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The politics of aid is changing..........Darryl D’Monte
In an era when big developing countries no longer treat aid as integral to their development plans, it is interesting to see how industrial economies are tweaking policies in this regard. France, which traditionally extended assistance to its former colonies, is now looking to support the creation of infrastructure in emerging economies like China, India and Brazil.
The official agency, Agence Francaise de Development (AFD), told Indian journalists that of the €3 billion as overseas development assistance (ODA) in 2007, €2.7 was to developing countries. However, as much as €1 billion was to countries in sub-Saharan Africa, most of which are French-speaking. Asia, which is by far the most populous continent, received only 14 per cent.
France lists its support to growth as the topmost mission in its ‘comprehensive approach to development’. As much as 42 per cent of its aid went towards commitments ‘directly contributing to growth’. The other two are to combat poverty and economic and social inequalities and protect global public goods, which would broadly embrace environmental concerns. Most of its aid last year continued to go towards reducing poverty — mainly in terms of meeting the UN Millennium Goals, which seeks to halve the 1 billion people under the poverty line in the world by 2015.
An AFD document reviewing France’s policy two years ago noted that aid, by its very nature, involves an asymmetrical relationship; the donor is invariably stronger than the recipient. During the Cold War, Western countries provided assistance to Mobutu’s Zaire and the Soviet Union to Cuba. The document noted that there were always strings attached; power was in the hands of donors. It cited the Washington consensus, ‘derived from the free market reforms of the 1980s in the US and the UK’, as an example of this asymmetry.
This is why AFD believes that aid is now looking at infrastructure for economic development. The most promising directions today are of public-private partnerships and the mobilisation of national savings resources through different guarantee mechanisms. The first seeks to maximise funding and better allocate tasks between public and private sector players; the second aims to insulate projects against risks associated with foreign exchange fluctuations.
Of AFD’s total aid disbursements last year, only 15 per cent were as grants and the rest were loans. Within these loans, 51 per cent was to ‘non-sovereign’ entities — non-state agencies, including private enterprises, which received 12 per cent of all loans. AFD describes the shift as one from ODA to ‘development financing’. In 2005, 90 per cent of aid went to governments. AFD officials deny that France is diverting ODA to the private sector, but admit they ‘heard this in India’.
AFD opened an office in Delhi last May. Its aid to this country is about €120-€150 million a year, by way of technological expertise and technology transfer. However, it does not transfer patent rights of technologies which would prove beneficial to India and other developing countries, like those in the energy sector. When French suppliers bring products into the country, it finances training and capacity-building here. In joint ventures, it funds French consultants to Indian companies. France, which has the biggest multinational water companies in the world, notes that India has ‘huge plans’ for hydroelectricity in the northeast, biomass and biofuels. It is also following India’s moves on improving urban transport and environment.
There is a bilateral working group on sustainable development with India. An EU summit on September 29 will be followed by a bilateral summit which will discuss ways of reducing carbon emissions in India. France believes in civilian uses of nuclear energy and is aiding India overcome obstacles to such cooperation with the US, as well as with the International Atomic Energy Agency and the Nuclear Supplies Group.
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