'Challenge' for nations seeking aid

This vast, semitropical nation, almost twice the size of California, usually tops the list of African success stories.

Ten years after a brutal 16-year civil war, it boasts a multiparty democracy, significant spending on public services, and economic growth consistently in double digits.

Indeed, it's just the type of country President Bush said he wanted to reward with his new Millennium Challenge Account (MCA), a $5 billion increase in foreign aid that will reward poor countries on the right track.

But Mozambique may not be getting a piece of that big pie.

Under the new fund's criteria - a set of 16 financial, political, and humanitarian indicators - Mozambique doesn't make the cut.

Nor does Uganda, another country Mr. Bush specifically mentioned as a development success story in his speech last March announcing the account.

It turns out that giving aid on the basis of merit is harder in practice than in theory.

The Millennium Challenge Account emerges from a shift in thinking among donor nations: Foreign aid should go first to the nations with the "right" policies. It's a merit-based boost to countries giving a priority to education, healthcare, and fighting corruption. Although Congress still has to authorize funding for the MCA, and the qualifying countries have yet to be announced, the "irregularities" emerging from the MCA criteria show that separating the worthy from the unworthy isn't as easy as it sounds.

"There's been a decision to base this on merit, trying to show which countries are really committed to development," says Steve Radelet, a senior fellow at the Center for Global Development in Washington, which conducted the survey. "The reason they have these numerical indicators, for all their weaknesses, is that they are in effect trying to depoliticize aid. The negative is that you sometimes get funny results."

Seventy-four countries, which have a per capita income below $1,435, are eligible for MCA money. To then qualify, a country must be above the international median on half of the indicators in each of three areas: ruling justly, investing in people, and economic freedom. However, failing to pass the corruption indicator alone can disqualify a country from consideration. As many as 20 countries are likely to qualify for MCA funds, says Mr. Radelet.

The problem, say observers, is a lack of good, comprehensive data. The US wants to reward countries that invest in their people, for example, but there is no single statistic that tells that, explains Radelet. Things that can be measured, such as spending on education and health, the percentage of children who are immunized, and primary school completion rates - all of which have been chosen as indicators in the "investing in people" category - can discriminate against exactly the poorest countries who would most benefit from the MCA.

Take Mozambique, for example. Often commended for its political and economic reforms, Mozambique passes all the governance criteria, which address such issues as corruption and human rights, and the required economic criteria. In other words, it has a good government with the right economic policies.

Where Mozambique fails is in the investing in people category, where it passes only one of four indicators. It doesn't have high enough immunization or primary school completion rates, and while it spends enough on health, its education budget isn't large enough.

But development experts say that these are the problems of a poor country, not necessarily the problems of an inefficient one.

"The hardest set of hurdles are in health and education," said Radelet. "Of the five countries that miss qualifying by one indicator, all of them fail in the investing in people category."

Observers also say the criteria may not be strict enough on governance and human rights. Although some successful countries like Malawi and Albania do pass the required indicators in areas like corruption and political rights, Radelet and others say that their records are hardly stellar, but that the data just aren't good enough. Some politically oppressive countries like China, which would qualify in the second year when the group of eligible countries is expanded, fail on all three of the human rights indicators - political rights, civil liberties, and something called voice and accountability - but still pass because those are grouped in the same category as indicators on government effectiveness, rule of law and corruption, which they do well on.

"I think people are going to look at this and say, 'This doesn't square with our inclinations and will have to take a look again at the methodology,' " says Lael Brainard, a senior fellow at the Brookings Institution who is studying the MCA. "This is where scientific theory meets reality."

The government's plan does, however, take into account some of the anomalies in the numbers. A board of directors, composed of cabinet-level officials, will make recommendations directly to the president. The board will be "empowered to take account of data gaps, lags, trends, or other material information, including leadership, related to economic growth and poverty reduction," according to the MCA proposal.

Andrew Natsios, head of the US Agency for International Development, said the US would still help in situations where people are dying from famine or disease. But "in terms of economic investment in sectors that lead to growth, we have to have evidence of national political leadership that is willing to make reforms already and has made them on their own," Natsios said, according to Reuters. In countries where there is no political commitment to democratic reforms, the US should work with nongovernmental groups, he said.

Most academics agree that the MCA is headed in the right direction. Giving countries a clear set of guidelines by which they will be judged gives them a sense of what areas they need to improve and a sense that aid is being distributed fairly.

Oliver Morrissey, an expert on international aid at the University of Nottingham in Britain, says that it will encourage a Republican Congress, skeptical of foreign aid, to continue to send money overseas.

"I think the motivation is to get a political constituency for aid," says Mr. Morrissey. "Congress doesn't believe in aid and Republicans don't believe in giving aid as such. So the only way the government can convince them to give aid is to say that we're going to give it to countries that are doing well."

Out of 74 countries with per capita incomes under $1,435, only 11 nations would qualify for US aid under the new Bush Millennium Challenge criteria. Each country is judged on 16 criteria that measure whether its government is "ruling justly," "investing in people," and providing "economic freedom." If a country fails the corruption test, but passes the other 15 categories, it will not get US aid.

Qualifies for aid

Albania

Bangladesh

Bolivia

Gambia

Georgia

Honduras

Malawi

Mongolia

Nepal

Senegal

Sri Lanka

Eliminated by corruption

Moldova

Nicaragua

Missed by one indicator

Cambodia

Ivory Coast

India

Mali

Mozambique

Source: Center for Global Development (www.cedev.org)