The Hubbub Over Foreign Aid:
Facing The Sobering Reality
By Geepu-Nah Tiepoh
Recent pronouncements by officials of the Liberian government, including President Taylor, indicate that the government is disappointed with the current level of foreign aid to Liberia. Two months after submitting the government's National Reconstruction Program to an international donor conference in Paris last April, Liberia's Finance Minister chastised the African Development Bank (ADB), at its recent Annual Conference, for not being "responsive to Africa's needs", noting specifically that the Bank has failed to come to Liberia's aid (The Inquirer, Vol. 7, No. 95). Upon returning home from a trip to Nigeria and Burkina Faso early July, President Taylor too accused the international community of turning its back on Liberia, saying all that the country is getting from non-African nations is promises (Liberian Daily News Bulletin, Star Radio, July 6). The President repeated this criticism in a speech at a recent National Conference held in Monrovia. This article examines the issue of aid to post-conflict Liberia from the perspective of post-Cold War shifts in national "strategic interests"; current changes in global capital movement; and Liberia's own political and public management climate. The basic question addressed is whether or not international donors have actually been unresponsive, and if so, why? I will argue that the performance of foreign aid donors may seem inadequate, depending on one's expectation for and interpretation of foreign aid. For the Taylor Administration, it appears as if excessive aid expectation has blinded government officials to the raw reality of a changing global political economy and to the uncertainty of Liberia's own domestic policy environment.
Foreign aid, also known as official development assistance (ODA) and provided by donor governments and multilateral institutions, has long been a source of capital for the Liberian state. The impact of such aid on Liberian economic development remains a question, which this article is not intended to discuss. Suffice it to say, however, that foreign aid to Liberia, and to developing countries in general, has always had a significant instrumental objective. For example, in the heyday of the Cold War the United States, which has been the greatest donor of aid to Liberia, used her donations to maintain the political loyalty of the Liberian state and to insure its protection of US economic and strategic investments on Liberian soil. In the 1980s, during the Doe dictatorship, US military and economic assistance experienced unprecedented growth. Military aid grew annually from US$1.5 million in 1979 to US$16.2 million in 1985. Economic aid rose from US$17.6 million in 1979 to US$75.5 in 1985. Total US assistance to the Doe regime is estimated at over US$500 million between 1980 and 1988. On the other hand, there is a long legacy of state corruption and bureaucratic incompetence in administering and managing foreign capital in Liberian development. For example, the gross mishandling of the British bank loan of 1870 (compounded by the loan's unfavourable terms) led to a national debt of about $800,000 by the turn of the century (ROAPE, December 1984: 56-69). Corruption and mismanagement of US aid by the Doe government, combined with Congressional pressures, forced the Reagan Administration to send American "Operational Experts" to Liberia in 1987 to directly manage the Liberian economy.
The main question is whether the international donor community has been unresponsive to post-war Liberia and, if so, why should the Liberian government have anticipated otherwise? I am not suggesting that the government should have expected noncooperation from the international community. Truly, every government has the responsibility to expect and pursue the best for its people. However, any expectations that are not guided and controlled by reality tend to lead one up blind alleys. In the case of foreign aid, unguided expectations might have made our government appear as if it is completely out of sync with international and national realities. Depending on one's interpretation of aid to post-war Liberia, he or she may arrive at a different conclusion about whether or not foreign donations have been adequate. If one views post-war aid as a restitution for the role that some foreign governments had played in the making of the Liberian crisis, then no amount of US aid, for example, could be deemed enough for that country's role in arming the Doe dictatorship. I am sure, however, that this is not how Liberians and their government would like to consider post-war reconstruction aid. For one thing, if we applied such a definition, then our own government might probably lose its right to seek aid from foreign donors. Therefore, the best way to consider the adequacy of foreign aid is to assess the actual contributions made by donor governments and institutions against the backdrop of existing international economic and political realities and against Liberia's own domestic policy climate.
It is understandable why the Taylor government would harbour high hope and expectations for international aid. First, it has assumed power with a devastated country requiring a Marshall Plan type of capital inflow for reconstruction. Second, in an effort to attract foreign capital, including aid, the government has been desperately attempting to comply with IMF/World Bank adjustment conditions, including fiscal austerity and debt servicing. Its first official budget of US$41 million for FY1998 wasdesigned to be financed without borrowing, and 4 percent of it (US$1.6 million) went to external debt servicing. One point six million dollars is obviously not a significant payment on the national debt. Arrears to the IMF alone, not to mention those owed to other multilateral institutions, require US$15 million to stabilize (The Inquirer, Vol. 7, No. 61). However, the very fact of making that payment at a time when things are so bad in the country shows the desperation of the government to be on favourable terms with the owners of capital. So what has been the response of the donor community? From the government's own sources, at a donor conference held last April, the international community pledged US$220 million. This amount is half of the US$438 submitted by the government as the total cost of its National Reconstruction Program (News Update, Liberian Embassy, US, April). It has been reported that the Planning Minister told a press conference in early July that about half of these pledges were already being spent in Liberia (Liberian Daily News Bulletin, Star Radio, July 6). Assuming that such reports are true, then it must be agreed that the donor community has already honoured at least part of its obligations. As to whether the donated aid is being administered in manner contrary to government's wishes or to those of the donor agencies is a different matter. Moreover, it should be noted that some of these donor countries had provided humanitarian aid, however limited, to Liberia during her crisis. The US Agency for International Development (USAID), for example, has reported that it gave Liberia $421 million in humanitarian relief (mostly in food distributions) between 1990 and 1996 (USAID Fact Sheet, October 1, 1996).
