Aid and the environment

Aid to developing countries has often been blamed for environmental catastrophes. Aid-givers now make improving the environment a top priority

IN THE late 1980s the European Community’s aid for rural development in Cameroon was cut. Worthy plans for conserving and replanting the country’s forests were dropped. Instead, the EC paid for a smart new metalled road from Yaoundé to Ayos. When the community’s auditors went to examine the new road they found that its economic rate of return was much lower than expected. And that was not all they found. The road’s "60-metre-wide trench mainly runs through natural secondary forest .. . Its impact on the environment, including the possible increase in commercial exploitation of forestry resources, has not been adequately appraised."

Typical, many environmentalists would wearily observe. Aid projects are often capital-intensive, designed to provide jobs for the donor country’s engineering firms and gravy for the recipient country’s elite. Their disastrous environmental side-effects would have been predictable if anybody had taken the time to consult local people. Instead, projects are planned by a handful of consultants who jet in for a few weeks, write their report and jet out. Protecting the environment, say such critics, requires patience and local knowledge.

The deepest greens go further, and argue that aid is always bad for the environment.  Aid involves importing foreign technologies and changing the established order of things—an order, perhaps evolved over centuries, that may be the best way for humans to exploit nature without irreparably harming it. Besides, say these ultra-greens, the goal of aid is economic growth, and growth mucks up the environment.

A point on which everybody agrees is the need for "sustainable development". In principle, this idea is clear enough:development, not merely economic growth, should be the target, and it should lead to enduring improvements in welfare. But whether a particular road or plantation represents sustainable development or yet another environmental affront is a source of endless argument.

A new way to help

For many people in the aid lobby, the question is not whether aid is bad for the environment, but whether the environment is good for aid. With the cold war over, and aid budgets under threat all over the world, one of the few arguments for aid that sways western donors is the need to protect the environment in developing countries. As a result, aid donors everywhere are scrambling to appear environmentally correct, and hunting for green projects to help.

As they do, they keep one eye on the horde of campaigning groups—the nongovernmental organisations, or NGOS as they are universally known—which gather at the point where environmental and development issues intersect. Some of these NGOS, especially in developing countries, use their flexibility and knowledge of local life to be helpful conduits for aid money. Others make life miserable (sometimes justifiably) for donors. In Europe, environmental NGO5 tend to team up with those lobbying for aid to promote development. In America, there is less co-operation. Green lobbies put greenery first and development, at best, second.

The World Bank is the donor that America’s ferociously green NGOS watch most closely. One of these groups even publishes a newsletter (Earl3j Wciming) which alerts environmentalists around the world to ungreen activities in the multilateral development banks. All of these institutions are increasingly chivvied by NGO5. The African Development Bank, whose location in Abidjan has so far spared it the attentions of western environmentalists, was recently forced for the first time to bow to NGO demands. It called off a plan to finance a road that ran alongside the Dzanga-Sangha national park in the Central African Republic. The Bank intended the road to support a coffee plantation; the NGO5 worried that it would encourage intrusion into the park.

A good effect of NGO bullying has been to make donors pay more attention to the effects of their activities on the environment. America’s Agency for International Development (AID) was one of the earliest agencies to carry out routine environmental-impact assessments (ELM). When legislation obliged all federal agencies to conduct such assessments, AID initially assumed it was exempt. It changed its mind when an NGO threatened to take it to court.

The multilateral agencies eventually followed. In 1989 the World Bank began to screen projects routinely for environmental effects. Since then it has become greener in other ways. Its team of resident environmentalists has expanded mightily, from five in the mid-1980s to more than 200 today. It produces an annual environmental report. It has decided (from this year) to hold a yearly conference on sustainable development to coincide with its annual general meeting. And it has created a new vice-presidency of environmentally sustainable development (shrewdly giving the job to Is-mail Serageldin, an Egyptian economist, expert on Islamic art, old Bank hand and man of great charm and intellect).

Today few donors would undertake a project for a road or plantation without an EIA. The project may not, as a result, be any different: most such assessments are conducted with the project already under way. And they are often done in a rush, by foreign consultants with little or no local experience. Bill Adams, a geographer at Cambridge University, recounts how consultants were given six weeks to "green" a controversial dam in Ghana; they took their numbers from back-of-envelope estimates by a visiting British academic.

