I am doing a series of articles on the book “Rethinking Canadian Aid” (University of Ottawa Press, 2015), and now it’s time for “Chapter 16: Undermining Foreign Aid: The Extractive Sector and the Recommercialization of Canadian Development Assistance” by Stephen Brown. In the words of the author, “This chapter argues that the new initiative [of funding mining projects] was emblematic of a new turn in Canadian development assistance — namely, the explicit recommercialization of aid. Canadian trade interests have always underpinned Canadian aid to a certain extent (Morrison 1998). However, a clear trend in the 2000s, under Jean Chrétien, Paul Martin, and the Stephen Harper minority government, had been to move away from commercial self-interest.”
As I started the chapter, I suspected I was going to have a problem with the thesis. In short, I don’t think it’s true, not even in the sense that it could be part of a trend — I disagree that it is commercialization let alone re-commercialization, nor do I think it is part of a trend as Brown sees it. But I was interested to see his lines of evidence. Even more so when he raises the bar so high: “Though undoubtedly some benefits will accrue to poor people in developing countries, the emphasis on extractives is an ineffective and potentially illegal use of ODA funds that will benefit wealthy mining companies more.“
Let’s start first with the argument that funding labour market training is a subsidy. I’m honestly not sure where to begin…perhaps with the fact that the WTO, which is kind of interested in anything remotely looking like a subsidy, says it is not a subsidy and never has been. Trust me, they looked at Japan’s funding of telecomms in Asia in the 90s and later, with their aid budget, and in a far more direct manner than here, and it wasn’t a subsidy then, so even less so now.
Or maybe I’ll start with the ILO and various labour agreements that require developed countries to help develop the local labour force. Or maybe I’ll look domestically at every donor in the world that has an equivalent labour market training program aimed at their own economy, providing the basis for much of GDP growth. Or maybe I’ll look at the fact that technical or vocational training has always been considered “dirty” in elitist aid circles particularly for academics, preferring instead to argue in favour of high-tech tertiary education or basic education, unless it looks like micro-credit for a ditch-digger to buy a shovel.
Or maybe I’ll start with pointing out that the approach (LM training) either stands on its own or doesn’t, is a subsidy or not, regardless of whether a Canadian company or NGO hires them or not. It’s either an acceptable effective aid technique or not, and the OECD gurus who look at best practices say it is. Exactly the same as for domestic labour markets in every other country in the world — training for the jobs that are available, not the ones the academics think are sexy or palatable. Training + job = wages and a chance at sustainable development. The presence of the Canadian company may make it look opportunistic, or even self-serving, but that colourizing doesn’t make it a subsidy.
The next point I really like is that the CSR projects were joint NGO/company/CIDA partnerships, but this was terrible apparently. Brown suggests instead, that as with some other projects, the company could and should have just contracted with the NGO themselves, and there was no need for CIDA funding. It’s a good argument, as long as you don’t poke at it a bit.
Like the fact that he’s right about other experience with this type of approach, particularly for environmental groups working in developed countries (and noted later for the headaches with the extractive industry abroad). What did they find? The NGOs, academics, critics everywhere came to the conclusion that when the private company contracted directly with the NGOs, it was just their attempt to put lipstick on a pig. Instead of a real partnership, NGOs felt a power imbalance and that the company was in charge. So they came up with a possible solution. Rather than it just being the NGO and the company, they would involve a third party to help balance out the power. Like a government partner, one not driven by the bottomline (the company) or only having goals without accountability (NGOs). Depending on the developed country’s situation, and governance situation, the “best practice” was to include a local government or a national government, or both. In developing countries, the local and national government’s are often quite weak and suspected of being corrupt — so the NGOs wanted an outside, trustworthy partner. Like a donor. So Canada, through CIDA, followed the best practice, but this apparently is evidence that they are in the company’s pocket? It must be nice to be an academic with a slippery sense of accountability for your rhetoric to say “It’s bad if if you do and bad if you don’t”, either way you get to publish something critical I suppose.
But I’m a real world manager, not an academic. And I kind of think it’s probably better to follow the NGOs own best practices and be involved rather than not. I really like how it’s terrible that the company is getting money in one paragraph to do the project, and in the next, saying “no, the NGOs are doing the projects”. Does that mean the NGOs, who are also funding the project, are subsidizing the company too? I’m seriously confused by the logic chain for this argument. Then it gets really confused — it’s terrible, but then he states “The mining companies’ inputs are mainly financial and the projects themselves do not differ substantively from traditional aid projects” and that there are almost no funds from CIDA at all (miniscule budget). WTF? Whose argument was he trying to make?
Sarcasm aside, I do give him a nod that “The reasons CIDA has promoted these partnerships are unclear” and that “there is insufficient coordination among the various parties in explaining the initiative’s nature and rationale to the Canadian public. Many actors involved may also lack an understanding of the issues, or even lack competence in public relations.” It’s a very important point, albeit not in the negative way Brown portrays it. Absolutely true. That’s why they are called “pilot projects” and they are only a small amount of money. Because it is not a tried and true approach for CIDA, they are dipping their toes in to respond to private sector, NGO and local recipient demand, and are not going to be definitive at day one.
You know what else started like that? AIDS projects. There were groups advocating that treating AIDS was just a waste of money, and that donors should have let them die and focused their resources on the living. Farther back, basic education was considered a waste of money initially — focus on the adults and get the immediate bang for your donor dollar, not wait 20 years for basic education investments to kick in. Bed nets. Landmine removal. All of them started with pilot projects that were vague and ambiguous about their development goals, nature and rationale. 10 years afterwards, there was a lot to say based on those pilot projects — if only to say in some cases that they didn’t work. Even on an bureaucratic level, you don’t spend millions of dollars on consultations and policy development to give guidance to 0.1% of your budget. However, Brown is right to raise it as an issue — because it is pretty good evidence of where more work is needed, and where interest will lie in the future in figuring out what works or not, as opposed to focusing attention on whether doing it represents a complete reorientation of the entire aid budget. And while Brown seems to think the evidence is “already in” (citing the hyperbole of some of the other chapters), most of it is rhetoric without any real comparative evidence. That’s what is really needed, and the reality is it will only come with pilot projects.
