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Now is the time for G-8 to pay up [Calgary Herald]

07/08/2002

From the Calgary Herald

Now is the time for G-8 to pay up: Guarantees of aid, debt relief can help, but real action is needed to stem the tide of poverty. U.S. think-tank experts say the record shows promises can be broken.

The gathering of the world's powerbrokers at the G-8 summit in Kananaskis recently followed a familiar recipe. Take one special initiative aimed to help the world's poor. Add a lot of talk. Take great care to avoid saying or promising anything to which you might be held accountable later. Mix (and mingle) well, and pat yourself on the back for your generous concern.

This time, the fanfare was over the G-8's endorsement of the New Partnership for African Development (NEPAD). Last year, it was over Closing the Global Digital Divide. In 1996, it was a "new" Partnership for Development. In the game of G-8 diplomacy, it pays to have a short memory. When faced with the enduring fact that lifting people out of poverty is a long hard process, the G-8 usually succumbs to the political attraction of the new over the difficult, and of additional promises over following through on existing commitments.

So, it's no surprise to see what's happened to debt relief. In 1999, the G-8, moved by a swell of public support, committed its own resources to a celebrated plan to reduce the debts of the poorest countries of the world.

And where is debt relief today? The International Monetary Fund recently reported that as many as half of the countries already receiving debt relief will continue to be mired in debt even after the completion of the initiative.

The culprit? Not corruption or economic mismanagement in recipient countries, but over-optimistic projections by the IMF and the World Bank of the debt that they could sustain.

Not only cynics, but many of those directly involved in the process, recognize why the projections were so rosy. If they were realistic, the cost that they would imply for the G-8 governments might be too big to get any kind of political support.

Getting the debt relief initiative right would require going back to the design of the initiative and straightening out the projections, or at the least insuring poor countries against the donors' irrational exuberance.

This unsexy task could salvage one of the best ideas to come out of the development assistance business in years.

Also gone the way of debt relief is the pledge to untie aid, which the countries in the Organization for Economic Co-operation and Development (OECD) announced in the spring of 2000.

Tied aid refers to the practice of giving aid to poor countries on the condition that it be spent on the purchase of goods and services in the donor's own country. There was near universal agreement that eliminating it was good for development, since conventional estimates are that it reduces the value of aid to the recipient by between 15 per cent and 30 per cent.

But, the OECD exempted from its pledge, technical assistance (which is a fancy phrase meaning "welfare for developed country consultants").

This is important, because technical assistance makes up nearly one-third of all foreign aid, and is virtually all tied to the donors' own professionals, who are often 10 or 20 times as expensive as those who could be hired on the world market from other developing countries.

So, what happened to all that talk about how ending tied aid is an effective way to do more for developing countries? A low profile decision to untie technical assistance could save poor countries billions of dollars a year. But, it's not attractive politically and it wouldn't grab headlines.

Last, take Afghanistan, where only six months ago, the donor community pledged billions of dollars to support the reconstruction effort. There is perhaps no other country where the stakes are higher for the U.S. and the world. But, after the initial fanfare, very little of the pledged money has been forthcoming.

Even if the money does flow, the U.S. and its G-8 partners have made clear that they would rather support discrete projects in Afghanistan, leaving the United Nations Development Program to fill the huge gaps in just paying civil servants to reconstitute a competent government.

Building schools is more visible and politically attractive than financing teacher salaries. Schools are a good thing, but not without teachers and books.

In NEPAD, the G-8 has made a new round of promises. This time there is a difference. The African leaders made promises too -- to sensible economic management and adherence to the rule of law.

If African and other poor country governments keep theirs, the G-8 ought to get real about its own. This involves not only resources to support NEPAD, but also all the old promises from years ago -- truly sustainable debt relief, the end of tied aid and real reconstruction in places like Afghanistan.

Nancy Birdsall is president and Brian Deese is a researcher at the Center for Global Development, a new think-tank in Washington D.C.