Doublethink: The two faces of Norway’s foreign and development policy

January 2010

New report written for Forum for Environment and Development, Oslo.

To read the full report click here

SUMMARY

Government officials and ordinary Norwegians tend to see Norway as a small but influential country that often sets international standards
for ethical behaviour and that does good in the world. But how real is this benign image and how ethical is Norway’s foreign and development
policy in practice, both compared to its declared policy and to other countries? This report looks at some key Norwegian foreign and
development policies, some of which are controversial in terms of their impacts on poverty reduction and development.

It finds:

• The government’s Pension Fund, although having established ethical criteria and excluded some companies from its portfolio,
  continues to invest in numerous companies abusing human rights and the environment. Neither is the Fund noticeably more
  ethical than several other investment funds.

• Norway’s oil industry, which is contributing massively to domestic wealth, is increasingly active in states abusing human rights.
  Despite some positive environmental policies, Norway is also a major, and increasing, emitter of greenhouse gases contributing
  to global warming. Norway’s environmental aid is insufficient to compensate for this impact.

• Norway has a growing arms industry which, despite greater restrictions on exports than in other countries, still enables
  Norwegian arms to end up being used by NATO allies in offensive operations overseas. Norwegian military equipment is still
  exported to a small number of human rights abusers.

• Numerous Norwegian companies, including state-owned enterprises, are involved in human rights or environmental abuses
  overseas but the government is failing to clarify or establish legally-binding mechanisms to hold corporations to account for
  their impacts. The government’s faith in voluntary mechanisms to improve corporate behaviour goes against United Nations
  calls for improved global governance that are being supported by Norwegian aid.

• Norway has taken positive steps to press the World Bank to stop imposing privatisation and liberalization conditions on
  developing countries, but these have not been matched by a switch away from backing the World Bank’s ‘private sector
  development’ model. Rather, Norway continues to promote privatization processes from which its own energy companies,
  in particular, are benefitting.

Norway has taken a genuine and important ethical lead on some international policy issues and it is these that, not surprisingly,
its ministers stress and that the rest of the world often notices. But the list of unethical policies is also long and becoming longer.
The leitmotif in Norway’s unethical behaviour concerns the promotion of business interests and the failure to restrain and direct
them towards promoting human rights. In this respect, Norway has become little different to other rich countries exploiting the
planet for their own benefit.

Norwegian ministers remain fundamentally more open, and the state much more transparent, than most other developed or
developing countries. Yet they face a number of dilemmas and are avoiding hard policy choices. Many seem to think that they
can have a large oil industry and at the same time lead the fight against climate change; that they can work in corrupt, repressive
regimes and still be seen as champions of human rights; that they can promote Norwegian business interests in the global economy
to the same degree as other states but be seen as pioneers of corporate social responsibility; and that they can talk about
redistributing global wealth while their pension fund continues to invest in tax havens.

Overall, Norway has lost its ethical niche. During the cold war in the 1960s and 1970s, Norway’s ‘peace-seeking’ stance stood out
between the superpowers. In the 1980s and 1990s, during the wave of neo-liberal economic globalization that pushed unfettered
liberalization around the world, the successful Norwegian model, with a major role for the state in economic policy, also stood out.
Now, Norway’s policy-makers have not developed a big idea to give to the world. They need to make some hard decisions and
develop new ideas if they are promote genuinely ethical foreign policies.

To read the full report, click here

Norway’s dirty little secrets

Published in Guardian, Comment is Free, 24 September 2009

Can the European Left look to Norway to push the world’s powerful nations to act morally abroad? A Labour/Socialist Left
coalition government is celebrating electoral victory there, the first time an incumbent government has won re-election in
40 years. Four years ago, it promised to act as a “peace nation” to support a “more democratic world order” and human rights.
Yet Socialist-led Norway – still living on its benign image abroad – has instead become the home of four dirty little secrets.

The first concerns the government’s pension fund, which invests its huge oil income in over 7,500 companies in 46 countries
and is worth around £250 billion. Regarded by many as a model of ethical investment, its portfolio is more like a dirty list of the
world’s worst corporations, including numerous oil, mining and agribusiness corporations criticized for their human rights and
environmental impacts. The fund also invests in half a dozen tax havens and numerous Israeli and other companies accused of
contributing to the occupation of Palestinian territories. The government has so far excluded only a handful of companies from
the fund on ethical grounds.

