"Northern governments are guilty of offering empty promises to the poor when it comes to TRADE, AID AND DEBT RELIEF.  While LDCs face a complex of problems, the report finds that their efforts to combat poverty have been systematically undermined by northern governments.  On trade, the industrialized countries have operated a policy of highway robbery masquerading as market access preferences"[1]

Introduction

Some seven years from the Millennium Declaration we are faced with the inevitable need to reassess the current levels of poverty, the instruments that are in place for tackling poverty and indeed the constraints that must be resolved.  The fact that the Millennium Development Goals (MDGs) represent an unprecedented commitment by all nations and institutions, including the International monetary Fund (IMF) and the World Bank, to implement and realize the MDG goals and targets needs to continue to be emphasized at all stages.  Part of the global ability to realize the MDGs are dependent on financing of such development.  Aside being affirmed as part of Goal Eight in the MDGs such understanding has also been reaffirmed in the 2002 Monterrey consensus on enhancing financing for development.

MDGs are unique in that they represent the first global compact between the heads of state of developed and developing countries, together with the UN system, the World Bank and the IMF.[2] The Goals have clear targets and achievable time-bound indicators of success, which can galvanize support among citizens and governments alike.  Throughout 2005, civil society organizations, governments and multilateral institutions will be focused on progress in meeting the Millennium Development Goals (MDGs), with ten years remaining until the target year of 2015.

“Will the legacy of our generation be more than a series of broken promises”-Nelson Mandela, 2001[3]

It is often said that global targets are easily set but seldom met and for each success story there have been some setbacks, the same is also true for the Millennium Development Goals.  .

The United Nations MDG+5 in September 2005review held in New York to many has been much ado about nothing.  It is sad to note that issues of the UN reform, peace and collective security, and human rights and the rule of law overshadowed the MDGs review.  Deletions of key commitments to the MDGs commitments, including a deletion of the timeframe of 2015 were the order of the day.  On official development assistance (ODA), it was agreed that all developed countries would increase aid by around US$50 billion a year by 2010, which in a way makes it to track whether the developed countries will live up to their initial aid commitment level of 0.07% of Gross National Product.  No mention was made to the need to replace the much abhorrent HIPC debt sustainability framework.

Background

The MDGs include a 50% reduction in poverty and hunger, universal primary education, reduction of child mortality by two-thirds, cutbacks in maternal mortality by three-quarters, promotion of gender equality, and reversal of the spread of HIV/AIDS, malaria and other diseases.  A Millennium Summit of 189 world leaders in September 2000 pledged to meet all of these goals by 2015.  A summit later this year will review progress towards the goals and set the development agenda for the next decade.

Of particular importance to this paper is Goal Eight outlining Northern governments’ commitment to a global partnership for development - a late addition to the MDGs- If Goal eight is ignored it is hard to imagine the poorest countries achieving Goal 1-7.  Goal Eight relates to issues of – debt cancellation, trade justice, equitable governance in global institutions, and political, social and economic rights for the poor – as an indispensable foundation for a politics that will enable sustained progress to end poverty in the South.  It is an important goal for holding developed countries accountable in advancing the MDGs.  This goal is particularly significant, as it requires richer countries to reform their policies and actions to contribute to the fight against poverty. 

Developing countries especially those in sub-Saharan Africa will not be able to mobilize enough resources to attain the MDGs by 2015 unless there are radical changes in terms of aid administration, international trade and the resolution of the burgeoning debt crisis.  One big problem is the conditionality aspects embedded in the country’s Poverty Reduction Strategy Paper (PRSP), the centre and key to the much needed development aid.  The PRSP itself is not an adequate funding criteria; neither is it an important tool in MDG attainment[4][i]; it is dependent on a country having a PRGF programme and meeting all the conditions and benchmarks in the PRGF which are not contained in the PRSP but are hiding in the Letter of Intent between the government and the IMF.  Thus the content of the Letter of Intent is also crucial to attainment of the MDGs.  Unless the MDG targets are also included in the IMF and World Bank instruments, the attainment of MDGs will remain a dream

It is important to note that the global structures that maintain poverty and marginalize the rights of the poorest clearly need reform, but there is little attention to these major framework issues in Northern governments\' approaches to the MDGs.  The UN should play a strong role in regular monitoring of the Donor countries’ progress on Goal Eight and the framework for their reporting on MDG Eight should be revised to include indicators on global governance and participation.

While a more equitable trade system is vital, donor Official Development Assistance (ODA), along with substantial debt cancellation, provides the essential additional financing capacities, particularly for the poorest countries’ progress in reducing and eliminating poverty.  Now is the time for the North to honour mutual commitments and obligations in a sprit of genuine solidarity.  Such commitments are encapsulated in the Millennium Development Goals - in particular Goal Eight.

