The IDB is gearing up to inject further financial resources into Latin America to help meet the UN Millennium Development Goals (MDGs). But a senior Japanese official has challenged the wisdom of throwing large sums of money at poverty reduction and other goals if the results are not sustainable.
"Massive injections of financial resources in the 20 areas listed under the eight goals might achieve most of the MDGs for the time being. But this may not be sustainable once such financial resource flows are reversed," argues Masahiro Kawai of the Institute of Social Science at the University of Tokyo.
The comments of the former Japanese finance ministry senior official are a challenge to efforts to double the amount of official development assistance (ODA) by 2015. They also run counter to the proposal by UK Chancellor Gordon Brown to create an International Finance Facility to front-load large sums of foreign aid to meet the MDGs.
"It is essential that each low-income country make substantial efforts to strengthen country ownership [of poverty reduction programmes]," Kawai told a seminar on MDGs. This would help "to improve institutions and to nurture private sector-led markets to achieve sustainable and balanced economic development, thereby fulfilling the MDGs."
Kawai will shortly take over a new office for regional integration at the Asian Development Bank. He made his comments at a time when IDB President Enrique Iglesias is preparing to tell governors that the Bank may have to accelerate aid to certain Latin American economies, which are in danger of missing the UN deadline for achieving the MDGs.
Kawai attacked the development orthodoxy linked to the MDGs. "Many aid recipient countries do not have national development programmes with clear strategic priorities linked to a medium term expenditure framework and reflected in annual budgets," he charged. "Many donor countries provide aid to recipient countries without using the procurement and public financial management systems of these countries."
Worse still, added Kawai, many countries receiving grant and other aid "do not have significant country ownership in their development programmes." In addition, "many donor countries do not seem to care much about such national ownership or how to encourage recipient governments to strengthen ownership, financial management and governance."
East Asia has been able to overcome many of these problems, argued Kawai, by improving domestic policies and institutions as well as their capacities in governance, human resources and industrial and social infrastructure. East Asian nations have also been able to make successful use of foreign aid by opening their economies to foreign trade and investment and by "enhancing their domestic institutional and entrepreneurial capacities."