What Does Foreign Aid Acheive?

2 03 2010

This is the third of three articles I published earlier. I think the three raise the serious issues associated with poverty and corruption, and give evidence of the reasons why they must tackled together as one policy not as two separate issues.  I first published this article on the 9th August 2008.

According to Andrew Mwanda, a leading Ugandan commentator the answer is very little in terms of economic growth. The evidence supports his arguments.

“Over the last 40 years, Africa has received over $600 billion in foreign aid and debt relief. For most of this period, the continent sustained zero to negative growth; positive growth was only occasional and sporadic, depending on international commodity price fluctuations.” reports the Guardian newspaper.

The article continues, “Why has aid been antithetical to growth? There are many reasons, including mismanagement and miss-allocation of aid resources, slow disbursement of aid monies and corruption. But the fundamental reason is that aid creates the wrong incentives for growth.”

Despite the evidence The recent G8 Summit in Japan upheld earlier calls for doubling foreign financial aid to Africa as a solution to poverty on the continent.

Mwanda suggests that If the source of this revenue is the national economy, government would be driven by self-interest to listen to its citizens about policies and it would be necessary to increase the productivity of private enterprises. But, foreign id distorts the situation. Rather than forge a productive relationship with their own citizens, governments find it more profitable to negotiate for revenues from abroad.

Foreign aid that has saved incompetent governments from collapse. By providing them an external subsidy, governments in Africa have been able to retain power even when pursuing policies that impoverish their citizens. Cut the aid, and many of them will be forced to pursue economic growth or pay the political price of their economic folly.

Our View: Almost certainly Mwanda´argument is correct, but this should not lead to an ending of aid. Instead it is the responsibility of o private and public, to adopt policies that recognise and address these issues. That means supporting initiatives, such as those by Transparency International, to encourage the expansion of open and accountable governments, and continuing to expose those that under-perform on the Corruption Perceptions Index which ranks 180 countries by their perceived levels of corruption, as determined by expert assessments and opinion surveys. This index allows decision makers to adopt policies and make investment decisions accordingly.





Corruption: The Ongoing Humanitarian Disaster

2 03 2010

I wanted to post this article again (first posted on 23rd september 2008). It exmpains why Artists Against Corruption will focus on exposing corruption, because of the direct link between corruption and poverty, expecially in developing nations.

Transparency International launched the 2008 Corruption Perception Index (CPI) which measures the perceived levels of corruption in 180 countries drawing on different expert and business surveys.

The Fatal Link between Corruption and Poverty

The Major findings of the 2008 report are “Persistently high corruption in low-income countries amounts to an “ongoing humanitarian disaster”, but at the same time, “Against a backdrop of continued corporate scandal, wealthy countries backsliding too.”

The report highlights the fatal link between poverty, failed institutions and corruption. “In the poorest countries, corruption levels can mean the difference between life and death, when money for hospitals or clean water is in play,” said Huguette Labelle, Chair of Transparency International. “The continuing high levels of corruption and poverty plaguing many of the world’s societies amount to an ongoing humanitarian disaster and cannot be tolerated. But even in more privileged countries, with enforcement disturbingly uneven, a tougher approach to tackling corruption is needed.”

Highs & Lows

Countries are scored on a scale from zero (highly corrupt) to ten (highly clean). The 2008 finds the cleanest countries are Denmark, New Zealand and Sweden, all sharing a score of 9.3. The most corrupt are; Somalia at 1.0, Iraq & Myanmar 1.3 and Haiti at 1.4.

Changes

2008 sores, compared to 2007 scores, showed significant declines for Bulgaria, Burundi, Maldives, Norway and the United Kingdom. On the other hand, Albania, Cyprus, Georgia, Mauritius, Nigeria, Oman, Qatar, South Korea, Tonga and Turkey all showed significant improvements.

Wealthy Country Corruption v Poor Country Corruption

Whether in high or low-income countries, the challenge of reigning in corruption requires functioning societal and governmental institutions. Poorer countries are often plagued by corrupt judiciaries and ineffective parliamentary oversight. Wealthy countries, on the other hand, show evidence of insufficient regulation of the private sector, in terms of addressing overseas bribery by their countries, and weak oversight of financial institutions and transactions.

“Stemming corruption requires strong oversight through parliaments, law enforcement, independent media and a vibrant civil society,” said Labelle. “When these institutions are weak, corruption spirals out of control with horrendous consequences for ordinary people, and for justice and equality in societies more broadly.”

Weakening the Fight Against Poverty

In low-income countries, rampant corruption jeopardises the global fight against poverty, threatening to derail the UN Millennium Development Goals (MDGs). According to TI’s 2008 Global Corruption Report, unchecked levels of corruption would add US $50 billion (€35 billion) – or nearly half of annual global aid outlays – to the cost of achieving the MDG on water and sanitation.

