World View : Foreign Aid: When the Giving Hurts : Faced with economic woe and unemployment, nations are cutting back on their charity.

By WILLIAM TUOHY

April 20, 1993 12 AM PT

TIMES STAFF WRITER

LONDON —

As Britain’s Cabinet minister in charge of overseas development, Baroness Chalker has traveled to Somalia, Bosnia, West Africa, Nepal and southern Africa since the first of the year viewing firsthand the needs of developing nations.

A former business executive, the minister returned home to argue the case for maintaining Britain’s foreign aid outlays against tightfisted government budgeteers determined to cut spending.

Her department’s role, she insisted, is “to improve the quality of life in developing countries.”

But she is finding foreign aid to be a tough sell--and she is not alone.

The U.S. Congress is also calling for major cuts in the foreign aid budget of the Clinton Administration, and many other donor nations are reducing their contributions to developing countries.

Industrialized nations, traditionally the major donors of foreign aid, are financially strapped by the worldwide recession and other demands on their budgets--hence the dwindling support for foreign aid, which totaled $131 billion in 1991.

Some of the largest contributors per capita--like Sweden and Finland--are reducing their foreign aid budgets by more than 10%; Italy, the fifth-largest donor after the United States, Japan, France, and Germany, also has drastically cut its contribution amid charges of official corruption in dispensing aid funds, particularly in Somalia.

Few major governments, with the exception of Japan’s, are increasing budgets or are likely to meet the foreign aid target of 0.7% of their gross national product set by the Paris-based, 25-member Organization for Economic Cooperation and Development (OECD). Meeting that standard would have pushed the U.S. foreign aid budget for 1991 from $11 billion to nearly $40 billion, for example.

In assessing the new directions in foreign aid, Alexander R. Love, chairman of the Development Assistance Committee of the OECD, calls the government cutbacks “very worrying.”

Further, he and other aid specialists say, the outlook for near-term foreign aid increases for traditional recipients is very dim for a variety of reasons, not only because of the recession.

“Let’s face it,” observed a British aid specialist. “Foreign aid recipients were often dictated by security considerations--and competition between the Western states and the Communist countries for alliances in the developing world. Now that communism is no longer a threat, there will be changes in those foreign aid priorities.”

The breakup of the Warsaw Pact and the Soviet Union into republics has seen many of the states, including Russia, change from net donors into net recipients. Now, enormous sums of money are earmarked by the West for Russia--last week’s G-7 meeting in Tokyo promised a $43.4-billion package, including debt forgiveness.

Such aid outpourings may cut into the funds available for the developing nations, experts warn, and particularly for sub-Saharan Africa.

“In some cases, foreign aid direction has turned into a competition for funds between the East and the South,” remarked a British diplomat.

In another drain on resources, the collapse of the Soviet empire and the resultant outbreak of ethnic violence in former Communist states have increased the funds allocated by governments to humanitarian and peacekeeping efforts.

“While peacekeeping costs are not directly linked to foreign aid budgets,” said one Western expert, “there is only so much discretionary money available to governments--and the funds have to come from somewhere.”

As a corollary, aid specialists note that the need for humanitarian assistance has risen in recent years because of civil conflict and natural disasters.

“We have seen a growing problem with continuing emergencies,” says the OECD’s Love. “Emergencies--drought, famine, civil unrest--get a priority claim on resources. Peacekeeping needs merge with humanitarian assistance. All these claims enter into the foreign aid equation.”

What worries Love and other overseers of foreign aid is the fact that money and resources for short-term emergencies may come out of funds designated for long-term development projects.

They are fond of quoting the old saw: “Give a man a fish and he eats for a day; teach him to fish and he eats for life.”

For example, almost half of the British private charity Oxfam’s overseas grants are spent on emergencies--money that could be spent on long-term development and reducing poverty.

Modern foreign disbursements began after World War II when most U.S. aid went to Europe to rebuild the shattered Continent and then, after the beginning of the Cold War, to stave off communism.

As Europe recovered, the big donor nations were Western democracies, and much of the foreign aid went to Third World nations, largely into development projects.

Governmental foreign aid has generally been of two kinds: multilateral contributions to large organizations like the United Nations, the World Bank and the International Monetary Fund, which then distribute funds in various programs; and bilateral, country-to-country aid in the form of grants, loans and other kinds of assistance.

Private aid organizations--CARE, World Vision Inc., the Christian Children’s Fund, Save the Children and others in the United States; the International Federation of Red Cross and Red Crescent Societies in Switzerland; Oxfam in Britain; Medecins Sans Frontieres in France; Caritas in Belgium; Action Medeor in Germany, and many others--contribute their share of foreign aid, though the totals are much lower than governmental assistance.

These voluntary agencies, known in the jargon as NGOs (for non-governmental organizations), aim to promote long-term sustainable development for some of the poorest communities in developing countries.

“Their strength,” says a British government official, “is that they can operate at the grass-roots level in ways not always open to government-to-government aid. They are involved in smaller, faster-acting programs at the local level.”

Foreign aid has never been all that popular among Americans, and now, in the face of recession and unemployment at home, public opinion in some other countries also appears to be turning.

Canadians, for instance, have been proud of their reputation as international good guys, willing to pay higher taxes to maintain it. “Canadians genuinely do want to help in the Third World,” says Michael Marzolini, chairman of Insight Canada Research. “They’re used to reaching deep into their pockets.”

But over the last couple of years, Marzolini said, Canadian support for foreign aid spending has fallen precipitously; a recent poll by his firm showed that only 13% of those surveyed believed Canada should spend more on foreign aid--while 51% thought spending should be cut.