Goal Number 8 targets that are of interest to this paper are:

• Develop further an open trading and financial system that is rule-based, predictable and non-discriminatory.  Includes a commitment to good governance, development and poverty reduction—nationally and internationally

• Address the least developed countries’ special needs.  This includes tariff- and quota-free access for their exports; enhanced debt relief for heavily indebted poor countries; cancellation of official bilateral debt; and more generous Official Development Assistance for countries committed to poverty reduction

• Deal comprehensively with developing countries’ debt problems through national and international measures to make debt sustainable in the long term.

Taking Nigeria as an example of African countries embattled with debt, trade and aid issues, research reveals that four decades after Independence in 1960, Nigeria remains a poor country with a per capita income of US$260 in 2000.  At the dawn of the third millennium, approximately 70% of the population still lived on less than US$1 a day, an indication of extreme poverty.  Real GDP growth has remained sluggish, averaging 3.5% per annum since 2000.  Nigeria is also a highly indebted country with total external debt exceeding US$32 billion in 2003.  The debt service burden remains crushing.  Foreign Aid in the form of Official Development Assistance (ODA) has been low and declining during the past decade.  In 2002, ODA per capita was less than US$2 and total ODA was only 0 .4% of GNP.  Clearly, Nigeria would find it difficult to attain the Millennium Development Goals without massive assistance from Development Partners in the areas of Aid, Trade and Debt relief.

Key Issues

• Donors in their dealing with developing countries have not been responsive to the government’s programming process.  ODA disbursement is often late, in most cases coming after national budget process.  This delay the implementation of poverty reduction programmes.  Donor funding is also inadequate and does not cover recurrent costs, which comprise the bulk of government expenditure in the priority sectors.  For example, Tanzania’s debt burden is increasing at an alarming rate although it is on the HIPC Initiative.  There is evidence that even after the HIPC relief, debt sustainability levels will not be reached.

·        Donor-imposed “Washington Consensus” policies remain at the heart of Poverty Reduction Strategy Papers (PRSPs).  The poorest countries are required to prepare PRSPs, under the guidance of the World Bank and the IMF, in order to qualify for loans or debt relief.  Donors increasingly use PRSPs as a guide to achieving the MDGs, under the largely rhetorical claim by donors that these strategies are “owned” by developing countries. 

• Donor-imposed aid conditions affect the achievability of the MDGs in at least two respects.  First, aid conditions are the tools with which the IMF and World Bank act as gatekeepers of aid channels based on their assessment of compliance to their policy prescriptions.  Secondly, bilateral donors channel significant MDG aid resources into highly conditioned budget support for implementing a country’s PRSP or into Sector Wide Programs in support of a line-ministry program in education, health or agriculture.[5]

·        The MDG approach has the potential to encourage the development of a country-owned and credible long-term strategy for growth and poverty reduction.  But the policy- making process falls far short of the potential.  This is partly because implementation of the MDGs is still driven by the PRGF´s macro economic framework and poverty reduction strategy is pegged on the widely disguised HIPC initiative.  There is also a lack of basic policy priorities and operational framework that should be pursued under the MDG framework to break from the poverty trap.

•  After years of implementing World Bank/IMF structural adjustment programmes, the government’s role in most African countries’ economy has changed radically.  From being a central player in the economy, the government has now been pushed to the sidelines where it is supposed to play the role of a facilitator and to provide only essential social services.  Under the IMF’s Enhanced Structural Adjustment Facility (ESAF) and later Poverty Reduction and Growth Facility (PRGF) the government embarked on a wide range of parastatal and public sector reforms.

•  Existing macroeconomic policies go beyond the insufficient attention they pay to social issues and poverty reduction.  Policy reforms have suffered from serious design weaknesses in relation to African -type economies because they neglected the impact of structural constraints, lack of economic and social infrastructure, weakness of market development, thinness of the entrepreneurial class, and low private-sector production capabilities.  As a result, the new policy environment does not deliver high growth rates.
• Genuine ownership of national development policy (including PRSPs) is a meaningless concept without effective state capacities to control the allocation of aid funds and have a say in formulating the policy agenda and monitoring the outcomes[6].  It is the lack of coordination on the part of donors of their aid projects in individual countries that undermines the sustainability of aid programmes and negatively affects resource allocation and growth.  Moreover, the volatility of aid flows can result in financial instability and hinder stable macroeconomic development.

