Electronic Library of Scientific Literature - © Academic Electronic Press
Vol. X / No 3 / 2001
ŠTÚDIE, ANALÝZY - STUDIES, ANALYSIS
3 Jaroslav Foltýn – Jan Hřích
Rozvojová pomoc a mezinárodní organizace
Development Assistance and International Organizations
18 Daneš Brzica
Európska investičná banka a jej úloha pri infraštruktúrnej obnove Európy
European Investmen Bank and its Role in Infrastructure Reconstruction of Europe
39 Martina Petrovičová
Organizácia pre hospodársku spoluprácu a rozvoj
Organization for European Economic Co-operation
ÚVAHY, ROZPRAVY, ROZHOVORY - REFLECTIONS, TRANSACTIONS, INTERVIEWS
55 Peter Hulényi
Komu pomáha zahraničná pomoc?
Whom does Development Assistance Help?
71 Viera Jančušová
Postoj medzinárodného spoločenstva a vybraných medzinárodných finančných inštitúcií k znižovaniu chudoby
Attitude of International Community and Selected International Financial Institutions to Poverty Reduction
86 Daneš Brzica
George Soros: Otvorená spoločnosť. Reformovanie globálneho kapitalizmu
95 Bohumila Ferenčuhová
Pavol Petruf: Taliansko-etiópska vojna v rokoch 1935-1936. Príčiny, priebeh, dôsledky
97 Peter Juza
Nikolaj Aleksandrovič Nartov: Geopolitika
The paper deals mainly with general trends of advancement of international official development assistance (ODA) in 90s. It separately analyses assistance provided by organisations incorporated into a wide institutionalised UN structure and by organizations outside this framework. In the first group there are above all the so-called Breton Woods Institutions (i.e. the World Bank Group made up of the IBRD, IDA, IFC, IMF) while the second group consists of institutions operating within the OECD structures (above all the Development Assistance Committee).
From the developed market economies (DME) point of view the ODA long-term decrease present during 90s is definitely not a flattering reality. While in 1991 the total amount of this assistance reached USD 62.6 bil., in 1999 it was only USD 48.2 bil. (together with the absolute ODA value also its ratio on GDP of donor countries decreased). This development had a background of a still worsening social situation in the developing world as a whole characterised by an increase of absolutely poor people (daily income under 1 USD) and people living in a state of the so-called extreme need (under 2 USD per day). During this decade the scissors of pension inequality between the DME and developing countries (DC) opened wider and wider.
Decrease of the development assistance in 90s is being explained by various DME representatives generally in two ways:
A closer look at the ODA issue can bring to a question both arguments to a major level. What concerns the first argument, transforming economies (TE) assistance was all the time remarkably lower than the ODA (the 90s average annual ODA value was approximately nine times higher). The ODA could hardly be ”forced out” by the TE assistance. Comparing sums of the ODA and TE assistance in 1990 and 1997 one can see an absolute decrease, though smaller than for the ODA alone (11 % comparing to 19 %). As for the second notion, the ODA decrease was sharper than world conjuncture fluctuation and also it is present during years of increase of world conjuncture.
The reason for the ODA decrease probably remains mainly in politico-strategic reasons, because the DC as a whole after the fall of the bipolar world do not play the role of a strategic space in which both antagonistic blocs tried to create the most advantageous position (among others by a development assistance) and thus gain advantage over the rival. And gradually getting relatively more and more poor the majority of the DC represents still less lucrative market for the DME, a market that requires use of all means (development assistance provision can play a certain role in this effort).
Visible poverty growth in the developing world (and probably also an effort to at least partially turn the trend of ODA decrease) led by the end of 90s to the start of a number of new initiatives form the Breton Woods institutions. Initiatives focused on long term relieve and financing new loans important for rating evaluation of respective DCs (financial sources for debt service cover) are the most important ones. One can find e.g. the HIPC-DR (Heavily Indebted Poor Countries Debt Relieve), ESAF (Enhanced Structural Adjustment Facility) or more complex the PRGF (Poverty Reduction and Growth Facility) among them. For the moment the NIFA (New International Financial Architecture) and NIDA (New International Development Architecture) are in a preparation stage. The above-mentioned new initiatives aim to provide a more flexible approach to respective DCs and stands less on neoliberal premises of economy policy. Acceptor countries are thus left freer in choosing the pursued economy policy then until now when they had to comply with the only model of economy policy focused on the so-called ”structural adjustment”.
The OECD and its Development Assistance Committee take up somehow different approach then the Breton Woods institutions. Noticeable differences dominate organization, geographical allocation and show of the development assistance (its basic definition is wider here). The OECD assistance is focused more on specific projects and sets fewer preconditions for acceptor countries.
