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DM format Centrale (500 mots)PCSI 2012-13, 29 avril

1. Tax revenue, not foreign aid, is the key to development in Africa

This year, many African countries celebrated 50 yearsof independence. And yet, too many African governmentsfund development policies primarily by using foreign aidand not by mobilizing their own resources. For some coun-tries, there are not yet alternatives. But for many others,it is possible and urgent to develop a fairer and more effi-cient taxation system. Unlike aid money, which will likelyremain painfully limited, tax revenue can make an enor-

mous difference to achieving development goals. In 2008,the combined fiscal revenue in Africa reached over $400bn- 10 times the total amount of aid money flowing to thecontinent.

The international community could play a key role.Saying that African countries should rely more on them-selves is not the same as saying they should be left toachieve this alone. Development partners could supportan international tax dialogue to voice and address Africasconcerns on issues such as tax evasion, fiscal havens and

abuses by multinationals.

Meanwhile, the more efficient a countrys use of col-lected taxes, the less tax revenue it will need to collect toprovide decent infrastructure and functioning public ser-vices. Reforms are needed to improve the public sectorsinvestment capacity and to involve the private sector inpartnerships. Monitoring and evaluation of public expen-

diture should become the norm, and coherence betweennational and local actions has to be improved.

Long-term, sustainable development will always becontingent on local ownership and domestic resources.These in turn require informed public policies with long-term perspectives. This is the key to African countriesability to diversify their economies and take a more centralrole in the global economy. Aid helps, but it is not enough.

Mario Pezzini, 1 in The Guardian, Sept. 21 2010

1. Director of the OECD (Organisation for Economic Co-operation and Development) development centre in Paris

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2. Aid and tax revenues per capita in Africa in 2008

"+$#,"++$#*%!!,!-./00/,12 !#

Source : African Economic Outlook, 2010

NB : ODA = Official Development Assistance

3. EU policy creates more poor farmers, says Oxfam

Are subsidised EU imports threatening the livelihood ofthird world farmers ? Oxfam2 campaign and advocacy exe-

cutive Colin Roche talks to David Storey .

The EU Common Agricultural Policy (CAP) is putting

many third world farmers out of business. Thats the starkmessage from Colin Roche, the campaigns and advocacyexecutive of Oxfam Ireland. He wants to see an end tosubsidies that support below-cost selling of EU farm pro-ducts to developing countries. He says there are numerous

2. Major international charity

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countries around the world where farmers are losing theirlivelihoods as a result of unfair competition from the EUand the US.

Many developing countries still have a predominatelyagricultural economy, says Colin. Its the only way thepeople have of making a living. Yet the efforts of theirsmall farmers are undermined by having to compete withimports from the EU which, because of export subsidies,can be sold below cost.

The importance of agriculture to developing countriesbecomes clear when you consider that four out of every fivepeople in Tanzania make their living from the land. Aidagencies like Oxfam and many others are involved in manyworthy projects there to help improve the lifestyle of localfarmers. But when the EU floods the market with heavilysubsidised products from the EU, local small farmers areunable to compete.

Small farmers in Namibia provide a another exampleof the negative effect of EU subsidies. Being close to ri-cher South Africa, they used to have a lucrative marketon their doorstep. Most of their farmers are very small -some had as few as one or two cows, explains Colin. Thenthe EU dumped cheaper agricultural goods on the marketand their market was gone. Goods that had travelled halfway across the world were putting the local farmers out ofbusiness.

The CAP seems all the more illogical in light of thefact that the EU and European aid agencies are committedto assisting the agricultural sectors in developing coun-tries. The Indian dairy industry, for example, has receivedvaluable assistance from the EU. Yet as a result of the

overproduction of milk in the EU, the development of thatsame dairy industry has been damaged by the dumping ofEU milk products on the Indian market.

The staggering statistics that flow from the CAP willsurprise even the most vocal defenders of EU policy. Eu-ropean citizens are supporting the EU dairy industry tothe tune ofe16 billion - thats over 2 euro a day per cow,and its more money than half the worlds population getsto live on. That means that European cows have a higherincome that the majority of the human population on theplanet.

