Events

African Ambassadors' Policy Roundtable I: An Overview of International Aid Facilities Available to African Countries

April 10, 2007 // 9:00am11:30am

Introduction
Ambassador Howard Wolpe, Director, Africa Program and Project on Leadership and Building State Capacity, Woodrow Wilson International Center for Scholars (WWICS)
H.E. Ambassador Nabil Fahmy, Ambassador of Egypt to the United States; Chairman of the Committee on Capacity Building, Washington-based African Diplomatic Corps

Panel: An Overview of International Aid Facilities Available to African Countries
Nils Tcheyan, Director of Operations and Strategy, Africa Region, The World Bank
Walter North, Senior Deputy Assistant Administrator, Africa Bureau, US Agency for International Development
John Hewko, Vice President for Operations, Millennium Challenge Corporation
C. Michael Forgione, Vice President and Manager, International Business Development, Export-Import Bank of the US

The Africa Program of the Woodrow Wilson International Center for Scholars, in collaboration with the Committee on Capacity Building of the Washington-based African Diplomatic Corps, chaired by His Excellency Ambassador Fahmy, Ambassador of Egypt to the United States, hosted the first policy roundtable for African Ambassadors on April 10, 2007. The policy roundtable brought together African Ambassadors and high-ranking embassy officials for a panel discussion intended to provide an overview of international aid facilities available to African countries.

Ambassador Wolpe opened the meeting and introduced the panelists. Ambassador Fahmy welcomed participants and indicated that the two-part policy roundtable series is directed at strengthening the diplomatic capacity and effectiveness of African embassies by providing in-depth, policy oriented briefings on issues of strategic importance to senior-level African diplomats. Specifically, he explained that the first roundtable was intended to focus on the availability of opportunities for African economic and social development through institutions such as The World Bank, the US Agency for International Development (USAID), the Millennium Challenge Account and the US Export-Import Bank. Recognizing the importance of such discussions to enhance the African Diplomatic Corps' understanding of the American system, he suggested that future roundtables should focus on the American political process and the upcoming presidential campaigns.

Nils Tcheyan began his presentation by providing a brief summary of current economic trends in Africa and outlining available aid mechanisms provided by the World Bank to support development in Africa. He remarked that in recent years, income per capita in African countries has exceeded that of all other developing countries except for China and India. Tcheyan presented the following statistics to illustrate Africa's increasing growth rates. Currently, 21 countries making up 36% of Africa's population have very low growth, averaging 2.1% per annum; 17 countries which consist of 36% of Africa's population have medium growth rates at 5.5%; and 8 countries making up 29% of population have growth at a high 7.4% per annum. Other indicators, including a fall in mortality rates in children under five years are promising. However, Tcheyan pointed out, many challenges still prevent the fulfillment and implementation of the United Nations Millennium Development Goals (MDGs) by the year 2015. One of the MDGs includes reducing the rate of mortality among children under five by two thirds.

Tcheyan noted that almost all African countries borrow from the International Development Association (IDA) branch of the World Bank that provides a third of all international aid in the form of grants. However, IDA credits are also available at a 1% interest rate over 40 years. Interestingly, the International Finance Corporation, the private arm of the World Bank, is significantly expanding the volume of activity in Africa, including focus on small and medium enterprises. The Multilateral Investment Guarantee Association is the World Bank's arm which provides assurance against political risk.

Currently, the World Bank operates in a decentralized, country-specific and field-oriented fashion. It is increasingly focused on fragile post-conflict states and sub-regional approaches for addressing issues such as strengthening transportation and water management capacities, for which new types of loans are being created. Noting that donor promises made at the 2005 G8 Summit in Gleneagles to double the amount of aid available to Africa have not materialized, Tcheyan emphasized the importance of mobilizing additional sources of assistance for Africa. He implored the Ambassadors to use their offices to solicit additional aid, to manage connections with new development actors—most notably China and India –and to cooperate with "vertical funds" such as the Global Fund to Fight AIDS, Tuberculosis and Malaria.

Drawing from his experience at the US Department of State and USAID, Walter North explained current developments in foreign assistance reform within the US government and outlined the resulting implications for Africa. The goal of USAID is to "help build and sustain democratic, well-governed states that will in turn respond to the needs of their people, reduce widespread poverty and conduct themselves responsibly within the international system." North described how previously US foreign assistance was not well organized. It lacked a clear goal, resulting in inconsistent prioritization of resources and diminished effectiveness, and suffered from poor management of staff, budgeting and tracking of funds, all of which further complicated the process of delivering assistance.

