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NON-ECONOMIC ISSUES

Rift in donor camp on tagging reforms to aid

REJAUL KARIM BYRON
Sharp differences of opinion have surfaced recently in the local consultant group (LCG) of donors on justification of tying non-economic issues, including electoral reforms and governance, to development aid.
The chief protagonists of the dispute are the World Bank (WB) on one side and some the European Union (EU) countries on the other.
The government early this year sent copies of a draft Poverty Reduction Strategic Paper (PRSP) to the donors seeking their opinion. The LCG sat on various occasions
to discuss the draft PRSP and the disagreements surfaced between the EU donors and the WB, LCG sources said.
The EU countries, specially the Scandinavian ones, demanded of the LCG to ask the government to outline in the PRSP its plan for reforming the caretaker government system, Election Commission, electoral law and law enforcement, specially regarding the 'crossfire' deaths.
They also suggested setting the reform agenda as condition for Bangladesh to get donors' support as well as the development support
credit of the WB for implementing the PRSP.
The EU donors observed that elections are at the heart of poor political governance. If elections are not held in a free and fair manner, it generates political instability and shocks, and may seriously hamper development. In such a situation, they felt a comprehensive strategy for promoting good governance has to be incorporated in the PRSP to ensure its effective implementation.
The EU countries also blamed the WB for taking a soft stance on these issues.
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The WB, on the other hand, argued that, being a multilateral donor agency, it cannot set political conditions for aid, sources said. However the bank said the bilateral donor countries could go ahead pinning those conditions to their aid to Bangladesh.
The LCG has finally sent its review and recommendations on the PRSP to the government, asking it to carry out the reforms excepting that of the caretaker government system
The LCG last month also went through a significant structural change. Since its inception in May 2000, WB country directors have been presiding over the group as well as its executive committee. WB country chief Fred Temple held the office from October 2000 to May 2003 and his successor Christine Wallich from June 2003 to May 2005.
But last month the LCG members decided to rotate the chair. Accordingly, USAID country chief Gene George now holds the presidency of LCG and its EC.
The LCG EC comprises six members -- three bilateral and three multilateral donors. Before June 2003, the EC had five members, one bilateral donor less than the current one.
The purpose of the EC is to steer LCG plenary meets, propose and prioritise agenda, and represent the LCG at meetings with government officials.
In another development this month, four donors have undertaken a joint initiative to devise a strategy for financing the PRSP programme. The members of this group -- WB, Asian Development Bank, UK Department for International Development and Japan -- claim to account for 80 percent of Bangladesh's foreign aid.
However, in its draft country assistance strategy, this newly formed group has not included any of the reform conditions.