Even worse is policy on oil. Norway is the world’s third largest exporter of oil and gas, which provide over a third of government
revenues. Last year, when the doubling of world oil prices plunged millions of people in developing countries into poverty, oil revenues
boosted government coffers by 17 times the value of Norway’s overseas aid. StatoilHydro, 67 per cent-owned by the government,
operates in several countries accused of corruption and dire human rights records, such as Azerbaijan, Angola, Iran and Nigeria, and
is eyeing up Iraq. Ministers have been speaking openly about re-orienting Norwegian diplomacy to push into new oil markets such as
Saudi Arabia.

On the environment, Norway’s benign image is also removed from reality. True, nearly all domestic electricity comes from hydro-electric
plants and Norway was one of the first to adopt a carbon tax to address global warming, in 1991. Yet with 0.1 per cent of the world’s
population, Norway emits 0.3 per cent of greenhouse gas emissions; if oil exports are included, the figure may be around 2 per cent.
The government is committed to making Norway carbon neutral by 2050, yet this will partly be achieved by buying carbon reductions
in other countries, not reducing to zero Norway’s own emissions.

Finally, Norwegian arms exports – little known outside the country – are booming. Although amounting to 0.1 per cent of world arms
exports, Norway’s weapons sales have tripled since 2000, reaching £336m worth in 2007. Norwegian arms were used by the US and
Britain during the invasion of Iraq while a lack of controls in Oslo have allowed high-explosives sold to the US to be re-exported to
Israel for use in the occupied territories.

Norway has lost its ethical niche. Although it has a large aid programme and strongly supports the UN, it has otherwise joined the
club of rich nations exploiting the planet for their own benefit. The leitmotif in its unethical policies is the failure to summon up the
courage to regulate corporations, whether in oil, arms or finance. Unless governments do this, hopes of an ethical foreign policy will
remain a mirage.

A fuller analysis, Doublethink, will be published by
the Forum for Environment and Development later this year.

Assessing progress towards the African Union’s 10 per cent budget target for agriculture

New report written for ActionAid. To read the full report, click here

SUMMARY

Agriculture is the engine of growth of most African economies, contributing on average about 30 per cent
to the continent’s GDP. It accounts for 60-90 per cent of employment and 25-90 per cent of export earnings.

Getting the farming sector right is key to Africa’s ability to overcome poverty. However, although the value
of agricultural output has increased by 2.5 per cent per year in Africa over the past four decades, per capita
production over the last 20 years has declined by 2 per cent a year.

In an effort to revitalize this key sector, a number of visionary and strategic initiatives have been mooted.
After the African Union’s adoption of the New Partnership for Africa’s Development (NEPAD) in July 2001,
heads of state committed themselves to a new programme to revitalize agriculture and reduce hunger – the
Comprehensive Africa Agricultural Development Programme (CAADP)

CAADP is defined as a strategic framework to guide country development efforts and partnerships to reach
a higher path of economic growth through agriculture-led development. Unfortunately, as this report shows,
countries have made limited progress towards meeting the CAADP commitments:

•    Only seven out of Africa’s 53 countries have reached their commitment to spend 10 per cent of their national
budgets on agriculture by 2008. There are almost as many states that have reduced their spending as have
increased it.
•    Eleven countries have reached CAADP’s target for 6 per cent annual agricultural growth. Average growth
rates in the sector are now 4-5 per cent, an increase over the 3.6 per cent rate before the CAADP commitments.
•    The target to double annual spending on agricultural research and development has also been missed, as
has the commitment to increase fertilizer use from 8kgs to 50kgs per hectare by 2015.
•    Governments are still far behind on other CAADP targets such as the attainment of food security, integration
of farmers into the market economy and improving access to global markets.
•    After five years of implementing CAADP, only one country (Rwanda) is on course to fulfil its obligations
under the high-level agreement. Rwanda has, in fact, aligned its national priorities with the CAADP agricultural
framework.

