'Real Aid' needed to eradicate crippling poverty

As Africans once again pin their hopes on the magnanimity of Western leaders to ease deepening poverty, questions remain over how international assistance can effectively be used to bring an end to chronic underdevelopment across the continent. The Group of Eight (G8) leading industrialised countries meet in Scotland this week under enormous pressure from global antipoverty activists, who say now is the time for a concerted effort to help millions of Africans escape poverty permanently. Local and international NGOs have congregated in support of three main issues: the total scrapping of multilateral debt; a major increase in the quantity and quality of aid; and dismantling the complex system of subsidies and barriers that give Western countries a head start on Africa's farmers and businesses. Although a bold move by G8 finance ministers earlier this year saw US $49 billion of debt cancelled, figures show that low-income countries are still burdened by more than $523 billion owed to multilateral agencies. African governments have long complained that debt-servicing obligations were strangling economic and social development, in some cases swallowing half the national budget. The Jubilee Debt Campaign, an NGO based in Britain, noted that in 2002 more money was spent on debt servicing than health or education in many countries, including Cameroon, Ethiopia, Guinea, Malawi, Senegal, Uganda and Zambia. The NGO says debt relief has proven to be effective: in Tanzania, cancellation enabled the government to abolish primary school fees, leading to a 66 percent increase in attendance; after Mozambique was granted a reprieve, it was able to offer all children free immunisation against childhood diseases. Oxfam has joined African finance ministers in insisting that debt forgiveness be accompanied by increased official development assistance (ODA) instead of prescriptive economic policy conditions. South Africa's finance minister, Trevor Manuel, has noted that bilateral debt forgiveness and emergency aid have increased, but other ODA to Africa declined between 1993 and 2003. This happens when donors merely "move the deckchairs around" and bilateral debt cancellation is scored against ODA "when, in fact, if we want to do the many things we must do, we need additional resources". Oxfam has called on the world's richest nations to agree on an extra $50 billion a year in aid to poor countries - with half of it going to Africa - effective immediately. The group says delaying this aid increase until 2010, a move currently on the cards, would leave a $100 billion hole in aid budgets, consigning 500 million more people to poverty. Furthermore, rich countries must meet the United Nations target of spending 0.7 percent of their national income on aid by 2010 at the latest. "Rich countries have never been richer, yet they have never given less; they give half as much in aid as they did in 1960. Increasing their aid to the levels needed - as they promised to do in 1970 - would cost them the equivalent of a cup of coffee a week for each of their citizens. The price of not doing it will be measured in millions of lives," Oxfam's head of advocacy, Jo Leadbeater, said in statement on Tuesday. In 1970 the leading nations agreed that 0.7 percent of the GDP of their states would be devoted to aid. This undertaking was reaffirmed at the 1992 United Nations Conference on Environment and Development in Rio de Janeiro, and again at the UN International Conference on Financing for Development at Monterrey in 2002. To date only five countries have managed to reach that target: Denmark, Luxembourg, the Netherlands, Norway and Sweden. Six others have pledged to do so by 2015: Belgium, Britain, Finland, France, Ireland and Spain. Although it is widely acknowledged that more aid is a critical tool in the struggle against endemic poverty, it is not seen as a magic bullet. Concerns remain that without proper monitoring mechanisms increased aid delivery could see a proliferation of corruption. Action Aid, an international development agency, says aid must be part of a broader development strategy if it is to make a lasting difference in people's lives. In a recent report, 'Real Aid: An Agenda for Making Aid Work', the agency claims that two-thirds of donor money is 'phantom' aid, and not genuinely available for poverty reduction in developing countries. "Failure to target aid at the poorest countries, runaway spending on overpriced technical assistance from international consultants, tying aid to purchases from donor country's own firms ... excessive administrative costs, late and partial disbursements, and aid spending on immigration services all deflate the value of aid," the report noted. In 2003 real aid totalled just $27 billion, or only 0.1 percent of the donor countries' combined national income. On average, the world's seven largest economies give a slim 0.07 percent of national income in real aid. Action Aid admits that the problems causing the gulf between official and real aid are not new, and although donors have signed numerous international agreements, little headway has been made in bridging it. "At the heart of this failure there lies a lack of accountability on the part of donors for either the amount of aid they commit, or the quality of that aid," the report observed. A new 'International Aid Agreement' should include "mutual commitments in place of one-sided conditionality, that are monitored transparently at the country level", as well as "national and international forums where donors and recipients can review progress on an equal footing, overseen by a UN Commissioner on Aid", the agency suggested. There appears to be broad consensus that more aid is essential if Africa is to get ahead, but a series of arguments put forward by the International Monetary Fund contends that there is no strong evidence that aid boosts economic growth and, hence, no reason to suppose that aid reduces poverty either. Co-authored by IMF chief economist Raghuram Rajan and a colleague, Arvind Subramanian, two papers on aid maintain that while projects may do good, they have unseen side effects that eventually hurt those they are intended to help. The authors point out that aid flows inadvertently push up a country's exchange rate, damaging exporters; aid projects that hire local workers are bidding up skilled wages, again damaging the export firms that hire from the same labour pool. Rajan and Subramanian emphasised that a failed aid project was not merely neutral in relation to poverty reduction but exacerbated the problem; they recommended that donors be a lot more discerning regarding the kind of aid they delivered. An overriding concern was that industrialised countries had done very little to tackle domestic trade polices that had spillover effects on poor countries. But getting wealthy nations to dismantle what NGOs have labelled a "rigged and unjust" approach to doing business may be a tall order: European and American farmers are the recipients of hefty agricultural subsidies that affect Africans directly. Although G8 countries have said they were committed to eliminating these trade-distorting subsidies, the pace of putting fairer practices in place has been slow. International NGOs advocating for trade justice have pointed out that small-scale African growers cannot compete with cheaper goods overseas or even at home, where below-cost products are dumped by rich nations, driving down prices to such an extent that African farmers are sometimes unable to sell in their own countries. In Ghana, a flood of subsidised American rice is crippling local producers. The EU does allow some Least Developed Countries such as Mozambique to export sugar to Europe without incurring the tariffs, but the quantities are severely limited. Malian farmers have been forced to swallow a bitter pill as the US continues to artificially lower their cotton prices so much that American cotton is cheaper in African countries than homegrown cotton, even with transportation costs. "Now is not the time for a transatlantic tit-for-tat over farm subsidies - G8 leaders must use Gleneagles [where they are meeting in Scotland] to set out a bold agenda in the run-up to the all-important meeting of the World Trade Organisation in Hong Kong in December," Oxfam's Leadbeater said. "With so many of the key players in world trade around the table in Gleneagles, it would be unforgivable if they didn't make concrete progress towards trade justice here."