The CR will have to – should she want to aspire for a developed country status with all included consequences – in the nearest time visibly increase value of provided development assistance (from the current 0.017 % of GDP to at least 0.2 % GDP). The CR will also have to consider the institutional assistance arrangement. Probably a Development Assistance Agency will be established soon. It will be the most beneficial for the CR to focus on different forms of immaterial development assistance, as for instance expert activity in specified branches or DC citizens study visits in the CR based on governmental scholarships. The CR disposes of the biggest comparative advantages, as is e.g. developed education system, for these forms of assistance.
The European Investment Bank (EIB) represents an organization, which supports European integration by providing loans for financing infrastructure projects, many of which create preconditions for closer cooperation of individual areas and European Union (EU) countries including associated members. Some arguments say that EU countries should provide more support to research and development than to infrastructure. It is evident, however, that business infrastructure should be built in a balanced manner and no country can afford for a long time to lag-behind in quality of its transport and telecommunication infrastructure, because these belong to the areas which contribute to attracting foreign direct investments.
Established by the Treaty of Rome in 1956, as a part of its decision to establish European Economic Community, it serves as a bank, which raises majority of its financial sources on capital markets to be able to finance projects meeting priority goals of the Community. The Bank is owned by the EU member states, which subscribed its capital. As an important international borrower, who has always been first-class rated (AAA) by major rating agencies, the bank mobilizes huge amount of sources under very favorable terms. The Bank is financially independent and is not financed from the Community budget. In the context of this framework of economic policy the EIB operates outside the EU in the framework of the Financial protocols attached to cooperation agreements of the EU with 12 countries (1991) in the Mediterranean region (including Yugoslavia) and in the framework of Lomé Conventions in African, Caribbean and Pacific (ACP) states. In the framework of the financial protocol attached to the latest Lomé Convention the Bank now operates in much more ACP states. In the framework policy of cooperation with countries of Central and Eastern Europe building democracy and introducing economic reforms the EIB also finances projects in Bulgaria, Czech Republic, Slovak Republic, Hungary, Poland and Romania.
2. Structure and bodies of the bank
The Bank has its own independent administrative structures and decision-making bodies separated from other EU institutions. The paper here briefly reviews existing Bank’s structure characterizing main decision, administrative and executive bodies, namely, the Board of Directors, the Supervisory Board, the Management Committee, the Audit Committee and the staff. The Board of Governors consists of one minister (usually Minister of Finance) from each member state. Being a representative of a government the term in the office of a governor is linked to his/her political mandate. The Governors, besides their other duties, create general directives related to the Bank’s credit policy, they pass annual report and balance, make decisions on increase of capital and appoint members of the Board of Directors and the Management Committee. The Board of Directors ensures that the Bank is managed in line with the provisions of the Treaty and the Statute and with general directives laid down by the Governors. The Management Committee is an executive body of the Bank. The Bank’s staff is important part of the whole organization. A table in the text shows the numbers of the staff and its development during the last couple of years.
3. Activities of the Bank in Europe and in outside of the continent.
The Bank has its primary role in financing projects inside EU and by doing this to provide higher cohesion among its member states. Besides a substantial volume of loans is allocated also in other countries of the world as a part of attempt to contribute to the EU’s development activities. Specific position here was for the BRD as both representing EU member states and (its Eastern part) former centrally planned economy. Thus, in its role of long--term financial institution for EU, the Bank provided at the beginning of changes in Central and Eastern Europe substantial sources for the BRD in volume of ECU 1.17 billion. Of this amount 60 % went for investments into the East German länder on which this Bank especially focused its attention (state as of October 1993). In the East German länder DEM 435 million were used for building of four large industrial plants in Sachsen, Sachsen-Anhalt and Thueringen. Total of DEM 455 million went for support of about one hundred of small and medium size firms in all of the East German länder and especially for investments into industry and for environmental protection. Another DEM 465 million were provided for extension and modernization of telephone networks in Dresden, Gera, Halle, Leipzig, Magdeburg and Rostock, which were used for modern connection in the framework of digitalization for 250 000 new participants. East German länder belonged to the priority area already in the first half of 1990s. It was in the framework of the EU regional policy and also they became eligible to receive support from structural funds. Since they become eligible to receive financing from the EIB, after German unification, East German länder received during three years around four billion DEM loans from the EIB for capital investments supporting economic development and integration with other German länder. In this period it was estimated that these investments lead to creation of more than 12 000 new jobs. The tables in this part show more on financing in individual EU member states and associated countries.
4. History and present situation in EIB support for the countries of Central and Eastern Europe
Since 1990, when the Bank started to provide loans to the countries of Central and Eastern Europe, it provided until 1998 ECU 8 billion for projects in Poland (2,151 million), Czech Republic (1,792 million), Hungary (1,142 million), Romania (1,052 million), SR (665 million), Bulgaria (446 million), Slovenia (325 million), Lithuania (148 million), Estonia (88 million), Albania (68 million) and Latvia (61 million). For the period from 1998 to January 2000 another ECU 5.6 billion was allocated for projects in this region, including ECU 150 min for transport and other infrastructure projects in the former Federal Republic of Macedonia, where the EIB started to lend at the beginning of 1998. The tables in the text provide more figures on the size and structure of the support.