We would like to see changes in European policy,especially in products such as milk where there is overpro-duction, says Colin. One suggestion would be to reducethe amount of quota available to dairy farmers.

Any reduction in quotas would bring a wail of protestfrom farmers. But how can we justify supporting the pro-duction of foodstuffs which we dont need and which wecan only get rid of by using taxpayers money to undercut

the prices paid to small farmers in developing countries ?

Well aware of the depth of opposition amongst farmersto any reductions in support levels, Colin points out thatthat the lions share of EU subsidies goes to the big farmersand agribusiness corporations. Since 1970 the number offarmers in Ireland has halved. The Common AgriculturalPolicy hasnt stopped the flight from the land, he says.The big farmers get the bulk of the subsidies and thesmall and medium sized farmers are leaving farming.

Source : Oxfam website

4. Time for a new deal for fragile states

The OECDs fourth high-level forum on aid effective-ness will hear a collective call for a new deal for fragilestates from the g7+ a group of 19 countries that strugglewith poverty, instability and the threat of violent conflict.Few of them are expected to meet a single millennium de-velopment goal.

The call is timely : recent years have seen a growingunderstanding of why some fragile states recover, whileothers remain unstable or slip back into conflict. Researchfrom the Overseas Development Institute and others sug-gests that the development of national institutions is cru-cial. Unless citizens believe that problems can be solved

through political processes, there is a risk that theyll besolved through violence.

But building effective institutions can take decades, andeach country must blend local culture with national iden-tity and traditions to build institutions seen as legitimateby all citizens. In this way, fragile states are not just a

more difficult case of development, but require a funda-mentally different approach that also recognises politicaland security challenges.

It may be tempting to walk away. Why not just quaran-tine fragile states until their people grow sick of violence ?

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Fragile states are not in a vacuum apart from the hu-manitarian concerns we may have, the challenges they faceare directly relevant to global security and economic inter-ests. The experience of Afghanistan, Pakistan and Somalia,as well as the wars in west and central Africa demonstratethat violence tends to spread to surrounding countries andbeyond. Weak governance can also allow space for traffi-ckers in guns, children and drugs as well as pirates andterrorists to operate with impunity.

Then there are the global financial costs. UN peace-keeping in Liberia and Sierra Leone costs five times morethan aid flows to these countries; in Afghanistan, militarysupport costs 20 times more than civilian assistance.

Success is possible. Many former fragile states havemade good use of foreign aid and are set to be tomorrowsemerging markets.

Helping countries to establish their own capable, ac-countable and legitimate institutions, so as to avoid chronicaid dependency and allow the withdrawal of peacekeepers,requires a shift in aid spending that does no harm tolocal institutions.

I see four key steps. First, we need to speed up thedelivery of results. The g7+ countries are burdened by theslow pace of aid, complicated procedures and a lack ofdonor flexibility. Procurement policies may assume com-petitive markets and efficient logistics that simply mightnot exist. Bureaucratic rules often lock humanitarian anddevelopment funds into separate compartments.

Second, we need a better balance between the risk that

money will go astray and the risk that programmes will failto deliver peace and development by delivering too little,too late. Development assistance to fragile states is usuallyprovided either the same way as in more resilient countrieswith stronger institutions with the same procedures andaversion to risk or by fragmented, unco-ordinated andlow-impact aid that bypasses legitimate national govern-ments. Reasonable financial controls are quite feasible infragile states.

Third, more money must go through the countrys ownsystems, with additional financial safeguards. Evidencefrom countries as diverse as Afghanistan, Rwanda andSierra Leone shows that with external verification of ex-penditures, and contracting out of fiduciary management,we can channel aid through national treasury systems wi-thout excessive risk, even in countries suffering pervasivecorruption and abuse of power.

Fourth, we need more transparency from donor coun-tries, international agencies, NGOs and the governments offragile states themselves. Donors should publish informa-tion on their aid flows and results ; governments of fragilestates should publish information on their budgets andcommunicate this to citizens.

