Yash Tandon (Director)
Let me first introduce
my organisation and myself. I am a citizen of a HIPC country,
Uganda, and I now live in Zimbabwe. I am director of a network
called the International South Group Network (ISGN) which
works on issues related to development, debt, human rights,
gender, democracy and governance and trade. ISGN was founded
in 1994 at the University of Fort Hare in South Africa. ISGN
is founder member of Jubilee South (JS) which is distinct
from Jubilee 2000 (J2). Whereas J2 was a northern-initiated
project that aimed to push pressure on Northern Governments,
JS is motivated to enlighten civil society in the South on
the debt issue, and to lobby South Governments. Whereas J2
was a short-duration campaign aimed at reducing the amount
of debt, JS is a longer-term movement aimed at raising the
systemic issue that makes debt such an endemic problem. JS
advocates rejection of HIPC and a total cancellation of debt.
1.0 The framework of current dialogue between
UNDP and Civil Society
1.1
First I’d like to thank UNDP (New York) for inviting us, members of
the civil society, to share ideas on this very important subject.
We welcome this as part of the larger process of opening up
the UNDP to civil society. Having said this, I’d like to say
that this is the only diplomatic statement I’d make. From
here on I shall not force myself to “be nice”. I think it
will serve our interest best if we are as candid and open
as the tolerance of our hosts would allow. We are not here
to embarrass our hosts. But we need to express ourselves freely,
or else our being here serves no purpose. Why do I find it
necessary to say this? Because I have noticed that developing
countries have been losers in international trade negotiations
because they tend to think they must remain polite. I have
been sitting in some of the trade negotiations in Geneva,
and I discovered that the developing country negotiators tend
to be either polite out of fear of the presence of donors
or World Bank or IMF representatives or quiet because of not
wanting to expose their ignorance. On the other hand, the
developed country negotiators are hard bargainers, and often
downright rude. You will forgive me therefore if I apply some
of the lessons I learned in Geneva. If I appear to sound rude,
I can only say that I have learned this from my masters.
1.2
So the first point I want to make is that the framework for dialogue
of this meeting is not right, it’s not fair to us members
of the civil society. The objective of this exercise is to
work out a UNDP-Civil Society “partnership agenda for action”
on enhanced HIPC initiative. This is what UNDP’s Aide Memoir
says in Par.1. But then in Par.24, it says that HIPC has already
been designed, and that it may be “too late” for revisions
“to the major components.” It goes without saying that this
meeting is the “final opportunity (for the WB/IMF) to refine
the framework based on compelling feedback from civil society.”
But we suppose we want not just “refinement” but annulment
of HIPC, or a drastic restructuring, are we already time-barred?
If so, then this is not right. Do we have to go through the
Seattle kind of process again to emphasise that it is not
right to decide things above the heads of the people? Why
do we have to always protest and say NO, or go to the streets
before we are heard? Seattle showed that it is not right to
decide matters behind closed doors and then present the people
a fait accompli on a take-it-or-leave-it basis. International
organisations, especially the WB, the IMF and the WTO, constantly
talk about transparency and good governance, but they do not
observe these in their own operations. By their lack of democracy,
they drive us to the streets to demonstrate and protest. What
is the point of being asked to critique HIPC if it is already
“too late” to change its architecture? Are we here simply
to give a pre-structured design a rubber stamp approval by
us so that the WB/IMF can say that the civil society has been
“consulted” and now they can proceed with the implementation?
I am afraid that we cannot go further on this basis. It’s
not acceptable to us.
1.3
The sense I have is that even the UNDP is brought on to the HIPC agenda
only after the WB and the IMF staff have already worked on
the design and got these approved by their respective Boards.
I can’t speak for UNDP, but if I’m right about the process,
then I think the UNDP should also not swallow this kind of
insult. The WB and the IMF know that they do not really have
a good rapport with civil society in the developing countries,
and they do not have the kind of filed presence that the UNDP
has. Hence, they have approached the UNDP to take their agenda
for them into the field and involve civil society. If the
UNDP has brought us here simply to identify our role in operationalising
an agreed agenda on enhanced HIPC, then the UNDP is making
a serious mistake. UNDP enjoys considerable goodwill among
many of us. Do not allow yourselves to be used by the WB and
the IMF to make us jump into bed with them.
