November 28, 2011 / 6:16 PM / 8 years ago

World aid donors plot strategy amid economic crisis

WASHINGTON (Reuters) - Major global aid donors meet in South Korea this week hoping to coordinate the billions of dollars spent on development as rich nations tighten their belts and brash new funders such as China rewrite the rules of traditional foreign aid.

Returnees from north Sudan wait in line to receive food from the World Food Program (WFP) staff in Wanjak near Aweil in the northern Bahr el Ghazal state in south Sudan December 30, 2010. REUTERS/Goran Tomasevic

U.S. Secretary of State Hillary Clinton and U.N. Secretary General Ban Ki-moon will attend Wednesday’s summit in Busan, held against a backdrop of economic crisis in the United States and Europe and the rich world’s repeated failure to meet its targets for helping the poorest nations.

“This is about dealing with the terrible fragmentation of the aid effort,” said Brian Atwood, chair of the development assistance committee at the Organization for Economic Cooperation and Development (OECD), the group of rich, free market democracies which currently account for about 80 percent of overall global foreign aid.

“There are estimates that we are possibly wasting 30 percent of the development dollars we spend because of transaction costs and lack of coordination,” he said.

“We would like to have much more coordination at the country level. And this is being demanded not so much by us as by the developing countries themselves.”

Development remains big business despite the economic woes besetting rich countries ranging from U.S. deficit fears to the European financial crisis.

In 2009, aid flows from bilateral donors and multilateral organizations such as the World Bank’s International Development Association totaled $122 billion, spread across 152 recipient countries, according to the Washington-based Center for Global Development think-tank.

But coordination among donors remains poor while benchmarks for transparency and efficiency of aid money are frequently not met — making it harder to defend as rich nations cut budgets and impose austerity programs.

A World Bank report in 2010 said only one of eight major U.N.-backed development goals agreed to in 2000 — halving global poverty by 2015 — was likely to be met. But more work needs to be done to reduce hunger and malnutrition, improve gender equality and access to healthcare and education, tackle climate change and help mothers and their newborns.


Clinton has fought hard to preserve U.S. foreign assistance, worth about $33 billion for the 2011 fiscal year, arguing that it is part of a “smart power” approach that will benefit U.S. security in the long run and spur economic growth that will boost U.S. jobs and exports.

“We are in a place where we should be thinking about a culture shift - from thinking about aid to thinking about investment as a catalyst,” said Cheryl Mills, Clinton’s chief of staff at the State Department.

“We have a responsibility to tell the taxpayers why it is in their strategic interest,” Mills told Reuters in an interview. “We should not be dialing back our investments at this time, especially when they are just one percent of the overall budget.”

But the Busan meeting is also expected to focus on a new class of funders like China and Brazil, which run their own bilateral aid programs that at times compete with traditional donors and often do not adhere to the same principles of transparency and accountability.

China’s overall role in global development aid remains relatively small. It provided about $40 billion over the last six decades, much of it to African countries where Beijing has growing interest in oil, minerals and other natural resources.

But Beijing and other new donors are stepping up their aid programs, which critics say are often used as political tools to advance their own economic interests.

“These guys haven’t been part of the consensus previously as donors,” said Greg Adams, director of aid effectiveness at the international aid group Oxfam.

“We don’t expect them to be in total compliance, but we do expect them to articulate their timeline on how they are getting up to speed,” he said, adding that preliminary negotiations made this appear unlikely.

“Donors are trying to dial back on commitments to make their aid transparent, untie it from donor country procurement deals, and use monitoring systems that track the performance of their assistance. This will make it harder for poor people and countries to lift themselves out of poverty.”

Editing by Deborah Charles and Vicki Allen

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