The Bank tries to support the development of Central European capital markets. With its capacity for development of capital markets, the Bank supported capital market development after Greece, Spain and Portugal joined the EU, contributing thus substantially to their growth and diversification. The support of the EIB to the transforming countries is provided on the basis of invitation from the European Council to the Bank to participate in the framework of the Community’s Program for the support of the countries of Central and Eastern Europe in their attempt to establish market economies. The program itself represented a part of coordinated approach of close cooperation with the European Commission, World Bank, International Monetary Fund (IMF) and European Bank for Reconstruction and Development (EBRD). In the framework of this context the EIB provides loans for projects according to the normal Bank criteria.
At the end of November 1989 the Council of Governors authorized the Bank to provide loans in total volume of ECU one billion for projects in Hungary and Poland. Projects started and six loans, in the total volume of ECU 215 million, were provided during 1990. In February 1991 European Council asked the EIB to start necessary procedures for extension of the loans for Bulgaria, ČSFR and Romania. At the end of April the Council of Governors authorized the Bank to provide loans in total volume of ECU 700 million. Later on, the Bank’s involvement in this support has continued. The Bank thus provides on permanent basis its sources, know-how and experience for the support of the countries of Central and Eastern Europe in their transition to market economy. It focuses also its activity in the region of South East Europe on infrastructure projects with respect to its long-term and successful past experience in this area since 1997 (and before that during the socialist period). The EIB financing in the former Yugoslavia during the period 1977-1990 reached the level of EURO 760 million. Of this EURO 668 million was used especially for highway and railway system connecting Slovenia, Croatia, autonomous province of Voivodina, Serbia and Macedonia and neighboring countries – Austria, Italy and Greece. The rest of EURO 92 million went for projects oriented on improvement and development of electricity network including exchange with Greece and Italy through energetic connection. The EIB signed with Yugoslavia framework agreements setting the legal framework making possible progressive arrangement of previous obligations of Yugoslavia towards the EIB for projects on its territory. These obligations reached the volume of approximately EURO 225 million. The Bank closely cooperates with the Yugoslav offices since October 2000 and now the Bank considers providing loans in volume of EURO 150-200 million for investment project in transport industry. It should cover roads, railways, waterways and air navigation and security and the investment should be realized immediately after the present mandate for Central and Eastern Europe will be extended also for the Federal Republic of Yugoslavia, which requires approval from the EU.
The Bank finances its projects on Balkan in the framework of its mandate for Central and Eastern Europe. This mandate was passed by the EU Council of Ministers for the period 2000-2007 and it expects loans for associated countries and four other countries of the South East Europe without candidate status (Albania, Bosnia and Herzegovina, Croatia and Macedonia) up to EURO 8.7 billion. The Bank carefully monitored democratic changes in the former Federal Republic of Yugoslavia. Immediately after the relaxation of economic sanctions and resumption crisis aid from the EÚ, the EIB made preliminary evaluation of most urgent needs in the basic transport infrastructures in Serbia and Montenegro. It has identified several investment projects (with estimated costs to be approximately EURO 450 million), which would be possible to start immediately.
5. The Bank’s activity in the SR
European Investment Bank has been oriented in its activity also on provision of loans. In 1994 the Bank provided ECU 20 million to Slovenské telekomunikácie, a state telecommunication company, for financing national-wide digital overlay telecommunication network composed of local switching equipment for some 300,000 digital lines and nearly 100,000 analogous lines, four regional switching exchanges and one international exchange in Bratislava and 2100 km of optical cables. This loan increased the volume of financing modernization of the telecommunication network in the SR to ECU 65 million. The following cases are examples of the Bank’s loans for particular investment projects, which had been provided to the Slovak Republic. As can be seen the variety of the loans differs and ranges from financial sphere to support of telecommunication facilities and small enterprises.