Not only does this call for a redoubling of efforts in low-income countries, where the welfare of significant portions of the population hangs in the balance, it also calls for a more focussed and coordinated approach by the global donor community to ensure development assistance is designed to strengthen institutions of governance and oversight in recipient countries, and that aid flows themselves are fortified against abuse.

This is the message that TI will be sending to the member states of the UN General Assembly as they prepare to take stock on progress in reaching the MDGs on 25 September, and ahead of the UN conference on Financing for Development, in Doha, Qatar, where commitments on funding aid will be taken.

Double Standards

The weakening performance of some wealthy exporting countries, with notable European decliners in the 2008 CPI, casts a further critical light on government commitment to reign in the questionable methods of their companies in acquiring and managing overseas business, in addition to domestic concerns about issues such as the role of money in politics. The continuing emergence of foreign bribery scandals indicates a broader failure by the world’s wealthiest countries to live up to the promise of mutual accountability in the fight against corruption.

“This sort of double standard is unacceptable and disregards international legal standards,” said Labelle. “Beyond its corrosive effects on the rule of law and public confidence, this lack of resolution undermines the credibility of the wealthiest nations in calling for greater action to fight corruption by low-income countries.” The OECD Anti-Bribery Convention, which criminalises overseas bribery by OECD-based companies, has been in effect since 1999, but application remains uneven.

Regulation, though, is just half the battle. Real change can only come from an internalised commitment by businesses of all sizes, and in developing as well as developed countries, to real improvement in anti-corruption practices.

Full Story





Capitalism in Crisis: The Cost of U.S. Corruption

26 09 2008

The ongoing bank driven economic crisis in the U.S., and the proposed $700bn rescue plan clearly demonstrate the cost of corruption. Again I am adopting the definition of corruption used by Transparency International (TI) to suggest that this crisis has corruption at its roots.

Transparency International, one of the largest Anti-Corruption agency in the world, define corruption as, “the abuse of entrusted power for private gain”. and say, ” It hurts everyone whose life, livelihood or happiness depends on the integrity of people in a position of authority.”

As to the cost, the $700bn deal being proposed would cost every man, woman and child in the United States about $2,300. And, the total cost exceeds total lending by the International Monetary Fund since its inception after World War Two. The IMF has loaned $506.7 billion since 1947.

In other words, the U.S. government is proposing a deal that would rob every citizen of the U.S. to reward the corrupt institutions and the corrupt directors of them.

The deal is in trouble today. Let’s hope and pray it does not pass. If it does it will be a clear demonstration that corruption pays and would undermine the credibility of America and the capitalist system as a whole.

These are my opinions, and the figures used come from reporting by Reuters.





Corruption Can Be Faught

25 09 2008

The Economist Magazine highlights Indonesia’s recent success in fighting corruption. The article says, “At last it is possible to detect signs that Indonesia is making progress against its rampant corruption, ” and points to the fact that in the latest in a series of spectacular busts by its Corruption Eradication Commission (KPK), on September 16th investigators pounced on a director of the anti-monopoly agency at a Jakarta hotel, as a businessman allegedly bunged him 500m rupiah ($53,000).

The results are also evident In Transparency International’s annual Corruption Perceptions Index, published this week, Indonesia improved its lowly ranking, coming 126th out of 180 countries; last year it was 143rd out of 179 countries surveyed. Its “cleanliness” score has risen modestly since the KPK was created in 2002. Buoyed by public support, the agency is calling for those convicted of graft to be dressed in garish uniforms and thrown into the same special jail that houses terrorists.

Read the FULL STORY





Transpaceny International Supports Artists Against Corruption

30 07 2008

Artists Against Corruption is delighted to announce that we have won the support of Transparency International, organisers of the global coalition against corruption, represented by over 90 offices around the world.

In support they said, ““As leader of a global coalition in the fight against corruption, Transparency International supports the initiative of Artists Against Corruption. In expressing the link between corruption and poverty through music, theatre, dance, art, photograph, and other art forms, the campaign will make people aware that corruption is one of the biggest obstacles to reducing poverty. This initiative helps advance our mission to create change towards a world free of corruption.”

We are now also discussing collaborate to rapidly internationalise Artists Against Corruption. News of any developments will be posted here. You can also join the newsletter mailing list for regular updates.





Aid Corruption & Poverty

22 07 2008

It does not take long to dig up articles to confirm the link between corruption and poverty. Indeed governments and institutaions are very aware of the problem. The big question is how many are really addressing the issues?

