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Board of New US Aid Fund Holds 1st Meeting - 2004-02-09


Two years after President Bush's administration announced a new approach to foreign aid, the fund responsible for implementing the new policy has held its first board meeting. The new foreign aid fund basically will reward developing countries for good governance.

Top U.S. aid officials have described the Millennium Challenge Account as a revolutionary development initiative.

State Department official Alan Larson is the acting director of the Millennium Challenge Corporation that oversees the multibillion dollar program. "The focus of the Millennium Challenge Account is economic development, growth and the expansion of living standards for the people in these countries that we're working with. And we are focusing on those countries that have the best possible development policies, even though they are poor," he says.

So far, 63 countries have been listed as eligible for U.S. aid under the new program. They include East Timor and Bosnia-Herzegovina, Mali, Senegal and Ghana, Pakistan, Afghanistan, Yemen, Vietnam, India and Bolivia to name a few.

Mr. Larson says the program would help fund aid projects for countries judged to be promoting good governance and programs aimed at improving basic health and education services. The first potential partners should be listed by May. "The basic criteria for even being able to be a candidate are to be poor, to have an annual per capita income level below $1,445 and be eligible for participation in all of the programs of the International Development Association," he says.

Mr. Larson says the U.S. administration has in mind projects that would spur sustainable economic growth and reduce poverty. He talked of programs to improve technology education and agricultural production, among others.

Administration officials say the Millennium Challenge Account will complement, not replace, the U.S. Agency for International Development.

Development expert Joseph Siegel of the Council on Foreign Relations says the program has great potential. "It's really assessing the progress that any individual country has made, compared to other developing countries. So, it isn't a matter of, are you following legal or political structures like the United States. And I think, that's one of the attractions, because you're looking at the median levels a country has attained on these various 16 measures," he says.

Mr. Siegel says the new approach to development assistance is something the development community has been advocating for years. "We have been seeing over the last five to 10 years more studies that show the strong, positive links between good governance, lack of corruption and good development outcomes. So, I think that is probably one of the sources from where this came," he says.

Still, Mr. Siegel says the three categories of requirements, political, economic and civil rights, need to be tightened to make sure those countries that may be making headway on economic development, but not political reforms, do not sneak through the vetting process. "The way it has been structured, there are countries that could slip though that category, with strong economic rights, but terrible political rights and civil liberties, like Gambia, China, Vietnam, that could be getting these very significant resources. And I think that would be a travesty of the system. It's not what it was intended to do," he says

Some development experts worry the program is limited, and say African countries under consideration represent a small percentage of the continent's impoverished masses.

Other experts express concern the program does not have adequate funding to make a difference.

When President Bush announced the plan two years ago, the administration contemplated a yearly budget of $5 billion, starting in 2006. Congress has earmarked only $1 billion for this year. The administration says it will request more than twice that amount for 2005.