Donors are also failing to meet their part of the CAADP commitments. Specifically, half of the US $251 billion total
investment agreed in the CAADP framework is supposed to come from aid or private investment needed to come
from overseas aid or private investment, amounting to US $8.9 billion a year. Although aid to African agriculture
has doubled from US $1.05 billion in 2002 to US $2.15 billion in 2007, this is still four times less than what donors
promised to deliver through CAADP.

….

A world of discrimination: Minorities, indigenous peoples and education

Chapter from Minority Rights Group, State of the World’s Minorities 2009

Education is a basic human right, but in all regions of the world minority and indigenous children are
being deprived of a quality education or access to schools at all. Of the 101 million children out of school
and the 776 million adults who cannot read and write, the majority are from ethnic, religious and linguistic
minorities or indigenous peoples.

Numerous states are violating international laws and standards by failing to provide adequate education for
minorities. The costs of failing to provide education for all are massive, holding back economic growth and
potentially sowing the seeds for conflicts. Yet the international community – governments and aid donors
alike – has still not fully woken up to the need to address inequities in education, and specifically the needs
of minorities.

At the UN Forum on Minority Issues, held for the first time in December 2008, speaker after speaker gave
evidence about educational discrimination and exclusion in their country. Often, national laws bar or reduce
minorities’ access to school or teaching passes over the history or culture of minority groups; further, schooling
is often only available in the dominant, official language rather than mother tongues spoken by minorities, or
else personal abuse is heaped on people from minorities by other pupils and even teachers.

In most developing countries – but especially in those schools attended by minorities which tend to be in poorer,
more remote areas – overcrowded classrooms, dilapidated buildings, few textbooks, few sanitary facilities and
poor teaching are all too common, and are holding back the educational and life opportunities of millions of children.

According to the UN Committee on Economic, Social and Cultural Rights, ‘as an empowerment right, education
is the primary vehicle by which economically and socially marginalized adults and children can lift themselves
out of poverty’. Yet educational discrimination against, and exclusion of, minorities is perpetuating poverty,
depriving people of fulfilling their potential and of playing a meaningful role in society. Education must, as
articulated by the former UN special rapporteur on the right to education, Katerina Tomasevski, meet the
‘four As’: it must be available (free and government-funded), accessible (non-discriminatory and accessible
to all), acceptable (culturally-appropriate and with good quality teaching) and adaptable (evolves with the
changing needs of society).

Ensuring access to such schooling for minorities is the greatest challenge facing policy-makers in the field of
education. Furthermore, in a world where inter-ethnic violence is present, and in some cases rising,
improvements in the education of minority groups to help create more tolerant, multi-cultural societies is
surely one of the very greatest challenges the world faces.

To read the full chapter, click here and go to “A world of discrimination”

Mining and tax in South Africa: Costs and benefits

New report

SUMMARY

The South African economy overall continues to benefit greatly from mining, but it is not benefiting as
much as it could, and the costs of mining are increasingly borne by communities in rural areas.

Mining accounted for 7 per cent of GDP, $20.7b worth of primary exports and employed 459,000 people
in 2006. The mining sector’s total contribution to the South African economy is estimated at $25.9b in
2006, including all taxes, procurement and wages. However, South African mining companies enjoy generous
tax treatment: they are able to deduct 100 per cent of much of their capital expenditures against tax while
gold mining companies pay a corporation tax rate according to a formula that keeps remittances to government
low. Moreover, the government is introducing a new mineral royalty system after caving in to many of the
mining industry’s demands: this will impose very low royalty rates that this report estimates will cost the
country $359m – $499m a year compared to previous proposals made by the government.

Mining companies paid taxes of $2.01b in 2006 – equivalent to 9.9 per cent of exports: a low figure. At the
same time, many companies are making large profits. Gold mining companies collectively made pre-tax
profits of $672m in 2007, of which only $127m went to the state in taxation. Platinum companies did
better: Anglo Platinum, the world’s largest platinum producer based in South Africa, made $1.6b after
tax in 2006; Impala Platinum, the country’s second producer, made a massive $2.2b.

