Aid effectiveness, the Chinese factor and democratic development
By Hemantha Withanage

“Some aid agencies come with US$50 million and give an hour lecture. While others give US$500 million without lectures,” the Minister of Enterprise Development and Investment Promotion of the Sri Lankan government said during the Multi-stakeholder dialogue on aid effectiveness (MSDAE) held recently in Colombo. I supposed this was an hour of lecture about aid conditionalities and perhaps how to follow the multilateral development bank (MDB) policy framework.

So now we have new money. And there was no lecture. China, Iran and India are the emerging big donors in our country which provide loans for coal power plants, oil exploration and oil refinery renovation, and harbor construction. China even comes with its own workforce.

I’m wondering why China is so generous. The minister said that China has many factories to relocate in Sri Lanka. To me it’s clear. China wants a 900-MW coal power plant and even a new harbor to cater to those polluting factories that will soon relocate in Sri Lanka, many of them owned or co-financed by Chinese companies.

According to some NGOs, borrowing from China and India creates another issue: implementation of the Safeguard policies. However the minister only said, “We are dealing with all these issues. We have an elected parliament with opposition parties. We can solve the issues democratically in the parliament. Who has elected the NGOs? It doesn’t matter if a few people shout. You know how China relocated thousands of people from the Three Gorges Dam.”

The minister also shared how the Indian Finance Minister responded to the issue of the affected people of Narmada, who are not willing to leave the project site. This is what the latter said, “Give them a swimming lesson.” He later said he was teasing us. I still find it disturbing. We are not in China but in democratic Sri Lanka.

Ironically, the minister was the chairperson of the Paris Declaration meeting in 2005. According to him, he was chosen not because he was special but because it was held right after the Tsunami. A number of NGOs are signatory to the Paris Declaration on Aid Effectiveness, which recognizes the importance of CSO participation.

Not many knew that aid effectiveness will be discussed and reviewed in Accra, Ghana in September 2008. Sri Lanka has volunteered to study its compliance with the Paris Declaration and to discuss its plans with the CSOs before presenting it in Accra. But, as the minister has asked, who are the CSOs?

At the MSDAE event, we discussed the principle of ownership, policy on harmonization, alignment, results management and mutual accountability. The role of the legislature and the judiciary were also discussed. I found out that the project success rate last year was only 53 percent for the ADB and only 43 percent for the World Bank. How sad to learn that only 32 cents of each aid dollar has actually gone to Sri Lanka, while the remaining 68 cents went to consultants, management costs, refugees and scholarships for students, among others.

According to one speaker in the MSDAE, 700 aid agency consultants in Cambodia have been receiving salaries equivalent to 160,000 government servants, emphasizing that the poor pay more debts than those stated on paper. Another speaker said international financial institutions, or IFIs, prefer foreign consultants. But of course!

IFI funds are usually provided in different lending windows. But new money from new sources always knocks on the door. Forget about the Millennium Development Goals (MDGs). Trade is now the name of the game. We fight for better safeguard policies of IFIs. However, there aren’t any for emerging bilateral aid. I thought Sri Lanka is a good place to introduce the country safeguards system which means operations and lending related to IFI projects will be subjected to the host country’s laws, and IFI policies will be subordinated. However, based on the recent pronouncements of our minister, such a system wouldn’t work in Sri Lanka. Worse, it could lead to further violation of people’s rights.

Here’s what the minister would say: “Never mind the safeguards. The government need money not policy lectures. Forget the MDBs. We have emerging donors. Forget the environment and the low carbon economies. We need development.” Social and environmental justice! – a few people will shout. But that can be handled, the minister will likely retort. We have democracy! Let’s just do business!