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Wolfensohn chides rich nations for not meeting aid target

Berlin, 2 Apr 2001 (IPS) -- World Bank President James Wolfensohn has criticised developed nations for their failure to uphold their promise to allocate 0.7% of their gross domestic product (GDP) for official development assistance (ODA) to the needy countries, particularly in Africa.

This, he said, would make an important contribution to halving world poverty rates. “Never was this more necessary. With each passing decade the challenge intensifies,” he added.

“Current levels of foreign aid, at some 0.24% of annual GDP, fall far short of the 0.7% target developed countries promised to meet,” he told a public discussion forum at the German Federal Parliament (Bundestag) Monday.

The 0.7% target was postulated at the Second Session of the United Nations Conference on Trade and Development (UNCTAD) in 1968 and adopted by the UN General Assembly two years later. The heads of state and government of the industrialised countries reiterated that goal at the United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro, Brazil in June 1992.

The total aid of all donor nations currently amounts to about $50 billion.

Making an impassioned plea for raising ODA, Wolfensohn told German members of parliament: “The difference between these figures (0.7% and 0.24%) is worth a hundred billion dollars a year. For millions of poor people, this is the difference between life and death. And it is surely an amount which, if correctly used, could make the achievement of global objectives possible.”

The World Bank chief’s listeners belonged not only to the parliamentary committees for economic co-operation and development and foreign affairs, but also to the finance committee, which plays a crucial role in budgetary allocations. Though the economic co-operation and development ministry, led by Heidemarie Wieczorek-Zeul from the Social Democratic Party, is keen to raise ODA, Finance Minister Hans Eichel - also a Social Democrat - and parliamentarians are far from enthusiastic about the idea.

Instead they are concentrating on consolidating the budget and reducing the country’s massive debt. As a result, allocations for the external affairs and defence ministries have been reduced. The External Affairs Ministry is headed by the Green Party’s idol Joschka Fischer. The Defence Minister is Rudolf Scharping of the Social Democratic Party, which is chaired by Chancellor Gerhard Schroeder.

Wolfensohn recently returned from a joint mission to Africa together with the Managing Director of the International Monetary Fund (IMF), Horst Koehler. Their discussions with 22 African leaders were said to have been “extremely productive”.

In fact, “Horst and I both came away from that trip with a very strong sense of how African leaders are now taking charge of their continent and their countries,” Wolfensohn said.

“It is a supreme irony that just at the time when African leaders are putting the right policies in place and are showing results, overseas aid to Africa has fallen,” he added. Aid to the continent dropped from $32 per person in 1990 to $18 per person in 1998.

“We must reverse that trend. I join Horst in saying that it is time for a concerted appeal to the heads of governments and major aid donors to make it clear, once and for all, that development assistance is not charity but a vital investment in global peace and security.”

These remarks are not based on what an observer termed Wolfensohn’s “emotional proximity” to Africa. They are very much backed by a recent study by the Development Research Group of the World Bank, which has been conducting a research project on “Aid and Reform in Africa”. The aim of the project was to arrive at a better understanding of the links between foreign aid and policy reforms in Africa.

Summing up the study, the group says: “Recent cross-country evidence has shown that foreign aid has a strong, positive effect on a country’s economic performance if the country has undertaken certain policy and structural reforms.”

But the evidence also shows that countries with good policies receive less assistance than countries with poor or mediocre policies. The juxtaposition of these two findings has led to the assertion that “aid cannot buy reform”.

The group says: “The purpose of the study is to go beyond the cross-country regressions and focus on the causes of reform and analyse if and how aid has encouraged, generated, influenced, supported or retarded reforms. The aim is to analyse the reform processes rather than the results of the reforms.”

To achieve the objective, the researchers undertook a series of country case studies. Each case study examined the nature of external assistance, and the causes and paths of reforms in different policy areas, and attempted to trace a relationship - if any - between the two.

The project covers Cote d’Ivoire, the Democratic Republic of the Congo, Ethiopia, Ghana, Kenya, Mali, Nigeria, Tanzania, Uganda and Zambia.

The country case studies were carried out by teams of external consultants and local professionals knowledgeable about the reform processes and the donor perspectives in each country.

The final report of the project was published on 27 March. In advance of this publication, preliminary results of the project have been presented in workshops in Africa, the United States and Europe.

The World Bank president pointed out that African development can only result from a partnership in which the leadership and basic responsibility must be borne by the Africans.

“The role of the international institutions and bilateral donors,” he added, “must be to give wholehearted support, with knowledge and experience, and liberally in terms of material resources and access to markets.”

Wolfensohn pleaded for a global campaign to meet the international development goal of reducing the proportion of people living in extreme poverty by half by 2015.

“Never was there a better time for such a campaign. Knowledge about what sustainable development entails has never been better. The budgets of rich countries have never been stronger. Technology has never been more dynamic. Our goals have never been clearer. We must seize this moment. We must be the first generation to think both as nationals of our countries and as global citizens in an ever shrinking and more connected planet.”

Today half the world’s population live on less than $2 a day; 80% of the global population has only 20% of global GDP; and within each country, there is a massive imbalance between rich and poor.

The challenge does not end there, the World Bank chief cautioned German members of parliament. Over the next 25 years, 2 billion people will be added to the planet, almost all of them in the developing world.

Wolfensohn added: “We will go from a world of 6 billion people to a world of 8 billion people - with maybe over six-and-a-half living in the developing world.  How many people will be condemned to live on under $2 a day then? How the international community answers that question will be the key determinant of whether our children will live in a peaceful world or a world of rising conflict.”

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