Larry Elliot, edconomics Editor of the Guardian newspaper (UK) as recently as 24th June reported that, ” MPs fear corruption risk from poorly monitored aid.” The story said, “Parliament’s spending watchdog will warn the government today that lax monitoring of aid spending meant hundreds of millions of pounds of taxpayers’ money was at risk of corruption or being wasted.”

The committee chairman said, “Despite spending around one fifth of its bilateral aid in the form of direct payments to the governments of developing countries, DFID does not know how good an instrument this is in reducing poverty. Nor does the department know whether such support provides better value for money in reducing poverty than other forms of aid.”

And, it does not take long to find evidence of the additional problems that can be cause by badly managed aid programs. “Poorly directed aid increases Afghanistan’s woes” was the title of an editorial piece in the Observer newspaper (UK) yesterday. The article says, “Corruption and criminality, linked often to the very heart of government, is endemic. Despite $15bn in aid that has been disbursed, Afghanistan remains mired in pervasive poverty with unemployment standing at more than 40 per cent. The country’s position as one of the world’s poorest has barely shifted since 2001.”

With all the money invested it says, ” There have been some positive steps since the fall of the Taliban regime. Millions of children are in education in a country with a long history of high levels of illiteracy, particularly among women. A vibrant media, although under threat from many sides, also exist. Improvements have been made in the provision of healthcare. But this is not enough to persuade Afghans that much is getting better when they are confronted daily by criminality, violence, a predatory police force and an ill-educated and corrupted civil service.”

And the article goes on to say, “The hazard of throwing more money at the problem is that without a tighter focus to that spending, Afghans see the increased aid budget as an opportunity for a small elite of Afghans and a small army of international contractors and aid workers to enrich themselves still further. A further consequence is that, because it lacks a professional civil service to support the people, the aid community has shouldered the burden, inadvertently undermining still further the development of effective local services.”

I am not arguing that aid should stop, on the contracry it should increase. But, it is just as important to make sure that what is spent is used effectively, and certainly does not make existing problems worse. Corruption is a very complicated issue, but that is not an excuse for ignoring it. Ignoring it costs lives.

Institutions like Transparency International provide a great deal of help to aid giving and aid receiving countries. They have developed best practice guidelines for reform based on the latest research into the causes and effects of corruption. All governments would be well advised to take their adviseand adopt comprehensive anti-corruption policies. Advice is also available to private enterprise and to individuals who want to fight corruption.





Corruption & Poverty

21 07 2008

Artists Against Corruption will expose the link between corruption and poverty in an effort to show that “corruption is the greatest obstacle to overcoming poverty” (World Bank), and hopefully help to end the tolerance of it.

The links are not immediately obvious, and they are in fact many and varied. They depend on the type of corruption, also many and varied.

On a macro level it is safe to say that “Corruption not only reduces the net income of the poor but also wrecks programmes related to their basic needs, from sanitation to education to health care. It results in the misallocation of resources to the detriment of poverty reduction programmes.” (Transparency International) But the, effects are most dramatically obvious at a micro or personal level when a bribe randomly extorted by a police officer may mean a families cannot afford medicines or even basic food.

Corruption has an impact on the effectiveness of spending by a national government, and on the effectiveness of international development assistance. The money does not always reach the intended beneficiaries because of corruption. in 2006 Donor countries donated US$104bn in official development assistance. This is set to increase to US$130bn by 2010. If this money gets into the wrong hands the Millennium Development Goals will be put at risk, or as Transparency International put it, “With increasing levels of aid there is concern that corrupt politicians and business people may use this money to enrich themselves rather than improving living conditions for the poor.” This will happen unless corruption is tackled as an integral part of poverty reduction strategies.

Corruption also has a serious impact on development driven by private businesses. In a society where a culture of corruption is dominant trust does not exist and business risks are higher resulting in less risk taking by enterprises. Foreign buisnesses are also less likely to invest. In a recent survey the Economist Intelligence Unit found that, “45% of respondents say they have not entered a specific market or pursued a particular opportunity because of corruption risks.”

It is safe to conclude that societies pay a massive price if they tollerate corruption, but the price paid by the poor is far greater. It is no exageration to say that for many poor people the cost of corruption is their lives. One example is when corrupt officials starve hospitals of resources leaving them unable to save lives, whilst spending public funds on projects that offer financial kickbacks.

Artists Against Corruption supports the general fight against corruption, but our focus is to raise awareness on behalf of those most affected by it.

Given the growing consensus that the problem must be addressed we are hoping for widesread support from institutions, governments, private companies and NGO´s in our effort to raise awareness and a desire to put an end to corruption.