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December 5, 2004
Foreign aid threatened by anti-terrorism, says Oxfam
Financial Times (UK)

The "war on terror" threatens to revive an era when foreign aid was dictated by security concerns rather than poverty reduction, Oxfam, the UK-based campaign group, warns in a report published today.

By Andrew Balls in Washington
Published: December 6 2004 02:00 | Last updated: December 6 2004 02:00

The "war on terror" threatens to revive an era when foreign aid was dictated by security concerns rather than poverty reduction, Oxfam, the UK-based campaign group, warns in a report published today.

In 2002, a third of the increase in aid flows from rich to poor countries came from allocations to Afghanistan and Pakistan, according to the report - Paying the Price, Why Rich Countries Must Invest Now in a War on Poverty.

Flows of US aid to Israel, Egypt, Jordan, Iraq, Turkey and Afghanistan in the past three years are equal to aid to the rest of the world combined.

"Debt relief for Iraq shows that rich countries can find the resources for foreign aid if they need to," says Max Lawson, Oxfam's policy adviser.

Development campaigners have contrasted the quick progress in reaching agreement among the Paris Club countries to write off up to 80 per cent of Iraq's debt with slow progress in forgiving the debt of poor African countries.

From 1960 to 1965, rich countries gave on average 0.48 per cent of gross domestic product in foreign aid, falling to 0.34 per cent by 1980-85 and 0.24 per cent by 2003.

Part of the reason for pessimism about the effectiveness of aid derives from the poor record that politically motivated aid had in supporting growth and development during the cold war years.

As well as security concerns, aid flows were dictated by domestic business interests, the report says.

About 30 per cent of aid given by the Group of Seven countries was tied to an obligation to buy goods and services from the donor country. Italy and the US were the worst offenders in this.

Only six of the 22 big donors give aid that is completely untied to purchases from domestic companies - an objective set by the members of the Organisation for Economic Co-operation and Development in 2001.

Italy was the worst offender, with 92 per cent of its aid, excluding technical assistance, tied to purchases from Italy or another specified country. The report says 70 per cent of US aid and 35 per cent of Canadian aid was tied.

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