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Africa: "Aid" Reality Checks

AfricaFocus Bulletin
Jun 28, 2005 (050628)
(Reposted from sources cited below)

Editor's Note

The world's richest nations greatly exaggerate the amount they spend on aid to poor countries, says a study released by ActionAid International. The report says that between 60%-90% of aid funds are 'phantom' rather than 'real' with a significant proportion being lost to waste, internal recycling within donor countries, misdirected spending and high fees for consultants.

The ActionAid report "Real Aid," released early this month, agrees with calls for massive increases in "aid" to developing countries. But it also calls for going beyond the hype and reforming the official aid system to decrease the proportion of "phantom aid." This can be done, the report says, only if the funds going as "aid" are recognized as obligations to fulfill basic human rights rather than as charity, and if there is real mutual accountability rather than one-sided conditionality.

This AfricaFocus Bulletin contains the executive summary, the introduction, and the table of contents from the "Real Aid" report. It also includes the text of another report, released on June 27 by the Brookings Institution in Washington, on "U.S. Foreign Assistance to Africa: Claims vs. Reality." While focused on quantity rather than quality of aid, the Brookings report debunks President George Bush's repeated claims to have "tripled" aid to sub-Saharan Africa. At most, the report shows, U.S. official assistance increased by 56% from Fiscal Year 2000 to Fiscal Year 2004.

These two reports touch only part of the widening debate about the responsibility of rich countries to act on Africa, which encompasses not only "aid" but also debt, trade, and other policies and structural ties that affect the continent. But they do serve as partial reality checks to help separate hype from substance as political pressure continues to grow for political leaders to be seen as taking action.

For a more extensive critical report on The Reality of Aid, from a non-governmental coalition including groups in both North and South, see http://www.realityofaid.org/roa2004/2004report.htm. Chapters from this report on Africa and on different "donor" countries can be downloaded in zipped PDF format.

Official statistics from the OECD's Development Assistance Committee, including reports through 2004 by donor and recipient, are available at http://www.oecd.org/dac/stats/statlinks.

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

Real Aid: An Agenda for Making Aid Work

Action Aid
http://www.actionaid.org/461/real_aid_report.html

Executive Summary

We live in an age of unprecedented prosperity and technological progress, yet the most basic social and economic rights are routinely violated on a massive scale. Each day, 30,000 children die from easily preventable disease. 100 million children see their right to a primary education denied. 800 million people go to bed hungry each night.

Aid has a critical role to play in achieving these rights. It is not a magic bullet. But experience shows that where aid is deployed effectively as part of a wider development strategy, it makes a lasting difference in helping people to lift themselves out of poverty. It is equally clear that more aid is urgently needed. Estimates of the financing needs of the poorest countries vary, but they all point to the same conclusion - that current donor efforts are grossly inadequate.

Yet increasing aid by itself is not enough. Put simply, the aid system is not geared to achieving the poverty reduction goals that were agreed in 2000. Donors must radically improve the quality of their aid if it is going to make a fully effective contribution to the fight against poverty. At present, two thirds of donor money is 'phantom' aid that it is 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, cumbersome and ill-coordinated planning, implementation, monitoring and reporting requirements, excessive administrative costs, late and partial disbursements, double counting of debt relief, and aid spending on immigration services all deflate the value of aid.

In this report, we show the extent to which the official aid figures exaggerate rich countries' generosity. By discounting for phantom aid, we establish the amount of 'real aid' that is promoting basic rights in the poorest countries. The results highlight the urgent need for reform by the donor countries:

  • In 2003, real aid was only $27bn, or just 0.1% of the donor countries' combined national income
  • For the United States and France, two of the world's largest aid donors, almost 90% of their contributions are phantom aid
  • The G7 countries are the worst performers when it comes to real aid. On average, the world's seven largest economies give just 0.07% of national income in real aid. In other words, they must increase real aid tenfold to reach the UN target of 0.7%
  • In real aid terms, the Norwegians are 40 times more generous per person than the Americans, and 4 times more generous than the average Briton.

The problems underlying the gulf between official and real aid are not new. Donors have signed up to numerous international agreements to improve the quality of their aid. Yet this agenda has made little headway. 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. Meanwhile, donors continue to make excessive demands on recipients for 'upward' accountability, attaching rafts of intrusive policy conditions to their aid, and restricting the ability of developing countries to plot their own development paths.

This report argues that the share of real aid in official aid flows is unlikely to increase unless this 'one-way' accountability is replaced by a system of genuine mutual accountability, which balances the legitimate interests of donors, recipients and, most importantly, poor people.

ActionAid is calling for a new International Aid Agreement to make aid real and accountable, with four key elements:

  • Clear policies from developing countries on the criteria for accepting aid
  • Mutual commitments in place of one-sided conditionality, that are monitored transparently at the country level
  • National and international forums where donors and recipients can review progress on an equal footing, overseen by a UN Commissioner on Aid
  • New mechanisms to substantially increase the volume and predictability of aid.

