By Emad Mekay
WASHINGTON, Feb 23 2002 (IPS)

The United States and European countries could arrive at common ground on development assistance despite having staked out very different territory in the run up to a global conference on financing for development, say analysts here.

The United States is pushing proposals to ensure that half of all capital transfers to developing countries take the form of grants, severely restricting lending by agencies like the World Bank and its soft-loan arm, the International Development Association (IDA).

Loans, Washington argues, have saddled poor countries with debt while failing to improve health, education, sanitation and other public services. Under its plan, countries would be given grants on strict condition that they improve such areas as health, sanitation, and education. Failure to meet specific benchmarks would result in a funding freeze.

European countries remain unconvinced despite heavy U.S. lobbying. In their view, the U.S. proposals overlook past achievements and risk undermining the existing system of international development institutions and programmes.

Tempers appeared to flare this week, when U.S. Treasury Secretary Paul O’Neill lashed out at the Europeans for not backing Washington’s proposal and said that by lending to poor countries, the World Bank had merely driven them “into a ditch.”

European officials countered that the United States itself is not doing enough, as it has failed to increase its own level of aid to 0.7 percent of gross domestic product (GDP), a goal to which wealthy nations have long been committed. Only a few – including Sweden and Norway – have honoured that commitment in practice, however.

U.S. aid to poor countries, by contrast, has sunk over the past 15 years to about 0.1 percent of GDP, the lowest level among industrialised countries.

According to the World Bank, rich countries must more than double current levels of giving and find an additional 60 billion dollars per year up to 2015 if they are to meet so-called U.N. Millennium Development Goals, which include halving poverty rates.

Armed with the Bank’s figures, Europeans pressed their case against Washington.

“There are no sufficient financial resources for development,” said Hilde Frafjord Johnson, the Norwegian aid minister. “It’s not good enough now. We need to see more delivery (on the part of rich nations) on the 0.7 percent point. The Third World countries are delivering but we are not.” She told IPS poor nations already had demonstrated a commitment to fight poverty.

Despite the exchange of barbs, say observers, the sides could move closer before or at next month’s International Conference on Financing for Development, scheduled for Monterrey, Mexico.

Already, the Europeans have said that they could support converting up to 10 percent of World Bank loans to grants. Among other industrialised nations, Japan and Canada have reportedly said they would go as high as 16 percent. Grants account for only one percent of the Bank’s current outlays.

In the end, they expect the Europeans will agree to a higher level and Washington, to increase its development aid.

Publicly, the U.S. administration is holding firm but its latest budget request includes a modest increase in aid spending.

Nancy Birdsall, president of the non-governmental Centre for Global Development and a former number-two official at the Inter-American Development Bank (IDB), describes the request as “a small movement in the right direction.”

Looking ahead to next month’s talks in Mexico, “the conference will put a new critical consciousness in the minds of those who can do something,” IDB President Enrique Iglesias told IPS. “I think there will be a reconciliation between the two sides and the more important thing is that we look like we are going to have more aid for overseas development.”

Others, including Fred Bergsten, director of the Washington-based Institute for International Economics and billionaire philanthropist George Soros, say President George W. Bush’s decision to attend the Monterrey talks has led several other heads of state or government to attend, too. In turn, the U.S. delegation could find itself under increased pressure to increase its aid commitment.

“The administration would be incredibly naïve if they (thought) that they are going to Monterrey without coming under pressure to give more money for development,” says Bergsten.

Excerpt:

By Emad Mekay
WASHINGTON, Feb 23 2002 (IPS)

The United States and European countries could arrive at common ground on development assistance despite having staked out very different territory in the run up to a global conference on financing for development, say analysts here.

The United States is pushing proposals to ensure that half of all capital transfers to developing countries take the form of grants, severely restricting lending by agencies like the World Bank and its soft-loan arm, the International Development Association (IDA).

Loans, Washington argues, have saddled poor countries with debt while failing to improve health, education, sanitation and other public services. Under its plan, countries would be given grants on strict condition that they improve such areas as health, sanitation, and education. Failure to meet specific benchmarks would result in a funding freeze.

European countries remain unconvinced despite heavy U.S. lobbying. In their view, the U.S. proposals overlook past achievements and risk undermining the existing system of international development institutions and programmes.

Tempers appeared to flare this week, when U.S. Treasury Secretary Paul O’Neill lashed out at the Europeans for not backing Washington’s proposal and said that by lending to poor countries, the World Bank had merely driven them “into a ditch.”

European officials countered that the United States itself is not doing enough, as it has failed to increase its own level of aid to 0.7 percent of gross domestic product (GDP), a goal to which wealthy nations have long been committed. Only a few – including Sweden and Norway – have honoured that commitment in practice, however.

U.S. aid to poor countries, by contrast, has sunk over the past 15 years to about 0.1 percent of GDP, the lowest level among industrialised countries.

According to the World Bank, rich countries must more than double current levels of giving and find an additional 60 billion dollars per year up to 2015 if they are to meet so-called U.N. Millennium Development Goals, which include halving poverty rates.

Armed with the Bank’s figures, Europeans pressed their case against Washington.

“There are no sufficient financial resources for development,” said Hilde Frafjord Johnson, the Norwegian aid minister. “It’s not good enough now. We need to see more delivery (on the part of rich nations) on the 0.7 percent point. The Third World countries are delivering but we are not.” She told IPS poor nations already had demonstrated a commitment to fight poverty.

Despite the exchange of barbs, say observers, the sides could move closer before or at next month’s International Conference on Financing for Development, scheduled for Monterrey, Mexico.

Already, the Europeans have said that they could support converting up to 10 percent of World Bank loans to grants. Among other industrialised nations, Japan and Canada have reportedly said they would go as high as 16 percent. Grants account for only one percent of the Bank’s current outlays.

In the end, they expect the Europeans will agree to a higher level and Washington, to increase its development aid.

Publicly, the U.S. administration is holding firm but its latest budget request includes a modest increase in aid spending.

Nancy Birdsall, president of the non-governmental Centre for Global Development and a former number-two official at the Inter- American Development Bank (IDB), describes the request as “a small movement in the right direction.”

Looking ahead to next month’s talks in Mexico, “the conference will put a new critical consciousness in the minds of those who can do something,” IDB President Enrique Iglesias told IPS. “I think there will be a reconciliation between the two sides and the more important thing is that we look like we are going to have more aid for overseas development.”

Others, including Fred Bergsten, director of the Washington-based Institute for International Economics and billionaire philanthropist George Soros, say President George W. Bush’s decision to attend the Monterrey talks has led several other heads of state or government to attend, too. In turn, the U.S. delegation could find itself under increased pressure to increase its aid commitment.

“The administration would be incredibly naïve if they (thought) that they are going to Monterrey without coming under pressure to give more money for development,” says Bergsten.

Excerpt: