America Can Profit from Foreign Aid Done Right

Whether you are looking at investing in a promising new business or in new systems to reduce poverty, a smart investor looks for certain givens.

• Have internal barriers to growth been analyzed for dismantling and have external barriers been analyzed to be overcome?


• Is the management team -- or in the case of foreign aid, the recipient country's government -- committed to the program and personally invested in the success of what you are trying to achieve?


• Is there accountability so you know exactly where your investment dollars are going?


• Are there benchmarks against which performance can be measured and success weighed?

These are among the issues venture capitalists use to weigh potential success when looking for new and expanding businesses. Why shouldn't similar criteria be used in the allocation of at least some of American's foreign aid dollars?

Washington has taken encouraging action in this regard through the formulation of the Millennium Challenge Corporation, or MCC. There has been a realization in recent years that as we increase the amount of foreign aid the US government spends some of it should be invested not just donated.

To this end, on a bipartisan basis in 2004, Congress passed legislation creating the Millennium Challenge Corporation thereby changing the way some of our foreign aid is given out so it isn't given out at all but, instead, invested. This followed President Bush's appearance at the Monterrey Conference in 2002 where calls for increased aid to meet United Nation's Millennium Development goals -- reducing the percentage of people in poverty by half in 15 years -- was met by America with calls for increased responsibility from aid recipients.

At that conference, the president promised to increase foreign aid by $5 billion each year, bringing our total commitment to the developing world closer to the declared objective of 0.7 percent of America's Gross National Product. As envisioned, the Millennium Challenge Corporation would be a different kind of government agency, overseen by a separate board chaired by the Secretary of State, who, reflecting his personal dedication to the concept, was then Colin Powell and is now Condoleezza Rice.

Having spent the last five years assisting various organizations foster economic activity in the developing world, I was attracted to the concept of foreign aid with accountability that MCC promises, and recently have been fortunate enough to be nominated and confirmed by the Senate as a Member of MCC's Board of Directors.

With a dedicated team built up only over the past three years, MCC has the potential to be a lasting achievement; a foreign aid program which, for the first time, takes into consideration the needs and wants of developing nations and which demands from its partners and itself high levels of accountability.

If a country is prepared to govern justly and meet a well defined set of requirements it is eligible to enter into negotiations with MCC -- which may agree to finance specific projects in health, infrastructure, legal reform, and a myriad of other projects -- with specific benchmarks for the advancing of funds at each stage of the process.

This simple but elegant approach prevents some of the major criticisms of foreign aid, namely corruption, waste, and failure to deliver services to those intended. The MCC, as it is structured, will advance funds only to those countries who continue to meet the 16 good-governance indicators established for eligibility at each stage of a multi-year grant.

In the original concept, according to reports, MCC was intended to ramp up over four years to a level of $5 billion annually by 2006. However, the president hasn't requested more then $3 billion in any one year, and Congress has actually only funded $1 billion in the first year, $1.5 billion in its second year and $1.75 in each of the last two years.

Unfortunately, MCC is the subject of some criticism in Congress because of the nearly $6 billion given to it, only about $92 million has actually been advanced to the compact countries and threshold countries with another $124 million in the process of being expended.

At this early stage in its lifecycle, however, MCC is analogous to an iceberg where observers see only the amount actually advanced to recipient countries, a number which seems very small in relation to the funding it has been given.

While some focus on this low level of disbursements, what lies beneath the surface of the iceberg is the $3 billion in assistance that MCC has actually committed to countries who have worked hard to make the improvements to qualify, countries such as Ghana, El Salvador, Georgia, or more recently Mozambique and Lesotho. By the end of the year, the amount MCC will have committed to these countries and the 10 others like them will jump to close to $5 billion.

Better still ask the people in Burkina Faso, Mongolia or Jordan, all of whom have spent the past several years trying to improve their governments enough to qualify for an MCC grant who may find there no longer are funds available.

