Should remittances count as foreign aid?

This is no small matter. The US, for example, has consistently (until recently) given the least (per GNI) amongst the OECD:

They recently moved off the bottom (while pipping Japan as the no. 1 in dollar terms). More generally, the fabled promise in the 1970s to double aid as a percentage of GNI has gone walkabout for everyone – it has about halved, as I understand it. The shortfall on this promise is some USD3.1tr, now (with USD2.6tr having been spent – 2005 dollars). Denmark, Norway, Sweden, Luxembourg and the Netherlands the generous exceptions to that rule.

Using the US as an examplar, again, the concept of Foreign Aid is also repeateadly muddied by Military Aid (accounting practices that called military assistance ‘foreign aid’ to make the money numbers look better after the Asian tsunami, an excellent example in international relations) and Food Aid (previously seen here, last Summer).

Across the world, aid aid is declining in proportion to our wealth – illustrated well, I think, by the Davos World Economic Forum consisting almost entirely, this year, of financial murmuring and jumping at the shadows of Sovereign Wealth Funds.

This is context and motive. If we send the army to help dig out a village, is that budgeting expense not Foreign Aid? If we give migrants jobs, and then those migrants send USD300bn of the money they earn back home (and with remittances growing substantially faster than Foreign Aid or Foreign Direct Investment), is that not Foreign Aid?

No way, says Ambassador Munir Akram of Pakistan, until recently chairman of the 130-member Group of 77 developing nations.

“We have to be very careful not to allow these remittances to be portrayed by the North as contributions on their part to development. They are trying to do this,” he told IPS.

Akram said Pakistan receives about 4.5 billion dollars annually as remittances from workers worldwide.

As a general rule, he pointed out, those who are poorest among the migrants send the most money to their families back home.

“These are our people, our workers. We invested in them, they studied in our countries, they got their education, and they are sending a small proportion of their earnings back home,” he said.

Akram said there is a move by Western donors to treat expatriate earnings as part of development assistance to developing nations.

He said these unnamed donors want to count remittances from North to South, but at the same time, they don’t want count repatriation of profits — from South to North.

“They will try and project expatriate remittances as an element of the contribution from the North to the South as a reason for not meeting other aid targets. We need to expose them,” said Akram, the permanent representative of Pakistan to the United Nations.

The answer is “no”, any more than my purchase of Oxfam coffee should be counted as Foreign Aid, for a couple of reasons. First, as above, it’s a scam. We can’t let our international aid accounting consist of shenanigans – that’s what we call a slippery slope (yes, before we know it, Rick Santorum will be given dogs to countries for their people to marry. Or something).

The second is more straight-forward for me, probably less straight-forward for some. Migrant workers are no different from any other worker (besides getting a rawer deal in just about every dimension, of course). They are hired according to the market supply of their labour, and paid according to demand for what they help produce, and the Marginal Revenue Product of Labour in what they produce. Less so, actually (refer to the part about them getting the raw deal).

There is no factor in the labour market for migrants that includes remittances. They do not demand higher wages because of the higher costs they incur as remitting migrants (trademark, I think, for that one), and firms most certainly do not factor in that need when they make a wage-offer. There is nothing deliberate about financing remittancing, from the perspective of the domestic OECD labour market.

The domestic economy involved loses income from remittances, yes – but (a) it allows, freely, the markets that service remittances to form, and make a profit, which means everything is working smoothly (in fact a lot of remittances are still made through unofficial channels, meaning the domestic economy is inefficiently benefitting from the practice, and should improve market-based services for remittances), and (b) the destruction of domestic income/money supply due to remittances pales in comparison to things like military expenditure.

If anything, remittances should be considered a better investment than expenditure by migrants: bullets are destroyed, yet their manufacture means a job. Given their income, a migrant’s spending of that money would be on consumption, which is the slow contributor to economic growth. Well, by sending money home, migrants are boosting the GDP in, and living standards of, underdeveloped countries, strengthening them as markets for exports – and future sources of skilled labour – for the OECD.