International conferences for the past decade have cal-led for better co-ordination, which remains elusive. Aidthat is fragmented into thousands of tiny projects frommultiple donors is impossible for a post-conflict govern-ment, and probably anyone else, to manage. The budgetof the sovereign government can provide the framework toco-ordinate and align aid with national priorities and plans.

Fragile states need support here to consolidate assis-tance into sector-wide national programmes, and to prepareand execute national budgets. Co-ordination can be impro-ved if transactions costs to government are reduced andif risks are shared among donors by pooling funds. Trustfunds, such as those in Afghanistan, Timor-Leste and WestBank/Gaza, and the Liberia health pooled fund, have beensuccessful in doing this.

Helping countries move from fragility to resilience re-

quires not just agreement in Busan, but also country-levelcompacts that set out monitorable goals for countries andtheir partners to achieve.

Success is not only important for the 1.5 billion citizenswho live with the everyday threat of violence and hunger,but also for the security and consciences of us all.

The Guardian, November 29 2011

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5. Small wonder

A new model of microfinance for the very poor is spreading

MY GROUP has rescued me and my children frompoverty, says Faustina Kwei, rearranging baskets piledhigh with cassavas and plantains around her market stallin a poor suburb of Accra, Ghanas capital. She used acombination of savings, dividends and loans from a savings

group to rent her stall and buy stock. For the first time,she can feed her two children well and send them to school.

Ms Kwei (pictured) is one of millions of poor people tohave benefited from the hottest trend in microfinance : vil-lage savings and loans associations. Millions of people likeher survive on meagre and erratic earnings. Access to thesimplest financial services can help stabilise their incomes,which in turn makes them less vulnerable to diseases andnatural disasters. An unexpected flood or fever can push apoor family into utter destitution, or the muscular arms ofloan sharks.

Most of the estimated 2 billion people who live onless than $2 a day do not have access to formal banks.Over the past 20 years, legions of microlenders have triedto extend financial services to them. But some commu-nitiesthe poorest, the least densely populated and themost remoteare not attractive to traditional microlen-ders. And the poorest of the poor are often wary of rackingup any kind of debt, even a small one. Some economistsargue that what the poor really need, if they are to managetheir cash better, is savings.

CARE International, a charity, began a novel scheme

in Niger in 1991 to help the poor savea basic form ofbanking called a village savings and loans association. Thisis based on savings rather than debt and managed by mem-bers of the community rather than professionals.

Since then, CARE and other NGOs, including PlanInternational, Oxfam US, Catholic Relief Services and theAga Khan Foundation, have promoted village savings. Theschemes are so successful that they are now spreading

across Africa, Asia and Latin Americasavings groupsnow have 4.6m members in 54 countries.

People like these schemes because they are easy to un-derstand, says John Schiller, a microfinance expert with

Plan International. And returns on savings are extremelyhighgenerally 20-30% a year. Borrowers typically payinterest rates of 5-10% a month on loans that usually haveto be repaid within three months. The rates may seemusurious but they are set by people who are in effect len-ding to themselves and saving the interest that they charge.

A village savings scheme typically involves a small group(perhaps 15-30 people) who pool their savings. Each buysa share in a fund from which they can all borrow. All mustalso contribute a small sum to a social fund, which acts asmicro-insurance. If a member suffers a sudden misfortune,she will receive a payout.

Members select leaders and draft a constitution. Therules spell out how often the group will meet, what interestrates it will charge and what loans may be used for. Atthe end of a cycle (usually about one year), all the moneyaccumulated through savings and interest is shared out ac-cording to members contributions, and a new cycle starts.Once members have mastered the system, the groups theyhave formed can take on additional tasks such as providingtraining in agriculture, health, leadership and business.

Members may go on to spread what they have learned

to other villages. Ms Kweis village scheme shared its ac-cumulated savings and dividends after nine months. Withher portion she was able to register her family for GhanasNational Health Insurance Scheme and pay rent on hermarket stall. Now Ms Kwei plans to organise other womenin her home town of Abokobi, near Accra. Savings couldimprove their lives, too, she reckons.

The Economist, Dec. 10 2011

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