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close this book The Courier N°137 January-February 1993 Dossier: Development and Cooperation - Country Reports Mauritania
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View the document Development and cooperation
View the document Three decades of development
View the document Toward an ethic for development
View the document An interview with DAC Chairman Alexander Love
View the document Development as a pledge of financing
View the document Can development be measured?
View the document Development and poverty: the case of Latin America
View the document Can development be left to the economists?
View the document The informal sector: development at the grassroots
View the document An interview with Michel Relecom, Chairman of UNIBRA
View the document Trade reform: impacts for the North and the South
View the document AASM then ACP... what next?
View the document Aid and development- where the twain shall meet
View the document Is development aid harmful to development ?
View the document Development aid in the 1990s
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An interview with DAC Chairman Alexander Love

Give development a chance

Alexander Love was elected Chairman of the OECD Development Assistance Committee, better known under its acronym DAC, in December 1990. The DAC groups the 22 major donors (including all EC Member States except Greece), offering them a platform to discuss all aid-related issues and monitoring their development cooperation efforts. The current DAC Chairman is a former Counselor of the United States Agency for International Development (US-AID) and part of his long career in development assistance was spent in the field, both in Asia and Africa. In the following Courier interview, he gives a frank review of the current thinking in the donor community. Focusing on Africa, he highlights the challenge of peace and stability in that conflict-stricken continent and pleads for such basic issues as education, demography and democracy.

· More and more people are nowadays suggesting that there is some sort of development aid crisis. Do you think that is putting it too strongly ?

- I wouldn't use the word 'crisis'. I would say that there is a concern about public attitudes and support for development assistance. I think this is beginning to reflect itself in pressures on the aid budgets in many of our member countries. And it isn't just a question of public support although it is a part of it. There are a number of factors.

First, as we continue to evolve in the post-cold war world, with the changes in the East-West relationship, I think the framework, rationale and definition of the priorities for development assistance are changing. There are the requirements for aid to the East and the growing global challenges of AIDS, drugs and environmental issues which are emerging as development issues. There is the disappearance of some of the traditional security concerns that have had an impact on programmes in the past. So one of the things that is going on in the world today is a process of reassessment of the new priorities. I don't think anyone feels that working with developing countries is not still a priority, but the challenge is there.

Second, I think that the economic difficulties that are being faced by many members of the Development Assistance Committee - and in today's world, we are almost the only donors - is causing a real problem. We have unemployment and major pressures on budgets. With unemployment at home, the question of public attitudes towards providing money overseas is critical. That reinforces the difficulty for Parliaments and those responsible for budgets. In short, the budget crunch and economic difficulties do not point in the direction of a more generous attitude towards development aid.

Third, I think that questions are being raised, even in some of the more supportive countries such as in Scandinavia about the effectiveness of aid. There are doubts whether programmes that have been assisting countries like Tanzania for many years have really resulted in anything tangible. As a result, I think some of the donors are saying 'What have we got from this assistance'? While it doesn't mean that they are turning their back on aid per se, they are asking: 'Have some of the approaches we have been taking been wrong? Is there a need for reassessing some of our ways and means of intervening in this situation?'

· When interviewing your predecessor several years ago, we reached the key question: 'Has aid aided ?' (after 25 years of operation). Mr Wheeler replied: 'So far, there is no clear evidence that aid hasn't aided. ' Do you think an answer like that would still be acceptable to the general public?

- I am not sure that I would put the answer that way. I think you have to look at the degree to which the developing world, as it existed thirty years or so ago, has changed and which parts of the world have gone through positive development and which haven't. It's clear to me that the transformations that have taken place throughout Asia, perhaps with the exception of the Philippines, have been mindboggling. In Korea, Taiwan, Singapore, Thailand, Malaysia and even Indonesia, there has been tremendous development.

And there is no question in my mind that aid played a major part in that process. It is very difficult to sit down and academically draw the causal relationships between aid and development. It is a complicated process and is clearly driven by a lot of other factors. So it's hard to say Korea or Taiwan or Singapore would have made it without aid. But I think what they would tell you is that access to assistance helped them accelerate the process. And I think that's a story that needs to be told.

