Helping poor countries

THE new World Bank chief, Robert Zoellick, who took over from the disgraced Paul Wolfowitz only last July, has already struck a deal with the donor nations that is likely to endear him to a burgeoning international anti-poverty movement. The bank announced on Thursday that it was to contribute more than double the $1.5 billion it had pledged two years ago to the International Development Association (IDA), its adjunct body which provides interest-free loans and grants to the poorest countries. Indeed, the WB President deserved the self-praise he claimed for the move saying that “by boosting its IDA pledge by over 100 percent, the World Bank Group is putting its money where its mouth is.” And, as he said, it would help the bank to convince the donor countries to increase their commitment for help to the world’s 81 poorest countries, especially in Africa. The “second big step” he has announced is approval of what is being billed as the biggest simplification and reduction in loan charges of the International Bank for Reconstruction and Development (IBRD). The charges have been cut by a quarter percentage point to favour as many as 79 creditworthy low and middle income countries which are IBRD borrowers and shareholders. The quarter percentage point reduction, though, does not look like a major concession, considering what the US Federal Reserve did recently to ease the credit crisis in the country’s financial markets. Widely expected to cut interest rates by a quarter of a percentage point, it actually gave the financial markets a half percentage point reduction. The developing world’s economic strugglers deserve at least that kind of a concession. The bank also made the telling disclosure that 39 of the 81 countries eligible for IDA assistance are in Africa, and the number of poor in the region has doubled over the past two decades. In other words, while the world is said to have been never so rich as it is today, poverty situation in many countries, especially in Africa, has been worsening despite help from donors like IDA.
Something is surely wrong with the manner in which assistance money is spent. Western donors tend to attribute the problem largely to corruption and incompetence of rulers in these countries. But there is enough evidence to show that the manner in which aid money is delivered generally makes it expensive credit that hurts rather than helps poor nations’ economies. While countries like Pakistan spend a sizeable amount of GDP on debt servicing, the donors dictate conditionalities on how the money is to be used. More often than not, it has been going into projects that benefited the donors themselves who took back much of the money in the form of project consultancy fees or prices of things that the debtor nations would have done better to procure from the open market. For instance, Pakistan bought the not-so-good-quality wheat from the US for a number of years under the PL-480 programme. Also, the aid money has frequently been used to sell arms to oppressive regimes. Africa has been a victim of the worst form of exploitation involving aid money through what has come to be known as vulture funds, whereby private companies buy poor countries’ debt on cheap rates and then sue them for huge profits. According to a report, Donegal International, which had bought a debt from Zambia for $3 million sued it earlier this year for $55 million and walked away with $15 million, earning a neat profit of $12 million the poor country needed badly to spend on various development projects. Clearly, it is not enough for the donor agencies to make available more funds or to reduce interest rates on loans; it is equally important to ensure that the recipients are allowed the freedom to decide what to do with the money. And, of course, the donors must also ensure that no vultures take advantage of weak debtors.

Syrian take on Mideast peace

CONSIDERING the significance of Syrian influence on post WWII Middle East politics, especially during the time of Hafiz Al Assad and now his son Bashar, and the fact that the Bush White House is in a desperate bid to push through the Israeli-Palestinian peace process to secure its own legacy, Washington would do well to listen carefully to concerns emanating from Damascus. For, as history has shown time and again, the last surviving Baathist dynastic dictatorship is better adept at manipulating regional politics than most bickering, bitter counterparts. Damascus too should not overplay its hand. Its concerns are understandable. Western generated momentum in seeing through the peace process is likely to prove unprecedented, with little of the like to present itself later, which is why Syria wants the Golan Heights settled now rather than have the issue put off to a later date. No denying it forms an essential part of the ‘comprehensive peace’ that is seeing Condi Rice shuttling across the Atlantic more times now than a couple of her predecessors would have in their entire tenures. But Washington’s compulsions are just as important to cater to. It risks not only completely compromising the entire effort, but also drawing another embarrassment on the Middle East front already rubbished by Iraq’s carnage and Iran’s belligerent race to nuclear enrichment. Already, key players Saudi Arabia and even Palestine have aired grave concerns of not taking too much interest in the November conference unless it points at a clear end to the impasse, especially in terms of borders, refugees, the occupied Jerusalem question and of course, the date of delivery of the independent state.
For Bashar Assad to push forward his Golan gambit at this critical time is going to irritate the Bush administration for obvious reasons, not the least because the Palestinian effort is being undertaken to salvage the administration’s otherwise tarnished legacy rather than a profound inclination to the cause. But all said and done, it is true that this is the closest the problem is going to come to being solved. Arab states are honour bound to exercise collective diplomacy to testing levels, and secure whatever possible from the November interaction. Sanity should prevail, amounting to bargaining for what is best for the entire region, and lesser differences that remain to be settled among the Arabs themselves should be put to a later date.

—Khaleej Times