Groups fight to outlaw tied aid 'disgrace'

By John Madeley

LONDON: On the face of it, nothing could be more generous. Western countries give poorer countries around US$50 billion a year in development aid.

The money goes to help alleviate poverty, grow more food, provide education, healthcare services and so on. But "give" is hardly the word. Even "aid" is pushing it a bit, for much of it comes with strings attached that sharply reduce its value.

Western countries give their bilateral aid -- support given directly to a particular country -- on condition that the recipient nation uses it to buy goods made in the donor state.

Western companies, who benefit from this system, naturally want to keep it that way. But this means that governments of recipient countries cannot invite tenders from their own national firms or from businesses in other countries.

This practice -- known as "tied aid" -- has long been the subject of controversy. It often means that aid money does not actually leave the donor country -- it goes instead to the firm that provides the goods.

But over 40 non-governmental organizations -- led by Action Aid and including Christian Aid and Oxfam -- claim that under European Union competition law the practice is illegal.

They also claim that the European Commission has known this since 1991 but has failed to act. They have persuaded the EC to investigate the situation and its findings are expected later this year.

The NGOs say that tied aid means recipients cannot shop around for the best buy, so reducing the value of the money given. They claim countries can typically pay up to 25 per cent more for goods as a result.

They point to one study of UK tied aid which showed the costs of vehicle spares to be 30 per cent higher than they could have been obtained elsewhere and the price for heavy vehicles 47 per cent more expensive.

Tied aid means that commercial matters take priority over poverty, say the NGOs. It can make poor countries dependent on firms in rich nations for advice, spare parts and technology.

It can also make for delays. In one case, drugs and pregnancy test kits destined for Malawi, under a UK aid project, could no longer be safely used because they had passed their expiry date when they arrived. In contrast, buying on the spot offers quicker delivery.

Unsuitable technology is another undesirable offshoot of the tied aid system. Danish companies, for example, have benefited from providing maize drying facilities in an area to Ghana which produces hardly any maize.

Western governments have talked for over 20 years about untying aid but with no result. Aid ministers from western countries met in Paris recently to discuss the issue, but postponed a decision until a further meeting on 20 June.

Action Aid claims that rich countries are obstructing proposals to phase out tied aid. "Rich countries have acted disgracefully by failing to agree to end this abusive practice," said Jeff Chinnock, the charity group's policy adviser.

He accuses some countries -- especially Japan and France -- of "caving in to domestic commercial lobbies by scuppering plans to remove strings attached to aid".

"If donor countries cannot agree to untie aid in June, non- government organizations will seriously consider bringing legal proceedings to end this practice in the European Union," he said. "The stubbornness of some donor countries could make this the only way to break the logjam."

-- Observer News Service