WOCA load of rubbish – fiddling aid numbers at the G8

July 8, 2009

     By Duncan Green     

As expected, some of the more aid sceptic governments will be seeking ways to wriggle out of their commitments at the G8 summit, which opens in Italy today. But rather than just say ‘we’re breaking our promises – tough’, they are floating various kinds of creative accounting to allow them to meet their commitments without actually spending more money.

The approach pushed by Sylvio Berlusconi is the ‘whole of country approach’ (WOCA for short). Italy wants to remove the distinction between public and private aid. It would like all financial transfers to developing countries originating in Italy – including migrants’ remittances and funds provided by NGOs, as well as public aid flows – to contribute to the country’s aid ranking.

Like all the best bits of political spin, this makes superficial sense – as an Oxfam employee, I’m hardly likely to argue that aid has to come from governments to be useful. But clearly some kinds of capital flow are more ‘aid like’ than others, so there will be a lot of room for confusion (and creative accounting) about where the boundaries lie. For example, in its response to the new challenges for development cooperation caused by the global economic crisis, the European Commission put forward a “Whole of the Union” approach arguing that not just official aid but also export credits, investment guarantees and technology transfers should be counted towards the EU’s development contribution. Others are bound to argue that military spending should be included.

Whatever the theoretical merits of the argument, it’s impossible to divorce Italy’s attempt to move the accounting goalposts from its dismal record on aid. According to Iacopo Viciani, the coordinator of an NGO task force on aid effectiveness,  the Italian government has never contributed more than 0.2% of its GDP to development aid. In 2007, Prodi’s government established a timeline for increasing aid in order to meet the 0.51% EU target by 2010. But despite budget increases, aid spending remained at 0.2% in 2008 instead of rising to 0.33% as planned. And it only gets worse: the 2009 budget includes a drastic cut (by 56%) in the aid budget. In January 2009 development allocations reached their lowest level ever, at €321 million – less than the amount collected privately by NGOs.

But even more dangerous than Italy’s attempts to justify its feeble performance is the precedent it sets for other G8 countries to follow suit. They are all in recession (see graph) and there will be ever-louder voices in every Finance Ministry seeking a reverse gear on aid.

So watch out for signs of goalposts being shifted, amid the inevitable spate of lazy headlines about earthquakes, tremors etc (the summit has been moved to l’Aquila, the site of a horrendous earthquake earlier this year).

For G8 watchers, Thursday is climate change day, and Friday covers aid, food and Africa (see optimistic FT curtain raiser on the shift from food aid to investment in agriculture). See here for Oxfam’s coverage of events, and here for my colleague Max Lawson’s curtain-raiser opinion piece. And my favourite G8 moment so far? Bob Geldof getting Sylvio Berlusconi to apologise for breaking his promises on aid. You couldn’t make it up.

July 8, 2009
Duncan Green