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The
White House outlined a detailed proposal it calls the
Millennium Challenge Account on Monday, to set up a competition
among the world's poorest nations for portions of a new $5 billion
foreign aid fund, reports the New York Times. This would represent
a 50 percent increase in the amount of non-military foreign aid the
US hands out each year.
The new foreign aid program would be a kind of merit scholarship
for the best performers among developing countries, US officials
said. It would not replace or reduce the current need-based aid
that totals $10 billion per year, administered through USAID.
The administration's judgments about which nations will get the
money and which will not, would depend on how they score on a range
of performance tests. Countries will have to show they are
reorganizing their societies according to Washington's standards
and meet a series of criteria, based on those already set out by
the World Bank and private entities such as the conservative
Heritage Foundation, according to Agence France-Presse.
A total of 16 indicators will be taken into consideration: six of
the indicators reflect governance and the fight against corruption;
four relate to investment in social capital, such as education and
health. The other six reflect what US administration officials call
"economic freedom"-including nations' free trade
inclinations.
The criteria make no mention of cutting marginal tax rates, but
they clearly call for US-style governance of markets, free trade
and deregulation. In that regard, how open a country's market is to
imports-including American goods and services-will be an important
factor, notes the New York Times.
US President George W Bush's senior aides have said in recent
months that the new aid program is part of his effort to show
another side of his foreign policy. Organizations aiding developing
countries largely praised the effort, saying that if executed well,
it could begin to solve the problem of wasted or misallocated
foreign aid.
At first, the only countries allowed to compete for the new foreign
aid fund will be those with per capita incomes below $1,445, the
threshold the World Bank uses to define the world's poorest
nations, thereby limiting the first grants primarily to nations in
Africa and Latin America, along with India. If Congress grants the
full $5 billion Bush has sought, by the third year the program will
be open to nations with per capita incomes of up to $2,975,
encompassing some 110 countries, such as the Philippines and some
fast-growing Asian countries, that are able to attract significant
sums of private investment.
"This would be an important tool in making aid more effective,"
said Mary E. McClymont, president of InterAction, an alliance of
international relief and development organizations, "as long as we
keep an eye on making sure there is sufficient funding for the
nations that don't qualify, and for AIDS and famines and the needs
of countries like Afghanistan."
Critics worry that emphasizing performance in only the better-run
countries will ignore the plight of millions in countries that have
little ability to turn themselves around, notes the Wall Street
Journal.
Based on the criteria, countries likely to receive funding include
Bolivia, Mongolia, Senegal, Tanzania, Ghana, El Salvador, Morocco,
South Africa and Jamaica, said Steven Radelet, at the Center for
Global Development.