Then you can look at situations like India where you might come up with a variety of conclusions. You could say: 'Here's a country that still has an enormous number of poor people and, therefore, its been a failure', or you can turn it around and say: 'For many years, India couldn't feed itself, and was subject to periodic droughts and massive starvation. It is now a country that takes care of itself and can feed itself.' This has been brought about by a major success in agricultural research which was promoted by various development agencies. There has been a superb programme of investment in irrigation, agricultural development and fertiliser production facilities. This agricultural transformation has come strongly from their involvement in development assistance.

If you go to Latin America, it is harder to put your finger on exactly where it has worked and where it hasn't because they have been on a roller coaster. The period of the 1980s in Latin America was very interesting because, as it went into a downward spiral, a number of countries became very dependent on undertakings they made about sound, sensible economic reform programmes. The World

Bank, IMF and bilateral donors were critical to this process in some of these countries. And I think that, in conjunction with the progress that has been made on debt restructuring, they have helped to give Latin America an economic framework for a return to growth, which, of course, is what has happened. During the same period in the 1980s, Latin America decided to go through a process - essentially on their own - of political transformation. There are eight or ten countries, which had autocratic governments at the beginning of the 1980s, which have moved to 'democratic' regimes. So now we have Latin America outside of the situation in Haiti (and depending on how you characterise Peru), with more or less democratic government, and that is certainly a positive situation.

I think, however, that there is a major failing in the Latin American position in that the development programmes have not been able to overcome the problem of unequal income distribution. There are great disparities and, as a result, major social problems. The challenge that faces the development community, and Latin American governments in particular, is to do something about the social issue with a view to achieving greater equity and building a broader base of support for the democratic process. A simple democratic election and a change of government from a military regime is not enough. You've got to build a stronger base in terms of the political process and that means a more equitable economic situation. Otherwise there will be a 'flip-back'. You will see some reversion to the overthrow of the governments and a return to some form of autocratic regime.

· You have mentioned a number of national and regional successes but, as an old 'Africa hand' yourself, that continent is notably absent from your list. Despite this, in Africa today, there is a young generation of intellectuals who are saying: 'Let us refuse aid and do it our own way, with our own (very limited) resources'. What is your view about the overall lack of success in Africa and on the refusal of aid ?

- The situation there is obviously very complex. I think firstly that you must look at Africa in a long term context. There aren't going to be any quick fixes and, therefore, you've got to come up with a long-term strategy that begins to look at some of the key underlying factors that have an impact on African development and then start working on it. And you need to recognise that you are not going to see returns in some of these areas for a long time. What are some of the key problems? One of the major ones has simply been political unrest and civil war. Look at what is happening in Somalia today or what has taken place in Ethiopia and Sudan. Look at the situation in Mozambique which has spilled over into Malawi and Zimbabwe, and at what has happened in Namibia, Angola, Zaire, Liberia...

· The list is endless...

- Yes. You could even have another civil war in Nigeria. But if you just take Ethiopia, Sudan, Somalia, Angola and Mozambique, you are talking about 80 million people who have been living in the middle of fighting for many years, with large numbers of people displaced. How can you expect those economies to grow? These people are barely able to stay alive. Something has got to be done to put some peace and order back into that continent so that development has a chance. I think that, in a way, we turn a blind eye to the security problem in Africa and the impact that it has had in the past and is continuing to have in undermining the development process.

Look at Malawi and Zimbabwe. Malawi has taken an enormous number of refugees from the fighting in Mozambique and has paid for their support out of its own resources. Zimbabwe has had to put military forces in and to pay the cost of peacekeeping as well as shouldering the burden of a refugee population over a long period. That sort of thing undermines these countries' economies.

· So you would say that development cooperation has turned too much of a blind eye to those situations for too long?

