Foreign Aid  Reaches Only Corrupt Officials, Not the Poor.

ABC News 20/20
May 12, 2006


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John Stossel and "20/20" shovel through more myths, lies and downright stupidity. The conclusions may surprise you.  (ABC News) B y JOHN STOSSEL AND PATRICK McMENAMIN

MYTH: More Foreign Aid Will End Global Poverty

Food and Financial Aid Often Reaches Only Corrupt Officials, Not the Poor

John Stossel and "20/20" shovel through more myths, lies and downright stupidity. The conclusions may surprise you.  (ABC News) B y JOHN STOSSEL AND PATRICK McMENAMIN

May 12, 2006 — This myth may really rattle your brain. Lots of well-meaning people believe foreign aid will cure poverty.

U2's lead singer, Bono, stops almost every concert to tell his fans that Western governments can end poverty. "We have the resources, we have the know-how to end extreme poverty," he said last year in Chicago.

Angelina Jolie visited a model village in Africa to promote what she believes would be possible if our governments would just give more. The village she visited is the creation of Jeffrey Sachs, director of the U.N. Millennium Project and author of the best-selling "The End of Poverty." He's also America's most vocal promoter of giving more foreign aid to Africa. "How can we go another day when 20,000 children are going to be dying of these stupid reasons that are utterly preventable," he asked. Sachs helped persuade Western governments to double foreign aid to Africa to $50 billion dollars. And the people in his model village were thrilled about getting all this help from Sachs and Jolie.

Journalist June Arunga doesn't think this will really help in the long run. "You look like an angel if you have all these poor people behind you," she said. "Of course, they'll be smiling. Who wouldn't be smiling if they've just been given stuff? But that's not real life." Arunga grew up in Kenya, and she wonders why Americans waste money on foreign aid to Africa … when many politicians just steal it.  "Africa is full of governments that steal money," she said. Billions of dollars are hidden by African politicians in Swiss banks or spent on mansions, lavish trips and luxury cars. Even food aid gets stolen.

When "20/20" went to Kenya a few weeks ago, Kenyan farmers said bags of food aid from their government never arrived. "You find most of it is getting lost on the way," farmer Joseph Nthome said. Lost, but then found … for sale in street markets.

So much is stolen because we rely primarily on governments to administer foreign aid, and many African governments are kleptocracies. "Kenya does not need aid to get out of poverty," said James Shikwati, director of the Inter Region Economic Network and a consultant to ABC News on this story. He took us to the Kibera slums of Nairobi where people work hard selling clothing, shoes, furniture, yet they still can't climb out of poverty because the government won't let anyone own the land. "What's holding down Africans is actually the bad governments, the bad policies that make it difficult for Africans to make use of their own property," Shikwati said. "What the aid money is doing to Africa is to subsidize the bad policies that are making Africans poor." Carpenter Richard Kadivane told us he would expand his business, but he's afraid because the government might bulldoze it down for any random reason at any time, just as they've done before in other parts of the slums. "If you gave aid money," Arunga asked. "How does that solve the problem of the government razing down people's businesses?"

The Kenyan government made John Githongo one of its anti-corruption watchdogs, but when he complained that his government was stealing money, he said they told him to back off. "If you continue down the path that you're continuing," Githongo said he was warned, "then you will come to a sticky end." I asked him what a "sticky end" meant in Kenya. "A car accident," he said. "A robbery gone wrong." He fled the country for England, where he now lives in exile. I asked Githongo whether we could cure poverty if we just gave more foreign aid. "No amount of foreign aid is going to make any difference," he said. He may have a point. In the past 40 years, Western governments have given Africa more than half a trillion dollars. Yet Africa is even poorer than it was before the foreign aid began.