1.4
So my first suggestion is that the meeting is turned into an honest,
open-ended, forum, with no conditions attached to our participation.
We members of the civil society and the UNDP should be taken
seriously by those who have already designed HIPC and now
say it is “too late” to change it in fundamental ways. If
this workshop decides that HIPC must be changed fundamentally,
then the WB/IMF officials must go back to their drawing boards.
We can work in this forum only on that basis. To work on any
other basis would be a violation of the principle of democracy
and good governance of global institutions.
1.5
The idea of the workshop is to set up a “partnership agenda for action”
within six weeks from now. We insist that those of us who
have the time and the energy from our side be involved in
this process in good faith. We must avoid unilateralism on
the part of either the Fund or the Bank or the UNDP.
Let me now come to the
substance of the matter.
2.0 Why Civil Society
must reject HIPC
2.1
Let me first comment on some positive developments. The first is that
the WB/IMF have finally made the link between debt and poverty.
This, in my view, is a positive development. We in civil society
have been arguing for this for years. Debt cannot be handled
in isolation of the broader issues of poverty and development.
It is simply because of their dogmatism that the staff of
these institutions refused to make this link earlier. They
insisted on treating debt in isolation of the issue of poverty.
Now hat they have made this link between debt and poverty,
they are going about it in the wrong way. But to do this we
shall come in a minute. The point to note, however, is that
the WB/IMF always act almost ten years too late. The other
positive development is that they finally brought debts owed
to multilateral institutions on to the negotiations agenda.
This has taken them even more than 10 years. The bank and
the Fund learn lessons exceedingly slowly. They begin to dig
a well when people are already dying of thirst. As we shall
argue later what holds the Bank/IMF staff back are the interests
of G7 countries that control them. The G7 are not really serious
about tackling poverty. And the debt agenda is driven by
the creditors and not by and in the interest of the debtors.
2.2
The second problem with the Bank/IMF staff is that they do not do their
work honestly. They let their professionalism be corrupted
by the politics of G7. Corruption, take not, comes in
many forms. One (the first phase) is a perfect example of
it. It failed because it was badly crafted. That is why they
have now designed an enhanced version of it. The Bank and
the Fund employ highly paid economists and statisticians,
but judging by their record of anticipated gains the HIPC
countries should have made but which never materialised, we
must conclude that there is something fundamentally wrong
about their method of work. One government official from Uganda
told me that the WB/IMF figures are derived not from the needs
of the HIPC countries in question but from certain political
constraints under which the Bank and Fund staff operate. Thus
the “debt sustainability” calculations of HIPC One were essentially
“negotiated numbers” which had nothing to do with the objective
requirement of the situation. For example, suppose it required
90% reduction in debt service flows to bring the debt of a
particular country to what might be “sustainable” level, even
by Bank/Fund standards. But if this were not politically acceptable
to the creditor countries, then the Bank/Fund staff would
manipulate figures to conform to the figures acceptable to
them. The Bank/Fund staff are really servants of the G7 creditor
countries. During the HIPC negotiations, for example, Germany,
Japan and the UK raised objections to debt relief on grounds
that this would undermine credibility of Bretton Woods institutions
and create “moral hazard.” Hence, instead of 90% reduction
objectively needed by the situation in Mozambique, the Fund
staff manipulated the figures so as to make it appear that
a 25-30% reduction would still be “debt sustainable.” They
play all kinds of statistical tricks (like front loading and
back loading of high-interest or low-interest loans) so as
to please the creditor countries rather than objectively serve
the interest of the HIPC country in question. Their figures
are manipulated figures. They are politically derived figures.
They are not honest figures. The WB/IMF staff have been corrupted
by their masters.
2.3
This is also true when they work out, for example. export earning projections.
Often these are based on contrived figures in order to come
up with debt reduction figures that satisfy the creditors
rather than the debtors. Thus, for example, in the case of
Uganda they assumed sharp rise in coffee prices and coffee
exports in volume in order to get high export-earning figures
on which to calculate the debt Uganda would be able to pay
“sustainably”. But these figures turned out to be quite fictitious.