- Yes. Of course, the donor agencies have been in the forefront of emergency and humanitarian relief - that is part and parcel of their business. At the same time, and this is a question which has long bothered me, when you are facing these humanitarian crises which always get high priority, as indeed they should, the funds that are used to pay the bills often come right out of the development budgets. So there is a direct transfer from investments in long-term development to humanitarian relief. Obviously, if you can save a dying Somali child today rather than educating, say a Kenyan child, you are going to save the Somali but in terms of long-term development, there is obviously a cost. One of the problems we're seeing now, in a tight budget situation, is that resource allocation is being made away from long term investments.

Related to that is the question of how much of Africa's money goes on arms. The continent has one of the higher levels of military spending. In most cases, they are not facing internal or external threats but an enormous amount of money has been spent and you have to ask yourself again whether that money could not have been better spent on long-term development. And of course, if things break down later on, all these weapons become available, as they are in Somalia. So you get both the undercutting of the use of domestic resources and the problem afterwards of leaving armaments around to cause problems.

· Is that an indirect plea for greater political conditionality - spend less on arms and defence, and do more for your own development?

- I think what we are saying - we have already said this as the Development Committee - is that we have targeted military expenditure as an issue of major concern. We are encouraged by efforts to begin to do a better job of recording what is happening and make it more transparent. It's not so hard to take the step, although it is an important one, simply to show what is happening. Then comes the difficult question of saying what is too much. There, it seems to me that you can ask three questions. First, is a government doing the right thing in terms of putting money into the military, second, what is being done to remove the threats within the country or the region that are forcing them to do this and third, are the Northern armaments suppliers pushing exports of arms. I think all three of these issues have to be addressed. There has to be a partnership in terms of how to handle this.

So this problem is on the agenda, it is being worked on systematically and we will continue with it How this translates into conditions is, I think, another issue.

· Many other African countries also face a dual transition: Firstly, a transition in many cases towards democracy and secondly, the economic structual adjustment that has been going on for a decade. Faced with this double challenge, do you think there is a way out for these countries ? What is the link in your view between support for development and support for the democratisation process?

- The process of economic and structural adjustment obviously has been going on for a decade and will continue to go on for a greater period of time in Africa, although I think much progress has been made in Latin America. The donors have to support this with substantial resources to ensure that reform has a chance. The interesting and complicated part comes when these countries decide to undertake political reforms at the same time - and certainly we support them when they do. That does a couple of things, It seems to me. First, it may reduce the ability of the government to undertake quite difficult and painful structural adjustment reforms, cutting subsidies to the. urban population or whatever, as compared with an autocratic government. So you have got the problem of public support, although I do think that a process in which the government is forced to involve the population and win their support is the only one that is likely to work in the long run. The other thing is that its puts a time limit - a degree of urgency - on the economic reform process. You have a situation that is similar to that in Eastern Europe. The government can start difficult economic reforms but it must show some progress, otherwise you are going to get political unrest. So I think that the combination of the political and economic reform processes demands that the donors be more responsive.

A good example is Zambia which has made a peaceful transition. from Mr Kaunda to the new government. They have undertaken a quite incredible economic reform programme. At the same time they went through political change and on top of all that, they were handed the problem of the southern African drought which we estimate will cost them $300 million. In this situation, the donors have got to he]p with sufficient resources to see that they can get through the transition, otherwise you will begin to see public disaffection with the new government.

· What about the 'debt - aid - trade' triangle. Some say that you should tackle the debt first because, in the long term, if it isn't cancelled, you can't do anything else. some say 'aid first' while others argue that the way to escape from the situation is to boost trade. Is there a right balance to be struck between the three ?

- I don't know if it is a question of striking a balance. I think you should push trade, encourage more direct investment, do everything you can on the debt front and push the official development assistance to the extent that's required.

As regards Africa, the disturbing thing is that they are almost totally dependent upon official aid. There is negligible direct foreign investment. Their trade situation is not promising and we haven't made as much progress on the debt situation as we would have liked. In short, you have got an unhealthy balance and that bothers me. I don't think it is good for democracy to have governments which are basically dependent on external donors for their financing, because it restricts their decision-making processes. They become more responsive to external donors than to their own internal concerns. And I don't think we are that smart and unbiased in terms of what we know.