As already mentioned, the Bank provides financing also for small and medium-sized enterprises in the Slovak Republic. In 1993 the EIB provided its first global loan of ECU 28 million to the National Bank of Slovakia, which was fully used for financing small and medium-sized investments. Provision of long-term funds of foreign currency enabled the National Bank of Slovakia and its partner banks to support economic reforms by financing private firms, especially export-oriented metal-processing, agro-industrial, chemical and wood-processing ones, and also hotel and other tourism projects. This new global loan for the NBS was the seventh operation in the Slovak Republic. Loans provided previously were, in addition to the first global loan, for rehabilitation of the road network, expansion of the telecommunications network, the gas pipeline network and an underground storage facility and for upgrading the air traffic control system. In 1996, ECU 70 million was provided by the EIB to Slovenské elektrárne, an electricity utility company, for the refurbishment of a power plant at Vojany in Eastern Slovakia. Commenting the loan, the EIB Vice President W. Roth said: ”This is the EIB’s first non-sovereign guaranteed operation in the Slovak Republic. It reflects the increasing interest of the international financial community in the Slovak Republic, stemming from the strong performance of the Slovak economy in recent years.” That loan brought the total financing in the SR to the level of ECU 320 million. Previous loans of the EIB contributed to road and telephone networks modernization, gas storage facilities and also air control system. Number of small and medium-sized industrial enterprises were also financed through the EIB global loans, which were provided to local financial institutions in the Slovak Republic. For support of heating the Bank provided in 1998 a loan for 15 years to the company Paroplynový cyklus Bratislava, a. s., in total amount of ECU 50 million, for building a gas-fired heat and power station in Bratislava.
These examples, together with examples from other countries of Central and Eastern Europe, show that the role of the Bank in modernization and reform process is very important and that its activities contribute to speeding up the process of the EU enlargement.
The volume of the EIB operations has grown gradually and today the Bank together with the World Bank (International Bank for Reconstruction and Development) belong to the biggest financial institutions of its kind in the world. Whereas majority of loans is provided in the framework of EU, the Bank due to its professional experience in the area of project financing is invited to participate in introduction of the EU development cooperation policy. Since the beginning of its history, the Bank has moved from its original concept of creditor for huge infrastructure projects in the EU countries to a more extensive participation at infrastructure investment projects in associated countries and other countries of the world.
The forerunner of the OECD was the Organization for European Economic Co-operation (OEEC), which was formed to administer American aid under the Marshall Plan for reconstruction of Europe after World War II.
The Organization for European Economic Co-operation (OEEC) came into being on 16 April 1948. It emerged from the Marshal Plan, which sought to establish a permanent organization to continue work on a joint recovery programme and in particular to supervise the distribution of aid. The European organization adopted was a permanent organization for economic co--operation, functioning in accordance with the following principles:
Organization for Economic Co-operation and Development – OECD
In September 1961 the OEEC was superceded by the Organization for Economic Co-operation and Development (OECD), a worldwide body. In 1961, the OECD consisted of the European founder countries of the OEEC plus the United States, Canada and Japan. The list of member countries has expanded over the years until today, when 30 countries are members.
The Organization for Economic Co-operation and Development has been called a think tank, monitoring agency, rich man’s club, or an unacademic university. It has elements of all, but none of these characterizations captures the essence of the OECD.
The OECD groups 30 member countries in an organization that, most importantly, provides governments a setting in which to discuss, develop and perfect economic and social policy. They compare experiences, seek answers to common problems and work to co-ordinate domestic and international policies that increasingly in today’s globalised world must form a web of even practice across nations. But more often, their discussion makes for better-informed work within their own governments on the spectrum of public policy and clarifies the impact of national policies on the international community. And it offers a chance to reflect and exchange perspectives with other countries similar to their own.
The OECD is a club of like-minded countries. It is rich, in that OECD countries produce two thirds of the world’s goods and services, but it is not an exclusive club. Essentially, membership is limited by a country’s commitment to a market economy and a pluralistic democracy. The core of original members has expanded from Europe and North America to include Japan, Australia, New Zealand, Finland, Mexico, the Czech Republic, Hungary, Poland, Korea and as the last 30th one, the Slovak Republic. And there are many more contacts with the rest of the world through programmes with countries in the former Soviet bloc, Asia, Latin America – contacts that, in some cases, may lead to membership.
Exchanges between OECD governments flow from information and analysis provided by a Secretariat in Paris. Parts of the OECD Secretariat collect data, monitor trends, analyze and forecast economic developments, while others research social changes or evolving patterns in trade, environment, agriculture, technology, taxation and more. This work, in areas that mirror the policy-making structures in ministries of governments, is done in close consultation with policy-makers who will use the analysis, and it underpins discussion by member countries when they meet in specialized committees of the OECD. Much of the research and analysis is published.
The OECD’s Organizational Structure
Member countries meet and exchange information in committees. Committees bring together representatives of member countries, either from national administrations or from their permanent delegations to the OECD, co-located with the Secretariat in Paris. The overriding committee is the Council, which has the decision-making power. It is composed of one representative for each member country (as well as a representative of the European Commission). The Council meets regularly at the level of Ambassadors to the OECD to give general guidance to the Organization and its work. The Council meets at ministerial level once a year, when foreign, finance and other ministers from member countries raise – and give public prominence to – important issues and set priorities for OECD work over the coming year.
Specialized committees meet to advance ideas and review progress in more tightly defined areas of policy – such as trade, public management, development assistance or financial markets. There are about 200 committees, working groups and expert groups.
