Monday, July 07, 2008

Aid to Africa - the G8 Pledge

This report should not be taken at face value.  When the G8 powers agree to give aid they are not actually agreeing to give aid.  Yes, that's what the end-of-conference communiqués say, but the bottom line is that foreign aid is usually anything but.  Cutting aid to Africa may actually be a good thing for Africa.

Why?

Foreign aid does not come without strings attached.  Usually this is in the form of "yes, we will give you $Xmillion for such and such a project but you must spend it with us and use the contractors, goods and services we specify.  And by the way, this isn't really an aid package, we expect you to repay it with interest.  Well, for now let's just say we expect the interest, the principal can be added to your national debt.  That way we can still call it aid."

Leaders in the countries where the aid is going also have a different point of view from that expressed in the communiqué.  They will say "we welcome your aid package but our laws insist that joint ventures are set up to nurture our economy by transferring much-needed technology to our people.  We will tell you which companies you will joint venture with."

These joint ventures may well include companies set up by the ruling leaders in order to siphon off a portion of the funding.  This portion never goes near the receiving country and the donor country usually turns a blind eye - the cost of doing geopolitical business!

Of course, if private industry were to adopt such a scheme it would be illegal!  Company directors can go to jail for such crimes.

So don't get too worked up about aid during the current G8 Conference in Japan.  It's geopolitical business as usual.  The ones who suffer most are those who never see the aid yet are saddled with the debt.