Faced with the Herculean task of post-war reconstruction, the government harbours excessive hope and expectations for international aid without considering existing realities. First, as noted by Akinjide, it is important for African governments in general to stop behaving as if there are "permanent friends, permanent interests, permanent policies and permanent attitudes" in international relations (West Africa, 11-17 March, 1996 p. 381). The end of the Cold War has brought a change in the policies and attitudes of the industrialized nations towards developing countries. Old friends and relationships have been discarded, and new ones have been formed. The things that used to define "strategic interests" have drastically changed so that, for example, economic relation with China now becomes more valued by the US than economic improvement and political stability in Liberia. This is not to suggest that the US has no positive interests in the affairs of Liberia, but that her interests now are not as strategically compelling as in the past. The point is that we often behave as if the world is continuing with business as usual, and some of our leaders carry expectations that are based on an old view of the world. Some leaders continue to behave as if, for instance, the flow of foreign aid is still propelled by the same kind of interests and conditions as in the Cold War. Perhaps the Taylor Administration had thought that the donor community would have come to Liberia's aid in a Marshallian fashion, and such high expectation might have left it susceptible to great disappointment.
The second reality is the effect of aid fatigue and fiscal downsizing in the countries of the Development Assistance Committee (DAC) of the OECD. As a percentage of their combined GNP, aid allocations from DAC member countries fell for five consecutive years, from 0.33 percent in 1992 to 0.22 percent in 1997, far below the United Nations target of 0.7 percent of GNP. Denmark, Norway, Sweden and the Netherlands, which are not G-7 nations, were the only donors to maintain their allocations above the 0.7 percent target in 1997. Liberia's largest aid donor, the United States, is now in the lowest rank in aid-giving. By the year 2000 USAID will be operating in only 75 countries, compared with 120 in the early 1990s (The Tampa Tribune, 27 April, 1996). The third reality is the impact of globalization on the structure, distribution, and flow of international capital. Basically, economic globalization is a process in which products and services, and private foreign capital and direct investments are encouraged to move and operate more freely in international markets through improved transport and communication systems and economic policy liberalization. In pursuit of this process, developing countries are being asked to adopt the necessary policy and institutional measures to increase their inflows of international private capital and investments. This movement towards an increasing role for international private capital, combined with fiscal downsizing in donor countries, and the post-Cold War shifts in "strategic interests", is causing a downward trend in official development assistance to some regions (and countries) of the world. For example, while Sub-Sahara Africa's share of ODA remains high relative to Latin America and the Caribbean, her aid receipts have begun to decline. Gross bilateral ODA disbursements fell from US$13.9 billion in 1990 to US$10.7 billion in 1996 . Unfortunately, private capital and investment flows to Africa have not significantly improved to compensate for the declining trend in ODA.
Compounding the government's aid difficulties is the general climate of uncertainty surrounding its public management policy and human rights behaviour. In spite of many assurances and promises to improve its macroeconomic management climate, donor governments and institutions remain unconvinced and unsatisfied. The recent US$275,000 fraud scandal involving the Ministry of Finance, the First Commercial and Investment Bank (FCIB), and the International Trust Company (ITC) has not helped the government's case in this regard. Also, spending US$2.5 million on national conferences and celebrations, outside the national budget, is not a good signal to foreign donors. Furthermore, the human rights situation in Liberia remains tenuous, as people continue to be imprisoned without charges. In view of all this, diplomatic sources in Liberia are indicating that the government must implement more macroeconomic adjustment, control its security forces, and attend to human rights as the preconditions for providing new foreign aid to Liberia (Liberian Daily News Bulletin, Star Radio, July 24). At present, the Liberian people seem to be caught in a big dilemma. They cannot receive economic relief if their government does not ensure them their basic human rights. In other words, their political rights have become a precondition for their economic rights. On the other hand, however, the increased demand for macroeconomic adjustment by donor institutions, in the midst of high external debt, could increase austerity and socioeconomic hardship for most Liberians, if such adjustment is not backed with strong investment and growth measures. The Taylor Administration has officially sanctioned the global market order as the economic path for Liberia. It must therefore cooperate responsibly with its stake-holders and play by its rules. Accusations at international donors will only aggravate matters for Liberia.
Geepu-Nah Tiepoh Is A Development Economist & Consultant - ACLAD Development, Canada