Global Policy Forum

By Christina Lamb

HEARD the one about the hydroelectric plant in the desert? The nuclear power plant built on an earthquake fault line? The fishing project on the lake that ran dry? The salt factory that never produced a grain of salt? Or the gleaming international airport built amid a village of mud huts in the African bush?

These are the kind of white elephants that British aid has helped build around the world over the past 20 years. The latest revelations that British aid to Malawi could have been used by the government of one of the world's poorest countries to buy its ministers a fleet of 39 brand new S-class Mercedes Benzes, worth £1.7 million, will surprise nobody who has had any dealings with the corrupt world of aid to developing countries. Africans even have a word for it - referring to those who have got rich through dodgy dealing as "wabenzi".

Everyone has their favorite tale of projects that went awry or of African ministers turning official trips into shopping expeditions for bulk-buying beluga caviar, not to mention so many stereos and televisions that their planes home are hardly able to take off. In between, they may have wined and dined journalists, insisting on picking up the tab. "Don't worry. It's your taxpayers' money!" they say.

Foreign aid is the only global activity in which billions of pounds can be handed out with no real questions asked about how and where it will be spent, and no recriminations made if the projects funded by it are a disaster - as they frequently are - or even non-existent. Until now, there has been a conspiracy of silence between the Western governments, who want to show their largesse and moral supremacy, as well as keeping the recipients as allies; bureaucrats anxious to spend budgets; the developing countries who want the cash, whether for their own pockets or their people; and the aid agencies, which fear that, if they blow the whistle on the bad projects, the money for the good ones will dry up.

They have a lot to lose - in Nepal, for example, there are more non-governmental organizations than doctors and teachers. So taboo a subject was aid and corruption that, until three years ago, the main donor agencies, the World Bank and the International Monetary Fund had no policies for dealing with it. But after years of deliberate obfuscation, there is now so much concern at the amount of money going astray that a parliamentary inquiry into corruption in British aid is to begin hearings this week.

"You could fill your newspaper week after week with cases, there is so much corruption going on," said Robert Naiman, a policy analyst at the Center for Economic and Policy Research in Washington, who documents the misuse of Western aid. "We are only just starting to open the Augean stables." Among the recent cases of mis-spending is the Canadian-funded international airport at El Doret, a remote village in Kenya that just happens to be President Arap Moi's hometown. Norwegian diplomats laugh about funding a fish farm on a lake in Kenya that dried up, while the European Union paid for a salt factory in an isolated part of Queen Elizabeth National Park in Uganda. No one wanted to live there, so no salt was ever produced.

British aid allocated for housing poor Palestinians in the Gaza Strip has been used to build luxury apartments for wealthy friends of Yasser Arafat. Despite a report by auditors that 40 per cent of Mr. Arafat's budget was stolen through kickbacks, Britain is continuing with its three-year £105 million aid programme to the Palestinian Authority. Mr Naiman said: "Foreign aid is there to accomplish more than one thing and sometimes those things may be in conflict,". "People like Clare Short [the International Development Secretary] don't get to the position they are in by being idealists. Maybe the recipient government is stealing the money, but it is probably not the top concern of the Foreign Office to make sure that governments who are allies are using the money correctly."

The most notorious example was that of the late President Mobutu Sese Seko of Zaire, where report after report warned that his government was totally corrupt and that, if more money was lent, it would be stolen. Yet Western governments kept pouring in cash - and the Mobutu family kept shopping. By the time of his downfall in 1997, the country's average wage had fallen to £100 a year and Mobutu had amassed a farmhouse in Switzerland, a manor house in the Algarve, a villa on the French Riviera, a turreted chateau in Belgium and a vast apartment on Avenue Foch in Paris.

It wasn't just the ruling family who had their snouts in the trough, either: each minister was entitled to a Mercedes and a Jeep, too. The regime was so corrupt that Zaire's ambassador to Japan even sold off the embassy. According to In the Footsteps of Mr Kurtz, a book by the Financial Times journalist Michela Wrong: "The entire state administration came to resemble one of those conveyor belts that whiz an array of gifts past contestants in a television game show, with even disappointed also-rans entitled to generous consolation prizes."