Making remittances not aid.

As the IPS article also details, the emigration of skilled labour – particularly health professionals – is a serious and growing public health and human capital development issue for under-developed nations.

So, a compromise. The OECD should start adding remittances by skilled migrants to our Foreign Aid, but we should subtract the balance of their wage or salary from Foreign Aid, since our having them means their own country is left behind. Seems only fair.

Inflation in Iraq

Thanks to the blog Opit (whom I believe has new digs over at Opera) for this one – he posted it in response to the post about malnutrition in Africa.

From Yahoo, originally from the Inter-Press news service (who also have article running at the moment that details 2007 being the worst year yet for Iraq):

The Iraqi government announcement that monthly food rations will be cut by half has left many Iraqis asking how they can survive.

The government also wants to reduce the number of people depending on the rationing system by five million by June 2008.

…

the U.S.-backed Iraqi government has announced it will halve the essential items in the ration because of “insufficient funds and spiralling inflation.”

The cuts, which are to be introduced in the beginning of 2008, have drawn widespread criticism. The Iraqi government is unable to supply the rations with several billion dollars at its disposal, whereas Saddam Hussein was able to maintain the programme with less than a billion dollars.

“In 2007, we asked for 3.2 billion dollars for rationing basic foodstuffs,” Mohammed Hanoun, Iraq’s chief of staff for the ministry of trade told al-Jazeera. “But since the prices of imported foodstuff doubled in the past year, we requested 7.2 billion dollars for this year. That request was denied.”

The trade ministry is now preparing to slash the list of subsidised items by half to five basic food items, “namely flour, sugar, rice, oil, and infant milk,” Hanoun said.

The imminent move will affect nearly 10 million people who depend on the rationing system. But it has already caused outrage in Baquba, 40 km northeast of Baghdad.

“The monthly food ration was the only help from the government,” local grocer Ibrahim al-Ageely told IPS. “It was of great benefit for the families. The food ration consisted of two kilos of rice, sugar, soap, tea, detergent, wheat flour, lentils, chick-peas, and other items for every individual.”

Another grocer said the food ration was the “life of all Iraqis; every month, Iraqis wait in queues to receive their food rations.”

According to an Oxfam International report released in July this year, “60 percent (of Iraqis) currently have access to rations through the government-run Public Distribution System (PDS), down from 96 percent in 2004.”

Bugger. I think I’ve made this point with regard to the Chinese government, previously: people will accept non/un/anti-democratic (or otherwise dysfunctional) government, provided that they can at least eat, live in a house, pursue their own happiness as best they can. Take that away, and people start wondering, openly, why you’re the government. In the backs of our minds, we never properly forget that we invented government.

Which would make it suck for the Iraq government. Like any other government, they’re dealing with inflation that is predominantly exogenous – they can only buy what they can afford with the money they had. The fact that Hussein managed to feed people (under wildly different circumstances) will also not help (no, all the shit Hussein also did to them does no matter, because what you and I think is irrelevant to a man who can’t feed his family. That’s just the way it is, and you’re welcome to call a jobless man with hungry children stupid and irrational and ungrateful. In fact, I dare you).

I’d also be interested to see how the US responds to this, both from their administration responsibility perspective (increase aid? Ask for more foreign support? We already saw Africa’s experience with inflation, yesterday), and from the perspective of military occupation (since this problem will also, to some extent (a) affect the costs of the US mission in Iraq, and (b) affect the angriness of the people faced by the US mission in Iraq. Especially if Iraqis decide to blame that mission for the inflation).

Africa aid wiped out by rising cost of oil

In case you missed this one today.

The rising cost of oil has wiped out the benefits many African countries were expecting from western aid and debt relief over the past three years, new research from the International Energy Agency has shown.

