Africa Keywords: foreign capital, ODA, donors, recipients, global crisis, investment

Over the past two decades, the ideas of market orientation of the economy and the liberalization of trade and investment regimes have become one of the important priorities of the development strategy of many African countries. It is expected that the openness of the national economy to foreign capital and competition will increase its efficiency, expand the flow of foreign investment, solve problems in the field of balance of payments and accelerate the pace of economic development in the interests of increasing national wealth and well-being of the population. The efforts of Governments in this area are complemented by international assistance at the bilateral and international levels.

The most significant component of external financial resources is official development assistance (ODA), which comes to the continent from the countries of the Organization for Economic Cooperation and Development (OECD), the Organization of the Petroleum Exporting Countries (OPEC) and a number of other countries on a bilateral basis, and from international credit organizations and funds in the form of grants and concessional loans.

ADVANTAGES AND DISADVANTAGES OF ODA

Sub-Saharan Africa, given the growing poverty in the region, has become the largest recipient of ODA (about 40% of total ODA inflows to all developing countries). According to estimates by OECD experts, in 2009 - 2011, net ODA payments to countries in this region by member States alone amounted to $42.5, $ 43.7 and $ 40.4 billion. respectively, ¹.

In some of the poorest countries on the continent (Guinea-Bissau, Sierra Leone, Burundi, Malawi, Eritrea, Rwanda, etc.), ODA plays a significant role in maintaining financial and economic balance, reimbursing three quarters of import costs and accounting for between 70 and 100% of total gross domestic investment. Very often, ODA inflows exceed the tax revenues of local Governments in these countries. At the same time, the share of subsidies in ODA commitments reaches 92-100%, and the rate on loans issued for up to 40 years is equal to 1%².

Experts of the UN Committee on Trade and Development (UNCTAD) question the expediency of such a significant focus on charity of foreign countries. In their opinion, the effectiveness of management decreases due to the narrowing of the area of responsibility of local authorities. Governments that are highly dependent on foreign aid tend to pay too much attention to donors, and there is less focus on domestic revenue mobilization. The formation of permanent expenditure items of national budgets from aid resources, with significant fluctuations in its size and instability of inflows, can create serious problems for public finances.³

Traditionally, economic and social infrastructure remains the main area of financing and lending under ODA. This is due to the fact that only the state can develop such low-profit industries. In addition, with rising oil prices, many developing countries have been forced to adopt expensive energy development programs. Loans and subsidies to agriculture are also growing, as the main sources of poverty are concentrated in rural areas. An important role belongs to food aid, which is usually directed to the most needy countries, where there is an explosive socio-political situation.

Aid as an institution is experiencing a well-known crisis today. Both recipients and donors are criticized for the low efficiency and conditionality of ODA. At the same time, the latter recognize the insufficiency of the amounts allocated for development assistance. It also recognizes the need to overcome the distrust and skepticism of rich countries about the usefulness of ODA and its role in development.

The situation with ODA was affected by the end of the cold war, as many donor States used aid as a means of foreign policy and security. Some recipient countries have lost their geopolitical significance and grounds for receiving aid, primarily Ethiopia, Somalia, Mozambique, Congo, and Kenya. The end of the East-West standoff has helped reduce the interest of the main international donor, the United States, in financing aid programs for these countries.

Other donor countries ' interest in developing countries, especially former metropolitan areas, gradually declined. Inefficiency of the aid already provided, growth of corruption-

Poor economic governance and human rights violations in recipient countries made donor Governments less trusting and more likely to be conditioned and selective in their aid delivery.

In the recent past, foreign aid has allowed weak and economically inefficient regimes to remain in power in Africa. Western powers and international financial organizations seemed to be sanctifying the policies pursued by these regimes with their authority. It is no coincidence that the four main recipients of American aid in 1957-1995-Zaire, Liberia, Somalia, and Sudan - were marked by corrupt and incompetent rulers and some of the worst economic outcomes in the world.

The growing awareness that large-scale capital outflows from poor countries are closely linked to capital inflows to the rest of the world has added to the skepticism of Western donors. Opponents of aid believe that it is aid that gives governments in less developed countries the opportunity to continue their policy of wasting resources and prevents the necessary change in such policies. This view is supported by the fact that aid programs are more useful for the elite than for ordinary citizens of these countries. Aid does not always reach the poor to whom it is intended. A significant part of it is plundered by those who distribute it - representatives of the ruling elite, corrupt officials and intermediaries.

