Well-heeled consultants and companies in the West are the beneficiaries of a global-aid system which results in less than 40 percent of cash donations helping to eradicate poverty in the developing world, according to a report yesterday.
Just over a month before Britain will make a doubling of aid a centerpiece of the Gleneagles summit, the charity ActionAid said the bulk of the money currently allocated was wasted, misdirected or recycled within rich countries.
It found that 61 percent of aid flows were "phantom" rather than "real" -- rising to almost 90 percent in the case of France and the US.
The report accused rich countries of "political grandstanding" and highlighted the ways in which they were disguising how real aid flows were even lower than they appeared to be.
"Failure to target aid at the poorest countries, runaway spending on overpriced technical assistance from international consultants, tying aid to purchases from donor countries' own firms, cumbersome and ill-coordinated planning, implementation, monitoring and reporting requirements, excessive administrative costs, late and partial disbursements, double counting of debt relief, and aid spending on immigration services all deflate the value of aid," it said.
Compared with a UN target of spending 0.7 percent, rich countries were ostensibly spending 0.25 percent of their national income on aid each year.
The figure came down to 0.1 percent when "phantom" aid was stripped out.
The G7 countries -- Britain, the US, Germany, Italy, France, Canada and Japan -- spent only 0.07 percent of national income on real aid and would need a tenfold increase to hit the UN target, ActionAid said.
Britain, according to the research, is a better-performing country, but still allows 29 percent of the money spent by its Department for International Development (DfID) to be squandered on "phantom" aid. The UK was spending 0.24 percent of gross domestic product on "real" aid in 2003.
The report quotes a DfID official as saying that foreign experts giving technical advice in Vietnam, for example, are paid US$18,000 to US$27,000 a month, compared with US$1,500 to US$3,000 for local experts.
DfID rejected the findings.
"It's simply nonsense to suggest that a third of UK aid is `phantom,'" international development secretary Hilary Benn said. "ActionAid's figures just don't stack up. It's absurd to argue that debt relief, or practical advice from technical experts, isn't real aid."
He did, however, accept that there was a need for more and better aid and said the UK was working with other donors to avoid duplication and waste.
ActionAid said the report did not invalidate the need for more financial assistance, saying that where aid was delivered it was helping to tackle poverty.
It called for a new international agreement that would see money spent where it was needed rather than on business-class flights for Western consultants. It said three-quarters of the money spent on technical assistance was wasted on inflated salaries for consultants flown in to advise poor countries.
The authors of the report, Romilly Greenhill and Patrick Watt, said their figures were not precise because of the paucity of data.
They added, however, that they had tended to be generous to donors and that the true scale of the challenge might be even greater than that highlighted.
To arrive at their figures, they deflated the value of official aid to take account of donor practices that reduced its effectiveness.
The charity said its proposal for an international aid agreement run by the UN would make aid more accountable. An agreement should involve clear policies on criteria for accepting aid, mutual commitments in place of one-sided conditionality, national and international forums where donors and recipients would review progress on an equal footing, and new mechanisms to increase substantially the volume and predictability of aid.
The report adds: "Donors have signed up to numerous international agreements to improve the quality of their aid. Yet this agenda has made little headway. At the heart of this failure there lies a lack of accountability on the part of donors for either the amount of aid they commit, or the quality of that aid."
Donors, it said, continued to restrict the ability of developing countries "to plot their own development paths."
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