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DOES FOREIGN AID REALLY HELP THE POOR?

Does aid really go to the small farmers? Or does it go just to the 'big boys' - the judges, the magistrates, the members of Parliament, the union chairman? Then, what is the impact of aided projects based on the use of high-price imported inputs - as they often are? Besides, land reforms promoted by aid agencies are generally pretentious and do not bring any real benefit to the poor.

By Bharat Dogra


May 1999

Impressive statistics are often cited regarding the number of rural poor who have benefited from projects financed by aid agencies. What is forgotten is that these statistics sometimes include all people living in the project area. This is certainly not a proper way of evaluating the number of beneficiaries, as many such projects are known to leave untouched - or even worse off - a majority of the poor.

Another reason why the number of 'rural poor beneficiaries' is exaggerated is that often the term 'small farmer' is defined in too liberal a way, to also include relatively better-off medium farmers and in some cases even big landowners.

One US House appropriation subcommittee investigated a livestock project in Honduras, which had received three successive loans, totally $23.2 million, from the soft-lending window of the World Bank, the IDA [International Development Association]. Investigations revealed that the average size of loans for all three projects ranged from $25,000 to $59,000 and that the vast majority of farmers receiving credit from the project owned more than 375 acres of land.

These certainly were not the rural poor of Honduras. As the subcommittee pointed out, 'Local officials point out that they have been unable to devise any pro-gramme to reach such people and that projects were not designed for, and cannot reach, the rural poor who are landless or existing on 1 or 2 hectares.' The World Bank (along with the Swedish International Development Authority, SIDA) financed 3,000 deep tubewells in Bangladesh. Each was supposed to serve 25-50 small farmers, organised in a cooperative irrigation group.

Did the benefits of this really go to the small farmers? A foreign expert working on this project told two independent researchers, Betsy Hartmann and James Boyce, 'I no longer ask who is getting the well. I know what the answer will be and I don't want to hear it. One hundred per cent of these wells are going to the "big boys". First priority goes to those with the most power and influence - the judges, the magistrates, the members of Parliament, the union chairman. If any tubewells are left over, the local authorities auction them off. Big landlords compete, and whoever offers the biggest bribe gets the tubewell.'

A SIDA study that evaluated this project also pointed to its failure, or rather inevitable failure: 'It is not surprising that the tubewells have been situated on the land of well-to-do farmers who are the chairmen and managers of the irrigation groups. It (would have) been more surprising if the tubewells had not been located on their land, with the existing rural power structure maintained largely because of the unequal distribution of land.'

In their study of one such village, Hartmann and Boyce found the tubewell had become the property of the richest landlord of the village. The irrigation cooperative had been reduced to a few signatures he collected on a scrap of paper. This big landowner sold water to other farmers at a very high rate. He also had his eye on the plots near his tubewell. His increased earnings from the tubewell project have put him in a better position to buy out the small farmers' lands when they are financially in a spot.

If aided projects aimed at increasing the productivity of small farmers are based on the use of high-price imported inputs - as they often are - they can result in increased problems for the small farmer. An obvious example is the Masagana 99 project of the Philippines, initially funded by USAID.

Assessing the impact of this programme launched in 1977, Frances Lappe and Joseph Collins wrote, 'By 1977, the government announced that over 50,000 borrowers were being taken to court. Many were small farmers who had lost their crops owing to national calamities. Some were detained without trial and were forced to sell their farm animals or even their farms to repay the government loans.'

One of the main beneficiaries of this programme was Planters Products Inc., a company which markets largely imported fertilisers, pesticides, herbicides and agricultural equipment. To participate in Masagana 99, farmers have had to use certified seeds which call for the massive use of the products supplied by Planters Products.

Occasionally, World Bank aid has been tied to the promotion of export crops, even though left to themselves the local peasants prefer to grow food crops for their subsistence. Many export crops, moreover, are exposed to the rise of a fluctuating market, risks which can wipe out many small, low-resource farmers.

The International Finance Corporation (IFC), like the IDA, is a World Bank affiliate but set up with the exclusive purpose of lending to the private sector. In the late 1960s, the IFC invested in sugar production in Ethiopia, in cooperation with HVA, a Dutch agribusiness firm. By 1970, HVA controlled over a fifth of the cultivated land in the Awash valley.

For nearly 500 years, semi-nomadic herdsmen, especially the Afars, had been grazing their cattle in the rich lowland plains inundated by the Awash during the rainy season. As these excellent pastures started falling under the control of HVA and other foreign companies, the pressure on the less fertile areas increased and ecological ruin followed overgrazing. With the loss of the rich greenlands, these tribals became much more exposed to the vagaries of nature. Those who stayed on at the Awash found their cattle dying after drinking water contaminated by sugar mill residues.

In 1973, Ethiopia experienced widespread famine which killed nearly 100,000 people. The semi-nomadic tribes were the worst affected. Nearly one-third of the Afars are estimated to have been wiped out.

Thus the poor can sometimes be harmed by misdirected loans. Often, it is the rich businessmen and contractors who corner a big share of the benefits of such projects.

The person who benefited the most from the Bangladesh tubewells project was an extremely rich, London-based businessman of Bangladesh. 'When his company secured the contract for supplying pumpsets for this project,' Hartmann and Boyce report, 'the price tag on the pumpsets jumped to $12 million although another company had reportedly offered to provide them at the World Bank's original estimate of $9 million... In the words of one official, the businessman's extra $3 was easier than robbing a bank.'

Similarly, Lappe and Collins write about the experience of some projects in Bangladesh. 'While investigating the Bank-funded rural development project in Bangladesh, we learnt that rural work projects designed to maximise local labour input had been diverted from the local rural workers committee by rich contractors. These contractors, using capital-intensive methods, built roads and markets quickly and shoddily but quite lucratively for themselves. World Bank internal reports disclosed that recently completed market places were in deplorable conditions and that the newly built roads were already partially washed away.'

The Wall Street Journal reported on 10 November 1977 that '(in Indonesia) it is authoritatively estimated that 10 to 15% of the total outlay on Bank-financed projects (running at over $500 million a year) is dissipated through leakage.'

Lappe and Collins pointed out that the land reforms promoted by aid agencies are generally pretentious and do not bring any real benefit to the poor. In fact, these reforms can have the effect of strengthening the position of an enclave of better-off producers, at the cost of forestalling possibilities for a more sweeping reform motivated by an organised peasantry and benefiting an entire rural population. - Third World Network Features

About the writer: Bharat Dogra, based in New Delhi, is editor of News from Fields and Slums (NFS), an alternative media effort offering an insight into issues of relevance to the grassroots in India.

1901/99

 


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