The Fund staff draw their figures and predictions about the
market from out of black boxes with completely unreliable
set of assumptions. Once again, these assumptions are politically
rather than professionally inspired. The figures look impressive
only because they appear to be “scientific” in the form of
tables or graphs, but their credibility is practically zero.
2.4
These figures are purely public relations exercises to satisfy the
press and public opinion in the domestic arena of the creditor
countries, to keep the Oxfams and Eurodads at bay. Thus, for
example, if Mozambique’s debt service figures were say US$300m
a year, then the Fund “experts” will manipulate figures to
bring these down to say $100m (1/3rd of the total)
to make it look politically palatable to the creditors. This
would satisfy those criticising the Fund that “something”
is being done for the poor Mozambiquans. The impression is
created that the country has been “relieved” of $200m, which
should have therefore be available for “poverty reduction”
when, in fact, no real resources were in fact released. And
then the unpaid $200m adds to the debt stock, and thus the
debt goes on increasing year after year. If the matter was
not serious, and if it did not involve the lives of people,
you have to laugh at the sheer absurdity of Bank/Fund logic.
It is no wonder that nothing came off HIPC One.
2.5
Let us get deeper into the subject. There is the baggage of conditionality
that comes with HIPC. Indeed this is the most dangerous part
of HIPC. In 1995, for example, the Bank wanted Mozambique
to lower tariffs on processed cashew nuts. Mozambique refused.
It had, I think, a 20% protection of its locally processed
cashew nuts, and the bank wanted it reduced to 14%. So the
bank'’ will was imposed on Mozambique as a condition of HIPC
“relief”. The result was that the local factories could not
face competition from Indian cashew nuts, many closed down
and 10,000 people lost their job. Now the Bank wants Mozambique
to abolish import duty on sugar, all in the name of “liberalising
trade”. What happened to the cashew nut industry now threatens
the sugar industry. And yet the image created in the media
and in the domestic arenas of creditor countries is that by
introducing HIPC, the Bank/Fund are really acting as “friends”
of Mozambique. Well, if you have such “friends”, as they say,
who need “enemies”?
2.6
Let us go further deeper. This is the WB/IMF dogma that countries pursuing
“sound policy environments” induced by the debt “relief” would
attract foreign capital, which will solve their problems of
poverty. Hence, this is made part of HIPC’s conditionality.
This is one of the most laughable of Bank/Fund’s dogmas. The
tragedy is that the staff of the Bank/Fund appears to believe
in this hilariously comical assumption. And they want the
civil society in HIPC countries to monitor the creation of
“sound policy environments” so that foreign capital can come
and solve the country’s problems. The fact of the matter if
that the bank/Fund are putting the horse before the cart.
It is not foreign direct investments (FDIs) that bring growth,
but growth that attracts foreign capital. In Africa, Angola
attracts more FDI because of its oil and despite the civil
war than does Zambia, which under the present regime has fulfilled
practically all the “policy” requirement of the Bank/Fund
to attract foreign capital. The argument that FDIs come to
develop third world economics is one of the biggest lies of
our time, a lie that is swallowed even by our governments.
2.7
Then there are political conditionalities that come with HIPC. The
Bank/Fund economists have no understanding whatsoever of things
like democracy or good governance. It is not their job, they
have no skills in this area. In any case, their masters have
corrupted them. And yet, as directed by their masters, they
put good governance as conditions of HIPC. This is another
area of absurdity in the Bank/Fund’s conceptual baggage. They
have no means of monitoring good governance. The notion of
corruption has become their sole yardstick to measure good
or bad governance. And Transparency International, a body
set up by a former President of the World Bank, Robert MacNamara,
has become their new-found monitoring mechanism on corruption.
This body has designed “scientific” looking scale of corruption
that appears to serve the purpose of a substitute for measuring
“good governance”. And yet TI’s concept of corruption is seriously
flawed, and its understanding of corruption partial and self-serving
(a subject that we cannot go into here at any length).
2.8
Political conditionality and a correct “policy environment” to attract
foreign capital could include a pliant, subservient working
class. Thus, Guyana was taken off the list of HIPC because
the workers went on a general strike. So you have an absurd
situation where the workers go to the streets because the
system does not look after their interests and the Bank/IMF
find this intolerable because it violates their notion of
“good governance”. This is really quiet absurd.