1. Aid Issues

“There are large areas of the aid system that are in urgent need of reform”[7]

The quality of aid continues to be affected by the tying of donor aid disbursements to donor country goods and services.  It is estimated that aid tying devalues aid for recipients by up to 30%.[8] Aid tying continues to be high for a number of donors, despite a recent DAC agreement to untie aid to the least developed countries.  For example, most aid flows to Tanzania were made conditional on the government privatizing the water system in towns such as Dar es Salaam.  The move has increased water prices and made poor populations more vulnerable to water borne diseases like cholera.  Such aid is contrary to the spirit and letter of attaining MDGs by 2015 in Africa. 

The tying of aid to conditionality, including policies dictated to the country by donors, delays in aid disbursement, suspensions of aid or outright withdrawal have all made it difficult for a poor countries like Malawi, Zambia and Mozambique to use aid for sustainable development, including poverty reduction.  Another problem has been that the priorities of donors have not always been consistent with the priorities of the government.

Poor governance, political interference and corruption have also affected the effective and efficient use of aid.  In regard to Aid to Malawi the Danish Charge D\'Affaires Finn Skadkaer Pedersen said "a weak administration" and "systematic intimidation of the opposition” in Malawi since 1995 has made it difficult to implement development programmes.  Malawi’s former President Bakili Muluzi is on record for having lashed out at donors, accusing them of meddling in African politics by using their aid money to influence political trends on the continent.  Relations between Denmark and Malawi soured late last year when Copenhagen was forced to recall its outspoken Danish ambassador to the country Orla Bakdal after an audit report he instituted, on how Danish money was being spent, revealed some anomalies.  [9]

1. Debt Issues

“Debt is tearing down schools and hospitals.  The effects are no less devastating than war”[10]

Debt continues to inhibit growth and wealth redistribution by reducing the amount of money available to governments to invest in social services and welfare.  Debt service has resulted in the decline in the rate of economic growth that in turn has been associated with a decline in per capita income.  According to data reported in the World Development Reports, Malawi’s GNP per capita appears to have risen during the 1970s and peaked at US$210 in 1983.  Thereafter, it decreased, reaching US$160 in 1987.  It rose again, reaching the previous peak of US$210 in 1992 and a higher peak of US$220 in 1997.  Since then per capita GNP has fallen continuously and now stands at about US$195.  The decline in the rate of economic growth has been associated with a decline in education services that make it difficult to attain the MDGs.  The increase in primary and secondary school enrolments has not been matched with a commensurate expansion in resources.  As a result, classroom accommodation is inadequate, with many primary school pupils having to learn under trees.  Secondary schools have resorted to shifts, which puts an extra burden on teachers.  Boarding accommodation in secondary schools is also inadequate.[11]. 

 Health has experienced a similar fate.  The increase in budgetary allocation to the sector has not been adequate to cater for a rapidly increasing number of patients.  This has resulted in increasing numbers of inpatients per government hospital bed, declining availability of drugs and other materials, and inadequate numbers of doctors in relation to the size of the population.  The delivery of medical services in government hospitals and clinics has certainly become inefficient.  The world’s poorest countries continue to pay more every year in debt payments than they receive in grants and loans, forking out an enormous ₤100 million every day to the rich North[12].

Sustainable debt financing on the part of the developing countries is an important element for mobilizing resources for public and private investment.  Exclusion of domestic debt and contingent liabilities in the debt sustainability analysis is a concern especially for the HIPCs, because of its implications for fiscal resources available for financing poverty reduction.

While the 2005 Gleneagles’ G-8 Debt Deal is a step forward and sets an important precedent in terms of granting a 100% cancellation of debt to all severely indebted poor countries which is what civic activists have long advocated for over years.  The deal only represents one eighth of what Africa needs in terms of Debt cancellation, as this means canceling only US $40 billion out of Africa’s burgeoning debt stock of over US$330 billion.  The $40 billion to be cancelled represents less than 10% of debt cancellation required for poor nations to meet the MDGs in 2015.  The plan does not include middle-income countries that are heavily indebted and impoverished.  Globally, the 18 countries that qualify immediately represent less than a third of countries (at least 62) that need full cancellation to meet the internationally agreed Millennium Development Goals (MDGs), which seek to halve extreme poverty by 2015.

The G-8 debt agreement does not address the real global power imbalances but rather reinforces global apartheid.  The question of creditor –debtor co-responsibility of the South‘s debt remains unresolved, as issues of odious and illegitimate debts continue to be swept under the carpet.  It is not a lasting solution in which all stakeholders-debtors and creditors have a say.  It is just a piecemeal measure that seems to deal with the symptoms of the problems and not the causes.

