Georgia, Moldova, Turkmenistan and Armenia

Except for Turkmenistan, the donor community has poured tens of millions of dollars into Georgia, Moldova and Armenia. For all the money, Moldova remains an economic basket case and Georgia is in entropy mode. Armenia may move away from the downward spiral it has been experiencing since the end of the 1993 war with Azerbaijan - but it won't have anything to do with the development aid it has received over those years. It will be because of changes in the geo-political make-up of the region, the rise of Turkey and a resurgent Russia intent on re-creating the Soviet Union.

Moldova is an interesting case because I recall a heavy emphasis - at the expense of economic and business support - on civil society programs. This was particularly the case with USAID whose local mission was in thrall to civil society. The problem with that is a poor household does not really care about civil society if it has little or no income or food. What is also surprising is for all intents and purposes, the current government won the election by a few points. They call themselves "communist" but in reality they are not. They simply have an un-reformed soviet style system - despite all that foreign aid - which lives up to its previous inefficiency. Moldova's biggest and unrecoverable mistake was seperating from Romania. The second problem is the Transdneister, that sliver of illegal, trafficking, blackmarket and gun-running dirt with its own unrecognized passport and thousands of Russian troops to protect it from Moldova, of which it is a part. The Transdneister problem is what keeps Moldova tied to Russia. No development aid that does not take that into consideration will succeed. Nor will it succeed without strong political will within the Moldovan government to change. That may require a change in the system.


Georgia - well, that's a different case. It is very clear that Saakashvili must go. It may be that his attempt to assert central government control over the break-away regions of Abkhazia and South Ossetia was partly due to his promise to the more nationalistic parties in Georgia to do so and thereby win the last election, but now comes the blow-back. It was never really important for Georgia to regain control of those two regions over which it has had no effective control for a decade. Even if Russia has overreached and concentrated the attention of Turkey and Azerbaijan on its newly imperial ambitions, Georgia is now in danger of disintegration as long as Saakashvili remains. If Georgia loses Batumi, then it loses its oil transit revenues. A graceful way out is needed and the opposition must come up with a plan for moving forward economically, socially and politically and not just have the removal of Saakashvili as its goal.

Turkmenistan has now accused Russia, through Gazprom, of blowing up its gas pipeline on the Uzbek border this week. That may well be true. It will be interesting to see how the gas war develops because Russia is determined to gain almost total control of gas resources either through production or lines. This is the real great game developing in the western areas of Central Asia.

Servers

Had a huge problem with my service provider in Ghana which basically resulted in limited or no connectivity for the better part of this week. Things seem to be back on line - sort of - so I can get back to posting.

Time to re-think development aid

One of the purposes of this blog is to try and propose alternatives to the accepted wisdom of development aid implementation. A key problem with development aid is that little of the aid is spent on the target country contractors and suppliers and even if they are not available – always a suspect report from an “implementing partner” – there is little effort to actual developing local entrepreneurial firms. This has been particularly true in Afghanistan, of course, and has been well documented. In that regard, I hope that the Obama administration will alter the way USAID and associated US aid donors (including the Defense Department) design their terms of reference.

Since I believe in finding root causes – not just proximate causes, it may be that the principal mistake may be the manner in which development aid programs are designed and implemented. The assumptions made at the very initial stage of design then embed themselves in the terms of reference and contract. Any modifications are made at the edges.

A root problem is that both the EU and the US award development aid contracts to national firms in the vast majority of cases. Since that is unlikely to change, some effort must be made to encourage the use of local contractors, suppliers and experts. Encouragement does not mean to simply “try your best, fellas”. Contracts should affirmatively provide for levels of funding specifically for local firms. It should not be left to the US or EU contractor to inform the prime donor that such local talent is not there simply because that fact should have been discovered during the planning stage of the project. In that case, provision should be made to develop local human and business resources so that at least some sustainable development would be built into the project.