2.9
How has the HIPC addressed these serious problems of the original HIPC?
The answer is that it has not. The figures put out by the
Fund staff are still politically cooked figures to satisfy
the requirements of the creditors rather than those of donors.
I have talked to some responsible officials in both Mozambique
and Uganda. They tell me, in confidence, that they have no
choice but to accept HIPC because for various pragmatic reasons
they are afraid of the donors, that they would be pleased
if civil society would take the responsibility of challenging
the donors on HIPC. Mozambique’s official line, in any case,
is “thanks for HIPC but we need 100% cancellation of debt.”
So although the WB/IMF staff might say that the enhanced HIPC
is welcomed by the so-called “beneficiary” states, actually
the latter welcome it only because when you are down on the
floor crushed by the creditor on top of you, what do you do?
Let me be very clear – at least the HIPC countries that I
know DO NOT want HIPC; they want outright cancellation of
Debt.
2.10
The second point is that
Enhanced HIPC suffers from the same conditionality problem
as the HIPC phase one. It is a leverage to push HIPC countries
to adopt policy positions to facilitate the entry and operation
of foreign capital in those countries. In other words, HIPC
is achieving what the Multilateral Agreement on Investments
(MAI) failed to achieve globally because of opposition from
third world countries and peoples’ movements. This is quite
unacceptable. The policy positions are premised on the Washington
Consensus assumptions that have been found to be based on
false premises. I don’t understand how the civil Society,
indeed even the UNDP, can support a programme that is based
on discredited Washington Consensus.
2.11
A third reason enhanced
HIPC should be rejected is that it still does not address
the basic issue of poverty in the countries involved. The
WB/IMF have linked debt with poverty. This, as we said earlier,
is a positive development. But they are doing the wrong connection.
They think that by relieving part of the debt they would save
money that the HIPC countries would be able to use for welfare
activities. And they think liberalising their markets would
make their economies competitive, and help secure FDIs. Both
these assumptions are false. They want civil society organizations
to help design the operation of this and to monitor implementation.
This is like asking the civil society to pull the cart after
the WB/IMF have put the cart before the horse. It is an absurd
notion. It WILL NOT succeed. They are avoiding the issue of
poverty in the developing countries. They are treating the
symptoms.
2.12
Now the Bank/Fund want
the debtor countries to work out national Poverty Reduction
Strategy Papers (PRSPs), in order for them to qualify to receive
HIPC support (Par.20 of UNDP Aide Memoir). But this is to
be done “with assistance of WB/IMF”. This will NOT WORK. The
WB/IMF remain the “gate keepers” with a veto to disallow things
they do not accept. If, for example, a HIPC country wants
to put money on free health and free education and the WB/IMF
staff say that this is not allowed under the “cost recovery”
formula, then the debtor’s will be subverted. There is something
that the WB/IMF staff have never understood, or never learned
from the SAP experience. It is this that no programme of theirs
will ever succeed if the country has no political commitment
to it. These are projects imposed by the Fund and the Bank.
The responsibility for their failure is that the Bank and
the Fund. Why should civil society be involved in an exercise
they do not own In fact, the Bank/Fund are using the concept
of “interim” paper on Poverty by the debtor countries to skip
the process of involving the NGOs. The NGOs will be brought
in only when the WB/IMF “gate-keepers” have done their work
on the so-called “Interim” paper. Why should the NGOs come
in at that stage? The whole thing smacks of the kind of manipulation
that some of us witnessed to at Seattle.
3.0 Conclusions and Recommendations
3.1
It is clear that the enhanced HIPC is only enhanced cheating. I am
afraid that is the only honest thing to say about it. It is
high level cheating, high-level manipulation of the kind that
took place at Seattle. This cannot be endorsed either by civil
society or, in my view, by the UNDP. They must not be party
to it.
3.2
The only way forward is to look at the issue of poverty and development
with a fresh approach. The Washington Consensus must finally
be declared dead and it should be buried for good never to
be resurrected in any form or disguise. The poverty reduction
strategies must analyse fundamental causes that create poverty
and underdevelopment. The analysis must be done by the people
affected, the people of the South, and be implemented by their
governments with the help of civil society. The process must
be owned by the people and accountable to them. Any other
approach is top-down and will not carry the necessary political
commitment, which is the principal reason why SAPs have failed.
