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Date: Tue, 29 May 2001 09:54:16 -0500
From: APIC <[log in to unmask]>
To: [log in to unmask]
Subject: Africa: Aid and LDCs
Africa: Aid and LDCs
Date distributed (ymd): 010529
Document reposted by APIC
Africa Policy Electronic Distribution List: an information
service provided by AFRICA ACTION (incorporating the Africa
Policy Information Center, The Africa Fund, and the American
Committee on Africa). Find more information for action for
Africa at http://www.africapolicy.org
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+
SUMMARY CONTENTS:
The Third UN Conference on the Least Developed Countries (LDCs),
organized by the UN Conference on Trade and Development (UNCTAD),
met in Brussels from May 14-20, with most observers seeing little
new action to implement the anti-poverty goals repeated at the
meeting. NGOs attending a parallel forum called the results
'disappointing.' However, coinciding with the opening of the
conference, the OECD's Development Assistance Committee announced
an agreement in principle to 'untie' $5 billion of the estimated $8
billion a year of bilateral aid to LDCs, opening contracts for
supplying certain projects to international competition.
Below are several documents relating to the issues at the meeting:
(1) the press release from OECD announcing untying of funds, (2)
the press release from the parallel NGO Forum, and (3) a brief
excerpt from UNCTAD's report on LDCs prepared for the meeting, in
which UNCTAD Secretary-General Rubens Ricupero contrasts the
status-quo view of development with a proposed alternative view.
The outcome of the conference seems more reflective of the status
quo view he critiques than the alternative proposed in the UNCTAD
report.
Extensive documentation on the conference, including statistics
on the 49 least developed countries (including 34 African
countries) is available at
http://www.un.org/events/ldc3/conference/
According to a report in the Financial Times (May 14, 2001),
official development assistance (ODA) to LDCs has dropped sharply
over the last decade, from $17 billion in 1990 to $12 billion in
1999. The latest figures on Official Development Assistance to all
countries show the total for DAC members as 0.22 percent of GNP,
less than a third of the UN target of 0.7 percent. The U.S. continues
to rank the lowest, with 0.1 percent, while Denmark,the Netherlands,
Sweden and Norway exceed the target with 1.06, 0.82, 0.81, and 0.80
percent respectively. See
http://www.oecd.org/media/release/ODA_april01.pdf
Additional comparative statistics, with critical analyses of
official aid written by representatives of both northern and
southern NGOs, can be found in The Reality of Aid 2001
(http://www.realityofaid.org).
+++++++++++++++++end profile++++++++++++++++++++++++++++++
Organisation for Economic Co-operation and Development
(http://www.oecd.org)
News Release Paris, 14 May 2001
Development Assistance Committee Reaches Agreement on Untying
Aid to the Least Developed Countries
The OECD's Development Assistance Committee (DAC) has formally
adopted a Recommendation to untie aid to the Least Developed
Countries (1). The Recommendation was agreed at the DAC's High
Level Meeting (25-26 April) ad referendum at that time in order
to permit Members to secure political endorsement. The text of
the Recommendation is available on the website at :
http://www.oecd.org/media/release/dac_recommendation.pdf
The Recommendation is a concrete signal of donors' commitment to
reforming aid practices to strengthen its impact and
effectiveness. The agreement comes at a particularly opportune
time in light of the Third United Issues Nations Conference on
the Least Developed Countries, which opens in Brussels today.
Under the Recommendation, aid loans and grants covering a wide
range of financial and project support (such as capital
equipment, sector assistance and import support) will be open to
international competition and no longer reserved to suppliers in
the donor country. Total bilateral aid to the Least Developed
Countries stands at around $8 billion (some 17% of total
bilateral aid). The Recommendation means that about $5 billion
of that will now be provided as untied aid. DAC Members are
invited to continue to provide untied ODA in areas not covered
by the Recommendation when they already do so, and to study the
possibilities of extending untied aid in other areas and to
other developing countries.
This agreement will improve the effectiveness of aid in various
ways. It will realise better value for money (for taxpayers in
donor countries, and for recipient countries). Tied aid is
estimated to cost on average between 20-25% more than if the
goods or services in question were procured through
international competition. It will give recipient countries
greater ownership of their development process and create the
possibility to shape more efficient and rational public
procurement capacities. In the context of the Recommendation
there are provisions to promote and assess progress towards
balanced effort-sharing among donors. In both developing and
developed countries, the Recommendation opens up important
markets to international competition that were previously closed
and provides a level playing field for access to procurement
markets by publicly advertising the aid offers covered by the
Recommendation.
