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Global Aid Becoming Investment Business

Daniel Girard writes from Iondon
***Financial resources flowing from rich countries to poor remain high. But with business investment to a select few developing countries increasingly muscling out traditional aid. it is the most impoverished people who suffer.**
THE subject was so com monplace and the details deemed so inconsequential they were awarded just one sentence near the bottom of a column of international news briefs. Under the headline "poverty trap. ' The Times of London reported the World Bank could not release up to $250 million in loans to Rwanda until the Government of the devastated African country paid off $3.75 million in arrears.
To the Bank's many critics, it was yet another example the gross inefficiency of the world's largesi lending institution and its twin, the International Monetary Fund (IMF), born 50 years ago in Bretton Woods. New Hampshire.
Opponents charge that with more than one billion people living in absolute poverty. 40 per cent of the' population in developing countries lacking basic sanitation or clean water and the gap between rich and poor growing wider, the two bodies, committed to the reduction of global poverty, have proved a disaster.
"(Their) policies are falling precisely the people they are supposed to help, the poorest in the developing world." says Michael Taylor, director of Christian Aid. a British non-
governmental organisation (NGO).
Christian Aid and a group of other Third World charities are pressing for reforms to the World Bank and IMF at the Soth annual meetings of the Washington-based institution in Madrid (October 4 — 6). Critics want the debt of devel-offlng countries substantially
reduced, controversial structural adjustment programmes (SAPs) altered and the two bodies democratised so that they are more accountable to taxpayers in rich countries and recipients in poor nations.
World Bank officials admit their record has not been perfect but they insist the Institution has contributed to global
economic and social progress in the past half century. In developing countries, average life expectancy has increased by about 50 per cent: the proportion of children attending school has risen from less than half to more than three-quarters; and average income per person has more than doubled, they note.
Spokesperson Geoffrey Lamb said the Bank will continue to fund "free market friendly" projects because, despite the short-term negative impacts on social programmes. SAPs are the best way to go about reducing poverty.
Lamb admitted the social components including health care and education of the first generation of SAPs — large loans to countries contingent On them liberalising their economies — had been "quite inadequate" but current policy is aimed more at softening the blow for the poorest of the
"Increasingly we will not lend in situations where we are not satisfied of the viability and proper Implementation of a. project." Lamb told reporters at a news conference releasing the Bank’s 1994 annual report. "Which is not the same as saying we will not make any more mistakes."
No matter which side of the debate they are no. few people dispute the fact that global aid has changed dramatically since the fall of the Berlin Wall in 1989. The former Soviet Union, once a large aid donor, has not only stopped paying out. but. along with its now-independent republics and other former Eastern bloc allies, has become a major recipient of assistance from main global lenders — the World Bank/IMF. the 22-member Organisation for Economic Co-Operation and Development (OECD) and regional development banks.
The world's poorest countries have paid a heavy price for this shift.
In its report earlier this year, the OECD noted total assistance to developing countries in 1992 reached a record $159.1 billion, a 21 per cent increase from the previous
But further examination of the figures for so-called development finance, shows continuation of a disturbing trend for have-not countries. Concessio-n81 money — cut-rate loans, grants and Other concessions — fell 3.5 per cent between 1991 and 1992 while private flows — direct investment, international bank lending and other private money — increased by nearly 53 per cent.
Between 1984 and 1992. private flows increased from just over 39 per cent to nearly 57 per cent of OECD countries total resources to the developing world.
Few people dispute Individ ual business investment is needed to make the world's poorer countries more self-sufficient. "Aid should never be looked at as the solution to poverty worldwide." says Harriet Lamb, of the World Development Movement (WDM), a British NGO No
country wants to be dependent on aid."
■ But as private investment figures show that is exactly what Is happening. It is typically only a select few "economically attractive" nations that get the money. According to the 1994 United Nations Human Development Report, although private flows to developing countries have increased dramatically in recent years, between 1989 and 1992. 72 per cent of the money went to just 10 countries. Sub-Saharan Africa received. just a six per cent piece of the pie and the least developed countries only two per cent.
Lamb of WDM said economic adjustments are definitely needed In poor countries to reduce poverty and make them more efficient and attractive to foreign investors but the SAPs are being universally applied without taking into account differences between the nations.
Lamb added that developing nations' debt — which accords^ ing to the World Bank wad* $156.4 billion or nearly 54 per cent of the gross national product of sub-Saharan Africa in 1993 — must be reduced
She applauded that the agenda at the Madrid meetings will include a discussion about the IMF selling its estimated $15 billion infold reserves, using perhaps one-third to reduce debt of the poorest countries.
Most observers say aid to developing countries is a question of priorities on the part of donor nations and recipient governments. As long as richer nations put winning new markets for domestic products and securing contracts for their industries ahead of improving the lot of the poor, few see poverty being tamed.
The Human Development Report notes that only seven per cent of the funds from bilateral donors is directed to education, primary health care, rural water supplies, nutrition programmes and family planning services.
Those crucial, areas could easily he paid for by divert!^ small percentages of the bu^ get developing countries devote to military spending. About 12 per cent of the $125 billion those nations pul toward defence in 1992 would provide primary health care and safe drinking water for all
— GEMINI NEWS
DANIEL GIRARD is a re porter with The Toronto Star newspaper