IS MALAWI READY TO DO
WITHOUT AID?
A
CRITICAL REVIEW OF THE BOOK; DEAD AID BY DR DAMBISA MOYO
Dead Aid
book makes a aggressive position on why aid has proved not to work in Africa
compared to some Asian countries. Dr Dambisa Moyo, the author of Dead Aid is a distinguished Zambian economist.
She has a PHD in Economics. She is a graduate of Oxford University and obtained
her master’s degree from Harvard University Kennedy school of Government. She
worked for World Bank as a consultant before joining Goldman Sachs global
economics group where she worked for eight years.
In Dead Aid, Dr Moyo provides critical and
undeniable viewpoints on how aid has failed to change the economic landscape of
Africa. Dead Aid clearly disputes
the failure of Aid in Africa, and then Dr Moyo gives a picture of how Aid has
continuously damaged Africa than being a solution to its obtrusive economic and
developmental problems. She ends the last bit by providing an antidote against Western
Aid for African countries, a highway to economic growth.
Aid
is help or assistance,[1] rich countries offer money equipment or services to
poor countries to help them improve life. Aid can be in two folds. Firstly as a
grant, where you do not expect a repay anything in return or as a loan where a
borrowing person or institution repays within a specified period.[2]. Loan
could be either short term or long term depending on how long a country takes
to repay. Dead Aid has classified
aid in three broad categories, humanitarian aid, charity based aid and
systematic aid. According to DR Moyo, systematic aid is aid transfer from
either government to government or a lending institution to government.[3].
Systematic
aid is divided into two categories, Bilateral and Multilateral aid. Bilateral
aid involves transfer or payments from government to government while
multilateral involves payments from an institution to government [3] e.g. from
the IMF to a country. In United States aid is classified into five categories,
bilateral, economic, aid supporting USA agenda, humanitarian assistance and
military assistance.[2] these provide classical American categories of aid that
congress consider when proposing a budget. Bilateral aid supports development programs
of developing countries.[2] The USA bilateral aid, which is managed by United
States Agency for International Development-USAID is meant to support long-term
projects in private sector development, economic reforms, democracy promotion,
environmental protection, population and human health economics.[2] Aid support
for USA agenda on the other hand support USA home project. It focuses on
economic, political and internal security interest.[2] Humanitarian aid, is
defined as responsive aid to calamities or catastrophic phenomenon exacerbated
mostly by natural disasters[3] or war, for example the Tsunami disaster, famine
in Somalia.
Military
aid is aid that focus on the development of the military and training of
partner countries defense forces. The military aid goes to training and
acquiring of military equipments. In 2004, the US congress approved USD4.8
billion of military assistance, consuming up to 23% of the total US foreign
aid.[2]
DR
Moyo attack on African aid surrounds the failure of both bilateral and
multilateral aid. She writes in Dead Aid,
that tones of aid monies given to Africa from the Western countries are
disbursed in form of concessional loans or grants where African countries
expects to pay back after a given period.
Is Aid a Serial killer?
Changes in the aid agenda has
largely contributed in making aid ineffective in Africa. For over 60 years of
Western assistance, there has been an immense shift on aid agenda for Africa
such that aid did not manage to make lasting economic progress for Africa. This
explains poor management of aid. The Marshal Plan, is evidence that if aid is
focused on one agenda it yields remarkable economic growth.[3] The Marshal Plan
aid agenda strictly targeted at rebuilding Europe after the Second World War.
Upon its completion, the Marshal Plan was considered the most successful aid program.
The program responded to the needs of countries requiring aid at that time and
helped to build their momentum to generate their own financial empire. People’s
lives were improved; countries registered higher GDP in subsequent years than
before. You may wish to note that during this time aid monies were focus on
reconstruction of Europe and made coherent with Europe’s developmental needs.
The fact that the replica of the Marshall Plan could not work for Africa as Dr
Moyo writes, the answer remains hanging. Maybe yes, given that Europe and
Africa have a different setting geographically and politically. However, aid is
capable of reverting a country to its financial pathway in a proper system of
government and financial management. Generally, aid has not killed Africa but it
has been mismanaged and that had some effects on African growth pattern. In around
1960’s, like the Marshall Plan for Europe, African aid agenda focused on construction
of Africa. Some African countries including Malawi, Zambia etc used aid to
construct bituminized roads, bridges and airport.[3] Towards 1980, the aid
agenda had completely shifted to alleviate poverty. This meant a sharp drop in
the aid money positioned for construction of Africa to alleviating poverty. Around
the 1980, the aid agenda had shifted to governance issues. According to Dambisa
good governance was a function of reformed institutions, respect of rule of law
and a corrupt free environment.[3] In 2000, the aid agenda shifted again. Such
drastic shifting in aid agenda explains reason why not so much is shown for aid
today. Every time there was a shift, the previous agenda collapsed.
Dead Aid, presents Aid as an architect of
corruption. In most countries where aid has not worked, resources end up in the
pockets of few people.[3] Due to poor system of government and financial
management, it creates a spongy financial membrane where policies in place fail
to control politicians enriching themselves using finances intended for
development. Dr Moyo, argues that aid into a country introduces free flowing
finances where citizen fail to hold government accountable of its expenditure.
