Poorest Nations Compete For Aid Under Bush Plan

by Jim Lobe

Some hailed the proposed Millennium Challenge Account (MCA) as a possible breakthrough in improving the effectiveness as well as the amount of U.S. aid.

Others feared that the plan may lead to greater marginalisation of poor countries that fail to meet the strict conditions determining which countries will be eligible for the aid.

Still others worried that MCA may detract from more urgent aid needs, such as debt relief and the global fight against HIV/AIDS, which public-health experts say requires a minimum $10 billion a year.

"We are concerned about those poor countries which have many poor people and many basic needs to be met but which are not eligible to receive MCA funds," said Mary McClymont, director of InterAction, a coalition of some 160 U.S. aid and humanitarian NGOs.

In late Nov. briefings, administration officials reiterated their commitment to fund the MCA with $5 billion in fiscal years 2004 and 2005 ($1.6 billion and $3.4 billion, respectively), in addition to the nearly $10 billion in bilateral aid already provided each year. Beginning in 2006, the administration hopes to get $5 billion for MCA each year.

They also announced that the MCA will be run by an independent body, the Millennium Challenge Corporation (MCC), whose board will consist of cabinet-level officials chaired by the secretary of state. With a staff of only about 100 people, it will be run by a CEO nominated by the president and approved by the Senate.

Poor countries will be eligible to receive money from the MCA only if they perform well on 16 criteria in three broad categories, according to a White House "fact sheet" released late November. These are:

• "Ruling justly" -- civil and political rights, the rule of law, government accountability and effectiveness, and control of corruption, as assessed by non-profit group Freedom House and the World Bank;

• "Investing in people" -- government spending in health and education as a percentage of gross domestic product (GDP), primary education completion rates, and immunization rates; and

• "Economic freedom" -- six criteria covering macroeconomic and trade policy, and the degree to which governments make it easy to do business and welcome foreign investors.

For 2004 and 2005, only countries whose per-capita income is below $1,435 may compete for the money. As of 2006, eligible countries will be expanded to include those with per capita incomes up to $2,975.

The MCA, which was first announced by Bush on the eve of a major international conference on development finance in Monterrey, Mexico, last March, has been touted as among the most innovative of the administration's foreign-policy initiatives.

If approved by Congress, it will substantially reverse a gradual, 20-year decline in U.S. foreign aid that has made Washington the stingiest aid-giver of all Western industrialized nations as a percentage of its GDP. In fact, current U.S. performance is considered so poor that even an increase of $5 billion a year in bilateral aid in 2006 will not lift its ranking.

Nonetheless, NGOs have generally applauded the greater generosity included in the aid increase, as well as its emphasis on good governance and investment in health and education.

"Selecting countries with strong records of good governance makes recipient countries trusted business partners in the joint endeavour of development, and allows them the ownership they need to make aid effective," said Nancy Birdsall, president of the Center for Global Development (CGD) and a former executive vice president of the Inter-American Development Bank here.

Some NGOs also suggested that a small aid agency like the proposed MCA could be far more agile and experimental than the government's USAID, for example, which has often been tarnished by reports of its links to intelligence agencies.

Others said they continue to have reservations about the plan.

"We are facing renewed budget deficits and pending war in Iraq," said Sarah Lucas who works with Birdsall at CGD, "and there is a lot of concern that this will squeeze development assistance, although White House officials are falling all over themselves to reassure us about that".

Congress will still have to appropriate the MCA funds, along with the annual foreign-aid budget, and may be tempted to cut back on the latter, which includes humanitarian relief and development assistance, particularly if the MCA is seen as the preferred investment.

"We want to avoid a situation where bad aid to bad countries goes through USAID while good aid to good countries goes through MCA," Lucas added.

Still others took issue with the White House and Birdsall that the MCA scheme would enhance country "ownership" of projects funded by MCA.

"With this kind of program, there's so much more leverage on poor countries to cave in to what the West's view of good policies is," said Nancy Alexander, director of the Citizens' Network on Essential Services, a development group that is concerned about the way Western aid has been used to promote corporate interests in poor countries.

"It looks like the money will be used to bribe countries to follow the neo-liberal path at a time when that whole adjustment paradigm has proved to be a failure," said Doug Hellinger, president of the Development GAP, a Washington-based policy group.

He and Alexander pointed in particular to the economic criteria that will be used to assess eligibility as evidence that the MCA will not support countries that buck the so-called "Washington Consensus."

Among other criteria, countries will have to show a favorable credit rating as assessed by Institutional Investor Magazine and a free- trade, no-tariff policy as assessed by the staunchly right-wing Heritage Foundation.