Mining in South Africa has major costs for many mine-workers, no less than 2,869 of whom have died
in the mines over the past ten years while over 4,000 were injured in 2006 alone. Health and safety
regulation has been shown to be inadequate. Furthermore, many rural communities are now in open
conflict with mining companies, seeing few benefits from their activities or being made poorer. Some
entire villages are being ‘relocated’ while losing farmland or access to water. There is evidence of water
pollution and harmful health effects on people from gold, platinum and uranium mining. Companies’
‘community development’ spending is miniscule in comparison to profits. The South African government
needs to review its fiscal policies and audit the local impacts of mining.

To read the full report, click here

Sierra Leone at the crossroads: Seizing the chance to benefit from mining

New report, written for the National Advocacy Coalition on Extractives (NACE) in Sierra Leone.

To read the full report, click here

Executive summary

This report considers how the people of Sierra Leone could benefit more from the country’s mineral resources,
especially diamonds and rutile.  The task is urgent since the country is one of the poorest in the world, still emerging
from a brutal civil war. Although minerals account for around 90 per cent of exports, ordinary Sierra Leoneans are
failing to benefit significantly since government revenues are so low. Tax laws have given too much away to mining
companies while government policies to monitor and regulate the mining sector are poor or non-existent. Unless these
change, the current expansion in mining will not translate into benefits for people.

Sierra Leone now has an opportunity to turn this around. The government, supported by donors, is redrafting the
country’s mineral legislation and reviewing individual contracts signed with mining companies. This process is positive,
but NACE’s analysis is that it will fall short of what Sierra Leone needs to ensure that mining provides a route towards
prosperity. Officials from government and donors need to re-think their strategy.

Some individual mining and tax agreements signed by the government with companies have provided extraordinary
concessions. A 2003 agreement with Sierra Rutile, one of the country’s two largest foreign investors, reduced the company’s
royalty rate to a minuscule 0.5 per cent until 2014 and scrapped entirely the payment of corporate income tax on profits
until 2014. NACE’s calculation is that the country will lose $92m (£61m) from the royalty concession alone. Despite sales
of $28m in 2006, NACE’s understanding is that the company may be paying less than $1m in annual remittances to the
government.

Government revenues from mining are miniscule. Of mineral exports of $179m (£119m) in 2006 (of which diamonds
accounted for $125m), only around $9-10m (£6-7m) returned to the government – between 5 and 6 per cent. Studies
suggest that with significant institutional and capacity reform, Sierra Leone could export $1.2 billion a year in mineral
exports by 2020 – a sevenfold rise over current levels. With good government spending, nearly a million people could
be lifted out of poverty. The government appears to have adopted a target to receive 7 per cent of the value of minerals
exports as government revenue; NACE believes the government should be aiming to take a minimum of 10 per cent,
meaning its annual revenue by 2020 could be $120m – twelve times greater than currently.

No mining company in Sierra Leone is currently declaring a profit. But profit projections from the two major
companies – Sierra Rutile and Koidu Holdings, the country’s largest diamond miner – suggest that the government could
significantly benefit in the future. Sierra Rutile itself states that the government will receive $580m over 20 years; Koidu
Holdings that it will remit to the government $399m over the next 17 years.

However, if these benefits are to materialise, massive problems in Sierra Leone’s mining sector, all associated with
governance, need to be overcome.

•    There is an extreme lack of transparency, with a lack of information at all levels, creating mistrust and ignorance
about the financial position or intentions of government and companies. Some companies provide no public financial
information on their activities while the government does not publish a figure showing how much it earns from mining
overall.
•    There is a severe lack of capacity in all government departments associated with mining to, for example, assess and
collect revenues and taxes and acquire basic geological information.
•    The country lacks adequate monitoring mechanisms to ensure that mining companies are behaving in a lawful manner;
there are concerns that some companies claiming to be exploring are actually already exporting, for example. Diamond
exports are believed to be at least double the volume of what is officially declared.
•    There are extremely serious gaps in the mining regulations, creating uncertainty among companies and communities
as to who is responsible for what. For example, there are no laws dealing with underground mining, despite the fact that
there is one underground diamond mine in the country; there are no comprehensive laws on blasting, despite the fact that
this occurs; there is no functioning institution in the country with the legal authority to monitor Environmental Impact
Assessments; and there are no formal procedures laid down on relocating communities affected by mining, despite over a
dozen such relocations in the rutile mining area.
•    The prevalence of corruption is well-recognised. The Director General of the Ministry of Mineral Resources has stated
that ‘reducing corruption and rent seeking’ is one of the challenges facing the department which he recognizes ‘has had a
reputation for corruption’. Sierra Leone is ranked 142nd out of 163 countries in Transparency International’s Corruptions
Perceptions Index.