Aid weakens the power of the citizens, as those responsible for financial
basket depends on donors to finance their budget. Official thus become so free to
misuse the finances on projects that would enable siphon the resources in the
name of illegal contracts, exaggerated procurement, inflated allowances and
other tricks.
On a broader perspective,
corruption should not be blames to be born out of Western financial assistance.
It could be argued that even when Africa was financially stable, rich in its
investments, its leaders would still not focus on development. African
leadership is characterized by its greed and lack of political will to put
development a top priority on its agenda. African nations are good at talking
and writing development but very little or nothing at all is done practically. African
leaders are strong at keeping to their leadership positions or working out a
leadership transition that would favor them. A lot of their energy and finances
is spent on building their social status, supporting their political battles
with little focus on development.
Dambisa provides a vibrant
case that conditionalities attached to aid did not affect the aid flow to
African countries despite Africans countries not being loyal to the conditions.
Aid conditionalities were a set of standards developed by donors to guide aid
disbursement to nations.[3] Some of the major conditions included aid tied to
procurement, where donor institutions only allowed procurement from their
certified countries even when procurement could be done at a low cost in a
different country. Donors also pre-determined how they wanted their resources used.
Such conditions among others provided aid-receiving countries with less power
to prioritize their developmental agenda. One could argue that such conditions
diluted the meaning of aid in Africa as it served donors interest and promoted
paternalisms philosophy, where receiving countries could not decide what they
do with aid but rather conform to their aid institution needs. José Cerqueira
an economist from Angola observed that “to
them, we should have ears, but not mouth”p109[3]. Despite operating under such strict conditions, some African
countries never satisfied the condition attached to aid. It was surprising to
note that aid kept on being fluid, giving countries a window where they could
have invested aid monies into developmental agenda on their priority list. Instead,
it gave such countries an opportunity to concentrate on their selfish agendas,
enriching the selected few. Mismanagement of aid in Africa, even when donor
institutions did not strictly question the credibility of aid receiving
countries is a sign that African countries sit on weak political platforms that
do not adequately support development and where leaders are not held
accountable for their actions.
Dambisa’s proposition on
what she regards as an antidote to Western aid is a perfect strategy African countries’
must consider to polish their economic problems. African leaders need to start
perfecting their developmental view. Dr Moyo clearly states basic homemade
strategies how Africans can make use of the funding and trade opportunities
that exist in their surroundings. In what appears to be the basics for African
economic boomerang, there is need to promote a culture of transparency in
African states, a culture that condemns corruption at all level. African states
have to establish a culture where everyone is a corruption watchdog. Instruction
reforms are also prime to African economic growth. There is an urgent need to
refocus on our rules and regulations for fiscal management, for trade both
internally and cross border. African countries need to be reactive to the
existence of financial opportunities elsewhere than sorting assistance from the
same western aid groups. There is however need to make a cost benefit analysis
of donor resources before injecting them into your country economy stream. Dr
Moyo, further makes a point on vigilance to trade opportunity. The trade market
provides a perfect scenario for “give and take” where we are not just at the
receiving end but we also have something to offer.[3] There is need to make
most of our internal natural resources to attract investments both locally and
internationally.
Can Malawi do Without Aid?
Like
other African countries whose dependence on aid is very minimal, Malawi has the
potential to do with little or no aid at all. However, the process to aid independence
cannot happen overnight. As a country, Malawi will need a gradual transition to
economic sustainability. Given the present economic crisis where our Growth
Domestic Product GDP cannot fully support the country’s economic development,
financial support from different agencies is principal in sustaining the countries
budget system. Malawi clearly requires sufficient support in the area of
infrastructure, agriculture, energy, health and capacity building to keep the
system running.
The
fall of our GDP every subsequent year is a perfect demonstration that our
economic graph is always nose-diving. Efforts have been made to save the
country’s economic meltdown. We have tried to reduce inflation to a single
digit on paper, reduce annual budget deficit to an acceptable level to set the
country on a sustainable growth path.[5]. We have tried to implement what was
later discovered to be a fiddled zero deficit budgets. Our economic system is characterized
by unemployment, insufficient domestic revenue collection, small private sector
base and an outrageous import and export imbalance that requires immediate
attention. The current financial base cannot fully withstand such glaring
financial gap; hence donors have to be invited as developmental partners.
It
is however very important that policy makers need to start laying foundation on
how Malawi could be aid free. While aid still flows, there is need to execute rigorous
macro economic reforms, strengthen our zero tolerance to corruption
campaign. Our parliamentary representatives
and all other leaders have to be committed to development, committed to improve
market-based policies and creating a good environment for investments. Malawi
requires a clear strategy on how it can take advantage of the existing resources
to eventually become self sustainable and manage its own economic growth.