· Is there a way out then ?

- I don't see any way out in the short term. It is pretty hard to try and tell people to go and invest in Africa. What will it take to make Africa attractive - to make it a viable credit risk for the banks and a productive investment target for the private sector? I think we have to face the fact that, unfortunately, they are going to be dependent on official development assistance for quite a period of time. But it does seem to me that we need to think through a strategy of saying: 'What are the constraints that need to be tackled to enable Africa to have a greater chance of development in which they are not so dependent on the donors?'

· There is increased competition for fewer resources: a kind of 'East-South conflict' with former East-bloc states, at least in the eyes of the developing countries of the South, eating away at the available funds.

- Except that's not really happening...

· But they believe it.

- Whether they believe it or not, it's not happening. First of all, I think we need to put in perspective, some of the key changes that have had a serious impact on this resource question. One change has been the disappearance of the Eastern Bloc and the Soviet Union as a major donor. Depending on how you counted it, some $4-5 billion was coming out of there - you can argue about the exchange rate or about the quality of what they were doing, but they were a major donor and that has now disappeared. This means that a number of places that were heavily involved with them, which included Ethiopia, Mozambique, Angola, Indochina and Afghanistan, are re-entering the former Western aid recipient category - which is now the world recipient category - as additional claimants. These are big recipients now entering the equation, and they are not part of the East but of the South in the traditional sense of the term. They are in there competing for IDA and bilateral allocations. At a time when the IDA level is not going up and the bilateral level is only rising slowly, that is probably one of the more immediate competing factors.

Then you move to Eastern Europe. The process we are engaged in at the moment is in discussing which are the relevant countries, and whether they are to be regarded as 'developing' or perhaps in some other category such as 'countries with economies in transition'. As a first step, we have made decisions to designate the five Central Asian republics as 'developing' and they are now in that category in the computer. We also decided to graduate six countries, that were small recipients, and were on the developing country list. And we will be going through a thorough revision in the course of the next year to make some adjustments.

The question of course will be: 'What impact is that going to have on the reallocation of aid'. Right now, I don't quite know but I don't, for example, see the flows which we are attracting to Eastern Europe as constituting a major diversion. Nor, frankly, do I see the five Central Asian republics being such large claimants that they are going to cause major diversions. If we start talking about taking resources away from traditional developing countries and putting them into Poland or Russia itself, you might see a major diversion but I think we will be keeping Russia and some of those other places separate. The donor community is dedicated to making sure that money is not diverted from the South.

· Africa will, as you said earlier, continue to depend very much on official development aid. But it is no secret in the donor community that there are difficulties over where to put the money. People are looking around and asking: 'Where can we find good projects', particularly if you take 'sustainable development' as the criterion. Do you agree that there is such a problem ?

- I think there is an enormous need, and there are limits on the capacity to absorb aid. There is no doubt about that. But let us look at some of the positive things that I think might happen in Africa within the next two or three years that could lead to some very interesting opportunities for the donors. Let us assume that the peace in Mozambique holds and that the election process in Angola does eventually bring stability - neither, of course, is guaranteed. In Mozambique, there may then be opportunities to begin returning people to their homes and to make some basic investments in reconstruction. In Angola, which, of course, has good resources of its own, the possibilities are enormous. Now, if South Africa could make its transition with a reasonable degree of stability, the Southern Africa region as a whole will then present incredible potential. South Africa has got the technology, expertise and entrepreneurship while the resource base of the countries to the north is enormous. There would then be a substantial likelihood of the region becoming an attractive area for direct investment - and they have a market too. It may just be Southern Africa but it could begin to turn around the image of the continent as a whole.

In contrast, I despair for the Horn of Africa. I find the situation in Sudan almost as deplorable as that in Somalia - perhaps even more frightening in the long-term. At least in Somalia, in the final analysis, they are all Somalians and they are all of one religion. If you can find some way to get the clans to cooperate, perhaps they will come back together. But Sudan, I find to be terribly frightening. As for Ethiopia, I don't know. It is a country with enormous potential if - setting aside the Eritrean question - the rest can hold itself together. But in any event, peace and political stability must be the first order of business.