Or Peru, the Philippines and Ukraine, all of whom are a part of the innovative pipeline developed by MCC to help move along lower-performing countries in attacking corruption, improving their judicial systems, expanding press freedom, and improving the rights of women as a way to assist with possible eligibility for a larger, truly transformative MCC Compact. These nations, on the threshold of getting the MCC "stamp of approval," want to change their systems. Fourteen have already been allocated commitments of $316 million in grants to assist them become eligible for the much larger Compacts.

This caution in disbursements, however, instead of being lauded, is causing the opposite affect. The U.S. Senate Appropriations Committee has just proposed funding the MCC this year at $1.2 billion, well short of the $3.0 billion it had asked for. If allowed to stay at this level, it will be the third year in a row below the amount the MCC has requested from Congress.

Choking off funding will only make the MCC less effective and will only signal to the those countries who have been getting their house in order by building health clinics, improving roads and facilities to get goods to market, or introduced often politically painful anti-corruption legislation that their efforts have been for naught.

MCC was built by Congress to operate more like a business. As a businessman, I can tell you, it is better to control the outflow of funds, measure outcomes and discipline the process, rather than advancing funds indiscriminately with nothing to show for it as has been done in the past.

With fruits of the efforts of the past three years ripe, now is the time to increase funds for MCC, not reduce them.

Comments

[mrcontinental]

They are trying to little to late, especially since we caused the problems to start with with our insane policies carried out by the World Bank and IMF, WTO, designed to drown the third world in debt and keep dollars flowing back to the US and UK.

Entire countries like Argentina or Brazil or Indonesia were forced to devalue currencies relative to the dollar, privatize key state industries, cut subsidies, all to repay dollar debt, most often to private US banks. When they resist selling off their best assets, they are charged with being corrupt. The growth of offshore money centers in the Caribbean, a key part of the drug money cycle, is also a direct consequence of the decisions in Washington in the 1970's and after, to deregulate financial markets and banks. As long as the dollar is the global currency, the US gains, or at least its big banks.

This is a kind of Dollar Imperialism more slick than anything the British Empire even dreamed of. It is a part of the current America "Empire" debate no one mentions. Instead of the US investing in colonies like England to earn profits on the trade, the money comes from the client states into the US economy. The problem is that Washington has allowed this perverse system to get out of all control to the point today it threatens to bring the entire world to the point of collapse. Had the US instead promoted long-term policy of investing in the economic growth and self-sufficiency of countries like Argentina or Congo, rather than bleeding them in repayment of unpayable dollar debts, the world would look far less unstable today. So to start screaming "investment" at this late stage is truly laughable, as if anyone trust us now anyway. It's ironic that the american public are the only citizens on the planet who don't know the truth behind our "foreign aid".

[mrcontinental]

If anybody cares to know what we've really been up to:

http://www.opednews.com/maxwrite/print_friendly.php?p=opedne_john_per_070315_john_perkins_3a_new_co.htm

[noam4prez]

We have no reason to expect that MCC will be any different than the World Bank or the International Monetary Fund, which have devastated every country that has accepted their loans. These organizations are designed to funnel U.S. tax dollars into the hands of U.S. capitalists, through expensive public works projects in client countries, implemented by U.S. contractors. Bechtel, http://en.wikipedia.org/wiki/Bechtel, is a prime example, but there are many others. The client government officials take their cut, and then the people are left repaying the loans.

[mamacat]

Given the long history of politicing every department of the government, I have to wonder what the Bush White House has been up to with this Corporation. Without oversight of the body that was supposed to be performing oversight, dare anyone trust anything this government does?

[godlessclif]

"It would be better NOT to have
foreign aid than have a system that boils down
to poor people in rich countries giving money
to rich people in poor countries." reality

I have never seen a better definition of foreign aid. We have no excuse for giving foreign aid when we have homeless on our streets. Charity begins at home. Money for rich foreign dictators, so they can buy their people's silence with bread and circuses, is not charity.

