Europe has made an ambitious commitment to scale up its aid to Africa and Africa’s challenges call for that greater engagement. But boosting aid to countries that are already aid-dependent requires clearer delivery mechanisms and a degree of budgetary predictability. Something new is called for and cash transfers directly to poor people could be an alternative — but only as a part of a longer-term vision of partner countries’ welfare systems.
The EU has committed itself and its member states to increase aid flows to 0.56 percent of GDP by next year and 0.7 percent by 2015 — with a big focus on Africa. The combined aid commitments of OECD Development Assistance Committee member countries would mean a doubling of official development assistance to Africa between 2004 and next year — that is, if they are honored.
It is, after all, fair to question whether donor countries will stick to these commitments and, indeed, whether conditions in partner countries will permit them to. But a theoretical doubling of African aid by next year — with the possibility of even more after that — offers a huge opportunity to combat poverty. So tackling any obstacles that could inhibit the effective application of these additional resources is a priority.
While Africa’s needs are relatively well known, there are challenges in scaling up aid to tackle them. This reflects such problems as macroeconomic management, aid-dependency syndromes, absorption capacity, transaction costs, and — related to all of it — the risk of decreasing returns as aid levels rise. Given the current aid-to-GDP ratios in sub-Saharan Africa — with approximately half of countries yielding ratios of above 10 percent even before future increases in aid are taken into account — these challenges must be taken seriously.
Donors and their partners agree on a way forward that could, in theory, tackle these challenges. The agreement is contained in the so-called Paris Agenda, which defines principles of ownership, alignment, and harmonization. It calls for the improved predictability of aid flows, with budget support and program-based aid as the preferred means of delivering support. It is an agenda for improved partnerships, reduced transaction costs, and increased efficiency.
It is when the Paris Agenda leaves theory and confronts reality that problems emerge. Budget support suffers from low credibility, not only among donor taxpayers, but also among citizens in recipient countries. While it assumes predictable financial flows, such predictability can be spurious. After all, neither donor countries nor their partners are exempt from such problems as corruption, political crises, armed conflicts, human rights abuses, vested interests, or international power politics.
As a result, placing so many eggs in one basket leaves the business of aid provision looking increasingly risky. Furthermore, budget support that’s linked to national poverty-reduction strategies also rests on the questionable assumption that the political economy of a partner country works to the benefit of the poorest.
Politics on the donor side is no less complicated, with growing aid budgets often viewed by taxpayers as excessive at a time when the anti-aid lobby is becoming more vocal. When donors finance 50 percent or more of a country’s national budget, they may sometimes find intervention unavoidable — donors certainly have the power to intervene. That could mean more conditions being placed on aid, not fewer — even if the rhetoric sometimes appears to suggest the opposite.
Would dispensing aid by making cash transfers directly to the poorest work better?
Experimental schemes have been implemented in Latin America in which child allowances are conditional on school attendance and vaccination. Cash aid has sometimes replaced food aid in humanitarian crisis situations, and there have been targeted social protection schemes in Zambia, as well as incipient welfare schemes for the elderly in India, South Africa, and Lesotho. The results so far are very promising.
Poor people spend money reasonably effectively on investment as well as on consumption. Food and other basic goods are bought — benefiting the local economy — nutrition improves, and kids attend school for longer. An unconditional child grant scheme in South Africa — with mothers as recipients — even demonstrated the impact in centimeters, because the height-for-age index among children improved in relation to control groups.
Affordability does not appear to be a big hurdle. Assume, for example, that an annual universal grant of US$50 is given to all children below 10 years of age in Mozambique, Malawi, and Zambia — covering roughly 10 million children. These are three low-income countries with HIV prevalence rates of roughly 15 percent. Further assuming a relatively generous 20 percent administration overhead, the total cost of the scheme would be approximately US$600 million — equivalent to a fifth of the reported aid flow to these countries in 2004 and to between 3.5 percent and 4 percent of their combined GDP. It would certainly be costly, but not out of reach if African aid is doubled.
For cash-transfer schemes to work, they must be regular, predictable and long term. But while donors and their taxpayers might be willing to make long-term commitments for such a purpose, there is likely to be rather less appetite for commitments that would seem to be never-ending. A formula for burden sharing would be needed that increases domestic financing.
But under no circumstances should these schemes be established as purely donor-driven mechanisms that bypass local budgets and institutions. Partner countries must be ready to invest in their institutions and develop their own vision of how they want to organize their welfare systems.
Would African partners want this? Maybe. In any case, the cash-transfer debate is no longer limited to those in northern development circles. It has now reached the agenda of some African governments and the African Union.
Goran Holmqvist is on leave from the Swedish International Development Cooperation Agency, where he was acting director-general.
COPYRIGHT: PROJECT SYNDICATE/EUROPE’S WORLD
Saudi Arabian largesse is flooding Egypt’s cultural scene, but the reception is mixed. Some welcome new “cooperation” between two regional powerhouses, while others fear a hostile takeover by Riyadh. In Cairo, historically the cultural capital of the Arab world, Egyptian Minister of Culture Nevine al-Kilany recently hosted Saudi Arabian General Entertainment Authority chairman Turki al-Sheikh. The deep-pocketed al-Sheikh has emerged as a Medici-like patron for Egypt’s cultural elite, courted by Cairo’s top talent to produce a slew of forthcoming films. A new three-way agreement between al-Sheikh, Kilany and United Media Services — a multi-media conglomerate linked to state intelligence that owns much of
The US and other countries should take concrete steps to confront the threats from Beijing to avoid war, US Representative Mario Diaz-Balart said in an interview with Voice of America on March 13. The US should use “every diplomatic economic tool at our disposal to treat China as what it is... to avoid war,” Diaz-Balart said. Giving an example of what the US could do, he said that it has to be more aggressive in its military sales to Taiwan. Actions by cross-party US lawmakers in the past few years such as meeting with Taiwanese officials in Washington and Taipei, and
Denmark’s “one China” policy more and more resembles Beijing’s “one China” principle. At least, this is how things appear. In recent interactions with the Danish state, such as applying for residency permits, a Taiwanese’s nationality would be listed as “China.” That designation occurs for a Taiwanese student coming to Denmark or a Danish citizen arriving in Denmark with, for example, their Taiwanese partner. Details of this were published on Sunday in an article in the Danish daily Berlingske written by Alexander Sjoberg and Tobias Reinwald. The pretext for this new practice is that Denmark does not recognize Taiwan as a state under
The Republic of China (ROC) on Taiwan has no official diplomatic allies in the EU. With the exception of the Vatican, it has no official allies in Europe at all. This does not prevent the ROC — Taiwan — from having close relations with EU member states and other European countries. The exact nature of the relationship does bear revisiting, if only to clarify what is a very complicated and sensitive idea, the details of which leave considerable room for misunderstanding, misrepresentation and disagreement. Only this week, President Tsai Ing-wen (蔡英文) received members of the European Parliament’s Delegation for Relations