As I said earlier, governments have this major and continuing challenge to invest in stabilisation and this is going to require significant and perhaps increased resources in the longer term. We should be going back to some basic investments. We should be doing much more in education in Africa.

We are also crazy not to do more about the population issue. As a donor community, we have a mental block in this area. It is very much like the way we looked at population in Asia 30 to 40 years ago and the arguments being used are the same. They are saying 'We can't do this, we need the children to run the farms, the people don't want to do it'. Yet if you look at Taiwan, Thailand, Indonesia and so on, in one generation, these countries have managed to hold their populations down. If Africa doesn't do something about its population problem, it is going to eat up all of the investment. And I think that the desire on the part of the African people to do something about it exists. It may be to go from eight to six in a family - not necessarily down to one and a half - but so what? We should at least be giving them the chance to decide themselves what size of family they want and not simply to say: 'Its too bad you don't have access to the type of devices to control it yourselves'. It must be done, and it is such a low cost operation.

So we have to invest in new resources in Africa, we must focus on the demographic issue, on peace and stability, on encouraging democracy - and then we have to wait.

Until some of these things begin to happen, where is the attraction for someone to go to Africa? You either go for the market, the resources or the labour. Africans are not that well trained and they certainly cannot compete with the highly skilled labour forces of South-East Asia. The markets, outside South Africa itself, are not very interesting although there is a natural resource base and that does get exploited.

Another element is encouraging them in the process of shifting from a public sector to a private sector focus. There is still a lot to be done in that area, and it is also a long term process. There are some entrepreneurial skills in Africa but they are not as well developed at this stage as they were in Asia thirty or forty years ago. There aren't many people out there to take on the responsibility and we must help to build the institutions to support the process.

· How do you see aid evolving towards the end of this century. Will the 0.7% GNP target ever be reached (the average today is about half of that) and will there be another role for development aid ?

- I think that the definition of development priorities will change. You will see the growth of the global issues I have mentioned as a more important part of the relationship, and I think you are going to see more countries 'graduating' and becoming donors in their own right. There is a lot of activity going on out there which we are not measuring - which is South/South cooperation and the emerging donor role of countries like Korea, Taiwan, Thailand and Singapore. They are now in the business. Indeed, some of them have been for many years and they are going to become an even more important factor in assistance to the poorer countries.

Secondly, there will be a broader framework of cooperation between the developed and developing countries, if we even continue to use those terms. It will include an interface between financial concessions and financial assistance, a more cooperative and intelligent interrelationship in areas like trade, greater efforts to promote direct investment and working agreements on issues like the environment, AIDS and drugs. In short, the relationship will need to be much more comprehensive if we are going to really get this process going. This is part and parcel of the growing interdependence that is evolving in the world. That presents a challenge for the developed countries and indeed for the OECD as an institution. We have to find ways to get the treasury, the aid ministry, the foreign ministry, the trade ministry, the health ministry and so on, who are involved in these things, to work together so that their policies and practices reinforce the objective of promoting development in the broadest terms in these countries.

At the moment, there are tremendous rigidities in our own capitals. Within the OECD as an organisation, all the different groups that are so competent in their own areas, are mirror images of the various ministries at home, but we don't talk to each other to the degree that we should. So it seems to me that we all have a challenge, which is to start working more cooperatively and seeing that our policies are reinforcing rather than counteracting.

If we can do that, we may begin to see a kind of multiple influence on the countries involved. It means that the aid people are going to have to start realising not just that they are not the only 'guy on the block' but also that they may not be the most important participant on the block when it comes to dealing with the range of these countries.

We need to move into a different structural arrangement in which aid will be more important in some areas than it is in others. It is going to be important in Africa for a long time, but it is going to play a much more selective, targeted role in areas like Asia. I believe that by the end of the century, we will see a transformation in the character of the relationship with the developing countries even though there are still going to be those on the list that are quite poor. I hope that happens, because if it doesn't, we are not going to get the job done.

Interview by Roger DE BACKER