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Foreign Aid or Trap?Did the World Bank and IMF Prevent Bangladesh from Having a Flood Control and Disaster Management Program? by Sophia Barkat Bangladesh is a land of rivers and lakes. There are 30 rivers and numerous lakes. Most descend from the Himalayas, and are tributaries of the Brahmaputra River. Bangladesh is also a deltaic country. It's fertile land is perfect for agriculture and fisheries. Even with a population of 130 million, it has shown historical signs of self-reliance up until the 1970s. In recent years, the incidence of natural calamities, brought on by seasonal floods and cyclones, has however, pushed the nation into unthinkable poverty. Because of the floods, farmers, who constitute the main industry group, have been forced to sell their arable lands just to survive, and after that have been forced to migrate to urban areas in search of more stable sources of living. The migration of landless farmers to the cities has put more pressures on the already exhausted government budgets for education, health care, and raised urban squalor. Today, in Dhaka, disease, poverty and joblessness abound. Yet, inspite of the recurring Monsoon season flooding and cyclones, the Government of Bangladesh has no program to help the poor survive disasters, other than to start begging for more aid from rich nations. Why? Bangladeshi citizens have been asking this question for years, not to mention all the nations of the world, every time there is a new flood or cyclone, and the country is scrambling to make ends meet. This is an attempt to find out why. The attempt involves knowing the recent history of the nation, a look at the Bangladeshi Government's spending policies, at the various development agencies operating there and their recommendations to the Government of Bangladesh, and at the whole business of Foreign Aid. Ershad Ousted In 1991, the Government of Bangladesh under President Ershad collapsed. Ershad, himself, had taken power soon after a military coup in 1980 killed President Ziaur Rahman, and the interim President, Justice Sattar, died of a heart attack. Though there were rumors, General Ershad was not implicated in the killing of Zia, nor was there any investigation made about Sattar’s death, though close sources of Sattar raised questions. While Ershad established martial law, General Manju, a top-level general in the Bangladesh Army took the blame for Zia’s death, and was tried by a secret court and hung the same week of the death. Since taking power, Ershad ruled Bangladesh under martial-law for the first five years. In 1985, he held a General Referendum, not an Election, to see if people wanted him to be the President instead of having Martial Law. He, thus, became a civilian president, as there were no other candidates. During his rule, Ershad was known for openly being corrupt and for allowing the government to become corrupt. Bangladesh also became a major debtor nation, under his leadership. Tired of the way Ershad and the government under him was stealing and misusing public funds, the people of Bangladesh took to the streets, asking for his resignation. In 1990, Ershad deployed the military on the streets to break up civilian protests. But the military commander, General Nuruddin, otherwise soft-spoken and meek, basically told Ershad he could not help out. It is said that the American embassy, also told Ershad it was time to go. Thus, Ershad was removed from power. Justice Shahabuddin’s Task Forces Bangladeshis thought this was a turning point in their history. They had hope. The Acting President, retired Justice Shahabuddin, asked the nation’s top brains to give the government their advice on how to rebuild the nation. And that’s how the Report of the Task Force On Bangladesh Development Strategies was formulated. The Task Forces each reported on one major issue affecting the Nation. However, three kinds of recommendations were voiced: 1. NGOs like the World Bank, IMF etc. directly or undirectly make up for a fast growing sector in Bangladesh -- the Aid Sector. When those on the Task Forces were on the payroll of donor organizations, such as the World Bank or IMF or USAID, their report or recommendations for the Government were in line with donor organizations policies. The Macroeconomic Policies Task Force is one example. Report of the Macroeconomic Policies Group Task Force The Report said: "In the '80s, a severe deterioration in the terms of trade along with reduced external aid availability seriously eroded Bangladesh’s growth prospects and left her with unsustainable external and fiscal deficits." (Report of the Task Forces, Vol. 1, pg. 1) Citing a World Bank report, this Group stated that the Government of Ershad failed to carry out 100% donor-suggested reforms (Report of the Task Forces, Vol. 1, pg. 2), though it also noted that much of the reforms were carried out (Report of the Task Forces, Vol. 1, pg. 1). These reforms have to do with the Government’s expenditures, primarily in health care and population, education, environment, agriculture and trade. In the report, donor nations criticism of the Ershad government is as follows:
