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Development & Aid

Getting Past Aid to Develop

PARIS, Apr 5 2013 (IPS) - With the level of Western aid to the world’s poorest countries declining amid the global financial crisis, economists are calling for “innovative” means of development that range from proper taxation of multinationals to laws that ensure gender equality.

“The game changers are inclusive growth, regional integration and gender equity – making sure women have property and inheritance rights,” said Prof. Mthuli Ncube, chief economist and vice-president of the African Development Bank in an interview with IPS.

Ncube was in Paris this week to attend the Global Forum on Development hosted by the Organisation for Economic Cooperation and Development (OECD). Much of the focus was on Africa, with former Nigerian president Olusegun Obasanjo being a keynote speaker.

“There must be fairer and more transparent relationships between investors and the African people. The whole issue of negotiating fairer royalty fees is crucial because we’ve seen commodity prices going up, but revenues for African governments are not increasing,” Ncube told IPS.

“Africa has huge natural resources, and the investors in these natural resources are mainly from outside. We have to examine how these investments can benefit the African people through job creation, protecting the environment, developing African entrepreneurs and using the revenues from resources to diversify African economies,” he said.

He added that discussions on maximising revenues from natural resources to finance development had to take into account the fact that “benefits are going to the elite in African countries” and also to the foreign investor companies. “The growth is not being shared, it is being creamed off,” Ncube said.

He pointed to World Bank studies indicating that from 1980 to now, an estimated 1.4 trillion dollars have left Africa illegally as a consequence of official corruption and other factors. Ncube stressed that increased transparency was essential for Africa’s growth.

The Global Forum followed the release of the annual OECD report which showed that development aid fell by four percent in real terms in 2012, after a two percent decrease the previous year.

“There must be fairer and more transparent relationships between investors and the African people."

The OECD said that the “continuing financial crisis and eurozone turmoil has led several governments to tighten their budgets, which has had a direct impact on aid to poor countries.”

It said that there has also been “a noticeable shift in aid away from the poorest countries and towards middle-income countries,” but that a moderate recovery in aid levels is expected in 2013, based on donors’ projected spending plans.

“As we approach the 2015 deadline for achieving the Millennium Development Goals, I hope that the trend in aid away from the poorest countries will be reversed. This is essential if aid is to play its part in helping achieve the Goals,” said Angel Gurría, the OECD secretary-general.

But aid from rich countries is not necessarily the answer, say many economists. Franklyn Lisk, professor of development policy and practice at the University of Warwick in the United Kingdom told IPS that the whole issue of assistance had to be examined in the context of “development and justice”.

“In Africa, we have this paradoxical situation where the richest continent in terms of natural resources is the poorest in terms of human development and physical development. This is due partly to the fact that African governments have not been able to realise anywhere near the true returns they should get from their natural resources,” Lisk told IPS.

“I would like to see what I call tax justice because many foreign companies in extractive industries in Africa and other developing countries get away with paying little or no taxes, through manipulation and connivance with corrupt regimes,” he added.

Lisk and other economists estimate that if African countries were able to realise the “true value of taxation,” the revenue would account for six times the volume of total aid.

“There would not be any need for aid if African countries get their true share in terms of revenues and royalties,” Lisk told IPS. “We have to go beyond economic growth and beyond issues of sustainability to look at those dimensions of development such as social issues, tax justice, gender equality – issues that are not sufficiently taken into account.”

For the OECD, however, assistance does play a role in development, and the organisation’s top officials expressed concern at the falling aid levels, calling the trend “worrying”.

Opening the Forum on Thursday, Gurría said that while poverty has declined globally, partly because of economic growth and innovative policies in countries such as Brazil and Bangladesh, it was still crucial for the international community to “work together to put forth a new and more ambitious vision for a Post-2015 development world.”

In 2012, members of the OECD’s Development Assistance Committee (DAC) provided 125.7 billion dollars in net official development assistance, representing 0.29 percent of their combined gross national income.

To achieve the Millennium Development Goals (MDGs), the United Nations has set a figure of 0.7 percent of gross national income as an aim.

Gurría said he was heartened by the fact that nine countries still managed to increase their aid, in spite of the crisis. Meanwhile the new DAC chairman Erik Solheim said that his committee would continue to encourage its members to live up to their commitments.

“I welcome the efforts of those nine DAC members that increased their aid in 2012, and urge others to increase their aid as soon as their budget circumstances allow,” Solheim stated.  “Maintaining aid is not impossible even in today’s fiscal climate. The UK’s 2013-14 budget increases its aid to 0.7 percent of national income, which gives hope that we can reverse the falling trend.”

The nine DAC countries that increased aid – Australia, Iceland, Austria, Korea, Luxembourg, Canada, Norway, Switzerland and Luxembourg – were praised by NGOs such as the anti-poverty campaigner ONE.  Other donors who boosted their assistance included Poland, Turkey and the United Arab Emirates.

ONE said that aid was necessary because many African countries won’t achieve the eight Millennium Development Goals by 2015 without assistance, especially those related to providing primary education and safe drinking water.

“Donors are now focusing on emerging countries, at the expense of sub-Saharan Africa and at the expense of the least advanced countries,” ONE France’s director Guillaume Grosso told IPS. “They need to realise that when you invest aid smartly, you get results.”  (END)

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