Two studies by World Bank economists say foreign aid is one of the problems because "higher aid levels erode the quality of governance." Former World Bank economist William Easterly agrees. His new book, "The White Man's Burden," argues that Western efforts to cure poverty in the rest of the world have done more harm than good. "Aid has the perverse effect that it makes [African] politicians much more oriented toward what will get them more money from the West than it does to making them meet the needs of their own people, which is really a scandal," he said. Fifty years ago, countries in East Asia were as poor as Africa. Now many are rich, despite much lower levels of aid because their governments created understandable laws so people could trade, borrow and start their own businesses.  In 1999, I went to Hong Kong and in one day, with one form, I got legal permission to open a shop. The next day "Stossel Enterprises" was open for business, selling ABC trinkets. By contrast, to open a legal business in Kenya you might have to get licenses from 20 ministries and you may have to bribe people. It can take years, and the government can still shut you down.

Foreign aid won't solve that — especially if it's stolen. But Jeffrey Sachs argues that this emphasis on bad governance is misleading. "This idea that the poorest of the poor are our enemies, the big lie that we tell all the time," he said. "That all they want to do is shake you down." "Poor people don't want to shake me down," I replied. "The rich leaders of these countries want to shake me down." "Our government can find practical ways to ensure that the money that we're actually giving for real things there reaches the real people," Sachs said. "We can do that in Africa? We can barely do it in America." "Audit what's happening," he said. "Those systems have been shown repeatedly to work." Sachs argues that foreign aid would have worked in the past if we had only spent enough. U2's Bono agrees. At his concerts, he asks his fans to use their cell phones to send a message demanding our politicians increase foreign aid … but why petition politicians? Why doesn't he ask his fans to spend their own money? It's good to help.

I'll contribute to a charity like "The Free Africa Foundation" (http://www.freeafrica.org), which builds malaria-free villages from individual contributions. Charities are much more likely to keep a close eye on the money. If they don't, donors stop giving. By contrast, foreign aid often just makes politicians rich — but leaves their people poor.

THE WASHINGTON TIMES
 May 11, 2006

http://www.washingtontimes.com/world/worldbriefings.htm
China digs in on a struggling continent
WORLD BRIEFINGS
By Xin Li
THE WASHINGTON TIMES
May 11, 2006

China is investing in Africa on a vast scale that goes well beyond efforts to meet its growing need for oil.  In Zambia, seven Chinese companies have invested $170 million in the mining sector. In Zimbabwe, exploration of the world's No. 2 platinum reserve is largely dominated by Chinese companies. China is even sending unemployed laborers to farm and set up small factories in parts of rural Africa. "We bring machines and expertise that the locals have never seen," said Liu Jianjun, who has set up 28 Chinese communities in Africa in the past eight years.  "To attract and retain us, they gave extremely good terms, such as charging a symbolic annual fee of $1 per acre for 99 years," said Mr. Liu, whose efforts have provided jobs and a new life for 15,800 farmers and laid-off factory workers from the city of Baoding, in Hebei province.  Mr. Liu rejects the name "Chinatowns" for these settlements. "They are 'Baoding villages,'?" said Mr. Liu, noting that Baoding means "protection and peace." Such villages of 400 to 2,000 Chinese have been set up in African countries including Nigeria, Zambia, Sudan and Kenya. Mr. Liu negotiates long-term land-use leases from African local governments, then organizes Chinese to work in farming, fishing, light manufacturing and mining. Residents of Baoding villages work hard and have almost no leisure time. They are thus able to earn many times more money than they would have in China. During the Chinese New Year holidays of 2002, the 380 residents in one Baoding village in Zambia wired home about $9 million. To minimize resentment and protectionism from local industry, Mr. Liu chooses remote locations to distance the settlements from city violence and tribal conflicts. The villages employ Africans and Chinese at a 1-1 ratio to ensure local support.