It
is important to ensure that current developmental activities should respond to
those outlined in the Malawi Poverty Reduction Strategy Paper MPRSP. There is
need to graduate from political battlefield to a development focused nation
where leaders at all levels are willing to work together for a sustainable
development. Immediate activities should focus on those aimed at promoting self-sustainability
to those that promote investments ie nutrition and food security, clean water, rural
development, infrastructure development and development of the energy sector. [7].
There
is an urgent need to set up deliberate tax policies that supports and promotes
both local and international investments. Investors are persuaded by flexible
taxes that favor their establishments and profits. Investments’ are a backbone
of any country’s economic growth. Investments’
absorbs skilled, semi-skilled and unskilled labour force. Unemployment is one
of Malawis major tide. Only if companies are ready to operate their business in
Malawi, unemployment is more likely to improve positively. Similarly, it will
contribute to the countries revenue base through pay as you earn tax. There is
need to work on the countries total annual budget expenditure for government institutions.
In 2012 budget statement presented in parliament, it was observed that the
country had accumulated in domestic debts and arrears nearly MK72 Billion.[5]
One would wonder how such huge sum of money was used on top of institutional
budget. The MPRSP attributes such lack of financial discipline as a
contributory factor to the country’s poor economic performance.[7]
Malawi
should intensify the zero tolerance to corruption campaign. Corruption is labled
to be among the top killers of economic growth let alone development. Corrupt
practices facilitate an environment, which leads to unfair distribution of per
capital income. Resources end up in the hands of few connected people. Malawi
is rated 3 point s out of 10 on the Corruption Perception Index, describing it
as the most corrupt, worse that Zambia which is at 3.2.[8]. Corruption delays
economic growth, as a country on an economic development campaign we need to
ensure that we set up deliberate policies that will aid reduction of corruption
at all levels. The country anti corruption bureau has to act freely and fairly
within their mandate. Deliberate stiff penalties must be imposed on all perpetrators
of corruption. Such strategic approach to corruption aught not be done in the
name of gaining donors confidence but in the name of an independent economy. A
corruption free environment is very likely to facilitate equality on how people
access the available resources for example education, health just to mention
but a few which will ultimately improve the country’s GDP.
Although western aid
has been described as ineffective in the last 60 years with not much to show
for it. Aid has led to some tremendous development in Africa that cannot go unnoticed.
Dr Moyo’s emotional outburst against aid from West does not give a balanced
viewpoint of what western aid has managed to do in Africa. Africa in itself has
largely contributed to the failure of aid through its corrupt practices, non
strategic priorities, population growth, lack of political will to drive
development agenda just to mention but a few. Any aid program is more likely to
fail if implemented under poor conditions, poor structures for managing
finances, rampant corruption, breakdown of rule of law. It does not matter
where your aid originates from, but if it cannot be managed properly then it
cannot succeed in responding to development.
Malawis accomplishment
of economic independence is exceedingly feasible. It can however not happen overnight
and it requires strict financial, structural and institutional restructuring to
be achieved. It will therefore be challenging for a country like Malawi to survive
without aid. Domestic revenues seen to plummet, are leading to a wide budget
deficit gap. In fiscal years 2011/2012 and 2012/2013, domestic revenues as a
percentage of the total budget were paged at 79 per cent to 63.5 per cent
respectively.[5][6] Malawi needs aid strategically positioned for sustainable
development and not just for consumption. Aid approaches should focus on
infrastructure development and promotion of policies that would obviously
promote and encourage capital investments.
With improved
communication, uninterrupted energy supply, excellent policies for favoring
investments and zero tolerance to corruption, Malawi is very likely to make
strides economically and move from aid dependency.
Reference List.
1.
Collins English Dictionary.HarperCollins.2010 Edition
2.
Curt Tanoff, Larry Nowels. Foreign Aid: An Introduction
Overview of U.S. Programs and Policy. Congressional Research Service. [Updated
April 15, 2004. p4 – p12: Accessed on 28th June 2012]. Available
from http://www.fas.org/sgp/crs/row/R40213.pdf
3.
Dambisa Moyo. Dead Aid, Why aid is not working and how
there is another way for Africa. Penguin Group. 2010.
4.
Thayer Scudder. The Kariba Case Study. Division of
Humanities and Social Sciences. Califonia Institute of Technology. Pasadena,
Califonia 91125. Social Science Working Paper 1227. 2005.[Accessed on 20th
June 2012] Available from: http://www.hss.caltech.edu/~tzs/The%20Kariba%20Case2.pdf
5.
M inistry of Finance. 2012/2013 Budget Statement
delivered by Dr Ken Lipenga on 8th June 2012. Budget Statement 2012
6.
M inistry of Finance. 2011/2012 Budget Statement
delivered by Honorable Ken Kandodo on 3th June 2012. Budget
Statement 2011
7.
International Monetary Fund. Malawi Growth and
Development Strategy from Poverty to Prosperity 2006-2011. International
Monetary Fund 2006: IMF Country Report No: 07/55
Transparency International [homepage on the
Internet]. Berlin [updated 2012; Accessed 15th June 2012]. Available
from: http://www.transparency.org
