Development aid meet a damp squib

Another attempt to provide developing countries with funds for development ended with a whimper earlier this month, as industrialised countries failed to meet their promised aid targets. Instead of committing 0.7 per cent of its gross national product (GNP) as agreed upon way back in 1970, the European Union (EU), for example, parted with only 0.39 per cent at the International Conference on Financing for Development (FfD), held in Monterrey, Mexico, from March 18 to 22, 2002.

The FfD's outcome, titled the "Monterrey Consensus", was a washed-out version of the initial draft. No carbon tax, global reform or doubled aid but lots of words, politics and the usual cocktail of charity, rapacity and diplomacy that governs global development. Minor aid, debt relief, removal of trade barriers and private investment were promised, but little was done by way of daring global change.

The supposed saving grace was that US President George Bush actually attended Monterrey and admitted that aid helps. He announced an additional $5 billion in aid over the next three budget years (although there is confusion that the figure may actually be $10 billion), through 'Millennium Challenge Accounts' -- something the US NGOs applauded as "a down payment for development". But aid was justified on the rhetoric that poverty fuels terrorism, targeted at Africa and linked to reform -- accountability, governance and free markets. In other words, aid will be given for opening up markets to US business. The US did come up with a seemingly sensible proposal to give half of all aid as grants, not loans that ultimately become debt. It would have also allowed direct lending to NGOs rather than going through corrupt governments or costly lending processes. But the EU opposed this saying that it would dilute the lending base of global financial institutions.