A number of aid specialists have expressed concern that large-scale aid flows can destroy motivational signals for entrepreneurship, create dependency, increase corruption and embezzlement of aid resources. Food aid has long been criticized from these positions, and warnings have been voiced about the threat to food security in recipient countries due to the reduction of self-sufficiency potential.

Other warnings relate to the possibility of developing symptoms of the so-called "Dutch disease" in recipients of ODA. Large dollar injections cause the local currency to rise and reduce the price competitiveness of African goods. The result is an increase in imports and a reduction in exports, the ruin of domestic producers, the emergence of structural unemployment and the strengthening of social stratification in society.

Local entrepreneurs, such as coffee planters and flower exporters, should be making a profit from rising prices for their goods, but they are being squeezed out of their own economies by foreign aid dollars.

Small-scale African producers also have to compete with highly oxidized products coming from Europe and North America. The Ugandan cotton industry is able to export almost half a million bales, but it only manages to export 160,000 bales.⁴ High government subsidies for North American cotton growers prevent competitive pricing in international markets.

Glossy brochures and websites highlight the importance of trade for Africa's future, but little progress is being made in the markets. African producers still account for only 1% of global trade.

Long-term ODA programs focus on other goals instead of funding innovation and creativity. At least 70,000 qualified university graduates leave Africa every year because they are unable to stay in the market due to extremely low salaries. Channeling some of the aid funds to return these gifted and enterprising individuals would undoubtedly help improve its effectiveness.⁵

Thus, the development model, which was initially based on aid, is being seriously criticized. It turned out that aid is less and less consistent with the modern concept of development as an independent process, determined primarily by private initiative, the development of human resources, the latest technologies and market mechanisms. Critics of aid such as M. Friedman, P. Bauer, and W. Esterly believe that its programs should be drastically reformed, reduced,or eliminated altogether. ⁶

Their opponents, in particular, J. Sachs, J. Stiglitz, N. Stern object that the shortcomings of aid are exaggerated. In their view, aid generally contributed to poverty reduction and economic growth, or at least prevented a deterioration of the situation, and many miscalculations were made by donors themselves.

The behavior of all donor Countries is to some extent related to factors that are not directly related to the development problems of recipient countries. Even if donors are willing to contribute to development, there is no doubt that they have their own priorities. The results are often far from the desired ones, the policy direction in this area becomes unstable, the amount of aid and the level of spending fluctuate greatly.

Traditionally, major donor States have directed the vast majority of their aid to countries within their sphere of influence that have historical, political and cultural ties with them, whether they are former colonies and overseas Territories or allies from among the newly independent States. Japan, for example, provides the most substantial assistance to the countries of East Asia; France focuses on the French-speaking countries of Africa; Great Britain, Belgium, Portugal-on their former colonies.

Despite the variety of specific factors in the provision of ODA, donors ' own interests, both economic and military-political, have always been dominant. In particular, the aid was actively used to boost commodity exports, preserve sources of raw materials, and provide a favorable investment climate for its private investors. The "connectedness" of aid, which provides a monopoly on the supply of goods and the implementation of certain projects to sellers and contractors from donor countries, remains a serious problem and is constantly discussed within the OECD. According to the estimates of experts of this organization, there are not many related issues.-

It accounts for 16% of the total amount of ODA allocated by all OECD member States, including 29% by France, 37% by Canada, 39% by Portugal, 40% by Austria, and 61% by Greece. Conditionality of loans and subsidies is especially characteristic for projects in the field of transport, energy and telecommunications. This cannot but disrupt the system of competition in the commodity markets. According to a number of estimates, recipients ' overpayments for conditional deliveries due to price gouging are on average as high as 15%. In addition, aid is often accompanied by a large number of political and bureaucratic procedures that reduce its positive effect.⁷

However, aid advocates argue that, despite all the shortcomings of the ODA program, health and education indicators have grown faster in the 40 years of their implementation than in any other 40 years. In their view, it is important to ensure that aid is directed towards building productive capacities, rather than financing capital outflows - to pay off external debt, in the form of flight to offshore zones, in the form of real estate deposits, and to create excessive buffers as a precautionary measure in case capital inflows or outflows stop.⁸

UPDATING APPROACHES AND REVISING THE BASIC PRINCIPLES OF ASSISTANCE

The problems of Sub-Saharan Africa, which has the world's worst indicators of economic and social development, well-being and public health, are now perceived by the world community as a global problem that threatens the stability of the planet. There is an awareness of the need and urgency to address the special needs of the region and radically increase its financial support, as Africa continues to suffer disproportionately from violent conflicts, poverty and disease.