3.3
The debt issue too must be looked at afresh. First it is necessary
to look a the entire debt stock and not just debt service
flows. It is easy to manipulate figures for debt service flows,
and to make it appear as if a country is “sustaining” its
debt when, in fact, the debt stock is increasing even further.
One needs to look into the terms of trade between the export
products and the imports of the highly indebted poor countries
to understand why the debt continues to pile up. One needs
to look into the financial transactions of these countries
and analyse their impact on debt creation. The debt issue
must be examined not from the creditor nations’ viewpoint
only (as the WB-IMF tend to do), but, principally, from the
debtor nations’ viewpoint. For example, the “moral hazard”
that the creditor nations are concerned about in refusing
to cancel debts must be challenged by the “moral illegitimacy”
of the debt overhang that kills all development, and is the
principal cause of perpetuating poverty in the South.
3.4
As I argue in a second paper, a careful analysis of the origin and
character of the debt would show that there are 7-categories
of “debts” that do not even qualify as debts. These are:
i)
odious debts (incurred by previous
regimes in violation of human rights),
ii)
honorific debts (incurred in
fulfilment of UN resolutions),
iii)
fraudulent debts (often even
criminal),
iv)
illegitimate debts (for fake
experts and consultants and fake projects),
v)
debts unilaterally hiked by
the lenders through interest rate and foreign exchange manipulations,
vi)
fictitious debts (those without
corresponding transfer of real assets to the South), and
vii)
Washington Consensus (WC) debts
(debts incurred because of WB/IMF misleading developing countries,
which should be laid down at their doorstep).
3.5
We made 6-recommendations on how to move forward on the debt issue.
These are that:
i)
The UNDP should help develop
a methodology to conceptualise and measure inadmissible debts,
much in the way it has developed a methodology to measure
welfare for its annual Human Development Reports. This basically
a conceptual and statistical exercise should be quite easy.
As a rough guess, I would argue that the current over US$3
trillion debt would come down to a few hundred million dollars
of legitimate debt. These latter should be paid, the rest
stand cancelled automatically because they do not qualify
as “debt” in any case.
ii)
The United nations should insist
on the implementation of its resolutions that deal with issues
of human rights, development and social welfare and link these
with the debt issue. It should take its own responsibilities
seriously and assume some of the debts incurred by debtor
countries in pursuance of UN resolutions. These “debts” do
not belong to the debtor nations; they belong to the international
community.
iii)
In the same manner, the WB/IMF
and other IFIs should take responsibility for debts incurred
as a result of their misguiding developing countries on a
false road to a development such as Washington Consensus.
There should be a way of measuring the IFI debt to developing
countries.
iv)
HIPC should be neither extended
to other countries nor deepened in the countries in which
it is operational. It should simply be scrapped. It adds insult
to injury. It is cheap, and rather cynical, trick to create
the illusion that “something” is being done for “the poor
“ of the world. The resolution of the Jubilee Campaign of
Latin American and Caribbean countries passed at Tegucigalpa
in January 1999 and of the Jubilee South at Johannesburg in
June 1999 unqualifiedly reject the HIPC initiatives as a means
of perpetuating debt and not as a solution. (see appendices)
v)
The negotiating fora in which
debts are discussed or negotiated should move away from the
Paris consortium or any other creditor-controlled institutions
such as the WB/IMF. Let the UN set up a special body where
the issues are negotiated.
vi)
The debtor governments should
form regional or multi-national consortia to refuse to pay
inadmissible debts. In this effort they can get the support
of their populations provided they are transparent in exposing
all illegitimate or fraudulent debts, and provided they are
accountable to the people. They should, however, pay the debts
that have been legitimately incurred, and that have resulted
in actual transfer of net assets from North to South.
Appendices:
1.
Resolution of the Latin American & Caribbean Jubilee Campaign,
Tegucigalpa, Honduras, January 1999
2.
Jubilee South Resolution on Debt, Johannesburg, June 1999
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