The OECD’s Secretariat
More than 1 800 staff of the OECD Secretariat in Paris work directly or indirectly to support the activities of committees. Some 700 economists, scientists, lawyers and other professional staff, mainly based in a dozen substantive directorates, provide research and analysis. The Secretariat is directed by a Secretary-General. The Secretary-General also chairs the Council, providing the crucial link between national delegations and the Secretariat.
The OECD works in two official languages: English and French. Staff members are citizens of OECD member countries but serve as international civil servants with no national affiliation during their OECD posting. There is no quota system for national representation; there is simply a policy of employing highly qualified men and women with a cross-section of experience and nationalities.
The work of the OECD Secretariat is financed by the member countries. The annual contribution of each member country is calculated according to the weight of its economy. The United States is the biggest contributor followed by Japan. Countries can also elect to finance specific programmes or projects. It is the member countries assembled in the Council who determine both the size of the annual budget, which at the present time is around US$200 million, and the programme of work.
In the year 1991, the OECD launched its ”Partners in Transition” programme that offered assistance to countries in the region building the institutions and legal regulatory structures needed for a market economy. Between 1995 and 1996, the Czech Republic, Hungary and Poland became members of the OECD. However, negotiations with the Slovak Republic, which had applied for membership of the OECD in 1994, at about the same time as these three neighboring countries, took longer. The formal invitation to the Slovak Republic to join the Organization came on 28 July 2000 when the Council of the OECD at its Ministerial Session has agreed to invite Slovakia to become the 30th Member of the Organization. The signature of the agreement setting out the terms of accession took place on 28 September 2000 in Paris. Membership of the Slovak Republic in the OECD is effective as from 14 December 2000 when the Slovak Republic deposited its instrument of accession to the OECD Convention with the French Government, depositary of the Convention.
The provision of development assistance is a long-standing standard component of the foreign policy of developed countries. Slovakia would like the international community to note that since joining the OECD, it now belongs to this group of developed countries, and they in turn from time to time, remind Slovakia that along with membership come certain obligations. This article addresses obligations, as well as the benefits and the meaning of development assistance.
Whom does Development Assistance Help?
Regular attendees of international conferences on development assistance would have ready made impressive answers such as ”... development assistance helps to decrease differences in the living standards of rich and poor nations by supporting sustainable development throughout the world...” Let us skip such standard replies and attempt to identify all the parties whom development assistance helps.
To begin with, let us start from the politically incorrect angle with the benefit that the donor country derives from the provision of development assistance, although this benefit is not a motivation but a positive consequence. Firstly, it improves the donors image within the international communities. Good examples of this are North European countries. Development assistance provided by these countries greatly exceeds the European average 0.4 % of GDP as well as the suggested target defined by the OECD/DAC (Development Assistance Committee) – 0.7 % GDP. Thanks to this generosity, these countries benefit from high degree of authority in and confidence of the international donor community. Secondly, and at least of the same importance, is the positive benefit on the domestic political scene. Non-governmental organizations (NGOs), leftist groups, the academic community and globalization opponents are generally the harshest critics of the position of their governments towards the developing world. Concrete data confirming their government’s development assistance as well as success stories from the field are efficient tools that can be used to counter these criticisms. Thirdly, on the economic benefits for the donor there are different opinions. On one hand entrepreneurs and suppliers of goods and services consider profit as an integral part of development assistance, while on the other hand international institutions and NGOs view this aspect negatively. There is no doubt though, about the fact that properly focused development assistance supports the export sector, helps to create employment in the donor country, identifies new emerging markets, and provides the donor country with a certain economic linkages with the developing world. Not to be overlooked also is the creation of penetration in new markets for providers of goods and services. For example, as a result of obtaining certain technical equipment within the framework of development assistance or through outright grants, sooner or later the recipient will need services and spare parts, and these usually have to be paid for.
The observation that development assistance should first of all serve the recipient does not sound very original. This, at first glance a basic consideration, is not always fulfilled. Even some Slovak recipients would be able to describe their experiences with multilateral or bilateral assistance that was devoid of results. To avoid this ineffective use of resources, donors and international organizations give precedence to so called ”needs oriented assistance”. During the process of formulating a framework for an assistance program, the recipient country is requested to define its own needs and priorities. The projects approved thereafter should then fall within this framework. In practice then, the recipient should obtain skills and access to new (at least from the point of view of the recipient) technologies in field that it considers beneficial. The creation of new bilateral contacts between government officials, non-governmental organizations and companies is also significant and these can continue to expand after the assistance is completed. For example, in the case of Canadian assistance to the Slovak Republic, it is not an exaggeration to state that without projects financed by CIDA, there would be minimal or even non-existent cooperation between Slovakia and Canada in many areas such as environment, health care, municipal self-government, defense, policing, etc. Co-operation initiated as a result of CIDA supported projects is still continuing several years after their conclusions and this is very beneficial for Slovakia.
