax on the poor, and a real appreciation of the currency, which can hinder the rural poor from exporting commodities vital to their livelihood.
Apparently, Canada's Standing Senate Committee on Foreign Affairs and International Trade has read the CGD and IMF reports and discovered an inconvenient truth. While the Committee knew with certitude the levels of ODA that have gone into Africa, it couldn't determine their effect on the intended beneficiaries—with the sole exception that they were worse off than before. This must mean that these same funds have found a way Out of Africa.
Jeremiah Norris is a Senior Fellow and Director of Hudson Institute's Center for Science in Public Policy. He specializes in public-private partnerships in development assistance, trade and development, and global AIDS, tuberculosis, and malaria policies.