…

Africa enjoyed a surge in western engagement during the UK’s presidency of the Group of Eight leading industrialised countries, culminating in a commitment by world leaders to a broad package of debt relief and increased aid at the 2005 Gleneagles summit in Scotland. But since then oil prices have steadily risen towards $100 a barrel.

Surveying 13 non-oil-producing African countries, including South Africa, Ghana, Tanzania, Ethiopia and Senegal, the IEA found that the increase in the cost of oil bought by the countries since 2004 was equivalent to 3 per cent of combined GDP.

This was more than the sum of debt relief and aid received over the past three years by the countries, which have a combined population of 270m, of whom 104m live on less than $1 a day.

The IEA’s warning comes as Senegal’s President Abdoulaye Wade said “crippling” oil prices threatened to provoke “unrest and violence” in Africa.

Score.

“The race to invest in Zimbabwe also underscores just how far global investors are willing to stretch in search of decent returns”

An update on the laughable-if-it-weren’t-such-a-tragedy basket-case of our times, Zimbabwe. From the Wall Street Journal:

Zimbabwe is an economic nightmare. The annual inflation rate is 8,000% and rising. People don’t have food to eat.

Yet investors have started pouring millions of dollars into the country. Foreign direct investment has rebounded, reaching $103 million in 2005, up from just $4 million in 2003, according to the most recent figures available from the United Nations Conference on Trade and Development.

What explains the flood of money? Some investors are betting there’s nowhere to go but up. A slump like Zimbabwe’s can’t last, and when it’s over — perhaps with the graceful, or otherwise, exit of President Robert Mugabe, who has presided over a decades-long downward spiral — the country will rebound.

The race to invest in Zimbabwe also underscores just how far global investors are willing to stretch in search of decent returns. The turmoil in global credit markets has rippled across emerging economies, boosting yields for some of the riskiest bets around.

At the same time, in recent years, relatively sluggish returns in many developed markets have sent investors farther afield.

Africa overall is emerging as a hot destination for money. Amid a global commodities boom, investment bankers from around the world are flocking to African commercial hubs such as Lagos, Nigeria, and Johannesburg.

…

Part of the challenge of investing in Zimbabwe is figuring out how much anything is actually worth, given the plummeting Zimbabwean dollar.

The Reserve Bank of Zimbabwe fixes the exchange rate at 30,000 Zimbabwean dollars to the U.S. dollar. The problem: Zimbabweans don’t put much faith in that figure — if they did, they’d quickly lose all their money.

There is another, presumably more accurate, method of estimating what a Zim dollar is worth. Dubbed the “Old Mutual Implied Rate,” it offers a glimpse of the obstacles to doing business in Zimbabwe.

It is based on the share price of Old Mutual, a British investment company whose stock trades on three different markets — London, Johannesburg and Zimbabwe’s capital of Harare. Because all Old Mutual shares are of equal value, it is possible to extrapolate the market value of the Zim dollar by comparing the price of Old Mutual shares on the different markets.

On Friday, the Old Mutual Implied Rate stood at 2,596,784 Zimbabwean dollars to the U.S. dollar.

Blimey. Didn’t most of the credit problems begin with firms tossing risk aside in the chase for unsustainable yields? I did say that Zimbabwe could certainly recover: many countries have done so. Speculation on this sort of scale isn’t going to help that happen (although it can’t be much worse than having the IMF do their dirty work for them).

The Heavily Indebted Poor Countries initiative vs. vulture funds

The Guardian today has a wonderful article dissecting the – typically ass-ish – behaviour of vulture funds towards the world’s poorest countries.

Vulture funds buy up sovereign debt issued by poor countries at a fraction of its face value, then sue the countries in courts – usually in London, New York or Paris – for their full face value plus interest.

Donegal International, an offshore vulture fund, burst into the spotlight this year when it won an award for $15m from impoverished Zambia in the UK High Court. Donegal paid $3m for some old Zambian debt, then sued for $55m, although the London judge reduced the award to $15m.

