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Panel urges more aid with fewer strings attached

by Thalif Deen

New York, 28 Jun 2001 (IPS) -- A high-level UN panel led by former Mexican president Ernesto Zedillo has concluded that the growing economic problems of developing nations can be resolved only with a massive infusion of hard-to-get development aid.

“The inescapable bottom line is that much more funding is needed for international development cooperation,” Zedillo told reporters Thursday.

If donor nations met their target of spending 0.7% of national income on overseas development assistance (ODA), he argued, total development assistance would increase by about $100 billion per year.

So far, only five of the world’s 23 donor nations - Denmark, Luxembourg, the Netherlands, Norway and Sweden - have met the target set by the UN General Assembly nearly 30 years ago.

“Rarely in recent years has the recognition of new needs led to new, additional funding,” the panel said in a report. “Instead, they have mainly been financed by cannibalising existing programmes.”

The panel said that development targets could be achieved only with an additional $50 billion in ODA, roughly twice current spending levels.

Humanitarian assistance alone requires an additional $3 billion to $4 billion per year, the panel said. And the funding of global public goods - including peacekeeping, prevention of contagious diseases and preservation of biodiversity - will require about $20 billion per year compared with the current spending of around $5 billion.

The panel was at pains to emphasise that simply throwing money at problems would not solve them. “How ODA is spent matters as much as how much is available to spend,” it said.

And there are reasons for believing that aid has not yielded as much value for money as it could, “in part because of donors’ actions.”

The report faulted donors for using aid “to advance their foreign policy objective or to promote their own exports” instead of being guided by the need to reduce poverty or promote economic growth, although it noted that the practise of tying aid to exports or geo-strategy has waned since the end of the Cold War.

The panel, assembled by UN Secretary-General Kofi Annan and with members including former European Commission president Jacques Delors, former Indian finance minister Manmohan Singh and former US treasury secretary Robert Rubin, issued its report in hopes of influencing the agenda of next year’s international conference on ‘Financing for Development’.

It argued, “the distribution of aid (should be) determined overwhelmingly by the depth of poverty of the recipient country and the ability of its policy environment to support an assault on poverty.”

However, it cautioned donors against attaching too many conditions to their aid.  Many, it noted, have imposed a host of requirements including good governance and anti-corruption measures, macroeconomic discipline and social, environmental, labour, human rights, and gender programmes.

“Worthy as each of these causes is individually, collectively, they impose a crippling burden on the fragile political and administrative systems of most aid recipients,” the study noted.

Worse still, it added, donors have tried to “micromanage their aid programmes” even as “a lack of donor coordination has imposed serious transactions costs on aid recipients, whose ministers must devote an inordinate amount of time to satisfying phalanxes of donors instead of focussing on their country’s problems.”

The panel, which also urged more debt relief for poor countries, proposed a summit meeting of world leaders on the subject of globalization.

That summit, as well as next year’s development finance conference in Mexico, should debate whether or not there should be global taxes. Specifically, participants should discuss proposals for two such taxes: The so-called Tobin Tax on currency transactions and speculative investment (named after Nobel laureate James Tobin) and a tax on the consumption of fossil fuels.

The panel also urged the international community to weigh the potential benefits of setting up an International Tax Organisation, which could address many of the needs that have arisen as globalization has progressively undermined the territoriality principle on which traditional tax codes are based.

Next year’s conference also has been asked to explore the desirability of securing an adequate international tax source to finance the supply of public goods, and to obtain new commitments to the 30-year-old ODA target.

Additionally, the conference has also been urged to obtain a commitment by the industrial countries to implement the 0.7% ODA target. “Poverty and underdevelopment pose severe threats to stability and peace,” Zedillo said.

“Reversing this shameful trend is the pre-eminent moral and humanitarian challenge of our age.” – SUNS4926

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