Before the fall of the Berlin Wall, the excuse of Western governments for ignoring such blatant corruption was to prevent developing countries falling prey to communism. However, 10 years on, the corruption continues. In the case of Malawi, where 64 per cent of the population are malnourished, British aid money has been increased to £52 million. (It was £30.8 million the previous year.) It is now the third largest recipient of British aid, despite a report by Gilton Chiwaula, the director of the Malawi Anti-Corruption Bureau, that found that one-third of government revenue disappears into the pockets of civil servants every year. Shortly after the latest increase was announced, the government ordered its gleaming new fleet of Mercedes. Part of the increased funding is intended to improve the country's education system, yet £1.5 million has disappeared from the school construction budget and the education minister, Sam Sulufi, has been arrested on charges of graft.

Britain also recently resumed aid to Kenya, despite numerous scandals. The Kenyan government is unable to show that it has spent hundreds of millions of pounds in grants that it has received from the UN and Canada on the projects for which the money was intended: roads, water supplies and energy. Indeed, for months residents of the capital have been without water and electricity for all but three hours a day. An opposition MP, Joseph Munyao, recently described the Office of the President as "a bottomless pit that swallows any money that comes", and pleaded with donors not to channel funds through it.

Corrupt African dictators spending Western aid money in Harrods is only part of the story. A Foreign Office official admitted: "There is a lot of being seen to be doing something rather than actually doing anything useful, let alone learning lessons from previous mistakes." Clare Short has made several speeches on the importance of rooting out corruption, describing new controls as "a central theme of our development programme". Critics say that the amount of money going astray has actually increased because of a shift from project-based financing, where there is more control, to the more politically correct sector-based funding, such as putting money into the education department in Uganda.

When money goes into a large pool in this way, it becomes much more difficult to track how it is spent. A spokesman for the Department for International Development refused to provide failure rates. Gary Streeter, the Tory MP for South West Devon, said: "I'm very concerned about the lack of strings attached to our giving. The new approach may be fashionable, but I think it's very naive."

Moreover, all but £450 million of Britain's £2.3 billion aid budget last year went through multilateral institutions such as the World Bank, the International Monetary Fund, the UN and the EU and that is where the main problem lies. Earlier this year, a report by the US Congress on the World Bank and IMF attacked both institutions. The Congressional commission, headed by Professor Allan Meltzer, found that the World Bank, which employs 17,000 people in 170 countries and each year hands out $50 billion in loans, has an astonishing 55-60 per cent rate of collapse among projects that it funds.

The report spoke of "too much energy devoted to making loans rather than following through" and pointed out that, in some cases, the Bank, which is meant to alleviate poverty, actually destroyed livelihoods. Exhibit A on the tendency of donors to foist projects on people and ignore realities is the Mozambique cashew nut project. After the 16-year civil war ended in 1992, Mozambique abandoned Marxism for the free-market policies required by the World Bank and IMF, quickly becoming the world's largest per capita aid recipient.

The only exception was the cashew nut industry, where the government put a tax on the export of raw nuts to ensure a supply for local processing plants, one of the country's few industries. Insisting that they knew better, World Bank officials threatened to cancel £350 million in planned loans unless the tax was dropped. Reluctantly, the Mozambican government complied. Since 1996, the 10 largest processing factories have closed as cashew growers sold their nuts overseas. Half the industry's 12,000 workers lost their jobs. "We only offer advice to these countries," said James Coates, the Bank's director in Mozambique, in an interview with the Washington Post. "It is up to them whether they accept it." The EU has an equally inglorious record. Earlier this year, The Telegraph revealed that the EU had squandered £18 million on fictitious aid projects in the Ivory Coast, paying 37 times the market price for medical equipment such as stethoscopes and baby scales.

The tragedy is that it is the people living in abject poverty in the developing world, for whom all these projects, institutions and bureaucracies have theoretically been set up, who ultimately pay the price of such corruption. Brenda Barton, of the World Food Programme said: "There are good people with good projects and millions of poor people out there needing their help. It shouldn't be so difficult to link them all up."

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