Introduction

International aid is in the spotlight as never before. The 'aid pessimism' of the 1990s has been supplanted by widespread agreement that significantly more aid is needed if poverty is to be reduced and basic rights protected. In the wake of the UN summit on Financing for Development in 2002, G7 countries are competing to push for their own proposals for financing development.

Yet aid increases will not help to reduce poverty in the absence of major improvements in the quality of that aid. At present, far too much aid is driven by geopolitical and commercial objectives rather than by efforts to protect the rights of poor people. If aid currently has a mixed record in terms of its impact on poverty reduction, that is because it is often not what it is designed to do. Poor quality aid from unaccountable donors is a blunt instrument in terms of its impact on poverty. As this report argues, farreaching changes are needed by donors to make aid a sharp tool in the fight to realise basic rights for all.

Recipient governments also need to reform. Accountability, transparency, democracy and the protection of human rights must all be improved. But where donors promote these changes, they need to happen in the context of genuine mutual accountability between rich and poor countries. Donors must support and encourage developing country efforts to reduce poverty by meeting their international commitments to provide more and better aid. They must reach these commitments, not as they are currently measured, but in terms of real aid that is truly available to support poor countries' efforts to protect basic rights.

Aid donors fall far short of meeting the official international aid target of 0.7% of national income. ActionAid's new 'real 0.7% rankings', presented in this report, show that when it comes to 'real' aid they are falling even further behind. According to our analysis, more than 60% of aid flows are 'phantom'; that is they do not represent a real resource transfer to the recipient. For the worst performing G7 donors, the figure is as high as 89%. Real aid stood at only US$27 billion, or 0.1% of donor national income in 2003, with G7 donors at an average of only 0.07%.

In other words, despite political grandstanding on the issue, G7 donors are only one tenth of the way towards meeting the 0.7% target. And this paltry contribution pales in comparison with the value of reverse flows from South to North, in the form of ecological debts, unfair trade rules and South-North financial flows, which stood at US$710 billion in 2003.

This report argues that for aid to be fully effective, it can no longer be treated as a voluntary, charitable transfer from North to South. Instead, aid must be part and parcel of a wider redistributive agenda designed to protect basic rights. For this to happen, poor people's voices, needs and priorities must be put front and centre in the design of aid programmes.

This means that current patterns of accountability must change. At present, donor agencies hold recipients accountable, and are in turn accountable to their own taxpayers. But donors continue to use unfair, undemocratic and inappropriate policy conditionality in a way that skews recipient accountability away from the citizens of poor countries. Meanwhile, neither governments nor poor people in recipient countries are able to hold donors properly to account for the quality or quantity of aid they provide. This must change. ActionAid is proposing a new international aid agreement to make aid more accountable, and effective.

This report falls into three parts. Firstly, we show why aid must be provided as an entitlement based on rights. Secondly, we present our assessment of 'real' aid by donor, and show how far donors are falling short of meeting the real 0.7% target, and compare this with the extent of South-North flows. And finally, we present our proposals for a new aid architecture based on mutual accountability between donors and recipients. Our focus is primarily on government-to-government development aid - although important, we do not discuss aid from NGOs, or humanitarian aid, or aid in kind. Our findings are based on deskbased research, new analysis of donor aid flows and new country case study research in Vietnam, Cambodia, Uganda and Ethiopia.

Table of Contents

[full report available at
http://www.actionaid.org/461/real_aid_report.html]

Chapter 1 Aid and Rights

1.1 International Aid Can Work to Protect Basic Rights 1.2 The Case for More Aid
1.3 Much More Aid Is Needed
1.4 Aid and Net Resource Flows
1.5 Conclusion

Chapter 2 Real Aid

2.1 Measuring Real Aid
2.2 Calculating Real Aid
2.3 Real and Phantom Aid - the Donor Rankings
2.4 Conclusion

Chapter 3 Accountable Aid

3.1 Donors Are Not Accountable
3.2 The Case of Aid Conditionality
3.3 An International Aid Agreement
3.4 Conclusion

Chapter 4 Conclusions and Recommendations


U.S. Foreign Assistance to Africa: Claims vs. Reality

The Brookings Institution, June 27, 2005

Susan E. Rice, Senior Fellow, Foreign Policy Studies

[Text only. The full report, including tables, is available on the Brookings Institution website at
http://www.brookings.edu/views/articles/rice/20050627.htm]

"Over the past four years, we have tripled our assistance to Sub-Sahara Africa." President Bush, Press Conference with Prime Minister Tony Blair, the White House June 7, 2005

The Bush Administration has significantly increased aid to Africa, but that increase falls far short of what the President has claimed. U.S. aid to Africa from FY 2000 (the last full budget year of the Clinton Administration) to FY2004 (the last completed fiscal year of the Bush Administration) has not "tripled" or even doubled. Rather, in real dollars, it has increased 56% (or 67% in nominal dollar terms). The majority of that increase consists of emergency food aid, rather than assistance for sustainable development of the sort Africa needs to achieve lasting poverty reduction.