At the G8 meeting held in Gleneagles, Scotland, in July 2005, it was noted that Africa is the only continent in the world that has become poorer in the last quarter of a century. The heads of the world's leading Powers have recognized the need to give absolute priority to solving the problems of the African continent in the coming years. They expressed their willingness to review the motivations and some basic principles of ODA, and to double aid to African countries by the end of the decade to $50 billion. In addition to writing off all existing debts to the poorest countries of the continent (about $100 billion) and direct the released funds to humanitarian projects. Developed countries were encouraged to allocate 0.7% of their annual gross national income (GNI) to aid poor countries. Currently, of all OECD member States, only Denmark, Luxembourg, the Netherlands, Norway and Sweden follow this recommendation.

The most important new approaches and principles in the field of international assistance to Africa, formulated at the G8 summits and in the New Partnership for Africa's Development (NEPAD)program, can be singled out9.

1. Equal partnership. This means close cooperation between donors and recipients at the interstate level in determining strategic directions and specific aid projects, and equal responsibility for its effectiveness. It is assumed that financial aid flows should be included in the recipients ' budget process and controlled by national legislation. At the same time, common sense suggests the expediency of searching for such forms of partnership at the strategic level that would take into account the specifics of the multi-layered basis and the peculiarities of the development of African society.

In the area of governance, it is intended to assist national government agencies in developing the legislative framework and institutional capacity to regulate the public and private sectors of the economy, in training personnel, in improving economic reporting, in particular, in ensuring maximum transparency in the implementation of aid projects, in strengthening the mechanism of equal and mutual control operating under the NEPAD program, in developing an anti-corruption strategy. Donor States intend to encourage recipient countries to strictly adhere to international human rights principles and standards.

2. Priority of peace and security issues. It offers effective mediation of donor States in conflict resolution and prevention using African regional organizations and the UN, as well as assistance in resolving post-conflict situations.

3. Humanitarian orientation of aid. The most important principle of providing assistance is increasing emphasis on social projects, investing in improving the quality of life and educational level of people, in the development of human resources. It was confirmed that basic education for all children in Africa, ensuring access to schools and hospitals for the poorest segments of the population, secondary, higher and vocational adult education, and teacher training should be supported by substantial donor funding.

Elimination of dangerous diseases on the continent, such as malaria, tuberculosis, HIV/AIDS, for example, depends on the restructuring of the health system, which involves the creation of training centers for medical personnel, free medical services for the insolvent segments of the population, increased investment in the creation of a normal water supply system and, in general, proper sanitary infrastructure of medical institutions.

International experience shows that assistance designed to improve the situation in the field of education and health brings significant economic benefits in the long run.

4. Improving the investment climate. The Group of Eight States consider it extremely important to promote an attractive investment climate in Africa for all investors, local and foreign, which allows them to use the continent's vast natural potential and opportunities for entrepreneurship and productive foreign investment.-

employment of the population, especially in the swollen informal sector, to reduce social tensions in society. One of the main steps in this direction should be overcoming internal obstacles to business and trade relations by developing economic and social infrastructure, providing assistance to agriculture and small businesses. The implementation of this priority task, which aims to create conditions for economic growth and reduce poverty, will require up to one-third of the total expenditure of donor countries in providing assistance to Africa. At the same time, assistance can be effective if it is of high quality and the management of the resources received is competent.