And lastly, for both donor and recipient countries, one cannot forget the benefits that individual participants (experts, consultants and government officials on both sides of the project) derive from international development assistance. By taking part in study tours, conferences and seminars, participants obtain professional and language skills as well as new contacts. And if this benefit is not limited to savings from daily subsistence allowances, this result could be included in the category of human resource development.
Whom does Canadian Assistance Help?
Canada provides assistance to the developing world in the amount of USD 1.7 billion. This contribution by itself is sufficient to rank it as a very significant donor among OECD member states. Canadian development assistance has a long term history and a good reputation in many developing countries, Canada’s program could therefore serve as a model for Slovakia’s own program, just now coming into existence. The fundamental basic component of the Canadian system is the Canadian International Development Agency (CIDA). Established in 1968, it has a status of a federal ministry and is headed by a Minister for International Cooperation. Approximately 78 % of total yearly Canadian development is disbursed by the Agency. A major portion of this disbursement (40 %) is used to fund the Agency’s own projects in more than a hundred countries around the world. CIDA also contributes to the annual budgets of multilateral development organizations (25 %) and funds CIDA-approved projects of Canadian and international NGOs when requested. These activities are carried out by more than 1,200 employees in Canada and abroad, as well as by hundreds of external consultants. Only 7.1 % of CIDA’s budget is used for administration purposes.
Notwithstanding years of experience, even the Canadian program of development assistance is not perfect. From time to time, some applicants complain that the approval process is sluggish and slow. On the other hand, the media keeps a close eye on tenders and bidding for goods and services for development assistance. CIDA is also sometimes accused of misusing financial resources, which could decrease the Agency’s credibility in the minds of the Canadian public (most recent examples of this are Canadian projects in Kosovo and Egypt). As with most large development agencies, CIDA is also struggling with the challenge of the scope and extent of its program. Canada provides development assistance to more than a hundred countries in a very wide range of sectors and fields. Focusing on a smaller number of countries would result in decreasing or abolishing programs in other regions, something which is very difficult to do in any assistance program.
Similar to other institutions for development assistance, CIDA has in place a system for defining its political and geographic priorities which helps to focus its programs. CIDA’s political priorities include the following areas: basic human needs, gender equality, infrastructure services, human rights, democracy and good governance, private sector development and environment. The criteria for selecting geographic priorities are more sophisticated and are determined by three indicators – trade volume (reflects economic ties and is measured by the trade balance between Canada and the recipient country); immigration (reflects ties between Canadians and residents of the recipient country) and development assistance (reflects political ties and is defined by the allocated development assistance for the most recent past). For every country to which Canada provides development assistance has been assigned an ”importance coefficient” based on these indicators. The first three countries of importance then become China, India and Egypt. The five most important recipients of Canadian development assistance on a continental basis are: China, India, the Philippines, Bangladesh, and Indonesia in Asia; Egypt, RSA, Algeria, Ghana, and Ivory Coast in Africa; and Mexico, Brazil, Haiti, Jamaica, and Chile in Central & South America. One of the criteria for Canadian development assistance is a mutual benefit both countries may derive from it. Some projects are therefore focused on the support of Canadian export and investment. The purchase of Canadian technology, skills or equipment could be a condition for implementing the project. An example of such a pragmatic and focused Canadian development assistance are the following statistics published officially by CIDA. To support Canadian development assistance, more then 2,000 Canadian companies received government contracts in the last five years, which facilitated their penetration of the markets of developing countries and those in transition. Development assistance programs created 36,000 sustainable jobs all over Canada. There are 110 Canadian universities and colleges involved in development programs. And most importantly from each Canadian dollar allocated to development assistance, 70 cents remain in Canada.
Canada also provides development assistance to countries in transition, including Slovakia. Unlike for the developing world, the program is not called development assistance, but is known as a program of technical co-operation. As a consequence of this program, 1.5 million Canadian dollars are allocated annually to Slovakia, and according to the decision of the Canadian Parliament, the program will continue until 2005. It is also significant for the purposes of this article to note that Canada is playing an important role in assisting with the establishment of Slovakia’s own development assistance program. In the first half of this year, three groups of Canadian experts visited Slovakia to assist with this endeavor. During the same period, CIDA funded a second study tour of Slovak development officials in Canada. The model of trilateral cooperation can be used in common Slovak-Canadian project for the selected development countries. Slovakia is therefore in a good position to learn from the Canadian experience in the provision of development assistance and use it in the process of creating its own program.
Whom will Slovak Assistance Help?
Debate about whether or not Slovakia should provide development assistance to developing countries has been going on for several years. When this topic is debated in public fora, the following questions are usually raised: Is Slovakia obliged to provide such assistance in compliance with some international agreements? Can Slovakia afford to assist other countries? And lastly – whom will Slovak assistance help? In other words – do we have to help, can we, and does it make sense?