In my experience, where funding has been structured to actually promote development, it has thankfully only peripherally involved the active involvement of the recipient government whose otherwise primary goal is to make sure its fingerprints are all over the project. Allowing fund disbursement to be controlled by the recipient governments involved is, I believe, a mistake unless there is a clear commitment to actually accomplishing the goals of whatever program is involved tied to iron clad conditionalities.

Another issue that deserves another look is the way of determining indicators for success or progress. In the US, Congress is impressed with statistics – how much was spent, what units (of whatever) were built, created, reduced, changed etc. In one example I experienced, the indicator for a successful land tenure program was an increase in transactions – a largely meaningless number unless taken in context of the economic environment. It is hardly a success in such a case if the only result is a massive sell-off at fire sale prices leading to a sinking economy. Much better to have fewer transactions that result in positive economic activity – including increased values and investments. Overall, it is necessary to take a much broader, long term view and develop indicators of sustainability that do not result in dependence on donors.

Three year or five year contracts to accomplish a wish list of deliverables may not deliver much in reality. Depending on the type of initiative longer contract terms should be considered to allow for change. Some consideration needs to be given to changing economic, social and political environments even before contracts are awarded, making the terms of reference obsolete. To help avoid this prospect, the process for determining feasibility, developing a plan of intervention and deciding on targeted outcomes needs to be significantly accelerated from, in the case of USAID, the usual 145 days.

Contracts should also avoid a “buy” American or EU requirement. Too frequently, this results in more money being spent than would otherwise be the case and, not surprisingly, does nothing to assist the local economy.

In construction and supply contracts every effort should be made to contract locally. If long term construction is required, then components should be added to develop, for example, TVET schools of a permanent nature with a guarantee that whatever construction is being planned, the graduates would have a job.

One final note about NGO support. In many political environments certain NGOs are not welcome and not sustainable. That does not mean they should not receive donor support. Just don't expect any sustainability once the donor goes away. In many situations, civil society NGOs are simply not effective. If the economy is or has been cratering, those trying to raise awareness for civil society initiatives are preaching to the families desperate to put food on the table. They don't care which particular oligarch of the moment runs the local paper.

Finally, the structuring of aid programs should include an investigation of the possibility of calving off a portion of program funding to act as a form of venture capital, providing either outright grants to support existing or develop new businesses within the framework of the program – something that worked in Armenia – or recoverable grants.

Many suggestions have been made in numerous published articles regarding improving the impact of foreign development aid. Hopefully, changes are coming as a result of political pressure and less ideological proclivities of those in charge of targeting that aid.

Nation Building

The US is indulging in nation building in Afghanistan, which never was and never will be a nation. Spending funds to provide schools, roads and livelihoods is fine, and if military protection is needed to support this effort and help make it sustainable, then so be it.

But, the world now has two more governments, Iraq and Afghanistan, whose social and political foundation is based on the denial of human rights to large segments of their populations. The denial of rights, often brutal and deadly, is based on a twisted version of basic human rights that asserts the priority of traditional ways and which cannot be criticized, particularly if those actions are based on religion. Taken to the extreme (or not in the case of Afghanistan)religious beliefs can allow anything, including murder and torture, so long as they are grounded in past practices sanctioned by those in power. To point out that this might somehow be wrong is to be branded as prejudiced.

Sorry. I do not believe that we should respect, tolerate, much less fund, any belief that advocates denial of basic human rights whether in the name of religion, tradition or anything else that smacks of "this is our way". It is merely an excuse for brutal discrimination to maintain or re-establish the status-quo ante.

The US and other nations have been spending billions of development aid in Afghanistan, yet the government has recently enacted a law that forbids women to leave the home without obtaining the permission of their husband. Iraq now has a full fledged fundamentalist regime that has dismembered the rights of women and other religious groups. Is this why the US and the rest of the world are pouring money into these newly minted 12th century regimes? Whatever happened to conditionalities?

I apologize for the rant which was caused by reading this today. The tacit approval implied by failure to tie funds to behavior through conditional funding that subsequently results in the re-deployment of abusive beliefs and actions, is outrageous. In fact, all - all of Central Asia was socially better off under the Soviets because at least they enforced equal treatment of women and men and held these perverted religious ideas in check. Let the Russians take back Central Asia for the sake of civilization.

