Opinion - Editorials

Aid at Monterrey

COMMITMENT OF ADDITIONAL aid from the E.U. and the U.S. rescued the United Nations International Conference on Financing for Development from becoming yet another meaningless summit of a number of heads of state. But the meeting, which was held in Monterrey, Mexico, must yet be considered a failure considering that it was originally planned to be much more than a pledging conference. Besides, the "Monterrey Consensus", the statement on financing development worldwide that was adopted at the summit, had earlier been reduced during negotiations to a bland document that said little that was new or innovative about global cooperation.

There were at least three objectives when a decision was taken at the U.N. in 1999 to hold the summit. One was to use the opportunity to review the progress in implementation of all the charters adopted at the series of U.N. summits that were held during the 1990s, a second was to view finance for development in the context of globalisation and a third was to bring the U.N. system back to the centre of international economic policy formulation and give it the same status as the IMF, the WTO and the World Bank. Instead, the Monterrey meeting turned out to be a summit, notable for the participation of the U.S. President, George W. Bush, where the only topic of note was aid. It must be said that it was surprising that at a time when the climate for aid is so poor, the E.U. and the U.S. both promised to increase their foreign aid budgets. But while both the economic blocs have been praised for their new-found generosity, the funds they have promised — and these are still only promises — are not substantial when set against the requirements. The Millennium Goals that the world community has set for itself for 2015 is a halving of global poverty, universal school enrolment of boys and girls and a reduction by three-fourths and two-thirds, respectively, of maternal and infant mortality. International estimates of what this means for foreign aid, over and above what the Governments of poor countries are to themselves contribute, are in the region of $50-75 billion a year of additional funds. What the grand promises at Monterrey by both the E.U. and the U.S. do finally add up to is a total of $25 billion from now until 2006. This is a large amount in itself, but it is not large when seen in relative terms and it is not a commitment of funds for each year until 2015.

Compared to the 30-year-old U.N. target for the developed countries to contribute a minimum of 0.7 per cent of GNP every year as foreign aid, the members of the Organisation for Economic Cooperation and Development, currently collectively contribute no more than 0.22 per cent of their GNP. Only the Netherlands, Luxembourg and the countries of Scandinavia have met this target, with the biggest laggard being the U.S. whose effort amounts to just 0.10 per cent of GNP. The OECD has recently estimated that even a modest increase of the average for all countries to 0.32 per cent of GNP by 2010 will see official development assistance (ODA) increasing by $46 billion. During the 1990s, ODA declined in real terms and in 2000 amounted to only $53.7 billion. This should not have mattered since private capital was expected to take the place of ODA. However, the impact of the volatility of private foreign capital should not be discounted, especially on the poorest countries of the world. The World Bank has recently pointed out that net capital flows of all kinds to the developing world plunged after 1997, falling from a high of $342 billion to just $196 billion in 2001. The decline was almost entirely the result of a contraction in private foreign capital in the aftermath of the East Asian crisis, a situation that shows no sign of a reversal. There could be no better illustration of the continued need for foreign aid than this decline in capital flows to the developing world.

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