The government under President Ernest Bai Koroma, elected in September 2007, is committed to reviewing the country’s
mining laws and the individual agreements signed with companies, and has stated that the country is benefiting too little from
mining. A new Minerals Act has been drafted (under the previous government) and a Task Force has been put in place to
report to the President. However, it remains unclear whether the government really intends to implement the new Act and
how far the government will go in revising the country’s mining laws. The current draft of the new Minerals Act contains
some positive features but, very disappointingly, fails to propose any changes to the key tax aspects of the country’s mining
legislation.

The World Bank is also playing a key role. One of ten ‘triggers’ (ie, policies the government must implement) for the government
to receive a $10m World Bank loan is changes to the mining tax regime ‘in line with recommendations from the IMF’.  Some of
these recommendations, outlined in 2004, are reasonable, but they do not call for any increases in the royalty or other tax rates;
they call for the diamond royalty rate to be retained at 5 per cent and for the rate for precious metals (currently at 4 per cent)
to be reduced to 3 per cent. More worrying is the recommendation that the terms of the 2003 agreement with Sierra Rutile
‘should be implemented’.  It is quite unacceptable that the World Bank should be enforcing any recommendations at this level of
detail, when this is clearly the task of government – and still more when they are the wrong ones anyway. The triggers are
contained in a confidential 2007 document showed to NACE researchers by an official in the World Bank.

Furthermore, the impact of mining on desperately poor people in the mining areas is a mixed bag and sometimes harsh. On
the one hand, Sierra Rutile and Koidu Holdings (at least until its recent suspension of operations, which forced the company
to lay off over 500 workers) both employ hundreds of people offering relatively high salaries in rural areas where is there no
other economy than subsistence farming. These salaries benefit thousands of people in poor households and have stimulated
local economies, though the precise effects have never been quantified.

On the other hand, many hundreds of people have been made poorer, notably in the rutile area:

•    Dozens, and perhaps hundreds, of households are currently losing farmland as Sierra Rutile expands its mining operations
across hundreds of acres of new land. All villagers spoken to in this research have said their incomes, food production and consumption
have decreased since they lost their land; many say openly that they have been plunged further into poverty.
•    Mitigation programmes by the company are inadequate: rental payments for the use of land and compensation for the loss of crops
(both set by the government) are exceedingly low and insufficient to cover losses. Company commitments to rehabilitate land and
provide agricultural support programmes and alternative sources of income are either meagre or have failed to materialise at all,
as far as NACE has been able to establish.
•    Although Sierra Rutile has developed a voluntary community development programme, this has failed to spend any significant
amounts of money so far and, at around $150,000 a year, is a relatively small sum anyway. Furthermore, the company has bizarrely
chosen for its first major project a plan to convert 5,000 acres of palm oil to bio-diesel (the use of agricultural crops to produce
energy). Yet community needs in the area are overwhelmingly basics such as access to safe water, electricity and good schools.

The adverse impacts of mining on local communities are certainly not all the companies’ fault. Expectations in the communities
affected by mining are high. Yet the lack of adequate government regulations mean that it is unclear – to the companies, the
communities and the government itself – who is responsible for providing infrastructure and social services, what companies
precise obligations are (and how these differ from voluntary spending on local development), and what the right process is to
be followed in relocating or compensating communities.

To read the full report click here

The global food crisis and fairtrade: Small farmers, big solutions?

Report for the Fairtrade Foundation

Around the world, tens of millions of people are suffering from increased and volatile food and fuel prices.
Among them are the world’s 450 million smallholder farming households who cultivate two hectares or less
and are home to around two billion people, a third of humanity. These farms are also home to half of the
world’s hungry people.