ODA AND THE GLOBAL FINANCIAL CRISIS

The current financial crisis and the downturn in the global economy, as well as a significant decline in market activity in developed countries, have increased the risk of a reduction in external financial assistance to developing countries. Some analysts have expressed concern that Western governments, trying to implement multibillion-dollar rescue packages in key areas of their own economies, may cut back on humanitarian aid programs and postpone the implementation of projects under ODA aimed at improving health, education and sanitation conditions in recipient countries. It is emphasized that the decline in ODA combined with an acceleration in the growth of world food and oil prices will have a very negative impact on the fragile economies of sub-Saharan States.

The crisis is a significant obstacle at a time when there is a real shift in addressing the problem of poverty. Funding constraints are likely to make it difficult to address the growing environmental challenges that are affecting the lives of millions of Africans.

However, many experts believe that the global financial crisis will not reduce the West's interest in reducing poverty and improving the quality of life in Africa, and commitments to help countries in this region will remain valid even in such difficult circumstances. French President Nicolas Sarkozy, for example, while noting Europe's interest in the development and prosperity of Africa, assessed the assistance provided to it as an important and necessary investment in a common future.¹⁰

Nevertheless, the existing instability in the international financial system and fiscal austerity in developed countries have affected the level of funding for ODA programs. Commitments made by the Group of Eight countries in 2005 at Gleneagles and Heiligendam (Germany, June 2007) to increase aid to African countries to $50 - $ 60 billion by 2010. per year, were unfulfilled. A positive development is the increase in the share of grants and grants in concessional loans, especially in aid to least developed countries (LDCs).

Several organizations have been set up in Africa (for example, the African Monitor in South Africa) to monitor the implementation of the G8 promises. These organizations emphasize that progress in increasing official development assistance flows and expanding access to Africa's traditional exports to world markets is very slow, with the exception of debt relief to the poorest countries.

It is worth noting in this regard that over the past decade, the list of financial donors and investors working in the African market has been significantly expanded at the expense of developing countries, which, unlike Western donors, do not put forward requirements for the internal political course of host States. China, India, Brazil and some other countries have helped to reduce the dependence of African countries on traditional donors.

Along with new donor countries, global funds that focus on specific goals, primarily in the field of health, are becoming important sources of financial support. Private donors, including large charitable foundations, also make a significant contribution to supporting countries in need. In addition, according to the OECD, a significant amount of funding in the countries that are members of the above-mentioned organization is provided by non-governmental organizations.

New players in the field of development finance put forward non-standard ideas and business models, which requires careful selection of assistance projects, options for bringing the allocated resources to recipients and managing the funds received. Much remains to be done to ensure that donor programmes are aligned with the priorities of host countries.

It is quite possible that in the medium term, new sources of financing for the economy and large-scale measures to solve environmental problems on the continent will be found, and aid flows from private funds will increase. At the same time, there is no doubt about the need for recipient countries to implement reforms aimed at expanding the possibilities of mobilizing savings and investment from domestic sources, and ensuring the stability of the economy in relation to external destabilizing factors.

¹ http://www.OECD.org./stat/ODA

² The World Bank. Global Development Finance 2005. Summary and Country Tables. Wash., 2005. P. 26 - 29; The World Bank. World Development Indicators 2008. Wash., 2008. P. 364 - 366; UNCTAD. The Least Developed Countries Report 2007. N. Y. 2007. P. 346 - 347.

³ UNCTAD. Trade and Development Report 2008. New York and Geneva, 2008, p. 176.

⁴ bales of cotton = 220 kg.

⁵ Finance and Development. Wash., 2005. Vol. 42. N 3. P. 16 - 20.

⁶ The DAC Journal. Development Cooperation. 2001. Report. P. OECD, 2002. P. 245; The World Bank. World Development Indicators 2008. Wash., 2008. P. 363.

⁷ Finance and Development...

⁸ BIKI, April 2, 2005, No. 37, pp. 1-4.

⁹ G-8 Africa Action Plan (www. g-8 gc. ca/kan - docs/afraction); The New Partnership for Africa's Development (NEPAD). Abuja, 2001; Action Plan for Africa adopted at the G8 Summit. Kananaskis, 2002 / / Vasiliev A.M. Africa - the stepdaughter of globalization; Matsenko I. B. Africa: from the Lagos Action Plan to NEPAD. Moscow, 2005. pp. 40-60.

¹⁰ UN. Africa Renewal. October 2008. Vol. 22. N 3. P. 6 - 7, 22.

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