Socialist Worker

Aid gets diverted into corporate pockets

Issue No. 1954

Debt drains money from African countries’ education projects (Pic: Jess Hurd/

Debt drains money from African countries’ education projects (Pic: Jess Hurd/

A new report from ActionAid shows that the G8 countries are giving little in real aid to the world’s poorest countries — despite their political grandstanding.

And much of the aid that is granted is tied to conditions that force neo-liberal economic policies such as privatisation onto poorer nations.

“Far too much aid is driven by geopolitical and commercial objectives, rather than by efforts to protect the rights of poor people,” the report states.

“If aid currently has a mixed record in terms of its impact on poverty reduction, that is because it is often not what it is designed to do.”

The report looks at the proportion of aid that is actually being spent on poverty reduction. In 2003 the development aid from all donors was $69 billion, or 0.25 percent of the combined donor gross national income.

But a large proportion of this aid never materialised — it was “phantom aid” that was diverted for other purposes. Some $13.8 billion went on overpriced and ineffective technical assistance and $2.7 billion was tied to goods from the donor country.

In total, some 61 percent of donor aid is phantom aid. Real aid in 2003 stood at just $27 billion, or 0.1 percent of combined donor income.

For the G7 countries this was even worse — their official development aid was $50 billion, but in real terms they only gave $16 billion. That amounts to 0.07 percent of gross national income.

When aid does get to the poorest countries, it is often tied to commercial objectives. For example, the US’s Emergency Plan for Aids Relief has committed $15 billion over five years — but the initiative requires that funding only be provided for branded drugs.

By excluding cheaper generic drugs, the initiative promises lucrative deals for US pharmaceutical companies. And it means far fewer people will have access to life saving treatment. The US congress has also recently voted to focus Aids funding on programmes that promote “abstinence”.

The $13.8 billion spent on technical assistance is also often tied to the donor country. Of the 34 largest recipients of technical assistance contracts from Britain, 25 are British, and the others are mainly American or Canadian. None are from a developing country.

If aid is to really help the world’s poorest out of poverty, there needs to major changes. We need aid that reaches the poor, rather than ending up in the pockets of multinationals.

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Sat 4 Jun 2005, 00:00 BST
Issue No. 1954
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