The Recommendation is focussed at the Least Developed Countries
-- the world's poorest countries -- because of their relatively
greater reliance on aid to support growth and development
objectives. Untying aid to these countries will contribute to
broader efforts by DAC Members in helping these countries to
meet the international development goals (including that of the
proportion of people living in extreme poverty by 2015).
Information For further information, please contact Helen Fisher,
OECD Media Relations Division (tel. 33 1 45 24 80 97).
(1) The Members of the Development Assistance Committee are
Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Ireland, Italy, Japan, Luxembourg, the
Netherlands, New Zealand, Norway, Portugal, Spain, Sweden,
Switzerland, the United Kingdom, the United States and the
European Commission.
**************************************************************
NGO FORUM at the UN LDCIII
(http://www.oneworld.org/liaison/forum)
Brussels, 20 May 2001 - Press Release
The NGO Forum has concluded that the overall outcome of the Third
United Nations Conference on Least Developed Countries is
disappointing in terms of the concrete commitments civil society
was seeking. Success can be measured in different ways, however,
and in terms of gathering the largest number ever of NGOs from
LDCs to discuss with civil society representatives of other
countries ways of solving LDC problems, and in terms of the
important precedent this sets, the NGO Forum has been a success.
It was a very important first step, one which needs to be
followed up, and which we hope will contribute to the involvement
of civil society in policy making on various issues of
international concern.
The NGO Forum has identified, inter alia, the following
weaknesses in the various areas addressed by the Programme of
Action (LDC III):
* Debt cancellation: The NGO Forum is extremely disappointed that
LDC III retains the framework of the Heavily Indebted Poor
Countries Initiative (HIPC), which the NGO Forum considers
completely inadequate for resolving the long-term problems of
LDCs. As the representative of civil society at this Conference
the NGO Forum is all the more disappointed by its failure to
cancel this debt whose main victims - the people in the LDCs -
were never consulted when the loans were signed. To go some way
towards repairing this enormous injustice, the NGO Forum calls on
governments and international bodies to ensure that civil society
is consulted before any further loans are signed with the
potential of crippling themselves and their grandchildren.
* Official Development Assistance: It is deplorable that LDC III
signatories do not renew their commitment to raise ODA levels to
0,7% of GNP by 2005. In fact LDC III failed to set any target
whatever for increasing ODA - even on the "commitment" to reach
the lower 0.15% target mentioned in the text, donors have only
resolved to "accelerate their endeavours to reach". The NGO Forum
would furthermore like to see pressure applied to multinational
corporations to sign up to the "Global Compact" initiative
launched by UN Secretary General Kofi Annan in 1999. The NGO
Forum welcomes the decision by donors to implement the OECD-DAC
recommendation to untie aid to LDCs, which will significantly
increase the value of aid.
* Trade: LDC III gives no commitment to ensure that any reforms
to the World Trade Organisation system do not further undermine
the interests of LDCs. It contains no agreement to address the
fact that non-tariff barriers, and particularly protective
measures disguised as sanitary standards, remain a severe
impairment to LDCs trying to gain access to the markets of
industrialised countries. While welcoming the UNCTAD initiative
to hold a capacity-building session for LDC governments ahead of
WTO negotiations in Quatar, the NGO Forum regrets that this
initiative includes no provision for participation by civil
society. Furthermore, LDC III did not heed NGOs' call for an
international fund to address the international commodity crisis,
but refers only in general to helping LDCs cope with it. There is
also an absence of financial and political support for
institutionalising fair trade, which as a voluntary system has
proven to be a successful trade and development model.
* Environment: LDC III did not go far enough in committing to
ensure an environmentally sustainable development of LDCs,
including providing additional resources to assist LDC countries
in mitigating the impacts of climate change and action on the
part of developing countries to reduce environmental degradation
- notably ending the dumping of hazardous waste in LDCs.
* Gender: LDC III lacks any formal recognition of the need to
introduce concrete measures to introduce women in LDCs,
particularly poor rural women, to user-friendly legal instruments
which empower instead of disempowering them.
* Follow-up. NGOs will work to ensure the strategies identified
in LDC III (both in the United Nations Action plan and by the NGO
Forum) are followed up at international, regional, national and
sub-national levels.
* On the subject of good governance, the NGO Forum reiterates its
call on the United Nations to take further steps to help
governments around the world realise that governance is the
business of all the people of a country, and not just the
prerogative of its leaders.
************************************************************
UNCTAD (http://www.unctad.org)
The Least Developed Countries 2000 Report
Excerpt from Overview by Secretary-General
[full report and much additional information available on site]
The current diagnosis for policy change
The diagnosis for policy change which is currently guiding the
rethinking of international development cooperation can be
summarized as eight central propositions.
