Tsunami 'aid', with interest

2005-01-11 08:04

Tokyo - The billions of dollars promised by world leaders after Asia's devastating tsunamis may seem like unparalleled generosity but recipient countries should beware there is also fine print.

As governments race to top one another by offering the biggest package, much of the "aid" will arrive in the form of loans that will need to be paid back, contracts for donor countries' companies or, many fear, will not come at all.

"I see no good reason to give loans. They're poor, we're rich, they need the money and I don't see why we need to ask for it back over the next 10 or 20 years," said David Roodman, a research fellow at the Centre for Global Development in Washington.

"It serves to inflate the amount that's being given," he said.

Ahead of Tuesday's tsunami aid conference in Geneva, Australia has climbed to number one on the donor list by announcing the biggest pledge in its history: A$1bn, equivalent to US$762.

But Australia would slip to second or third place if taken into account that half of its pledge is in interest-free loans to Indonesia.

Conspicuously, Australia is the only major country to go on record opposing any moratorium on debt repayments by tsunami-hit countries, let alone debt forgiveness.

"Indonesia already owes Australia a billion dollars in debt. Is increasing that amount by half going to benefit the Indonesian people?" said Tim O'Connor of the Australian watchdog Aid Watch.

Tense relations

Prime Minister John Howard is channeling the full package bilaterally to Indonesia, a neighbour with which Australia has long had tense relations and whose isolated Aceh province was devastated by the giant waves on December 26.

"The interest (of the package) is in our government rather than the Acehnese people. The interest is to shore up our relationship with Indonesia and bring our governments closer together," he said.

Germany has also promised a massive package, totalling 500 million euros. But in announcing the hefty sum last week, Chancellor Gerhard Schroeder gave few details on the shape of the aid from the Eurozone's biggest but worst-performing economy.

Schroeder suggested it could include debt reduction and measures taken with other members of the European Union and Group of Seven major economies.

One of the biggest surprises in the tsunami aid sweepstakes has been Japan, which has promised $500m.

In recent years, Japan has been the only major donor to disburse a majority of its aid through loans, taking advantage of super-low domestic interest rates, which let Tokyo offer huge sums with a minimum burden to itself.

In a sign of its goal to be Asia's key player, Japan has taken pains to stress that its contribution will be in direct grants, which Prime Minister Junichiro Koizumi began doling out on Thursday at an emergency summit in Jakarta.

The United States has pledged $350m to tsunami relief, but like Germany will still need to figure out how to find the money in its budget and in what form it will take.

According to the US Agency for International Development, just under $88m of the pledged money had been committed as of Monday.

Military spending

The figure does not include spending by the US military, which has launched major operations to reach isolated tsunami survivors, meaning that for post-crisis bragging rights Washington could claim its financial contribution to be higher.

Pentagon spokesperson Lieutenant Commander Greg Hicks said last week the military was spending five to six million dollars a day on the tsunami crisis.

But his figure included $5.6m - nearly all of it - to pay for the personnel and equipment already part of the US military.

President George Bush pledged on Monday that the United States was committed to its aid. However, US aid is some of the most politically tied, with laws requiring that the taxpayer money buy only US products.

Theoretically, aid workers bringing clean water to Aceh through US government money could be forced to import a more expensive purifier from the United States even if other options were available.

According to 2003 statistics by the Organisation for Economic Cooperation and Development, none of the aid from Britain and Ireland and less than five percent from Belgium, Japan, Norway and Switzerland had such political strings attached.

In 1996, the last year the United States reported its figure, 72 percent of its aid came with such political obligations. The only country with a higher figure was Italy at 92 percent.

Roodman said his think tank had calculated that the four countries worst hit by the tsunamis - Indonesia, India, Sri Lanka and Thailand - paid $1.8bn in tariffs to the United States a year - or five times what Washington has pledged in tsunami relief.

"The point is, it's good to remember that aid isn't the only way to help," he said.

- SAPA