Columns

The golden taps being turned off

Sir Ronald Sanders

Sunday, October 14, 2012    

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AUSTERITY budgets throughout Europe and government cuts on welfare spending have caused many people to argue that aid allocations to foreign countries should be reduced and the money spent on domestic needs instead. This will shortly have an adverse effect on countries in the Caribbean, unless they advance solid proposals with achievable outcomes for continuing to receive aid.

Popular media in many European countries have been in the forefront of the argument to cut aid. They have revealed how aid has been misspent and even used for the purchase of military equipment in certain countries.

Among the influential persons in Britain who would like to see the Government "turn off the golden taps and stop flooding the developing world with our money" is Lord Michael Ashcroft, a significant contributor to the coffers of Prime Minster David Cameron's Conservative Party.

Lord Ashcroft is no Scrooge. A wealthy man himself, he contributes generously to a number of charities and other organisations doing valuable and helpful work in many developing countries. As he said in an open letter to the recently appointed minister for international development in Britain, Justine Greening: "I do not fully agree with the argument (that) we should turn our backs on the world's poorest people because of tough times at home." Yet, his concern about Britain's aid spending is reflective of many, both in the Conservative Party and the country at large. He says: "They think it morally wrong to carry on giving away such vast sums abroad — more than £300 per household — at a time of domestic spending cuts."

Except for the Department for International Development (DFID), every government department in Britain has suffered severe spending cuts. DFID's budget has not only been protected, it is expanding from £7.8 billion in 2010 to £11.5 billion in 2015.

What influential persons like Lord Ashcroft want is to see aid provided on the basis of "rigorous analysis of all available evidence".

The reason that Caribbean countries, except for Haiti, should be highly alert to this increasingly prevalent thinking in Europe is that they are all classified as Middle Income Countries (MICs), and there is an increasing contention that the MICs should use their resources to look after their own and stop expecting the taxpayers of other countries to do so.

This thinking is already evident in the approach of the European Union (EU) to aid. The European Commission has unveiled a Differentiated Development Instrument which has graduated 18 MICs from aid except in certain specific circumstances. It is generally agreed that the decision to "graduate" MICs under its "differentiated" approach will migrate into the European Development Fund (EDF) under which Caribbean countries get aid from the EU as part of the African, Caribbean and Pacific (ACP) group.

Significantly, Ms Greening, at a Conservative Party conference shortly after her appointment, is reported to have "criticised the EU for giving aid to less poor countries" and said she would be "meeting European development officials next week to make sure the EU targeted aid where it could have the greatest impact". She is quoted as saying that "it was not right for the EU to provide aid for countries higher up the income scale".

There is still some hope that Caribbean MICs may not face an immediate 'graduation' from EU aid. Apart from the fact that the terms of an arrangement still exist under the Cotonou Treaty between the EU and the ACP that runs until 2020, other factors such as the vulnerabilities of small states could be taken into account. A vulnerability index for small states was developed by the Commonwealth Secretariat using criteria in addition to per capita income.

While these additional criteria have not been adopted by institutions such as the World Bank and the World Trade Organisation (WTO), they are compelling enough not to be wholly ignored. But it is important to understand that there is no guarantee that in the present climate in Europe they will be recognised. The popular sentiment is to redirect aid allocations to financing domestic needs.

What then can Caribbean countries do in these circumstances? What is certain is that many of them continue to need aid, particularly for infrastructural development. At the moment, much of that aid is coming from Venezuela, China or Taiwan, placing them in an increasingly dependent relationship with these three countries. In any event, while aid from these three sources is vital, it is not enough.

Caribbean countries, therefore, have to be mindful of Lord Ashcroft's admonition to the British international development minister and gear their aid requests "on rigorous analysis of available evidence". If Caribbean countries do not adopt this approach, some of them — especially the smaller ones with extremely limited natural resources — may have to slip back into the status of less developed countries before they become eligible for significant aid.

The British-based Overseas Development Institute has made an argument that Caribbean countries should take on board. In a paper by Jonathan Glennie, it points out that "those countries that are graduating from aid dependence to more sustainable levels of aid need to set in train policies to smooth their graduation, supported by key donor allies". But this will not happen without strategic thinking, planning and organisation by the Caribbean countries themselves.

The specific and realistic needs of individual Caribbean countries have to be identified with a clear idea of their sustainability and their contribution to job creation and production. Once those needs are identified and agreed, a donor conference should be organised to endorse the needs and agree the financing, including through changed rules in the international financial institutions.

The region's organisations — the Caribbean Community Secretariat, the Secretariat of the Organisation of Eastern Caribbean States and the Caribbean Development Bank — should be initiating this work, or at least placing it on the agenda of governments. The problem is not tomorrow, it is now.

Sir Ronald Sanders is a consultant and former Caribbean diplomat

Responses and previous commentaries: www.sirronaldsanders.com

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