But that was the tip of the iceberg. A paper prepared for the IMF/World Bank meetings this week shows there are now $1.8bn of lawsuits against poor countries where people typically live on less than $1 a day. Eight cases were launched in the past year – five against Nicaragua, two against Cameroon and one against Ethiopia. But the report warns the figures are far from complete and the real totals could be higher still.

It shows that of the 24 countries that have received debt cancellation under the Heavily Indebted Poor Countries initiative, 11 have been targeted for legal action by private creditors. And they have already seen awards in courts of just under $1bn – money that could have been spent on schools and hospitals.

Always an interesting debate – I am a smash-the-IMF-er type, generally (by way of full disclosure). The arguments for personal (even sovereign) responsibility don’t hold for me. Distressed debt, wether it belongs to shitty countries or shitty incomes/mortgages from sub-prime suckers, should be – somehow – protected. Not exploited.

Exploitation of distressed debt perpetuates, as the poverty trap never could, poverty. In our communities, in our so-called ‘global village’, etc., the principle of ‘catch-up’ will never work in practice while funds circle the globe poleaxing poor countries at every turn.

An enjoyable article to read. Also, the wikipedia entry for vulture funds contains a bundle of worthwhile references.

This is not to suggest there is ‘a’ solution – it is attitudinal. For example:

Gordon Brown has criticised vulture funds and called for international action to ensure that they cannot thrive. He wants the World Bank to help poor countries eliminate their commercial debts and creditors to establish a legal fund to help countries defend themselves. “We are determined to limit the damage done by such funds,” he says.

Can he honestly do this, without altering his own government’s alterna-function as international arms broker? I don’t think so. Well may we say, in our paternalism, that these countries could spend this money on health and education. They may just as easily spend it on the lifestyle of Charles Taylor – in which case our government would be just as happy to arrange trade shows.

The UN, fraud and failure (not irony)

Tsunami reconstruction funds worth $US500 million are being lost to fraud and corruption because of the failure by the United Nations to implement its own anti-fraud measures.

This claim is made by the UN’s former deputy director of investigations, Frank Montil, a former ASIO officer who for a decade was the deputy director of the UN’s internal watchdog unit, set up to investigate fraud and corruption within the UN and its agencies.

In an exclusive interview with the Herald, Mr Montil said “the oil-for-food scandal taught them nothing”. The fraud and corruption which had been occurring during the tsunami reconstruction period would come back to haunt the UN, which had wilfully ignored all the warning signs.

Sadly this is not an area of my expertise. My colleague-in-teaching-Economics would do better with this one (he knows corruption, and was mobilised by the US to help administer their response to the tsunami). However.

The line “former ASIO officer who for a decade was the deputy director of the UN’s internal watchdog unit” – does this not make him a poor choice for bone-pointer? He says “the oil-for-food scandal taught them nothing”, but I assume he meant to say us, because his tenure strikes me as co-inciding with exactly that scandal.

One gets the impression that this is one person’s claim, however large the department under him that wrote the/an original internal UN report:

“My estimations of fraud were that at the bare minimum in Banda Aceh alone there would be at least $US80 or $US90 million disappearing in fraud and corruption. That’s only in emergency funds. That doesn’t include the half a billion that will be lost to fraud and corruption in reconstruction funds,” he said.

Half a billion is a big jump from an apparently specific USD80 or 90 million. I tend towards the view of my colleague, actually – these are typical small, relative to the total. Even the USD12bn Paul Bremer apparently lost – the Iraq war burns up more than that in a fortnight, you know? The real question is, what gets done? Are these areas properly put back together? If so, then bribes are just another rent extracted by assholes along the way. If not, then bribes are still not the problem, surely.

I’m not suggesting we give no thought to the matter, but the UN/US/etc. should be more focussed upon proper re-construction. If KBR and every other outfit in Iraq built the towns, bridges, hospitals, properly, we really wouldn’t care if they skimmed. It’s when these are not built that we get upset.