However, some of the consultants who carry out EIAS argue that they can substantially alter the sort of project that donors are willing to finance. John Horbury of ERM, a British consulting firm, wrote his doctorate in the early 1980s on the environmental assessments required by AID. The procedure "was such a pain in the neck that officials simply stopped coming forward with schemes which they thought would be hard to get through." Now, he says, the same tendency is apparent in the World Bank. Sometimes schemes that do environmental harm may be worthwhile. Today, though, donors (and recipients if they are wise) prepare the ground far more carefully. An immense scheme in the highlands of Lesotho to divert the Orange river northwards has been carried out with hardly a squeak from environmentalists. Lesotho met their concerns early on by producing a "Water Project Environmental Action Plan". Its findings were built into the project, to ensure that environmental damage was minimized and that local people benefited.

Putting the money in

The new emphasis on the environment affects the way aid is given. Increasingly, donors want to add greenery to ordinary development schemes. Borrowers see that this is in their interest too. Embellish a run-of-the-mill proposal for a power plant with a scheme to improve air quality, as the Philippines has done, and it is far more likely to win support.

Better still, from a donor’s point of view, is a purely environmental scheme: to conserve the rain forest, say, or reduce air pollution. The money offered for such schemes often exceeds the supply of projects. In the late 1980s Madagascar and Mauritius drew up proposals to conserve their rich but dwindling natural heritage; aid donors offered more money, 50% more in the case of Madagascar, than the countries asked for.

One reason that demand exceeds supply is that environmental aid is hard to package in ways familiar to big donors. Sometimes loan schemes that can be dubbed "environmental" come in nice large lumps, with a clear rate of return. The plan to use the natural gas that Nigeria now flares off is an example. The burning gas pollutes the atmosphere; using it would bring environmental as well as economic gains. But many environmental projects are small and complicated. They require different agencies to deal with each other, and management costs are high in relation to the small amounts of aid required.

Martin Holdgate, who heads the World Conservation Union (IUCN), describes a typical example. In Costa Rica the Danish government’s aid agency has joined forces with IUCN to help 200 families earn a living from fisheries, charcoal-burning and boat-trips for tourists among the mangrove trees. The families needed a lorry, money to build better kilns and a few chain-saws.

Such schemes are easier for NGOS to manage than government agencies or development banks. Several donors already steer a growing part of their budget through organisations such as Oxfam or IUCN. That trend will be fostered by the search for ways to put more money into greenery.

So will another trend: the increasing emphasis on "capacity building". One of the most difficult aspects of environmental policy is the central role required of developing-country governments. Private firms rarely care much about pollution or the loss of countryside and species. Governments have to devise policies, frame regulations, set penalties and monitor enforcement. In many developing countries, governments struggle merely to stay in power; such further demands are a tall order. Even in stable, well-run countries, few institutions exist to run environmental policy.

More cash is therefore being spent on creating institutions to do these jobs. Mr Horbury describes how ERM’S work has changed. "In Asia our early work tended to be feasibility studies for waste-disposal schemes or sewerage projects—clear-cut, identifiable projects where our value-added was largely technical. Now, we are often involved in designing management systems." In Indonesia ERM has designed regional pollution-monitoring and control authorities for two provinces, looking at what their scope should be, what staff they might need, what policies they might pursue. The World Bank has helped to foot the bill.

A plethora of plans

Environmental policy, however, is not just a matter of financing projects here and there. Priorities must be set. Governments need to work out which aspects of the environment most need to be protected, and how.

Developing countries are now expected to put together a bewildering varietyof environmental plans. Richard Sandbrook of the International Institute of Environment and Development in London reels them off:

"They have to draw up a national sustainable-development strategy, a biodiversity plan if they have signed the convention on biological diversity, a climate plan if they have signed the global-warming treaty, a forestry-action plan if they have forests, and ~ National Environmental Action Plan (or NEAP’) if they want soft-loan money from the World Bank. The Thatcherite governrnents of the rich world are bombarding developing countries with demands for plans in order to appear politically correct, rnd it is clear that chaos abounds."

The greatest controversy surrounds the NEAPS demanded by the World Bank. Some leveloping countries resent the Bank, as they see it, foisting its own priorities on them. Aban Kabraji, of the IUCN in Paki;tan, is indignant at the way the Bank tried to bounce Pakistan into accepting a NEAP’, drawn up by a posse of visiting Swedish : consultants, when the country had already produced a national conservation strategy. The Bank, she felt, was more interested in drawing up a list of projects to circulate to would-be donors than in letting Pakistan explain its own environmental priorities.