The easiest answer is the one to the first question. Slovakia is not obliged to provide development assistance by any international agreement. At the same time though, we know that certain commitments arise from Slovakia’s membership in various multilateral groups, the majority from its recent membership in the OECD. This organization has defined a minimum contribution level for development assistance for its members. The members of its Development Assistance Committee have agreed that member countries’ development assistance contributions should gradually reach 0.7 % of their GDP. But the term ”gradually” appears to leave a relatively high degree of freedom of interpretation. Canada for example decreases its assistance since 1987 when it had reached 0.5 % of GDP to a current 0.28 % (1999-2000 fiscal year). Taking into consideration an approach by rich countries, the commitments of the Slovak Republic are not that dramatic.
A negative answer to the second question – can Slovakia even afford to assist developing countries would not be a surprise. In spite of that, we maintain that Slovakia is ready to provide development assistance with financial resources, technical capacity and skills as well as with human resources. It would not be difficult though, to hear the opposite opinion in Slovakia. It was not so long ago that Slovakia was providing development assistance to a select group of ”brotherly countries” and negative memories of this period are still fresh. Therefore it will not be easy to explain to the public the need for and significance of development assistance and this process should start the sooner the better. Government representatives, bureaucrats, and politicians working on the preparation of the concept of Slovak development assistance have to expect questions such as is it not a higher priority for Slovakia to solve its own economic problems first and help others only thereafter? It may sound a bit academic, but there is a real synergy between the domestic economic situation and assistance to the developing world. Using a more poetic expression from the sub-heading of this article, No man is an island onto himself, every man is a piece of the Continent, a part of the main. Advanced donor countries have their own economic problems as well. The USA for example, provides the highest of development assistance from the donor countries, USD 9.145 billion annually, yet over 32 million Americans still live on the borders of poverty.
Third question – Whom will Slovak assistance help? We have already answered this question in the first section of this article. In Slovakia’s case, the same principle applies – that effective development assistance should be beneficial for both sides, the donor as well as the recipient. Taking into consideration the current amount of Slovak development assistance, we cannot expect Slovakia to enter the group of donor countries with a thunderous ovation. On the other hand, Slovakia already provides a certain amount of development assistance. According to a statistical report compiled by a Canadian OECD/DAC expert in April 2001, Slovakia provided development assistance amounting to approximately SKK 300 million in the preceding year, equivalent to about 0.033 % of Slovakia’s GDP. The OECD member states’ average is 0.25 %. That means that to achieve this level, Slovakia would have to increase its development assistance to SKK 2.1 billion based on current GDP. But large projects are not always the best ones and very often remarkable results are achieved with relatively modest budgets. In Slovakia’s case, most official development assistance is provided in the form of financial contributions to international organizations and specialized agencies, as well as in the form of humanitarian assistance to countries affected by natural disasters. Assistance is provided by government Ministries, state institutions and NGOs. The problem is that this assistance is not centrally coordinated and monitored. As a consequence, Slovakia cannot present itself before the donor community like some other developed countries, who have their figures and statistics well summarized and organized. In the case of development assistance also, the old adage that … it is not enough to lay the egg, but one needs to cackle loudly about it as well applies.
Because of its membership in the OECD, the question is not whether Slovakia will provide development assistance, but rather in what amount, in what form and to whom it will do so. Putting in place the infrastructure to support development assistance program and the definition of geographical and political priorities is a question of months rather then years.
Poverty is multidimensional. The basic definition of poverty is a lack of access to or command over the basic requirements for a minimally acceptable standard of living. That is, a person is poor if he/she has insufficient food or a lack of access to some combination of basic education, health services, drinking water, safe sanitation systems and a safe area in which to live. Income is a proxy measure for poverty since income provides the means to guarantee adequate levels of all the other basic necessities. Of the estimated increase of 2 billion people over the next 20 years, 97 % will live in the developing world. Positive results in poverty alleviation are visible, although sufficient attention is not being paid to them. According to the data published by the Development Assistance Committee, in the past 30 years life expectancy increased by more than 20 years (to 62) and infant mortality rates have dropped by half. Primary school enrolment rates have doubled, major developing countries, particularly in East Asia, have passed from low to middle income status. Poverty alleviation is being realized by the means of the development co-operation system, which consists of bilateral and multilateral donors on one hand and partners in development cooperation on the other. Multilateral institutions are rather co-ordinators and intermediaries of finance consisting of contributions from member states than providers of aid.
Provision of the development assistance has been traditionally based on the principle of recipient orientation. In the 1990s, the principle of recipient orientation was replaced by the principle of recipient responsibility. The development co-operation is performed on the basis of the national development strategy papers elaborated by the developing country with the assistance of a wide range of national partners in development co-operation, including private sector and civil society actors. Particularly in the poorest countries the diversity of donors and their priorities and vested interests constitute a danger that the countries themselves will not be enabled to shape plans and make decisions on their own terms. That is why partnership, co-operation and co-ordination of donor activities have become priorities.
