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Fixing Foreign Aid

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  • Fixing Foreign Aid

    Fixing Foreign Aid
    Monday, May 24, 2004; Page A22

    Washington Post
    May 24 2004

    IN MARCH 2002, President Bush announced an expansion and renovation
    of U.S. foreign assistance. He proposed the Millennium Challenge
    Account, which would ultimately channel to poor countries $5 billion
    a year, a sum that would reflect a 50 percent expansion in existing
    aid programs. The new money would be spent in a new way: It would go
    to a short list of countries with sound policies, rather than being
    spread around dozens of places where corruption or political disorder
    undermines progress. Two years on, Mr. Bush's idea is not attracting
    the funding that he talked of. But his initiative has created an
    improved model for U.S. foreign assistance.

    The new model works by measuring the quality of poor countries'
    policies in three areas. The first concerns governance: Do citizens
    have civil and political rights? How bad is corruption? Is the
    government effective? The second category is investment in people,
    particularly in immunization, other health programs and primary
    schooling. The third is the quality of economic policy, measured
    partly by indicators like the inflation rate but also by the number
    of days it takes to start a business and "regulatory quality." The
    Challenge Corp., the government entity formed to administer the new
    aid program, has measured 77 poor countries against these benchmarks.
    The top 16 have been invited to apply for grants.

    Nobody pretends that these measurements are perfect; quantifying the
    "rule of law" is tricky. But the indicators are nonetheless the best
    available: They have been taken from respected outside institutions,
    such as the World Bank and Freedom House. Some might wonder, for
    example, why Armenia, a country with poor political and civil rights,
    was chosen, but Armenia's strong scores in economic management,
    rule of law and "government effectiveness" suggest that aid dollars
    will be well spent there. Why did Uganda and Vietnam, two development
    stars of the 1990s, fail to make the grade? Because their political
    scores were even worse than Armenia's.

    The question now is how the aid will be spent in the selected
    countries. High-performing poor countries tend to be the darlings
    of donors, so finding worthwhile projects may be a challenge. One
    solution may be to stay away from health and education, which attract
    the most outside backing, and go for power, water and roads. But
    infrastructure projects require engineering studies, environmental
    assessments, social-impact evaluation -- in short, they take time
    to get off the ground. Another solution may be to pour money into
    government budgets, so that the quality of government personnel and
    spending is strengthened, but this approach may not appeal to Congress,
    which likes backing discrete projects.

    Supporters of the Millennium Challenge Account worry that it is
    underfunded. When he laid out his plan two years ago, Mr. Bush said
    he wanted $1.6 billion in the current year, double that in 2005 and
    then $5 billion a year thereafter. Instead, Congress appropriated $1
    billion for the current year, and the administration has requested
    only $2.5 billion for next year; the eventual $5 billion target seems
    distant. But the chief danger to Mr. Bush's project is that, in an
    effort to wring money from Congress, his administration will make
    unrealistic promises about how quickly aid can be disbursed and how
    measurable the results will be. That will only breed cynicism when
    the promises go unfulfilled. Fighting poverty takes patience.
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