Speaking – obliquely – of which. Still no real updated information on the First Kuwaiti potential-scandal. A new one has arisen, of course. The Mother of All Embassies has been delayed because it was so poorly built. Ah, dear. We have a saying, either down under or just in my family: if you didn’t laugh, you’d cry.

Climate change disaster is upon us, warns UN

First, over at the Guardian:

Sir John, a British diplomat who is also known as the UN’s under-secretary-general for humanitarian affairs, said dire predictions about the impact of global warming on humanity were already coming true.

“We are seeing the effects of climate change. Any year can be a freak but the pattern looks pretty clear to be honest. That’s why we’re trying … to say, of course you’ve got to deal with mitigation of emissions, but this is here and now, this is with us already,” he said.

As a measure of the worsening situation, Ocha, the UN Office for the Coordination of Humanitarian Affairs – part of the UN secretariat that employs Sir John – has issued 13 emergency “flash” appeals so far this year. The number is three more than in 2005, which held the previous record.

Two years ago only half the international disasters dealt with by Ocha had anything to do with the climate; this year all but one of the 13 emergency appeals is climate-related. “And 2007 is not finished. We will certainly have more by the end of the year, I fear,” added Sir John, who is in charge of channelling international relief efforts to disaster areas.

More appeals were likely in the coming weeks, as floods hit west Africa. “All these events on their own didn’t have massive death tolls, but if you add all these little disasters together you get a mega disaster,” he said.

Sweet. Mega-disaster. Two things: first,

The Ocha appeals represent the tip of an iceberg since they are launched only with the agreement of the affected country. India was badly affected by floods that hit the rest of the Asian region in July. But unlike its neighbour, Pakistan, India did not call on the UN for help.

Ocha believes that 66 million people were made homeless or were otherwise affected across south Asia. The lives of several million more people were turned upside down across Africa. Sudan, Mozambique, Madagascar, Zambia and Uganda experienced disastrous floods, and Swaziland and Lesotho declared emergencies because of severe drought that reduced harvests by half.

The latest appeal from Ocha was launched yesterday, to try to raise emergency relief funds for Ghana, where more than 400,000 people are reported to be homeless as a result of flooding. Appeals may also be started for Togo and Burkina Faso.

I do agree that there are incentive problems, here. It is in the interests of the UN’s Office for the Co-Ordination of Humanitarian Affairs to paint a bleak picture. Or is it? This sort of talk does not make we want to donate money – it makes me think there’s nothing I can do (besides, I thought Bono was fixing this stuff?).

Secondly, and relatedly, there is the problem of us. Our brains, and the trouble we have dealing with things on a large scale (and, in my case, remembering where I saw the review of the book talking about this – I think it was in Wired magazine, but I can’t find it). Increase the scale of the problem, and you diminish our capacity to get our feeble minds around it. Besides, Dancing With the Stars is about to start.

So while I acknowledge a bias problem on the part of OCHA, I just don’t see that it’s significant enough to make me turn my back on the problem. Opinions differ, of course, but

… just as global warming starts to make itself felt, there are signs that “donor fatigue” has set in. Of about $338m (£166m) requested for Ocha’s 13 flash appeals this year, only $114m has so far come from donors.

Meanwhile, over at the blog Inhabitat comes a more pro-active voice, and one with which I am indeed sympathetic:

Architecture2030 is making their opposition to coal abundantly clear- continuing their anti-coal campaign, they’ve released a full page spread in The New York Times last Friday that read, “Want to stop global warming? Stop Coal.” What follows is a compelling case for ending our reliance on coal, supported by graphics and statistics that blame coal for global warming, along with a plan of action to repair the damage.

Based on their statistics, Architecture2030 predicts that based on our current rate of growth and coal usage, the planet will reach 450 parts per million (ppm) of carbon dioxide (CO2) in the atmosphere by 2035, triggering everything from glacial melting to rising sea levels. We are currently at 385 ppm, and are increasing atmospheric concentrations of CO2 at approx. 2 ppm annually.