Long-term friendship 

China is not a newcomer to Africa. Its involvement during the Cold War era sought to counter influence from the West and the former Soviet Union. It sent workers to build roads, railways, sports stadiums, city halls and other landmarks that remain throughout the continent, reminding Africans of China's friendship after the end of European colonialism. "African countries still have high solidarity with China, seeing it as a part of the developing world. They think China is in the same boat," said George Ayittey, president of the Free Africa Foundation, a Washington-DC based think thank. Chinese involvement ebbed as the Cold War drew to a close, but later revived as a catalyst for expanded trade. In 2000, China created the China-Africa Cooperation Forum, which meets at the ministerial level every three years. China also has signed many economic-cooperation treaties with African governments. From 2000 to 2005, China's total trade with Africa more than tripled, from $10.8 billion to $37 billion, making it the continent's third largest trading partner after the United States and France. "It's a new phase of something that is not really new," said Chester Crocker, professor at Georgetown University and former assistant secretary of state for African affairs. "This time, there is no question that the primary driver here is the economics." The world's No. 2 petroleum importer, China obtains 28 percent of its oil from Africa, mostly from Angola, Sudan and Congo, where Western countries limited investment over human rights abuses. In recent years, China has moved into West Africa, a traditional oil supplier for the United States and Europe. In January this year, it obtained an offshore deal with Nigeria worth $2.3 billion, and is considering $7 billion of additional investment there, said a report from the Council on Foreign Relations. It's not just oil. In Zambia, seven Chinese companies invested $170 million in the mining sector. In Zimbabwe, exploration of the world's second largest platinum reserve is largely dominated by Chinese companies.

Political sensitivities

"It's good economically. There are more economic opportunities, and that generates more revenues," Mr. Ayittey said. "But the benefits are not devoted to the people." Mr. Ayittey said China is not sensitive to African domestic political situations. In China's cooperation with corrupt governments, corrupt official often pocket profits. Moreover, China's policy of nonintervention in domestic affairs of other countries allows it to ignore human rights concerns. China is the principal supporter of Zimbabwean President Robert Mugabe. In exchange, Chinese have almost unlimited access to the country's minerals and roads.  In Sudan, after the United States and European companies pulled out in the 1980s, China soon filled the gap. About 70 percent of Sudan's exports go to China, mostly oil. In return, China used its position on the U.N... Security Council to block resolutions on the tribal warfare in the Darfur region of western Sudan, near its border with Chad. "Unfortunately, lots of Africans are not happy with the increasing involvement of China," Mr. Ayittey said. The Chinese "are willing to do just about everything. The investment should be good for Africa, but it doesn't have a human conscience."  In 2005, the International Monetary Fund told Angola to improve the transparency of its oil revenue or lose aid money.  After China stepped in with a $2 billion loan, Angola no longer was concerned by the fund's threat. "The thing about Chinese policy in Africa and elsewhere is they seemed to be more interested in cultivating government-to- government relations without asking questions about politics," Mr. Crocker said. "If we try to work with certain countries to let the government stay on the democratic track, while China does not, there's a problem. It creates a difference between us," Mr. Crocker said.

Negative impact

China is not the only country eager to conduct business in Africa. It is part of the global trend to seek oil and resources. Besides the United States and Europe, Brazil, India, Malaysia, Japan and South Korea all have a strong presence in Africa. But China's size separates it from the other emerging partners and catches the limelight.  African manufacturers are struggling to compete with imports from China, and with Chinese exports to other countries such as the United States. "In the U.S. and Germany, people don't expect those goods to be produced domestically, but Africa is barely at the beginning of the manufacturing age," Mr. Crocker said. "Their infant industries such as textiles and light manufactures can be driven out of business."  China's soaring trade has had an negative impact in Africa, its cheap goods leaving little opportunity for manufacturers on that continent to compete.  After the Multi Fiber Agreement ended on Jan. 1, 2005, ending quotas on clothing and textile imports, African exports were hit hard by competition from China. South Africa alone complained of a loss of 55,000 jobs in the textile industry since 2003, when Chinese textile exports to that country began, the Lesotho Clothing and Allied Workers Union said last year.  China has promised to facilitate imports of African commodities into its own markets and to grant duty-free treatment to some African countries. It is currently negotiating with South Africa on voluntary limits on Chinese exports there. China is in Africa to stay. When President Hu Jintao completed his three-day visit to the United States last month, he visited Africa on his return home.

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