Pakistan had the resources to produce such a plan. Most NEAP’S are drawn up in & Africa, which also has the greatest concenration of applicants for soft loans. Here, the problems are different. A recent study describes how many governments have been reluctant to involve NGOS for fear of giving them too much power; internal squabbling bias rendered some governments impotent; and others have drawn up plans and then ignored them*. The impression is of a well-meaning exercise which has given work to consultants but achieved little else.

Adjusting structurally

The biggest recent change in World Bank lending has had nothing to do with the environment. The 1980s saw a huge increase in structural-adjustment loans, intended to tide a country through a period of economic reform. The programme was a response to the debt crisis in developing countries in the early 1980s. Recently both the Bank and some NGOS have been trying to discover the effect on the environment of structural-adjustment programmes, and the macroeconomic policies they entail. In doing so they have wandered into new territory.

Two studies on the subject serve mainly to show how complicated it is to disentangle economic cause from environmental effect. But they refute some of the charges that environmentalists have often made.

Greens have tended to argue, for example, that countries with debt troubles would be tempted to increase the extraction of natural resources to earn hard currency. In the Philippines, Wilfrido Cruz and Robert Repetto found that this was not so: the squeeze imposed by stabilisation policies and the collapse of world commodity prices combined to reduce the output of timber, minerals and most other resource-based products. But the stabilisation programme also had unexpected environmentally harmful effects. A huge rise in unemployment and a 20% fall in real wages in the space of two years accelerated migration to hilly regions where the land was marginal and the environment most fragile.

Another frequent charge is that public-spending cuts reduce government help for environmental protection. Mexico’s experience, described in the study by David Reed (which was commissioned by wwF-lnternational), suggests that cuts may also fall on programmes that are environmentally harmful, such as subsidies for pesticides. And a fiscal squeeze may lead a government to charge more for the use of natural resources. Côte d’Ivoire was persuaded by the Bank to increase its charges to commercial loggers, though by too little to have much effect on logging.

The Bank makes much of this last aspect of structural-adjustment programmes. Often, it points out, natural resources are grotesquely underpriced—even from an economic point of view, let alone an environmental one. For example, developing countries spend roughly as much on energy subsidies as they receive in aid. These subsidies raise the demand for energy and are thus the cause of many environmental problems. Persuading developing countries to price energy properly is far more important than lending for individual projects.

The studies show how difficult it is to ensure that economic policies do not have environmentally malign side-effects. In Thailand, for example, an export tax on rice and rubber encouraged a switch to growing maize and cassava—crops that do more environmental harm than the ones they replaced. But when the export tax was reduced as part of the country’s structural-adjustment programme, the effect was not benign. Commercial rubber plantations began to spread across high slopes, replacing natural forest and causing landslides. Sometimes, aid officials must think, you just can’t win.

Going global

Inevitably, the new fashion in aid has spawned a new institution. The Global Environment Facility (GEF), managed by the World Bank, was set up at high speed by the rich countries to put money into projects that bring global environmental gains.

It has come up with some innovative ideas—such as creating trust funds that assure countries of a long-term income for environmental protection. But it has also run into a barrage of criticism.

Some of the complaints reflect teething troubles. Some national aid officials worry about the choice of projects, which has been strongly influenced by the United Nations Development Programme—and which happens to channel lots of aid cash to UNDP. They fret about how the trust funds will be controlled, and whether they will be prey to corruption. Environmentalists complain that the GEF’S choice of projects has been too secretive and that some of its grants have been much too large for the recipient country to handle efficiently.

Other criticisms, though, reflect an inescapable dilemma. The GEF is obliged to give only to projects with global benefits. As a result, other projects, with mainly national benefits, have been neglected. The trouble is that donors and recipients have different environmental priorities. Developing countries want to spend money on projects that will improve the lives of their own citizens—projects such as treating sewage and collecting rubbish. But donors often want green aid to be spent on projects that reflect the environmental concerns of the rich world: measures to slow global warming, for example, or to stop the loss of species.

The argument about priorities bedevilled talks on the two treaties (on climate change and biological diversity) signed in Rio de Janeiro last year. The developing countries that ratify these treaties will want to be treated as equal partners with first-world signatories. That means sharing decisions on how to spend the funds agreed to in the treaties—a task that the GEF will probably oversee. The danger is that the developing countries will refuse to let the rich countries dictate environmental priorities, and the rich world will refuse to pay on any other terms.

Source : The Economist 25th December 1993 - 7th January 1994

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