So, was Ershad really overspending? Aid and Spending under Ershad The Government’s dependence on Foreign Aid went up during Ershad. The Macroeconomic Policies Task Force stated, that in 1981, when Ershad took over, 58% of the government’s budget came from foreign aid – loans and grants. In 1990, when he left office, this was 98%. This implied that the Government’s autonomy was effectively reduced by Ershad. Also, under Ershad, only 2.2% of the ADP was spent on Family Planning projects run by the government. This is a cutback from 4-5% in the 1981. Similar cutbacks were seen in government spending in agriculture, health care and education. Why had Ershad pushed Bangladesh into more debt and why had a cut back budgets for development projects run by the government? Was it because Ershad, who was corrupt, just ran out of money to spend on development projects? No. In fact, the 4-5% figures for the ‘80s suggests that under Ziaur Rahman Bangladesh was not spending a great deal on development projects either. What was holding both back? For one, the Zia and Ershad’s Governments were paying interest on loans from donors, at 20% of ADP (annual development product) in the 1980s. The report, while pro-donor policy acknowledges that the World Bank, IMF and other top donors have told the Government of Bangladesh to stop spending on public goods and to divert Government monies to donor-led projects only (Report of the Task Forces, Vol. 1, pg. 6), thus, restricting the government’s own ability to spend money: "It has been suggested that the Government divert monies to projects run by donor agencies, away from projects run by itself." It’s because of this condition that the Government could not increase health care or even create a budget for Flood & Disaster Protection. It was over-stretched and lacked freedom to address real problems. Task Force Recommendations for Government of Bangladesh Macroeconomy The Task Force on Macroeconomics Policies noted, that private investment in Bangladesh fell from 15-16% of GDP during Zia’s rule, and had fallen to around 11-12% during the ‘80s. It cited low savings and high conversion of savings to real estate, as some main reasons for this (Report of the Task Forces, Vol. 1, pg. 3). It, thus, recommended that more foreign aid and foreign investment in Bangladesh be introduced, in line with IMF recommendations, if the nation was to experience growth. Agriculture The Task Force on Macroeconomics Policies blamed the Ershad government for "cutting back investment in public expenditures", and thus, "undermining the economy’s production potential" or growth rate – but also turned around and urged for sticking to IMF and World Bank plans to further denationalization and privatization of government industries (Report of the Task Forces, Vol. 1, pg. 2). It also recommended market-oriented public pricing policies and withdrawal of subsidies from industries, where it hinted the lack of tax-revenues from agriculture, the main industry of the country, as being a way to make up for poor tax-revenues. (Report of the Task Forces, Vol. 1, pg. 9) On the other hand, a separate Task Force for Poverty Alleviation called for protecting the agricultural industry by raising spending for such activities as irrigation and flood control (Report of the Task Forces, Vol. 1, pg. 29). They also attacked the trend towards squeezing of public funds for such measures, as "absurd and perverse" (Report of the Task Forces, Vol. 1, pg. 27). It also applauded the availability of business credit to rural areas, run by the government and NGOs – e.g. the Grameen Bank micro-credit program – which as of 1991 helped 2.5 million landless villagers start some form of business – farming or other. It should be noted that the funding for Grameen Bank now comes from the World Bank and other commercial banks. To date it has lent about $3 billion to the poor, and collects over $1.5 million in interests and principals per week. (See http://www.grameen.org) It noted the utility of existing Government micro-credit programs and employment programs to help the rural economy and recommended enforcing those with more money. Flood Control Agriculture, farming and fisheries are the main source of livelihood of most Bangladeshis. However, the government of Bangladesh has been forced to import rice due to incessant floods in the '80s and '90s, and due to the lack of self-funding for a disaster relief program. Rice is the staple food of Bangladeshis and one of it’s cash crops. The Macroeconomic Policies Task Force in particular reflected donor ideology by portraying Bangladesh as "poverty, aid-dependence and disaster- proneness," (Report of the Task Forces, Vol. 1, pg. 1) as floods have become a cash-crop for many multinationals. The Poverty Alleviation group, however, requested that government funds be set aside for this. Indeed, until 2003, there was no disaster relief program in Bangladesh, as the USAID and other donor nations have very "profitable" programs in place -- see http://www.usaid.gov/bd/disaster_response.html). A new ministry has been created under Prime Minister Khaleda Zia’s initiative, called the Ministry of Food and Disaster Management (See http://www.mofdm.gov.bd/), though it is still ill-funded, and coordinates food, cash and commodity aid by donors. Health Care There’s a high burden on publicly funded hospitals, especially with floods forcing people to cities. These people are landless, survive in slums with poor hygeine, and contract diseases. The Poverty Alleviation group sited the success of the Governments Immunization Programs and called for more government health care expenditure overall. It raised the issue of "NGO provided" health care, and their assessments as grossly overstated, as though telling the government not to rely on this data to project future health care budgets. In particular, the Poverty Alleviation Task Force cited WHO’s policy to have "Health care for All" in Bangladesh