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DEVELOPMENT: Swiss Aid Growing Despite Depression

Gustavo Capdevila

BERN, Feb 12 2009 (IPS) - The global economic and financial crisis has raised questions about whether the level of official development aid from the rich world will be maintained in future, at a time when the needs of the developing and emerging countries are growing as a result of the crisis.

The amount of aid sent to poor countries was 117.6 billion dollars in 2007, but this total could shrink by as much as one-third because of the global crisis, according to forecasts by experts.

However, Martin Dahinden, the head of the Swiss Agency for Development and Cooperation (SDC, a department of the Foreign Ministry), played down the risk of a reduction in the flow of aid.

"Of course there are fears about the volume of funds available for development cooperation, but I'm not all that pessimistic," unlike many other people, the SDC director told IPS.

At the International Conference on Financing for Development (FfD), held in early December 2008 in Doha, the capital of Qatar, "when we were already aware of the financial crisis, all the traditional donor countries reconfirmed their strong support," Dahinden said. And so far there has been no decrease, he emphasised.

"On the other hand, the crisis means that there will probably be a much bigger need. And the question is: Can this need be met with the means available?" the Swiss diplomat asked.

Dahinden said he was "very optimistic" about cooperation from Switzerland, which in 2007 devoted 0.37 percent of its gross national product (GNP) to development aid for poor countries. The SDC's budget for 2009 is 1.4 billion Swiss francs (over 1.2 billion dollars).

His confidence is based on a decision in December 2008 by the Swiss parliament, "after the crisis unfolded, which not only reaffirmed the existing commitment, but also invited the government to come up with a bill for an increase in the volume of cooperation," raising official development aid to 0.5 percent of GNP, he said.

The Department of Development and Cooperation is preparing a draft law to present to parliament in the first half of this year, which will allow lawmakers to vote on it before the end of 2009.

In 1970, the United Nations resolved that industrialised countries would commit a minimum of 0.7 percent of their gross national product (GNP) to official development aid, but statistics reveal that by 2007 only five countries had met this longstanding target.

Norway was at the top of the list of donor countries, contributing 0.95 percent of its GNP, followed by Sweden with 0.93 percent, Luxembourg with 0.91 percent, and Denmark and the Netherlands each contributing 0.81 percent of GNP. Bottom of the list was the United States, with an aid budget equivalent to 0.16 percent of its GNP.

Swiss cooperation is devoted to development programmes in the countries of the South and of Eastern Europe, including some republics that were part of the former Soviet Union. Aid officials agree that the consequences of the triple financial, food and climate crisis will hit people in developing or emerging economies particularly hard.

The financial disaster that originated in the countries of the North negatively affects the developing world, by blocking access to small loans and postponing planned foreign direct investment. The fall in both the demand for and prices of commodities can lead to increasing taxation of exports, the SDC said.

"One thing that is very often underestimated are remittances of money that people who emigrate abroad are sending back home to their families to live on. They represent about three times more than all official development aid," said Dahinden.

"So, if remittances decrease, it affects developing countries, although not all in the same way. But I would guess a country like Mexico, for instance, is heavily affected by what is going on in the United States," where the current global economic crisis originated, he said.

Dahinden told IPS that the Swiss government "will try to influence policy in the multilateral institutions in a way that benefits the countries that are most affected by the economic crisis.

"And on the practical level, we will of course have a look at the programmes and projects to see what adaptations are needed to give maximum benefits to those who need them most," he said.

"Bolivia is one of the priority countries where we are increasing our cooperation, and we will be very much focused on rural development. This is an area where most of the poor in Bolivia are living, and they are the population that is probably most heavily affected by the financial crisis," Dahinden said.

There are two particularly damaging factors in Bolivia, he said. On the one hand, prices and demand for its export commodities have plummeted, and on the other hand, nearly one-quarter of Bolivians working abroad will stop sending remittances or reduce the amount. Many emigrants will come home, where they will not find jobs, he predicted.

The SDC also speculated that a reduction in tax revenues and the cost of domestic programmes to mitigate the crisis are likely to decrease the funding that donor countries in the North are committing to development aid.

This means that the Millennium Development Goals (MDGs), approved in 2000 by the member countries of the United Nations with the aim of reducing poverty, illiteracy, disease, inequality and other social problems, are at risk of going unmet, the SDC warned.