Armenia - Turkey Accord

Armenia and Turkey have been talking. There appears to be a chance that Turkey will open its borders. Let's make no mistake - this would open up huge market possibilities to the impoverished, Russian ally in the south Caucuses. Such a move would also play well for Turkey with the EU.

Open borders for Armenia could allow a larger portion of the earmarked US development aid funds to be utilized in implementing a variety of interventions aimed to develop Armenian trade and business ventures.

The benefits of trade across the border with Turkey, avoidance of Georgian customs corruption and the effective targeting of development aid to support private sector growth could bring about significant change in Armenia. The end to isolation would likely have an immediate positive impact on the rampant corruption in the government and public services that exists at every level.

Much depends on the extent of any agreement with Turkey and the resistance to such a move by Azerbaijan.

Hurriyet News reported today that Azeri Foreign Minister Elmar Mamedyarov warned that "If the border is opened before the withdrawal of Armenian troops from the occupied territories of Azerbaijan, it would run counter to Azerbaijan's national interests".

This message was likely meant as much of a warning to Armenia as to Ankara. However, it also may represent an opening if it is not meant to only refer to Ngorno-Kharabakh. An offer by Armenia to withdraw from the other occupied territories could move the peace process forward. This may be the best time to start serious talks.

The other issue is Azerbaijan's position as independent of Russia, which might change if it felt that Turkey was about to abandon Baku. They have already signed a memorandum of understanding with Gazprom (Moscow's real foreign affairs arm) on natural gas transport through Russian pipes at market prices. Finalizing such an agreement would kill the Nabucco project which is intended to avoid Russia and bring natural gas to Europe via Turkey. So much for energy independence.

Finally, sorry Representative Kirk (R.CA). The Armenian Genocide bill will likely not pass now - Turkey, geo-politics, energy and peace are more important - and, what is the color of the sky on your planet? The failure of this bill will not cost the Democrats the House in 2010.

Ghana's land reform struggle - losing the battle?

In 1997 I first came to Ghana on a short mission for the World Bank together with two experts in urban planning and title registration respectively, to try and find out where the land reform program had jumped the track. Ghana had been the shining star of West Africa for the Bank, but the failure to rapidly provide secure tenure to ordinary Ghanaians, and especially the poor, via a much vaunted new title registration system was disturbing, to say the least. There are few things more important to economic growth and reduction of poverty than land reform.

We interviewed all the usual suspects: government representatives, bank official (accesss to credit which land ownership provides), urban planners and lawyers. We wrote a report. Apparently, no one listened because when I arrived here at the end of January this year I was presented with virtually the exact set of problems we had identified more than a decade earlier. Incidentally, the land market reform program intitiated by the Bank was known as Urban I. Urban V - or VI (I need to check on this) is the latest iteration.

Ghana has received more than $750 million in aid from the Bank alone in the past 20 years. A significant portion of that was sunk into resolving land tenure issues. The poor have no cash. But they have assets. It's the frozen capital described by Hernando de Soto in "The Mystery of Capital". Give the poor tenure and unfreeze the capital so that the poor can escape the informal sector. That's the theory and I happen to agree. So what has gone wrong in the past twelve years that has in many ways witnessed rather large sums of money have rather minimal effect? Why are slums growing on average of 3.5% a year in Africa? This is an accelerating train wreck and the solutions will only be more painful as time passes without a better approach. To be continued...

US Politics - Only once - I promise

I'm sorry. This is not what this blog is about, but I can't resist. From Talking Points Memo - two items...Rep. Bachmann and her newest campaign to glorify stupid with a constitutional amendment to protect the US Dollar from a non-existent threat and Sen Inhofe who believes because the Great State of Oklahoma bore the brunt of a heavy snowfall recently, global warming is false. To the people who voted for these moth-brains - are you embarrassed yet? What about the 30 co-sponsors to Bachmann's proposed constitutional amendment? On the other hand, it is April 1 - one can hope it's a joke. That's it. Just go read it.