During 2008, we have witnessed extreme price rises in the global food system as a result of production shortfalls,
unstable oil prices, use of agricultural land for biofuel production and changing consumption patterns. According
to the World Bank, food prices rose 83% between February 2005 and February 2008, led by large increases for
maize and wheat, as well as rice and oilseeds. This presents a massive new challenge to smallholder farmers,
as well as the urban poor and the landless around the world.

This report considers the challenges that smallholder face and the policies needed to overcome them. Through
research from India, Africa and Latin America with fairtrade producers – who are overwhelmingly small farmers
producing food for their families – the report also considers whether, as a result of being part of the fairtrade
system, they are in a better position to cope with the price volatility and global recession predicted in the months ahead.

To read the rest of this report, click here

A golden opportunity?: How Tanzania is failing to benefit from gold mining

New report by Mark Curtis and Tundu Lissu

To read the full report click here

Introduction

Gold mining is the fastest growing sector of Tanzania’s economy. Minerals now account for nearly half the country’s exports and Tanzania is Africa’s third largest gold producer. Yet ordinary Tanzanians are not benefiting from this boom both because the government has implemented tax laws that are overly favourable to multinational mining companies and because of the practices of these companies. Tanzania is being plundered of its natural resources and wealth.

Between 1997 and 2005, Tanzania exported gold worth more than US$2.54 billion (bn). The government has received around $28m a year in royalties and taxes on these exports, amounting to just 10 per cent over the nine year period. The 3 per cent royalty has brought the government only an average of US$17.4m a year in recent years. Raising the royalty rate to, say, 5 per cent would have increased government revenues by around US$58m over the past five years.

We calculate that Tanzania has lost at least $265.5m in recent years as a result of an excessively low royalty rate, government tax concessions that allow companies’ to avoid paying corporation tax and possibly even tax evasion by some companies if allegations are true. This is a very conservative estimate, in that it does not cover all the gold mining companies or all figures for recent years (which are not publicly available). Neither does it cover the financial costs of other tax incentives such as VAT exemption, which are extremely difficult to estimate. These extra revenues could of course provide a huge boost to tackling poverty in Tanzania. We also estimate that the prioritisation of large-scale gold mining in the country has come at the expense of small-scale artisan miners, around 400,000 of whom have been put out of work.

This report identifies three severe problems with gold mining in Tanzania, namely:

•    It provides the government with very low tax revenues
•    It is subject to minimal governmental and popular democratic scrutiny and is associated with the problem of corruption
•    People in the gold mining areas are barely benefiting and many are being made poorer.

Tanzania is one of the ten poorest countries in the world. Some 12m of the country’s 39m people live in poverty, surviving on average incomes of 399,873 Tanzanian Shillings (Shs) (US$307) a year. At the same time, Tanzania possesses around 45m ounces of gold, which at the current gold price means the country is sitting on a fortune of up to US$39bn, although extraction costs must of course be taken into account.

Precious Metal: The impact of Anglo Platinum in South Africa

This new report, written for the international NGO, ActionAid, analyses the impact on local communities in South Africa of the world’s largest platinum producer, Anglo Platinum – a company majority-owned by the British mining giant, Anglo American. 

Its main findings are that: 

Thousands of poor people in rural areas have lost agricultural land – their main means of survival – due to mining activities undertaken by Anglo Platinum. They are generally offered little compensation and insufficient ways of making an alternative living. The result is not just increased hunger and poverty, but also the destruction of a traditional way of life.

Whole communities have lost access to clean drinking water. Independent water sampling analysis commissioned by ActionAid has discovered serious water pollution at four sites near Anglo Platinum’s mines, including two schools. Mining activities are the most likely cause of this pollution, which has made the water unfit for human consumption.

Villagers have been removed from their homes in “relocation agreements” signed with associations that the company claims represent the community, but which have actually been established by the company itself.

Many communities are subject to constant intrusive mining activities, especially blasting, which is damaging their homes and environment.

Community protests to improve services offered to villagers or to challenge Anglo Platinum over land take-overs have often been met with brutality by the police and legal action by the company.

