The lean years ahead
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CTA. 2002. The lean years ahead. Spore 98. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/46482
Internet URL: http://spore.cta.int/images/stories/pdf/old/spore98.pdf
Is the concept of aid on the way out? It could be smarter for agriculture to encourage inward investment .Like a customer checking a bag of beans for the merchant s added stones, many diplomats have a tool for checking the sincerity of policy...
Is the concept of aid on the way out? It could be smarter for agriculture to encourage inward investment . Like a customer checking a bag of beans for the merchant s added stones, many diplomats have a tool for checking the sincerity of policy statements at world conferences. It s called the 'Any new funds?' test, and is being used a lot at present. In the current series of world summits to eliminate poverty or halve hunger or boost agricultural research, there is usually a set of governmental and partnership promises to devote more resources to the target in question. Often such funds are neither new nor additional but are re-allocated or re-named existing funds. One frustrated ACP negotiator at a meeting in March 2002, held perhaps symbolically in an ill-lit and airless cellar room in New York, to set the agenda for the August 2002 World Summit on Sustainable Development (WSSD) told Spore: 'Sometimes it s not even the old question of old wine in a new bottle. Sometimes they just change the label.' The image of holding promises up to the scant light to see if they contain 'Any new funds?' is a sad reflection on the current state of international solidarity and self-interest. Everything is relative It s sad, but not fatal, this devaluation of international cooperation. Less than one-fifth of investment in most developing countries comes from outside. Contrary to many impressions, most investment comes from local financial and human capital. This is especially the case in agriculture and rural development which, if not fighting a losing battle, are witnessing an erosion of external funding. Recent World Bank figures show that expenditure on agriculture has shrunk from a quarter of the institution s budget to less than one-tenth. National inputs are barely more significant: few developing countries devote more than 10% of their frail budgets to agriculture. In fact, as the FAO has recognised,'most investments are primarily mobilised by the farmers themselves'. Yet the sustained inability of the West to meet agreed aid targets is seen as a dire message for most ACP countries. They are used to outsourcing a small but determinant slice of their current expenditure and investment from foreign aid. That may need to change. Aid expenditure by the West has seldom done anything but shrink. In 2001, it sank to US$ 51.4 billion (t 56.8 billion). This represents 0.22% of the gross national income (GNI) of the West; ten years ago, it was 0.33%. The original 1970s targets of 0.7% were, except for some northern European nations, truly fantastic. New promises were made at the UN Conference on Financing for Development in Monterrey, Mexico, in March 2002. The United States pledged to jack up its aid budget by US$ 5 billion a year, of new funds, by the year 2006. European Union members made similar public promises. The net result: aid flows will rise to 0.24% of GNI. A pretty penny, but no more than that. The donors dilemma For donor nations, however, it is not just a question of bumping up aid budgets in the face of pressing domestic priorities and growing public resistance. If truth be told, and it is a truth any minister for finance or development will tell you in private, it is hard to properly disburse all aid funds. This leads to so-called underspends. There are organisational constraints in the way; hence the recent fads for capacity building . The donor s dilemma is to be accused either of apparently low aid pledges, or lack of focus in actual programmes: in brief, underwhelm or underspend. As it is, the aid community, official and non-governmental, is often accused of creating a parallel sector in a developing country s economy. It has its own infrastructures of education, transport, housing, priorities, grants, communications, personnel and human resource development strategies, all operating with scant regard for the sovereign state. This may, just may, buy quick results, but it scarcely enhances local development. Against this flaw-rich background, the classical practice of throwing money at a problem is not a real option to solve the needs of any sector, not even the neediest, such as agriculture. Recent talk of a Second Marshall Plan, for Africa, does not take account of the realities of insincere pledges from abroad and inadequate absorption capacity at home. The New Economic Partnership for African Development, with its emphasis on internal funding, is more realistic. Invest, invest Would development be better with less aid? Could well be so. Certainly, the alternatives seem to work better, if the playing field is level. Trade, not aid, as the 1964 slogan once said, can be more rewarding and enduring, on some tough conditions: fair trade, decent prices, realism about not exporting too much biomass too far, and abolition of insane subsidies to Western agriculture. The second alternative is direct foreign investment, already greater than all aid flows, public and private. Agriculture, however, is not rated as a sound investment, partly because income from volatile trading prices is uncertain. There are ample opportunities, nonetheless, to invest profitably in key points on the food chain: processing, packaging, distribution and marketing to name but a few. The smart farmer, farmers organisation, and research agency would all do well to target external investment, and not just aid funds, as a supplement to their own Herculean efforts. Existing experiences in micro-finance, savings, loans and insurance, can provide the basic financial skills which enable investment approaches. Making money work, instead of chasing money to make ends meet, is the next step for development finance. All it takes, really, is a new attitude. See Links, page 10 [caption to illustration] The world s banks could learn a thing or two here