16-17 October 2006, Misty Hills, Muldersdrift Ross Herbert Nepad and Foreign Aid: Opportunities and Limitations 16-17 October 2006, Misty Hills, Muldersdrift Ross Herbert The South African Institute of International Affairs

The South African Institute of International Affairs Key Questions What changes in global aid regime should Africa seek? What should Africa seek from China? What do we know about the opportunities and challenges of aid? How can we make aid more effective? The South African Institute of International Affairs

$50 billion in new aid pledged by 2010 The South African Institute of International Affairs

The South African Institute of International Affairs Aid as Mixed Blessing Nepad has scored significant successes with higher aid, debt relief … but aid has serious downsides Accept short-term necessity but need fundamental change in aid practice The South African Institute of International Affairs

The South African Institute of International Affairs Big Push Assumptions Big Push advocates acknowledge present aid regime/practices cannot absorb the new funds without dramatic changes Good governance can be engineered Implies either massive increase in aid agency staff supervision or greater budget support Dutch disease: big aid won’t warp exchange rates & damage competitiveness Nepad’s aid/investment assumption Growth is function of investment input Figure out desired growth & backtrack to $64 billion needed per year The South African Institute of International Affairs

Aid Theory vs Reality in Zambia 500 2500 6500 10500 14500 18500 1961 1969 1977 1985 1993 Per-capita income Income if aid - investment theory worked as predicted 1985 dollars Aid Theory vs Reality in Zambia The South African Institute of International Affairs

Measuring Aid Effectiveness World Bank: $1 Billion lifted 284,000 people above $1/day in 1998 compared to 105,000 in 1990 That means in 1990 $9,523 spent to give one person something less than $365 Now it costs only $3,521 The South African Institute of International Affairs

The South African Institute of International Affairs Why is aid ineffective? Cold War Short-term aid postings, staff incentives Aid mostly about boosting image of giver Bias for action & things, against experimentation Measure success by inputs, not results No transparency in aid agencies, no proper reporting Aid breaks democratic accountability Aid delays decisions, saps initiative The South African Institute of International Affairs

Nepad and Aid Opportunities Calls for more quantity and quality Nepad sector plans attempt to direct aid according to more rational plan Pushed for mutual monitoring system Strong platform to lobby for change The South African Institute of International Affairs

The South African Institute of International Affairs Nepad Organisation How does Nepad fit into bilateral aid talks? Are we being bold enough with Nepad? Regionalism as paradigm Works for conflict resolution, infrastructure, educational centres of excellence Less effective for other issues Additive/conventional vs transformative Reliance on RECs How to allocate Nepad staff time? Advocate, think tank or facilitator? The South African Institute of International Affairs

Influencing Developed World Western perceptions of Nepad/APRM Supportive of concept Don’t want to overwhelm But question speed, complexity What signals interpreted as real change? Grand bargain: not struck once, but needs to be fed with signals of innovation Candor, openness and public debate Tangible projects Engage meaningfully in aid effectiveness with detailed research, substantive proposals The South African Institute of International Affairs

Influencing Developed World Prepare the ground Policy ideas move from research to political position via centres of influence Need to build understanding of Africa in centres of influence Move beyond presidencies Aid policy largely set in legislatures Need to understand objections, coalitions Move beyond aid quantity to aid quality Develop measures of effectiveness Develop model management system The South African Institute of International Affairs

Influence & Service in Africa Faces view that Nepad must bring $$ Nepad needs both influence & valued services Problems states want to solve but need help Problems states need to be nudged to solve Forms of influence: Need escalate some issues to presidents Stimulate public debate about policy options Creative public outreach to stimulate thinking on reform, developmental theory Changing beliefs about what works APRM Forms of service: Quality of thinking/innovation offered Replace foreign technical assistance with assistance routed through Nepad think tank Facilitate access to new aid pools The South African Institute of International Affairs

What Should Africa Ask For? Support for systemic APRM reforms Long-term 10+ year project funds Industrial development Boost use and development of African experts Long-term measures of aid effectiveness Use loans for L-T projects that directly boost African revenues Structure aid to pull in investment Mozal, call-centre models Structure aid to promote growth The South African Institute of International Affairs

The South African Institute of International Affairs African Growth Goals Strengthen commercial infrastructure Invest in rural economies Invest in skills and research Invest in trade support, market access research Invest in marketing organisations Increase lending and savings Raise domestic revenue Promote justice and rule of law Remove obstacles to business Fight corruption, build effective institutions The South African Institute of International Affairs

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