Ability of a country to provide aid is affected with several factors, in particular with the economic resources (land, labor, capital), political criteria and the level of international solidarity and humanity of its inhabitants and government. A new criterion is the interest of the donor country to act in the framework of the recipient national strategy. On the other site, aid has never been given unconditionally. To be considered for the development assistance, the developing countries and their actors participating in the development co-operation have to meet criteria set by the international community. It was the two international financial institutions, the World Bank and the International Monetary Fund that paved the way for policy-based lending and conditionality in the early 1980s. Economic conditionality was first and foremost connected to the stabilization programs and structural adjustment programs of the IMF and the World Bank. Respect to human rights and democratization became an integral part of development co-operation in the 1990s. However, there are significant differences among donors. Aid policies of so called ”like-minded” countries (Norway, Denmark, Sweden, Canada, the Netherlands and today also Ireland and Switzerland) differ from those of other OECD countries by being more sympathetic to the recipients than to state self-interest and domestic pressure groups. By contrast, the policies of the bigger donors like the United States, United Kingdom, France and Germany have to a greater degree been driven by strategic and economic considerations.
The World Bank and the International Monetary Fund Initiatives
Debt Relief under the Heavily Indebted Poor Countries Initiative
The HIPC Initiative entails co-ordinated action by the international financial community, including multilateral institutions, to reduce to sustainable levels the external debt burden of the HIPC countries. The IMF and the World Bank introduced it in 1986. In late 1999, a number of modifications were approved to provide faster, deeper and broader debt relief and strengthen the links between debt relief, poverty reduction and social policies. To be considered for HIPC Initiative assistance, a country must satisfy a set of criteria. First of all, it must face an unsustainable debt burden, beyond available debt-relief mechanisms and establish a track record of reform and sound policies through IMF and World Bank programs. At present 41 countries are classified as being the heavily indebted poor countries (see Table 1). Secondly, all countries requesting HIPC Initiative assistance must have adopted a Poverty Reduction Strategy Paper (PRSP) and must have made progress in implementing the strategy for at least one year. The Initiative is divided into four stages: first phase, decision point, second phase and completion point. The ”decision point” is when the debt relief is approved and interim relief begins. The ”completion point” is when the remaining amount of relief is committed irrevocably. As of June 2001, 23 countries have reached their decision point. The total cost of providing assistance to the 23 countries is estimated to be about $29 billion in 1999 net present value terms. It contributed to freeing countries from $50 billion in payments.
Poverty Reduction and Growth Facility (PRGF)
In September 1999, IMF to replace the Enhanced Structural Adjustment Facility established the PRGF. In comparison with the ESAF programs, the PRGF programs are focused on integrating poverty reduction with macroeconomic policies and put an additional emphasis on good governance. As of March 2001, 77 low-income countries are eligible for the PRGF assistance. The eligibility is based on an IMF membership and on a country’s per capita income (the current cutoff point is a 1999 per capita GDP level of $885). An eligible country may borrow up to a maximum of 140 % of its IMF quota (under exceptional circumstances to a maximum of 185 % of quota). Loans under the PRGF carry an annual interest rate of 0,5 %, with repayments beginning after five and a half years.
The African Development Bank has practiced a similar system of granting loans on highly concessional terms to the poorest African countries. These loans bear no interest; they may be repaid over 50 years, including a 10-year grace period. In 1998, AfDB approved loans totaling $1.7 billion. By comparison, the World Bank lent $2.8 billion in the same year and the United States provided $1.2 billion in bilateral economic assistance. The AfDB is to a great extent dependent on contributions of non-regional members. From 1993 to 1999, the United States made almost no contributions to the AfDB. Despite of that, the United States is the third leading Bank contributor after Nigeria and Egypt. The Bank approved also loans on terms that approximate those of commercial lenders to ”creditworthy” borrowers, including governments, official agencies and the private sector. The stricter lending policies introduced by a new president of the Bank in 1995 mean that most African governments are ineligible to borrow from what they regard as ”their bank”.
There is the most visible divide between rich and poor in Asia, although the share of people living in poverty in its southeast part fell from 57 to 21 % between 1975 and 1995. Poverty in Asia still affects around 800 million people, or 75 % of the poor in the world. Poverty reduction is a central goal of Asian Development Bank. Its new development strategy, adopted in 1999, is focused on pro-poor economic growth, human development and good governance. The AsDB raises resources from its member countries. The most important is the Japan Fund for Poverty Reduction (total contributions in the amount of $155 million).
Improvements of the recent poverty reduction system are connected with increasing of its efficiency, which goes hand in hand with permanent increase of conditionality. The main message of the Genoa G8 Summit in the field of poverty reduction is focus on debt relief, liberalization of global trade for developing countries, increased private investment and initiatives to promote health, education and food safety.
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