* The relatively weak economic response to policy reforms in low-
income countries is a result of poor implementation rather than
inadequate policy design or underfunding. Poor implementation in
turn reflects the impossibility of rigorously enforcing policy
conditionality, and thus allowing Governments that did not wish
to implement economic reforms vigorously to get away with it.
* Aid will work if the national policy environment is right.
* The fundamental elements of the right national policy
environment are present when Governments: (a) pursue
macroeconomic stability by controlling inflation and reducing
fiscal deficits; (b) open their economies to the rest of the
world; and (c) liberalize domestic product and factor markets
through privatization and deregulation.
* Insufficient attention was given in the past to the achievement
of social objectives. Social policies, which should aim to ensure
that development is more pro-poor, should thus now be integrated
with the macroeconomic policies and structural reforms that
define the right national policy environment.
* National policy will be most effective if donors are not in the
driving seat and there is national ownership of policy. Ownership
in this context means that Government, through a participatory
process, takes the lead in the preparation of the strategic
programme document which will guide the economic reform process
and whose implementation will later be monitored as a condition
for aid and debt relief.
* Aid effectiveness can also be increased if donors focus their
aid on countries that have the right policies, i.e. increase the
geographical selectivity of aid flows.
* Aid effectiveness can be increased by improved coordination
between the IMF and the World Bank, and also amongst bilateral
donors. The strategic documents prepared by the Government should
provide a framework for this.
* External debt is a problem for highly indebted poor countries.
But the debt relief provided through the HIPC Initiative will be
sufficient to provide a sustainable exit from debt problems and
will be effective in reducing poverty as long as the national
policy environment is right.
Diagnosis for policy change: an alternative view
The issues of reorienting national policies, promoting national
ownership and partnership, and increasing aid coordination are
certainly the right ones. But the current diagnosis for change is
too rooted in a perspective which locates past problems at the
national level rather than in international economic
relationships, and is also unbalanced in its attribution of
policy mistakes and bad management between donors and recipients.
The core elements of an alternative diagnosis for policy change,
based on the analysis of this Report, can be summarized in seven
propositions.
* In spite of problems of implementation and interruptions, and
differences among countries, there has been a significant change
in the policy environment of many LDCs in the direction of
economic liberalization.
* It is correct to argue that it is necessary to have the right
national policies for aid to work. However, the policies
currently recommended have serious design shortcomings in the
context of LDC-type economies. These go beyond their past
insufficient attention to social issues. In short, they have
neglected the impact of structural constraints, lack of social
and economic infrastructure, weakness of market development, the
thinness of the entrepreneurial class, and low private sector
production capabilities. As a result, the new policy environment
does not deliver high growth rates except when the external trade
environment is favourable or reforms are adequately and stably
financed. The sustainability of economic growth stemming from
these reforms is questionable in most countries.
* Even if the national policy is right, this is not sufficient
for aid effectiveness. The lack of coordination among the
activities of various aid agencies and the failure to integrate
their projects into domestic economic and managerial structures
have undermined the sustainability of aid projects. Moreover,
although the LDC economies clearly need foreign aid, the
fragmented aid delivery system, administered by multiple donors,
has profoundly disrupted the resource allocation mechanisms in
these countries, with serious negative consequences for economic
management, the overall efficiency of resource use, and economic
growth in general.
* Aid effectiveness has also been undermined by the external debt
burden. This has reduced public and private investment within
recipient countries, and also had negative effects on the
allocation and use of aid by the international creditor-donor
community.
* It is artificial to separate the questions of the quantity and
quality of aid disbursements. Increased aid flows will be
ineffective without due attention to improvement of aid
effectiveness. Similarly, its improvement cannot be divorced from
considerations of adequate levels of external finance for the
LDCs. Insufficient funding in relation to foreign exchange
requirements and the dearth of contingency financing have
undermined some structural adjustment programmes, thus
contributing to programme interruptions.
* National ownership is vital for development programme success.
But weak ownership is not simply a problem of donors bringing
inappropriate "off-the-shelf" blueprints which are then imposed
by the sticks and carrots of policy conditionality. The poor
integration of the aid delivery system into national economic and
administrative structures and the lack of coordination of donor
activities have, in conjunction with strict policy conditionality
on the fiscal budget, eroded government capacities over time,
thus undermining the possibility for national ownership.
* Current expectations regarding the implementation of the
enhanced HIPC Initiative are unrealistic. The scale of debt
relief will prove insufficient to ensure debt sustainability in
the medium term unless external conditions are very favourable
and economic performance under policy reforms somehow improves;
moreover, the magnitude of debt relief, and its manner of
delivery, will not have major direct effects on poverty
reduction, although it does provide a vehicle for promoting the
adoption of pro-poor policies within poor countries.
************************************************************
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