[crabcake]

It seems to me that we are going to be the ones needing aid from other countries. When I was in school we were taught that we were the richest nation in the world. We loaned other countries money and they were indebted to us. I was in school just thirty years ago. What happened? Again, what happened in just thirty years that made us such a debtor nation that there is no way out? Evil is afoot!

[ThomH]

Great to see a results-oriented, businesslike approach to foreign aid, whose past wastefulness has turned off so many, probably contributing to the Congressional funding shortfalls Alan reports. MCC is pioneering a new way to do government-to-government foreign aid, and deserves to be fully funded. We all stand to gain from its success, and its cost is a tiny fraction of what we spend on the military.

Private aid too, in the form of charitable donations and loans to Non-Government Organizations, similarly needs to be results-oriented and business like, directed where it can be shown to make a difference. Calestous Juma, in his keynote speech at Harvard"s International Relations Week symposium last week, pointed out that many existing NGOs are adapted to "rescue" operations, whereas Africa now also needs "competence building", and therefore a new kind of NGO addressing that need.

Several NGOS focus on competence building, and some do it better than others. One doing it right is URDT, the Uganda Rural Development and Training Programme, an educational organization doing grass-roots work in Western Uganda. They produce extraordinary results at very low cost. Working with them has been a source of great satisfaction. Check them out at:

www.urdt.net

Be sure to dig into the site, and view the videos. Then join in to support them!


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[realitytrumpsbull]

Foreign aid is just another racket, without
adequate public oversight and effective spending
controls. As soon as you set up any mechanism
whereby US taxpayer revenue ends up in
someone's hands overseas, the competition is
on to get the mostest. Limiting such things
and having mandatory ending dates is key to
having an effective foreign aid concept,
and severely limiting and eliminating
corruption. It would be better NOT to have
foreign aid than have a system that boils down
to poor people in rich countries giving money
to rich people in poor countries....

[EnderCraig]

Compared to the emergency funding that congress has been handing out like halloween candy, these numbers of one to two billion to aid millions in struggling countries seems like pocket change.
I applaud any attempt to help these countries, but is this the best we can do?
What might you accompllish with a budget of 2.4 trillion dollars, sir? Thank you for taking on this challenge. I hope you find the support you need.

[rabun666]

Foreign Aid is bribery and must be stopped. The so called "coalition of the willing" countries that joined the U.S. in the occupation of Iraq were bribed to join. These bribes are announced publicly as foreign aid. Colin Powell and Condi Rice do it and it's disgrace and an insult to the American taxpayer.

[Cautious]

I think this nation could have done a lot to avert war and other negative things by doing foreign aid correctly. If we had offered foreign aid to Iraq conditional upon the outsting of Saddam, this may have come out differently. The same might go for responding to Iran's offer to help after 9/11 with the offer of foreign aid.

Someone should just do a quick calculation that compares foreign aid to war spending. What about investment in infrastructure, agricultural assistance and so forth, compared to war spending? As the poet says:

why not feed the people everywhere
and let the peace begin?
turn your swords to ploughshares everywhere
and feed the people

when they borrow in third world countries people need to be fed
so explain this to politicians while we send them guns instead
of the seeds that they're planting in the ground
making their own way
self sufficient without permission from the good old usa
but it seems they owe us a lot of money
and do you know what for?
cause the friends of senator arrogant made a killing on this civil war

it is hard to raise an army when your children are all fed
they got no motivation for making other people dead
even with governmentt persuasion of the most compelling kind
give them a choice they'll be looking at you as if you'd lost your mind
but then all of this craziness
it will not go away
till we stop feeding hatred with embargoes and blockades

why take the time to worry
about anybody else?
maybe talk about them
wonder how they felt
caught in the cross fire of someone else's fight
what is wrong?
nobody's right

all religions and ideologies
suffer from the truth
until lies become reality
when the people start to shoot
got a whole lot to answer for
but who are we to judge?
common sense and enough to eat
can settle any grudge
when the kindness of strangers
it means no disrespect
being honest with the help you give
means there's nothing to expect

(Copyright Stephen Stills)