Overseas aid ‘lines pockets of wealthy’

13 May 2009

Over half of the world’s overseas aid is paid to wealthy multinational companies and promotes cronyism, corruption and debt according to a new book published this month.

Dr Bracking argues that overseas aid does little to help poor Africans
Dr Bracking argues that overseas aid does little to help poor Africans

Dr Sarah Bracking from The University of Manchester says much of the billions of pounds worth of cash described by political leaders as aid are in reality loans, and have little benefit, she says, to the people who need help most of all.

“Over half of what is described as aid goes to the global south in the form of loans for private sector consultancy, technical assistance or works projects and the five richest countries can get up to 90 per cent of the business,“ said Dr Bracking.

“Poor countries, already up to their eyes in debt, are forced to pay it back at great cost to their citizens.

”It’s little wonder that the problems endured by many countries in the third world are as extreme as ever.

“If aid was democratised it would surely go to where its needed most: small businesses and mutual societies in the South  - instead of the multinational companies of the West.

“This book shows how the system of development aid makes sure the world’s poor have little chance of breaking free.

“At the moment so-called aid just reproduces unequal societies and wealthy elites at the expense of the poor: it lines the pockets of the wealthy.”

Criticised in the book - Money and Power published by Pluto Press - are contracts awarded to the West by development finance institutions such as the World Bank or the UK’s CDC Group plc.

CDC is already under fire from the House of Commons Public Accounts Committee for paying what it described as an ‘extraordinary’ £1m-a-year salary to its Chief Executive Richard Laing.

Majority-owned and run by the Government, but with its management function privatized, CDC has also been accused of adopting private-equity-style investment techniques, such as using offshore tax havens to avoid paying tax to hard-pressed governments.

It also uses aid to force the privatisation of industries, including basic utilities throughout Africa, at great cost to poor consumers who subsequently face rising bills and disconnection.

Projects underwritten by development finance institutions and characterised by Dr Bracking ‘as dubious’ include hotels, golf courses, horticultural plantations, a mobile telephony network and an oil pipeline.

The $4bn Chad Cameroon pipeline project was backed by the World Bank and built by a consortium of private companies led by Exxon-Mobil.

“It’s hard to see why development cash has been used for the Chad Cameroon pipeline project in two of the world’s poorest countries when it’s rationale was clearly to reduce the US reliance on oil from the Middle East.

“The only people who benefited were corrupt officials,” she said.

The Lesotho Highlands Water Project – a vast system of dams and tunnels to produce hydro electric power in Lesotho and South Africa was, says Dr Bracking, hugely overpriced, displaced thousands of local people and damaged the environment.

She said: “LHWP made some wealthy people wealthier – but has done nothing for the poor of Lesotho.

“Why would the World Bank choose to award $8 billion to multinational companies  when much cheaper and less damaging alternatives  - such as solar power - were available?”

Notes for editors

Money and Power is published by Pluto Press.

Sarah Bracking is available for comment

For media enquires contact:

Mike Addelman
Media Relations Officer
Faculty of Humanities
The University of Manchester
0161 275 0790
07717 881 567