1. Trade Issues

Africa’s share of global wealth over the last two decades has decreased tremendously in a number of frontiers-world trade, world production, net financial flows even in the era of reforms, and foreign direct investments have been hindered either by poor governance, the heavy debt burden or by conflict and political instability.

It is difficult to assume that Sub Saharan Africa countries can attain MDGs through increases in foreign direct investments.  There is little hope for most countries including South Africa of balancing their accounts by attracting steady inflows of Foreign Direct Investment (FDI).  The most damning critique of FDI is that no matter how conditions improve, foreign investors have a whimsical and Afro-pessimistic perspective, and are unreliable partners.  South African president Thabo Mbeki made the following comments;

In our own country, we have been assured that our economic fundamentals are correct and sound.  We have developed a stable and effective financial and fiscal system.  We have reduced tariffs to levels that are comparable to the advanced industrial countries.  We have reformed agriculture to make it the least subsidized of all the major agricultural trading nations.  We have restructured our public sector through privatization, strategic partners and regulation… Yet, the flow of investment into South Africa has not met our expectations while the levels of poverty and unemployment remain high.[13]

The unfair global trading system, global economic injustice and the lack of diversity in economic production and the heavy dependence on agriculture for most African countries makes them vulnerable to climatic changes, notably floods and droughts, with some regions being particularly drought prone.  The market access opportunities for LDCs can only be effective if LDCs are assisted to build their capacities to produce tradable goods of higher value and acceptable quality at competitive cost.  MDGs will be difficult to attain for debt-sustaining countries surviving on exports of raw cashew nuts, coffee, tea, cotton, while importing everything else in the form of industrial goods from abroad, using the foreign exchange earned from primary exports.

 Subsidies for agricultural products in developed countries pose an impossible challenge to most developing countries’ efforts to export farm produce to European markets.  And, yet it is in this area where they have comparative advantage that would enable them to attain MDGs if given an opportunity for fair competition.

Under the African Growth and Opportunity Act (AGOA), Africa has increased exports of goods and products to the US market, especially textiles and clothing, nuts, beans and tobacco.  However, Africa faces a number of constraints and problems in exporting to that market which will affect its ability to attain the MDGs.  The problems include supply-side constraints, high administrative demands by the US government, high cost of credit, lack of diversification, and competition from low-cost producers of textiles and clothing following the decision of the WTO not to subject Chinese exports to quotas.

Recommendations to:

1.      Donors/Developed Countries

The absence of radical reforms on the part of developed countries, beyond delivering more aid, an exclusive emphasis on MDG targets potentially sets up poor people and poor countries to take the blame once again for “their failure” to achieve the unachievable.  The emphasis should not be on whether a given country is failing or not to meet a given target.  Rather, global action and national policy change should be based on a democratic assessment of what is required from all countries to give priority to maximum sustained progress against poverty.

•  For aid to be considered effective, it should make a positive impact on income levels and on poverty reduction.

• ODA should be more predictable to allow better planning.  To date, the domestic resource base has proved more reliable and more predictable than external resources

• Better co-ordination and harmonisation of their activities and the channelling of more resources through the budget process to ensure that money is used for programmes identified as national priorities

·        Untie aid and provide technical assistance for capacity building.  Some donors have completely untied aid while others are still constrained by their national policies and laws

2.      Government

• Strong commitments are required from government to increase domestic resource mobilization, uphold the principle of rule of law and good governance, intensify the fight against corruption and put in place conducive environment to improve effectiveness of aid and attract investments

• Establish a strong macro-economic linkage through better translation of economic benefits to poverty reducing outcomes

• Maintain support to the priority sectors by increasing their budgetary allocations

• Strong commitments are required from government to increase domestic resource mobilization, uphold the principle of rule of law and good governance, intensify the fight against corruption and put in place conducive environment to improve effectiveness of aid and attract investments

• Establish a strong macro-economic linkage through better translation of economic benefits to poverty reducing outcomes

• Maintain support to the priority sectors by increasing their budgetary allocations

• The trade policy should have strong links with other government policy documents on poverty reduction and economic growth.  Specifically it needs to adopt appropriate measures to safeguard domestic industry and protect investors who are threatened by market liberalisation.  There is need to protect economic activities that serve household demand to reduce reliance on imports for basic commodities

• Improve the quality and quantity of exports.  To achieve this there is need to build the capacity of domestic investors to facilitate better product quality and quantity.  Foreign Direct Investment (FDI) should be encouraged in areas requiring high capital outlay rather than in low capital sectors that are more appropriate for local investors.

