Proposed Program Would Remodel Foreign Aid
By GEORGE GEDDA

The Associated Press
09/08/04 01:54 EDT

WASHINGTON (AP) – Secretary of State Colin Powell calls it the most
promising development in foreign assistance in decades. That is quite
a claim for a program that has yet to disburse its first dollar. But
it is clear that President Bush’s Millennium Challenge Account, first
proposed 2 1/2 years ago, represents a fresh approach to helping
countries overcome economic backwardness.

The fund’s premise is simple: If a poor country demonstrates a
commitment to govern justly, promotes economic freedom and invests
in its people, it may be entitled to U.S. dollars.

In other words, the Bush administration view is that little good
comes from pouring aid into a country that pursues bad policies.

Starting up a new program can be labor-intensive. Bush first proposed
the Millennium Challenge Account in March 2002. Only now are the
first outlays on the horizon.

Of 70 countries that meet administration eligibility requirements
based on need, 16 made the cut for receiving aid: Armenia, Benin,
Bolivia, Cape Verde, Georgia, Ghana, Honduras, Lesotho, Madagascar,
Mali, Mongolia, Mozambique, Nicaragua, Senegal, Sri Lanka and the
Pacific Island nation of Vanuatu.

They will get to share in the $1 billion Congress has appropriated
for the first year, assuming that Washington approves the projects
they design.

All 16 are small and poor. Eight are African, where a half-century
of development assistance has done little to improve the underlying
problems of hunger, disease and poverty.

Africa also is the prime beneficiary of another major administration
foreign aid initiative: $15 billion proposed over five years to
combat HIV/AIDS.

To the extent that much of Africa still lives in misery, Jeffrey
Sachs, a development expert at Columbia University, says lack of U.S.
foresight is partly to blame.

“In recent years, America gave a negligible $4 million a year to
Ethiopia to boost agricultural productivity but then responded with
around $500 million in emergency food aid in 2003 when the crops
failed,” Sachs wrote recently.

Nancy Birdsall, president of the Center for Global Development,
believes the Millennium program could become a development
breakthrough.

“If implemented effectively, the resulting program could fundamentally
improve the quality and quantity of U.S. aid and become a model for
other donor countries,” she said.

Her colleague at the center, Steven Radelet, welcomes the initiative
but criticizes other aspects of Bush’s policies toward low-income
countries. By supporting huge subsidies for American farmers in 2002,
Bush “undercut the livelihood of poor farmers around the world,”
Radelet said.

Paul Applegarth, a veteran of the World Bank and Wall Street, runs the
government agency that administers the Millennium Challenge Account. He
says successful reform in poor countries will attract not only the
fund’s money but also foreign investors, which he describes as the
key to long-term prosperity.

Applegarth also says there has been a notable uptick in debate over
reform in some poor countries as they try to position themselves to
join recipients of the U.S. program.

But Rep. Donald Payne, D-N.J., a member of the House International
Relations Committee, says an advantage of the traditional approach to
aid is that the poorest countries were always assured of getting help.

“Qualifying for Millennium Challenge funds has nothing to do with
how bad problems are in your country,” Payne says. He worries that
desperately poor Haiti, as one example, never will be eligible for
the program.

Under Bush’s plan, the Challenge is a supplement to the traditional
assistance vehicle, the Agency for International Development, founded
in 1961. Its budget is about $10 billion annually.

If Congress goes along, Millennium Challenge Account funding will
rise from the current $1 billion for this year to $2.5 billion in
2005 and then go to $5 billion annually by 2006.

USAID will continue providing development assistance. The agency is
credited with carrying out highly effective programs in such areas
as oral rehydration therapy, which has saved the lives of millions
of children with such diseases as dysentery; population and family
planning; and help for fledgling entrepreneurs.

USAID has its detractors, however. Former Sen. Jesse Helms, R-N.C.,
charged that AID’s programs had minimal effect and were “only lining
the pockets of corrupt dictators, while funding the salaries of a
growing, bloated bureaucracy.”

EDITOR’S NOTE – George Gedda has covered foreign affairs for The
Associated Press since 1968.