The link to Architecture2030 is worth following. As is the remainder of the article. Like George Monbiot’s Heat, like the report Zero Carbon Britain, there is a lot here that should, by rights, be commonly understood. That it is possible to reduce, drastically, our impact on the planet, without drastically affecting our economies (the two precautionary principles of climate change do not need to be in conflict, I guess, is my point).

The flip-side to this, of course, is carbon sequestration, which does/may show some promise – but not without its continued use driving the technological change. I already know my stance on coal, though – yours?

Won’t somebody just default on Zimbabwe?

I can only think Zimbabwe, formerly the bread basket of its region, is deliberately pushing the accepted definitions of sovereignty.

Zimbabwe’s bakeries have shut and supermarkets have warned there will be no bread for the foreseeable future as the government admitted that wheat production has collapsed after the seizure of white-owned farms.

…

Last week, the government said it plans to import 100,000 tonnes of wheat but acknowledged that a shipment of 35,000 tonnes is held up in Mozambique because of a shortage of hard currency to pay for it. The agriculture minister, Rugare Gumbo, blamed the food shortages on black farmers who have taken over formerly white-owned land.

Nice – you mean those former soldiers with nothing but poverty and anger, whose support you won by pushing white farmers out of the economy and country, not even all that long ago? Rush Limbaugh would indeed be proud, the snivelling, hypocritical drug addict.

Who honestly thought that utterly non-trained people would assume entire farms and be able to reproduce harvests? Still less in the face of political tribalism that has not only superceded government, but gone almost completely (short of Lord of War caricatures of Charles Taylor) apeshit.

So: kicked out the skilled work-force (ooh, now where does that failure of intelligent planning ring a bell?); infrastructure disappearing from theft by hungry people; crops dying from failing infrastructure; food and electricity drying up because country’s out of currency; government planning on taking away 51% (minimum) of every foreign-owned company; government blaming black people, promising more and saying they’ll start a new currency.

The funny thing is, it isn’t even as though this is irrepairable – Russia managed. The trouble is this sort of shit just invites bankruptcy, penury, starvation and the arrival of the IMF to deliver far more foreign and white ownership than any post-Rhodesian-born Zimbabwean could imagine.

I’ll consider no age an enlightened one until tribalism (including religion) has no place in government.

CARE Turns Down U.S. Food Aid

My wife sent me this story, which related to a previous conversation we had had about US food aid being such a pain in the ass for the people receiving it.

Now the charity group CARE has become what I say will be the first of many to declare the having of had enough.

A major international charity has decided to turn down millions of dollars worth of grain from the U.S. government to feed the world’s hungry because it believes America’s method of delivering vital food supplies does more harm than good.

…

While the U.S. is responsible for almost half of all food donations to the developing world, it has become increasingly isolated because of its method for doing so. It is the only country to utilize “monetized food aid,” a method by which grain is shipped from America to charities in the developing world, who then sell the grain in the local market and invest the proceeds for its own programs.

…

“If we are trying to limit people’s vulnerability to food insecurity, we just couldn’t see how we could continue [monetized food aid] in good faith,” David Kauck, Senior Advisor at Care told TIME.

That’s a couple of well-put-together articles now, from Time. Although I doubt they care what I think. The International Herald Tribune has written it up very well, also.

The US approach to food aid is terrible – it is as much, or more, welfare for US farmers than for The Poor Bastards Of The World. US food takes months to arrive, rather than the mere days that locally-purchased food would take, is limited (because it may spoil) and, when it arrives, depresses local prices – precisely something “aid” should not do.

Can you imagine your government coming up with a form of welfare payments that drive down the incomes of America’s (for example) poor people, while giving them their benefits? It’s that obviously counter-productive. For the poor countries, at least – it’s still money in the pockets of US farmers, owners of at least one of the top 10 lobbies in Congress. Or rather, at Congress, though I was probably more correct the first time.