And in Britain, an aid official says flatly, “These days, the taxpaying public is still willing to give--but they expect value for money in foreign aid.”

Despite the lack of public enthusiasm for giving, the United States has traditionally been the world’s largest donor nation--though it is now being overtaken by Japan. America once gave 60% of world aid; now it contributes 16%.

Meanwhile, Japan has announced plans to increase its overall aid by 50% in the next five years compared to the last five--to as much as $75 billion. Additionally, it is expected to make about $45 billion in subsidized loans available to foreign countries and businesses through such organizations as the Export-Import Bank.

Japan’s generosity is partly due to its need to recycle the enormous trade surpluses it has run up: Last year, its exports exceeded imports by $133 billion.

Japan is one of the few bright spots on the government aid horizon, however. For example, Canada--which in the past spent 1.9 cents of every government dollar on foreign support--is reducing its aid budget by 10%, affecting programs in Africa, Asia and Latin America.

France too is cutting back, amid economic troubles that have sent the country’s unemployment rate sharply upward. “The current financial situation of France does not allow much generosity beyond its own borders,” said new conservative Prime Minister Edouard Balladur.

Norway, the leading aid giver among the industrial nations in terms of per capita handouts, is cutting its aid budget by about 5%, though its foreign support remains at 1.09% of its GNP--still well above the OECD target figure.

Germany continues to contribute heavily to the countries of Eastern Europe and the former Soviet Union.

However, at the Tokyo G-7 meeting, German Finance Minister Theo Waigel brushed aside a U.S.-led campaign to step up aid to Russia even more, saying his country has already given enough. “Our national interest does not permit us to do more,” he said. Actually, the German public appears to do far less complaining about foreign aid to Russia and Eastern Europe than it does about the $100 billion annually being poured into the formerly Communist eastern Germany.

A Swedish official, in explaining its 10% foreign aid cut in the coming year, said: “We’re facing an economic crisis in Sweden with unemployment rising. We hate to cut back foreign aid to poor African countries. But we are still above the OECD target figure of 0.7%.”

Arab development aid fell sharply from $5.9 billion in 1990 to $2.7 billion in 1991 as the Gulf War changed both the volume and direction of Arab aid, according to the OECD. With Kuwait concentrating on postwar rebuilding, only Saudi Arabia remains a significant Arab donor. And its foreign aid program shrank from $3.7 billion in 1990 to $1.7 billion in 1991. Still, that figure represented 1.5% of its GNP.

Venezuela, one of the few aid-givers in Latin America, reduced its net disbursements from $40 million in 1990 to $10 million in 1991, the main recipients being the Dominican Republic, Honduras and Guatemala.

But some Asian countries, like South Korea, Thailand, Singapore and Taiwan, have gone from being foreign aid recipients to being donors. Taiwan recently lent $15 million to Vietnam to finance small businesses and $20 million to the Philippines to help convert the former U.S. naval base at Subic Bay into an industrial complex.

Taiwan’s International Development Fund, established in 1988, has paid out $188.3 million, and its Humanitarian Relief Fund, begun in 1989, has given away $91 million. China is sending assistance to Mongolia and Kazakhstan while reducing its aid commitments in sub-Saharan Africa.

Donor nations often have special reasons for selecting recipients.

Germany has favored aid to Eastern Europe because leading officials believe it is in Germany’s national interest to keep Eastern Europe stable and democratic.

Similarly, Italy, which traditionally singled out former colonies in Africa for aid, has shifted its aid sights to Eastern Europe--most recently, Albania, with the intention of keeping a wave of refugees from washing across the Adriatic.

China also concentrates foreign aid on countries lying around its rim.

Britain has funneled its aid toward former colonies like India, Bangladesh, Zimbabwe, Ghana, Kenya.

The United States gives by far the largest share of its foreign aid to Israel and Egypt, for historic and political reasons, and to ensure peace between the two most powerful Mideast nations. Other leading recipients include Turkey, El Salvador, Greece, the Philippines and Honduras--almost all chosen for political rather than humanitarian reasons.

But changes are under way.

U.S. economic and military aid to the Philippines, for example, has been cut by about half since the giant naval base at Subic Bay closed down. And Pakistan had all American aid cut off in October, 1991, when the White House was unable to certify to Congress that Pakistan did not possess a nuclear device.

Britain has tempered its aid to Kenya, warning that, as an official put it, “we are giving less aid than otherwise until we think your economic policies are sound and your government a good one.”

In fact, observed the OECD’s Love, “there is much more accountability nowadays” in the distribution of foreign aid. “To be eligible, countries are having to show what the World Bank calls ‘good governance.’ ”

Zambia, one developing country showing “good governance,” has been rewarded as the biggest recipient of British, Japanese and German aid in Africa.

Despite the problems in applying effective foreign aid on a worldwide scale, Love finds some evidence for hope.

“With the end of the Cold War,” he said, “we are looking at the opportunity to help developing countries move toward economic and political reform.

“Development can make enormous changes in the course of one generation,” he added. “There are great opportunities out there now.”

Times Staff Writers Mary Williams Walsh in Toronto, Tyler Marshall in Berlin, Rone Tempest in Paris, William D. Montalbano in Rome, David Holley in Beijing, Leslie Helm in Tokyo, Bob Drogin in Manila and Chris Courtney in Hong Kong contributed to this article.

A Matter of Percentages

% of GNP of Net Official Development Assistance from Development Assistance Committee countries in 1991.

Norway: 1/14%

Denmark: 0.96

Sweden: 0.92

Netherlands: 0.88

Finland: 0.76

France: 0.62

Canada: 0.45

Belgium: 0.42

Germany: 0.41

Australia: 0.38