An epidemic of white jeeps

The Economist – Aug 1st 2007

Curmudgeonly thoughts about aid

Arriving recently in Port Moresby, the capital of Papua New Guinea, your correspondent was puzzled: where were all the white jeeps? On recent visits to Phnom Penh and Dili, the capitals of Cambodia and Timor-Leste respectively, one of the most impressive sights was the swarm of white four-wheel drives—emblazoned with the logos of every United Nations body, donor agency and charity imaginable—that clog the streets. It turns out that “PNG”, as locals often call their country, also has its share of jeep-driving aid workers, though there are fewer of them and they mostly belong to one agency: AusAID, from Australia, of which PNG was a colony until 1975.

These three countries are among East Asia’s poorest and, year after year, receive huge amounts of foreign aid relative to their size. The UN’s $170m annual budget for Timor-Leste is equivalent to about half the country’s non-oil gross domestic product. And that is before counting the substantial spending by countless other donor agencies or the cost of the Australian-led peacekeeping force there. The $690m that donors are promising to Cambodia in the coming year is more than its government collects in tax revenues. And although Australia’s aid to PNG has declined since its independence, it is still equivalent to about one-quarter of that country’s tax revenues.

The sheer number of foreign-funded development projects, and the bureaucracy involved in dealing with their sponsors, overwhelm these poor countries’ ramshackle governments. A World Bank report last year said it was impossible to be sure how many foreign-funded projects were running in Cambodia—maybe 500, maybe double that.

Although this aid is well-intentioned and the recipient countries are truly needy, a curmudgeonly and heretical thought occurs: is this overkill? Are these impoverished countries, which have been bypassed by Asia’s surging prosperity, really benefiting from being bombarded with the money and advice of so many do-gooders, however sincere? Would they be better off if given a bit more space to develop self-reliance?

Of course, with so much money sloshing around, some of it is bound to do good. In Timor-Leste, for example, thousands of refugees from recent politically-inspired clashes are sheltering in tents provided by the UN’s refugee agency, while the UN’s World Food Programme is feeding thousands more who are suffering from a drought. If nothing else, the very presence of all these well-paid foreigners boosts the local economy, as part of their salaries trickles down to restaurant workers, rickshaw drivers and the like.

However, it is less clear whether these projects are making a sustainable improvement in the receiving countries. The UN compiles a “human-development index” (HDI) for each country, attempting to measure its development in broader terms, including health and education as well as income. The latest version of these figures shows, for example, that despite all the aid it has received, Papua New Guinea’s HDI has worsened from 0.53 in 2000 to 0.523 in 2004 (compared with 0.965 for Norway, the highest scorer).

Cambodia’s HDI has improved from 0.536 in 1995 to 0.583 in 2004. This is good but perhaps one might have expected better, after nine years of being love-bombed with aid. And perhaps much of the improvement was due to Cambodia having a relatively open economy and thus enjoying more rapid growth, rather than a result of its many development projects.

PNG’s prime minister, Sir Michael Somare, affects cynicism about Australia’s donations, calling them “boomerang aid”: ie, money that mostly returns to the pockets of Australian consultants and bureaucrats. But Sir Michael knows his country’s former colonial ruler feels too much responsibility (or possibly guilt) to walk away.

Likewise, Cambodia’s prime minister, Hun Sen, feigns disdain for his country’s aid donors, because he knows they lack the collective guts to quit, despite their exasperation at his government’s corruption and incompetence. Donors to Cambodia and PNG have tried clubbing together to press the two countries’ leaders with a common set of reform demands. But the prime ministers, like the leaders of other recipient countries, know full well how desperate donor agencies are to shovel their money out the door before the year-end, lest their paymasters back home cut their budgets.

A few years ago the buzz-phrase in foreign aid was “budget support”: Britain and other donors sought to give an increasing share of their aid directly to poor governments, especially in Africa, and let them decide how best to spend it. But in the worst-governed countries (ie, the most needy ones) the result was much misspending. In the poorer bits of East Asia, donors have tended to move in the opposite direction, removing aid from the clutches of local political leaders and overseeing its spending more directly.

Even so, they feel obliged to continue “working with” governments in the recipient countries, encouraging them to “take ownership” of aid projects’ goals, even if they do not control the funds. Often, all the agencies end up doing is constraining their own ability to speak out about the widespread graft and mismanagement in those governments. Donors should, if their efforts at coaxing recipient governments are going nowhere, be more ready to work without them, for example by using charities to send aid directly to the poor. Perhaps they might even, from time to time, consider the arguments for spending less.