Now, with the integration of the US Department of State and USAID, US foreign assistance programs are increasingly being built around a new strategic framework that is intended to result in assistance that is more effectively tailored to countries facing various challenges. Under the new leadership of Ambassador Randall Tobias, US foreign assistance is centralized directly beneath the Secretary of State, thereby establishing strategic direction and reducing ad-hoc decision-making. Nevertheless field staff will remain the principal designers of implementation plans with better country focus and central management.

North, reviewing funding statistics for Sub-Saharan Africa, noted that the US is a top donor and has met its Gleneagles commitment, committing $3.6 billion in aid to Sub-Saharan Africa in fiscal year 2006. The US foreign assistance to Africa is directed to three key areas including food aid, HIV/AIDS and emergency relief. In conclusion, North anticipated an overall growth in funding for Africa, provided that appropriations legislation in the American Congress continues to augment funding for foreign assistance to African countries.

Building upon the discussion of US government funding to Africa, John Hewko introduced the Millennium Challenge Corporation (MCC). The MCC was created by the US government in 2004 to strengthen the impact of foreign assistance. The MCC's mission is to reduce poverty through sustainable economic growth which it does by providing grants to a select group of countries that meet the eligibility criteria. Three fundamental principles guide the MCC's work, namely:

1. country selection—the MCC focuses on low- and middle-income countries that invest in their people and promote economic freedom and strong democratic institutions;
2. country ownership—individual countries are responsible for submitting grant proposals and implementing the funded projects; and
3. measurable results—the MCC is committed to the monitoring and evaluation of all projects.

In order to depoliticize the country selection process, Hewko explained that sixteen non-US government indicators have been developed by institutions such as the World Bank, the World Health Organization (WHO) and the UN Educational, Scientific and Cultural Organization (UNESCO) to guide the grant eligibility determination process. Of these sixteen indicators, six relate to democracy, four are directed at investing in human capital and six are tied to investing in economic freedom. In 2008, the number of indicators will increase to eighteen in order to incorporate the management of natural resources and access to land rights. Currently, there are twenty-five MCC eligible countries, half of which are in Africa. Eligibility is determined by measuring each country's indicator scores against others in the same peer group. The results are published on the MCC website every summer.

Regarding the types of country proposals that are funded by MCC grants, Hewko noted that eligible countries may focus on any sector as long as the proposal, first, aims to reduce poverty through sustainable economic growth; second, includes a broad consultation process outside of the top tiers of government; and third, is able to produce measurable results. To date, the majority of funding has been earmarked for infrastructure-related projects; however, proposals focusing on public health and education are very welcome. There is no minimum or maximum amount for grants a country may receive and grant spend-out rates resemble a bell-shaped curve, with the greatest funding dispersed in the third year of a five-year grant period.

For countries nearing but not reaching MCC eligibility, a small amount of funding, $10-15 million, is available as part of the "Threshold Program" that is designated to support specific project categories that can assist a country in establishing its eligibility for MCC funding. The MCC's current budget is $4.3 billion; however, in order to maintain current funding levels, funding needs to increase in the next fiscal year by at least $2 billion. Additionally, the MCC's efficiency is currently restricted by two specific limitations: the five-year life span of grants, which makes it difficult to administer long-term infrastructure projects; and the regulation that the MCC can only administer one compact per eligible country. The MCC is awaiting approval of two pieces of authorization legislation by the US Congress that promise to make the distribution of grant monies more effective by enabling the MCC to implement multiple ongoing compacts with eligible countries.

Michael Forgione explained that the mission of the US Export-Import Bank is to grow and maintain jobs in the United States by financing exports; therefore, it is distinct from the other organizations represented on the panel as it is not an aid agency. The Ex-Im Bank has a congressional mandate to conduct trade partnerships with Africa. To implement this mandate, it has established a Subcommittee Advisory Group for Africa that is made up of government officials and private sector experts on Africa-US trade issues. However, the Ex-Im Bank staff is based in Washington, D.C. and does not have a field presence.

Forgione indicated that 80% of loans are distributed within the private sector, rather than going directly to the government of a country. Projects are not constrained in scope, and may range from smaller projects that require less money to larger projects focused on building infrastructure, such as a rural electrification in Ghana. The Bank's assets total $100 billion, with about $60 billion outstanding and available to lend. Loans vary from short-term loans, with a time-frame as short as several weeks, to long-term loans which can extend up to ten years. Currently, short-term loans are available to forty-four countries in Sub-Saharan Africa, with medium-term and long-term loans available to twenty-six and thirteen countries respectively. Forgione added that special programs exist for environmental infrastructure projects such as water management and sewage treatment, and projects related to the health sector.

The discussion concluded with an in-depth question and answer session and closing remarks by Howard Wolpe.


Drafted by Thomas Gilchrist, Africa Program Intern and Doreen Chi, Program Assistant, Africa Program.

 

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