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Poor countries 'suffering from aid chaos'

01.01.70

The United Nations said yesterday that the best way for the rich world to deliver on its promise to double aid to poor countries would be to set up a new, independent, UN agency to replace the soft loans arm of the World Bank.
A report by the UN Conference on Trade and Development argues that aid structures are too chaotic, with developing nations facing too many donors pushing often unsuitable projects.

The report follows heavy criticism of the World Bank agenda, with many saying that its president, Paul Wolfowitz, is pursuing anti-corruption measures at the expense of delivering essential funds to the poorest people.

Last week a row also erupted between Britain's development secretary, Hilary Benn, and Mr Wolfowitz at the IMF/World Bank annual meetings in Singapore when Mr Benn threatened to withhold 50m from the World Bank to urge it to alter the conditions that are often attached to its loans.

With the Group of Eight rich countries having last year committed to a big increase in aid flows, the UNCTAD report, entitled Doubling Aid: Making the 'Big Push' Work, said bodies delivering the money needed to be redesigned to ensure resources led to lasting progress.

"Many of the aid increases over the last 40 years have been wasted as flows are dogged by unpredictability, conditionality and politicisation," said the report's author, Richard Kozul-Wright. "The commitments have been made, the question now is how can we get the biggest bang from the buck."

Since 1960, he said, Africa had received $25 per capita a year in capital flows, and in the same period Ireland had got $400 a head. Further, constant problems such as large debt, loss of resources and growth led by volatile commodity prices, were limiting the impact of aid. "It is time the UN gets back into aid delivery rather than the soft delivery of the World Bank and International Monetary Fund," he said.

The UN already delivers a large amount of aid; it donated $11bn in 2004 - about 10% of total official development assistance. A UN body, the report says, would promote more budget programmes to underpin developing governments' own programmes, rather than the project aid that now dominates the money flows and which is badly directed.

Mr Kozul-Wright said the Marshall Plan, devised for the rebuilding of Europe after the second world war, held key principles for effective poverty relief - it placed emphasis on regional cooperation, local ownership and domestic investment, and exports to raise income and output within a realistic time frame. A Marshall Plan approach was championed by the chancellor, Gordon Brown, in the run up to the G8 summit at Gleneagles.

Simon Maxwell, director of the Overseas Development Institute, said: "Using multilateral agencies like the UN is a good way to cut the number of donors and reduce the costs of managing aid. However, the UN needs to show it can perform as well or better than the World Bank, the regional development banks and EU."

Mr Benn's Department for International Development welcomed the report, agreeing that international aid institutions needed reform. But, it said, focus should be placed on improving existing bodies rather than creating a new UN fund.

The London-based thinktank the Globalisation Institute, which accused the UN of having a "megalomaniac agenda", said that instead of another "top down institution", freedom should be given to aid recipients over sourcing their money.

Mr Kozul-Wright said that many groups had voiced disquiet over the World Bank and IMF. "This report is pushing at an open door," he said.

Expert opinion

Halter Marek

02.12.06

Halter Marek
Le College de France
Olivier Giscard dEstaing

02.12.06

Olivier Giscard dEstaing
COPAM, France
Mika Ohbayashi

02.12.06

Mika Ohbayashi
Institute for Sustainable Energy Poliy
Bill Pace

02.12.06

Bill Pace
World Federalist Movement - Institute for Global Policy
Peter I. Hajnal

01.12.06

Peter I. Hajnal
Toronto University, G8 Research Group