by the year 2000. WHO reported that 40-50% of the rural population is covered by primary health care. The Poverty Alleviation Task Force, however, found this to be debatable. They project only 12% of ill have access to health care. (Report of the Task Forces, Vol. 1, pg. 30) That most people were undernourished, (below 2110 calories and 58 gms. of protein). Was the Advice Used? You may wonder why donors, like the World Bank or IMF or USAID, would want to keep giving money to Bangladesh? Why they would not want the Government of Bangladesh from having direct investment in education, health care, or agriculture, or for that matter in disaster management. Ruben Berrios, in his Ph.D. thesis, and book, "Contracting for Development: The Role of For-Profit Contractors in U.S Foreign Development Assistance," did a study of the way USAID distributes foreign aid. He wrote: "Though often seen as an agency that puts money into foreign hands, USAID is actually a source of contracting dollars and jobs for US companies and organizations. By funding principally US for-profit contractors who in turn deposit their checks in US banks, USAID makes these contractors the main beneficiaries of development assistance." In fact, the USAID has to do this – give contracts to US companies – because it is the law of the land. According to the BUY AMERICA ACT passed by the US Congress, all US Government Spending must be on US goods and services, though exceptions may be made. As Berrios points out in his book (pgs. 8-9): "USAID procurements that went to foreign assistance totaled $3.2 billion in 1996, 83% of which was spent on US companies and organizations." A list of companies that get top USAID contracts (US Taxpayer Dollars) are listed on pg. 46 of the book. Let me name a few for FY 1991 and 1996: Fig 1: US Organizations
and Companies to Benefit from USAID contracts
As you can see, as President Bush Sr. left office and President Clinton took over, the USAID contracts mostly changed hands from some companies to others. Nothing substantial happened about the way USAID operated, as far as giving actual aid to poor nations, however. Indeed, the distribution breakdown below remained the same, according to Berrios (pg. 17-18) : 1. Most of the funds are given directly by the USAID to US Companies and organizations, and on occasion to some foreign contractors. Berrios noted: "Of the foreign aid budget, USAID is responsible for 65% of the funds. The remainder...is handled by the Executive Branch (the Treasury Department through multilateral banks, the State Department through multilateral institutions such as the World Bank, United Nation, and Department of Defense)." Current USAID Operations in Bangladesh The USAID budget accounted for only 0.1-0.4% of US GNP in the ‘70s, ‘80s and ‘90s, (Berrios pg. 15) and continues to be the same today. The US GNP became $11 trillion in 2003, eleven times what it was in 1970 (See nationmaster.com). Thus, the foreign aid industry is an expanding business, and continues to benefit some of the largest Accounting/Management consulting firms in the US which employ many people. However, owing to increasing pressure from Debt Cancellation activists, the USAID, World Bank and IMF have changed their policies from giving loans and grants in the '60s, '70s and '80s, to purely grant-based businesses in the '90s onwards. The World Bank, IMF, or USAID has stopped forcing Bangladesh to take on more loans, since the 1990s. Bangladesh is still paying back interest at around 20-30% a year, and it is also forced by the World Bank and IMF, and WTO-type organizations to follow the kind of destructive advice that the Macroeconomic Policies Task Force had suggested and what are commonly known as Structural Adjustment Policies. The Population Research Institute which has been a critique of the USAID, World Bank and IMF programs, says about USAID activties in Bangladesh: "In 1997, 60% of all requested funds by the USAID for Bangladesh were to be spent on population control activities. Action Alert! In an earlier article, Beware Pakistan: Lessons from USAID programs in Bangladesh and India, I tried to show how useless and in fact, harmful, the USAID health care aid -- or population aid -- has been. A reading will illuminate on how the USAID, the WHO, the World Bank and IMF etc. all pushed dangerous drugs in the name of helping poor nations with health care. The same scenario occured with education, agriculture and of course, with flood management. Floods keeps pushing poor landless people to the cities, and furthers the image of an aid-dependent Bangladesh. Indeed, if someone asks you why Bangladesh has no proper Flood and Disaster Control Program or why it keeps slipping into poverty, you now know why. The people of Bangladesh are poor. When donor agencies force the Government of Bangladesh to push these people into more poverty, even if with the help of it's own intelligensia, it is wrong. Does America really want to be known for this kind of charity? Your help is needed. Tell your government to disband the USAID programs in Bangladesh if they are only going to send poor nations harmful drugs like Norplant, and if the World Bank and IMF, organs of the US Government, are only going to force poor nations to follow the aforementioned Structural Adjustment Policies. Also tell them that they should not call it charity or foreign aid if it only benefits US companies. About the Author(s): See under Our Contributors to find out about the Author(s) of this article. |
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