Anglo Platinum is continuing to expand its mining operations in densely populated rural areas, which will result in further imminent displacements.

Meanwhile, Anglo Platinum is making record earnings, amounting to $1.75 billion profit in 2007 alone. While the company claims to be socially responsible, it is spending less than 1 per cent of its profits on local community development. The company also makes many claims in its public material about the positive local results it achieves, which the report finds to be seriously at odds with the reality on the ground.

The report’s findings suggest that some of these impacts may be in violation of human rights guaranteed by the South African constitution.  

Read the report

The crisis in agricultural aid: How aid has contributed to hunger

Background Paper for ActionAid

Mark Curtis, September 2008

SUMMARY

 This paper shows that overseas aid to agriculture – rich countries’ spending that is supposed to increase food security in developing countries – has long failed to sufficiently help poor farmers and has often made them poorer. The context is where around 923 million people are undernourished, a figure which has increased by 75 million due to the current food price crisis. Over 2 billion people – a third of the world’s population – endure a lack of essential vitamins and minerals even when they consume adequate amounts of calories and protein.

 Part one of this paper shows:

 Agricultural aid levels have collapsed over the past three decades as hunger has risen in many countries

 Donors are now spending only half as much in real terms on agricultural aid as in 1980 – $3.9 billion in 2006 compared to $7.6 billion in 1980. Aid to agriculture now accounts for just 3.4 per cent of aid budgets even though 75 per cent of the world’s poor live in rural areas.

•  The European Union spent E50 billion on subsidizing its farmers in 2006. By contrast, EU aid to farmers in developing countries amounted to E891 million – 56 times less.
• Donors spend about the same on administering their own aid programmes as they do on agricultural aid.

 Declining funds are not spent in countries where most hungry people live

 Agricultural aid is very poorly targeted:

•  The ten countries that account for 69 per cent of the world’s hungry people receive only 20 per cent of all agricultural aid.
• The ten countries with the highest proportion of hungry people receive only 10 per cent of all agricultural aid.
• Over the past three decades, donors have cut agricultural aid significantly to some countries and regions where hunger is deepest, notably in South Asia.

 The international target of halving the number of hungry people will not be met

 The UN’s Food and Agriculture Organisation (FAO) projected, before the onset of the current food price crisis, that the world could meet the Millennium Development Goal of halving the proportion of hungry people in the world – from 20 per cent in 1990 to 10 per cent in 2015. However, the World Food Summit goal of halving the number of hungry people in the world is likely not to be met – by 2015: there will be still be 582 million undernourished people in developing countries.

 Donors’ current ‘aid effectiveness’ agenda does not address these issues

The process that donors began with the Paris declaration on aid effectiveness in 2005 ignores the major issues raised in this report. The declaration says nothing about ongoing aid conditionality (the practice of using aid to push market liberalization reforms), or crucial aid quality issues such as prioritizing assistance to countries where hunger is deepest. It also says nothing to imply that there is any particular urgency about transforming international aid to agriculture.

Part two of this paper shows:

 Donors’ spending focus within agricultural aid budgets bears little relation to the needs of poor farmers while critical areas of funding have been massively cut

 Major changes in the types of agricultural aid provided over the past three decades are to the detriment of small farmers. Donors have cut their aid for activities that academic studies show reduce hunger the most. Aid in support of ‘structural adjustment’ programmes – ie, agricultural liberalization and privatization – has massively increased, and has been at the expense of support for critical areas:

•  aid to help produce staple food crops – critical given many countries’ food deficits – has been reduced fourfold in real terms;
• the provision of key inputs such as such as seeds and fertilizer has been reduced thirteen-fold;
• rural credit to farmers to enable them to invest in new crops has become almost non-existent.

 Donors know little about the impact of their agricultural aid. What is known suggests that they have done almost nothing to promote global food security. Recent aid reviews of the World Bank, European Commission and DFID show huge deficiencies in aid quality.

 Many donors take very few steps to evaluate the performance of their agricultural aid. The evaluations that do exist often show grave deficiencies and, in the case of the World Bank and the EC, amount to devastating indictments.