Going back to the roles and interests of the mining companies, Brown has several paragraphs of why different groups have an interest and what role they might play. I’m really disappointed with this section as it could be a much larger piece and talk intelligently about the struggles in the types of projects. It’s a good summary, just too brief.
I was surprised when I reached the end of the chapter, as there was nothing else about “illegal use” of funds (which was a huge bar to meet), nor about how it fits into a broader supposed trend of commercialization and self-interest (which Swiss kicked to the curb in an earlier chapter — while others might be forgiven for not knowing that piece was there in the book, Brown is one of the editors!).
Let’s look at how it could be “illegal use” of aid funds. There are five ways it could be “illegal”, although one is more “not right”, than illegal. First, as discussed above, it could be a subsidy under WTO rules (Brown sometimes uses the term above in a more generic layman sense, but that is like saying paying for someone’s lunch is subsidizing their lifestyle — a generic sense doesn’t rise to the level of what a subsidy means legally). The WTO has looked at these types of expenditures ad nauseum. Everyone hates subsidies, but some generic subsidy-like behaviour is allowable without it being a legal subsidy. These ones are not subsidies, and therefore are not illegal as per WTO rules or trade agreements.
A second option could be if it violated a human rights tenet somehow; not only is there no evidence of that, it actually goes to expand human rights, giving some a voice they would not have had earlier and taking the edge off pure capitalism. Some might think it is lipstick on a pig, but it’s not illegal.
A third option would be domestic bid-rigging. If Canada said to country X, we’ll give you more aid money if you give Canadian company A the contract rather than Canadian company B, company B would have a valid complaint against the government that it illegally gave unfair advantage to one Canadian company over another. No evidence of that however.
A fourth option would be international bid-rigging. If Canada said to country X, we’re thinking of funding an aid project if you hire a Canadian company to do your extractive work (kind of a quid-pro-quo-tied aid policy, or extortion), you would think that would violate some law somewhere. It doesn’t. In fact, most countries have a different word for it. Trade. Or diplomacy, depending on who is doing the talking. Brown hints that there is evidence of this, that Canada promised more aid if the company got to mine locally, but there is nothing illegal about this. The aid isn’t a bribe going into someone’s pocket. It still might be unethical to some, or good diplomacy to others, but nothing illegal about it.
A fifth and final possibility would be if Canada was funding a purely commercial project with no aid benefit with aid money and claiming it as ODA. You would also be apt to think this was illegal somehow, but it’s not. Canada funds projects out of the international assistance envelope which funds lots of international organizations as well as some of Canada’s operations abroad. Not all of it is development. So there is no restriction on the envelope that says it is only for ODA-eligible aid — all assistance comes out of that envelope. So nothing illegal about the source of funds. After the fact, Canada calculates whether the project was ODAable or not, and reports it to the OECD. The OECD may or may not agree with our classification. If they don’t, they will deduct it from our reportable stats. Again, not illegal, just not “right”. If this is confusing, look at the UN Food and Agriculture Organization. We make an assessed contribution each year, based on a share of the approved budget of the FAO. But the FAO is not only about development. There’s a really complicated methodology that is periodically reviewed by the OECD’s Development Assistance Committee that estimates the FAO’s work is about 50% for the benefit of developing countries (a requirement to be ODA) and 50% is for the benefit of developed countries (such as food safety). So, if Canada’s assessed contribution in a given year is $10M, then $10M will come out of the International Assistance Envelope (IAE) with $5M being recorded as ODA. The fact that the other $5M is not “aid” yet is coming out of the IAE doesn’t make it illegal but it would be wrong to record $10M as ODA-eligible when we submitted our stats to the OECD.
I also want to address Brown’s suggestion that Canada’s tied aid policy, and specifically food aid, was changed to make Canada more “pure”. It wasn’t, particularly not for food aid. There are three huge problems with food aid — domestic oversupply, transportation costs, and expiry dates.
In Canada, there are specific sectors where we have an overabundance of production. I won’t go into specifics, but we do (it can be easily looked up, we get complaints about it at the WTO all the time). If we were to just dump it on the market, it would reduce prices and undercut production capacity. So we want to give away some of our excess, but the producers want some compensation for their costs in producing it. Food aid money seems like a perfect fit, right? Paying producers to grow food for developing countries who need food.
Except it costs a LOT of money to ship it. Extremely inefficient. Plus there are expiry dates by which some of it is unusable. In terms of efficiency, it makes a lot more sense to just give the money to someone like the World Food Programme, have them find a food source as close as possible to the need, and purchase it there. Plus, if it happens to be a neighbouring developing country, the other developing country gets the benefit of the purchase while the recipient gets the food (a double benefit). While much more complex, this is not unlike food banks preferring to get cash donations rather than food donations — they can stretch cash farther with discount purchases, lower their transport and storage fees = more people served. While we may have sang and danced about untied aid, the food aid was the most egregious form of it, not only for inefficiencies and potential ineffectiveness, it was also just straight out a pain in the patootie to manage. Now they can just write cheques for the most part, no muss, no fuss. The change was more logistical than philosophical.
In the end, I expected and hoped for more, given the high initial bar. Unfortunately, the evidence just wasn’t there.