• Governments need to retain the right to control investments and exchange rate regimes so that foreign direct investments and transnational corporations should serve the needs of people by contributing to locally and nationally determined sustainable human development strategies.  Financial liberalization and deregulation have left capital flows elusive to many governments and citizens in the south. 
• Government should take steps to domesticate technical assistance.  Much of the debt and ODA came with technical assistance, but these merely funded expatriate consultants and with hardly any domestic capacity built. 

3.      Civil Society

While NGOs in the past have concentrated on service delivery.  Many more are now engaged in social mobilization and advocacy.  Many have been serving as a bridge between local communities and government.  Most donors have begun to regard them as alternative effective ways of reaching the poor and a mechanism of channeling a sizeable percentage of donor funds.

·        There is need for social activists to persuade/pressurize the government to undertake an audit (review) of each of the projects/programmes for which the loans were incurred.  Two reasons warrant such an audit.  First, it would enable the government to truly verify the genuineness or otherwise of the debts that we are servicing.  Second, the responsible officers who contracted the odious loans and/or those who expended them should be prosecuted.  This action would help to signal the seriousness of the government about accountability as well as heal the country’s battered image. 

• It is important that representatives of civil society organizations take an important and decisive participatory role in the international regulatory and decision-making processes.  Locally, governments and transitional corporations must be accountable to their citizens through civil society organizations and locally- elected officials.  Top -bottom decision making should give way to a human rights based approach to development where people are the masters of their own destiny, able to make informed choices and decisions about their own development.  It is important to remember that people are not developed but they develop themselves. 

Conclusion

The, implementation of MDGs will require substantial, new and additional resources from both domestic and external sources.  Strong commitments are required from governments to increase domestic resource mobilization, uphold the principle of rule of law and good governance, intensify the fight against corruption and put in place conducive environment to improve effectiveness of aid and attract investments.

The key issue in trade development is the need to address supply side constraints.  The market access opportunities for LDCs can only be effective if LDCs are assisted to build their capacities to produce tradable goods of higher value and acceptable quality at competitive cost.  MDGs will be difficult to attain for a debt-sustaining African Countries surviving on exports of raw cashew nuts, coffee, tea, cotton, while importing everything else in the form of industrial goods from abroad, using the foreign exchange earned from primary exports.

For many African governments, there is need for close collaboration among the different stakeholders to meet the MDGs.  Key actors includes the government, CSOs, the private sector and the donors.  However, at the moment there is no framework for collaboration among the various players and no clarity of roles.  There is therefore a need to develop a collaboration framework, which will be crucial especially for resource sharing and reviewing progress.  MDGs should be explicitly situated within a framework of existing human rights treaties and state obligations, among others the International Covenant on Economic, Social and Cultural Rights, the Convention on the Elimination of all forms of Discrimination against Women, and the Right to Development.  This focus on rights stresses the obligations of all states, including Northern governments, to give priority to their responsibility to make specific efforts to make progress on social and economic rights for all. 

- Charles Mutasa is Executive Director of the African Forum & Network on Debt & Development (AFRODAD)

List of References

1.  AFRODAD (2002) Reality of Aid: Does Africa Need Aid? AFRODAD Publication, 2004, Harare, Zimbabwe.

2. African Development Bank 2002: “Global Poverty Report 2002” Achieving the Millennium Development Goals in Africa Progress, Prospects, and Policy Implications”

3. Brian Tomlinson (2000) Background Papers to “ the Politics of the Millennium Development Goals: Contributing to Strategies for ending Poverty’
4. Bhattacharya, R.  and B.  Clements.  2004.  “Calculating the Benefits of Debt Relief” Finance and Development.  December.

5. Development Finance International.  (2004) ‘The Effectiveness of Aid to Africa Since the HIPC Initiative: Issues, Evidence and Possible Areas for Action’.  Report for the Commission for Africa Malawi Government (1984), Economic Report 1984.
6. MBELLE A.V.Y.  (Ph.D.) 2003 “The Cost of Achieving Millennium Development Goals (MDGs) And Evaluation of Their Financing”: Tanzania’s Experience Presentation at the Forum on the Millennium Development Goals (MDGs) in West Africa, Dakar, Senegal

7. OECD-DAC.  (2004) Survey on Progress in Harmonization and Alignment

OECD-DAC High Level Forum.  ‘Harmonization, Alignment, Results: Report on Progress, Challenges and Opportunities’

1. Oxfam International.  (2003) The IMF and the Millennium Development Goals.  Oxford: Oxfam
2.  Simukonda,H.H.M.  (1992) ‘The NGO Sector in Malawi’s Socio-Economic Development’, in Mhone, G.C.Z.  (1992), Malawi at the Crossroads The Post-Colonial Economy (Harare: SAPES Books).