• A recent review of agricultural aid during 1991-2006 from the World Bank – the largest donor to agriculture – concludes that projects have not helped countries develop a long-term strategic approach to food insecurity or helped countries sufficiently increase agricultural productivity.
• An evaluation of the European Commission’s aid to rural and agricultural development covering the period 1995-2005 concludes that, despite some successes, EC aid is ‘limited… fragile… or hardly visible’ while projects ‘fail to achieve significant global impact’.

 Agricultural aid programmes are plagued by poor management and coordination among donors

 Aid to agriculture shows growing overlaps and duplication among donors with the proliferation of separate global and regional initiatives and separate funds, despite the decline in overall aid. The fact that various donors have been pursuing separate agricultural strategies in developing countries has prompted the then World Bank director for agriculture and rural development to accuse donors of ‘havoc and confusion and waste’.

 Part three of this paper shows:

 Aid used to push agricultural liberalization has deepened hunger in many developing countries and left their agricultural sectors worse off

Agricultural aid has for the past 25 years been used to promote ‘liberalized’ agricultural policies in developing countries, entailing the privatization of state agencies and liberalization of agricultural trade. This has been done either in specific aid projects, by making aid conditional on promoting liberalization policies or by the general ‘advice’ that has accompanied aid programmes. Numerous studies show that hunger and poverty have deepened in many countries as a direct result. The World Bank has been shown to have an ideological commitment to a failed economic model which, a recent internal review shows, has rarely been based on actual country analysis.

 Despite some of their claims, donors are continuing to use aid to push a failed economic model on the poorest countries

Despite considerable historical evidence that state-led approaches can work best in agriculture, donors retain their fundamental commitment to agricultural liberalization with an active role for the state firmly off the agenda.

• Although the use of conditionality has declined – since there is little left to privatize or liberalize in agriculture – research for this report shows that World Bank aid conditionality is continuing to be used, in countries such as Rwanda, Ethiopia and Burundi, to press countries to liberalize their agricultural sectors.
• The European Union’s Economic Partnership Agreements (EPAs) are a new form of aid conditionality, whereby entire aid programmes are conditional on developing countries promoting a package of liberalization policies. Weak safeguards mean that small-scale farmers will be exposed to sudden competition from EU agricultural imports. EU strategy is to create larger markets for European companies, a goal on which officials have often been explicit.

 Aid, together with policy ‘advice’ and pressure accompanying it, is promoting ‘high-tech’ farming that primarily benefits Western businesses

 Agricultural aid directly promotes agribusiness by donors pressing for ‘high-tech’ solutions to global hunger in their policy advice to developing countries. The increased use of fertilizer, chemicals and Genetically Modified Organisms (GMOs) is seen by most donors as part of the ‘solution’ to global hunger; behind this, lies an industry of manufacturers, scientists linked to corporations and foundations. USAID is leading the push for countries to adopt GMOs in their farming while the World Bank is strongly supportive, despite evidence that biotechnology companies have yet to introduce a single GM crop that actually increases yield.

 The global food system is dominated by a small number of companies but even in the rare instances when donors recognize there is a problem they continue to do nothing to address it. Donors such the UK’s Department for International Development (DFID), for example, continue to promote completely insufficient voluntary codes of behaviour for companies to abide by (or not).

 

Donors have chosen to avoid focusing their agricultural aid on the hundreds of millions of smallholder farmers

 Donors’ agricultural aid has prioritized the interests of global corporations over smallholders; yet most of the world’s 450 million farmers are smallholders, and 85 per cent of them cultivate less than two hectares. In most developing countries, small-scale farming needs to be at the central of agricultural strategy.

• ‘Low-input’ agriculture – farming that does not rely on expensive inputs such as fertilizer or chemicals – has essentially been bypassed by donors. Research on organic farming, for example, is non-existent in most developing countries and accounts for just 1 per cent of rich countries’ total research budgets.
• Donors have long prioritized the promotion of export crops rather than food staples, yet domestic markets are generally much bigger than export markets for poor countries. Many macro-economic reforms of the type promoted by donors are not targeted on, and are not even intended to affect, millions of smallholders who produce for home consumption.