President Bush has thus far rejected Blair's call to double aid to Africa, as well as the benchmark set by the OECD and signatories to the Monterrey Consensus, which called on developed countries to devote 0.7% of their gross national income to overseas development assistance by 2015. In declining to commit to either of these targets, President Bush frequently states that his Administration has "tripled" U.S. assistance to Africa over the past four years to $3.2 billion. On June 7, 2005, the President also announced that the U.S. will spend an additional $674 million, which consists of previously appropriated emergency humanitarian food aid. The U.S. recently agreed with G-8 partners to cancel the multilateral debt owed by 18 Heavily Indebted Poor Countries, a positive step forward.

As G-8 member states prepare to meet from July 6th to 8th in Gleneagles, Scotland, they will have to confront the challenge posed by their host, British Prime Minister Tony Blair, to double aid to Africa to $25 billion by 2015, preferably through the creation of an International Finance Facility. Part of a sweeping agenda set forth by Blair and his Commission for Africa to alleviate poverty and improve prospects for African security, democracy and sustainable development, this proposal includes scaled-up commitments by the G-8 to assist Africa with increased aid, trade opportunities, investment, debt relief as well as conflict prevention, conflict resolution and peacekeeping capacity.

The Gleneagles Summit poses an historic opportunity for the United States to lead the international community in providing increased development and other assistance to Africa. The Bush Administration should join the UK, France, Italy and Germany and twelve other developed nations and commit to devote up to 0.7% of U.S. gross national income to overseas development assistance by 2015. This commitment would place the U.S. in the forefront of international efforts to alleviate global poverty.

Global poverty undermines U.S. national security by facilitating the emergence and spread of transnational security threats, including disease, environmental degradation, crime, narcotics flows, proliferation and terrorism. First, poverty substantially increases the risk of conflict, which in turn creates especially fertile breeding grounds for such threats. Second, poverty erodes weak states' capacity to prevent or contain transnational threats.

Key Findings

  • U.S. aid to Africa from FY 2000 to FY 2004, the period to which the President referred, has not "tripled" or even doubled. Rather, in real dollars, it has increased 56% (or 67% in nominal dollar terms).

  • An analysis of actual U.S. appropriations from FY 2000 (the last full budget year of the Clinton Administration) to FY2004 (the last completed fiscal year of the Bush Administration) reveals a different reality about U.S. aid to Africa than President Bush has maintained.

  • In nominal dollars, total United States aid to Sub-Saharan Africa increased from $2.034 billion in FY 2000 to $3.399 billion in FY 2004.

  • In nominal dollars, of the $1.365 billion overall increase, $728.9 million, or 53%, consists of emergency food aid rather than overseas development assistance, which contributes to sustainable development. The remainder of the increase is comprised primarily of funding for the President's HIV/AIDS initiative (distributed between two accounts, Child Survival and Global Health) as well as emergency and post-conflict assistance to Liberia and Sudan.

  • Actual development assistance, excluding food aid and security assistance, increased only 33% from FY 2000 to FY 2004 in real dollar terms, or 43% in nominal dollars. In nominal dollars, less than $450 million of the increased foreign aid to Africa is official development assistance.

  • Official Development Assistance to Africa (aid programs directed at sustainable development) increased by 43% from FY 2000 to FY 2004. Of these programs (in nominal dollars):
    + Funding for the Child Survival and Health Programs Fund increased by 70%, primarily for HIV/AIDS.
    + Development Assistance funding increased 1% over FY 2000.
    + Global Health and HIV/AIDS Initiative, which did not exist as a separate program in FY 2000, received $263.8 million for Africa in FY 2004.
    + Peace Corps funding increased by 19%.
    + African Development Bank funding increased by 24%.
    + African Development Foundation funding increased by 31%.
    + African Development Fund decreased by 12%.
    + The newly-created Millennium Challenge Account did not exist in FY 2000, and its entire FY 2004 budget went towards administrative expenses rather than country programs.
    + The Heavily Indebted Poor Countries debt relief funding decreased by 32%.

  • The only programs that both existed in FY 2000 and more than doubled by FY 2004 were Foreign Military Financing, which increased by 109%, and emergency food aid (PL 480 Title II), which increased by 159%.

  • From FY 2000 to FY 2005 (estimated), U.S. aid to Africa will have increased by 78% in real dollar terms or 93% in nominal dollars not quite a doubling, much less a "tripling" of aid. Of this increase, 50% consists of emergency food aid (PL 480 Title II).

  • Actual development assistance, excluding food aid and security assistance, will have increased an estimated 74% from FY 2000 to FY 2005 in real dollar terms, or 89% in nominal dollars.

AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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