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What price foreign aid?by Neville Ladduwahetty Courtesy Island 25-06-2007Cuts in aid are being considered by the Co-chairs to pressure the Sri Lankan Government to halt its military offensive against the LTTE and take effective steps to curb the associated human rights violations. Paradoxically this is being considered in the background of a war that is being vigorously waged in Iraq and Afghanistan by some Co-chair members themselves (e.g. United States and NATO, the military arm of the European Union) in which thousands are dying and violations of every kind are being committed daily. Evidently, the contemplated action against Sri Lanka is because recipients of aid are expected to live up to higher standards than those practiced by Donors. Sri Lanka is engaged in a war of liberation, evidence of which is clearly visible in the Eastern Province. The removal of the LTTE threat from the province has liberated hundreds of thousands from the oppression of the LTTE. With the resettlement of the temporarily displaced there is renewed hope that the people of the Eastern Province can resume normal lives, unlike the Peoples of Iraq and Afghanistan who have no such hope of leading normal lives for decades to come. The entire Sri Lankan nation has been destabilized by the LTTE resulting in the denial of fundamental freedoms and the rights of the whole nation to better lives. A Government engaged in the pursuit of liberating such a nation cannot be faulted for the unintended consequences of its actions. That said, the Government should act in a manner to minimize human rights violations in order to prevent its own dehumanization, knowing full well that violations are unavoidable in zones of conflict. This was amply demonstrated in the strategies adopted by the Sri Lankan security forces in the liberation of Vakarai. The motivation for a Government to conform to accepted norms of conduct during war should be to protect the honour and self respect of the society it represents; not for the sake of "qualifying" for aid. Using aid to pressure a country to conform to accepted norms is to "buy" accepted behaviour. Such an approach may work in countries that have to depend on aid for survival. This is not the case with Sri Lanka because the quantum of aid today, particularly from the West, is relatively insignificant. Consequently, Donor nations are not in a position to dictate norms of conduct. Furthermore, the fact that Japan, one of the Co-chairs is committed to continue aiding Sri Lanka means that Japan's assessment of the situation is different to that of the West. This underscores the need to maintain standards for their very own sake, and not for any other, such as aid.
It is reported that the International Crisis Group (ICG) based in Brussels is urging Sri Lanka's donors to "reassess" their aid to Sri Lanka in the light of human rights violations by the Government, the LTTE and other armed groups (The Sunday Times, June 17, 2007). The fact that a group in Brussels considers it necessary to "reassess" the human rights situation in Sri Lanka for future aid, notwithstanding the decision by Japan, reflects how subjective these assessments can be despite the contribution from the West being much smaller than that from Japan. For instance, according to the Annual Report (2006) of the Central Bank of Sri Lanka, while the total for the Major Projects Financed by Foreign Lending during 2006 was $743million the contributions from the United States and the Republic of Germany were $100million and $55million respectively. These contributions amounted to 13.5% and 6.75%, respectively, of the total finance for Major Projects. The remaining 80% of the finances needed for major projects was funded by the ADB, Japan and syndicated loans from the Citicorp and HSBC. In terms of Sri Lanka's GDP of $28billion, the funding for major projects by the United States and the Republic of Germany amount only to 0.36% and 0.18%, respectively. It must be noted however, that assistance from the United States and the Republic of Germany is not limited only to funding major projects. Aid is also being channeled to their favoured NGOs for the implementation of undeclared agendas of the Donors. The entirety of Foreign Capital in the form of grants and loans in 2006 was $1.2 billion, which in terms of GDP is only 4.3%. This is only about one half of the total of Foreign Remittances of $2.33billion. With the likelihood of increased income from remittances, the impact of Foreign Aid on Sri Lanka would be insignificant to a point that its withdrawal could readily be made up by commercial loans or even aid from sources that do not have demands of compliance that are tantamount to interference in internal matters.
Despite the insignificance of the Foreign aid received by Sri Lanka as stated above, the popular perception is that Sri Lanka cannot survive without it. This myth is perpetuated mostly by the Western donors and by the NGOs set up by them to propagate their interests. By giving publicity to the myth of the importance of aid, donors and their agents have acquired the license to interfere in internal affairs and make an issue of violations of Human Rights despite the fact that every country without exception can be faulted for Human Rights violations of one sort or another because of the vastness of its scope. Foreign Governments have come to use Human Rights violations as an instrument to extend their agendas despite their own inability to live up to the required standards. If Sri Lanka is to be free of such pressures the Government has to take a hard look at the scope and relevance of Foreign Aid in today's context. If 80% of the funding for major projects is currently through sources that do not have preconditions, Sri Lanka should explore ways and means of funding of all major projects through such sources or devise means to attract local capital or capital of expatriates to fund its development activities. Another approach would be to use Public-Private Participation arrangements to develop infrastructure projects. The need to explore such sources is of vital importance because aid is the carrot that is used to further the self interests of Donor countries. Consequently, aid comes at a price. Even grant monies are required to be directed to areas of interest identified by the Donor. This is the real world because the prime motive of aid in any form is to serve the self interest of the Donor. The most recent example of this was India's gift of 2D Radar to Sri Lanka with disastrous consequences.
Why are the Co-chairs, with the exception of Japan, interested in halting the war on the pretext of curbing Human Rights violations? Spokespersons of the Co-chairs have stated that they want the violence to stop, but do not want the neutralization of the LTTE. Whose interests would be served by maintaining the capabilities of LTTE? And would the LTTE not be tempted to resort to violence if they retain their capabilities? Without wasting time to unscramble these contradictions or to explore the depths of Donor motivations, Sri Lanka should go ahead and plan its strategies with prudence, and pursue its own self interests with diligence. Such a plan would envisage measures to secure and develop the Eastern Province to its full potential and to ensure political representation for the Peoples of the province by holding elections on a priority basis. The economic development of the Eastern Province in terms of its agricultural and industrial potential would add considerably to economic growth of the country. Furthermore, the uniqueness of its multiethnic character would serve to dispel images of intolerance and the province could become a model of coexistence. In the meantime, the Government strategy for the Northern Province should be not to focus on territory but to focus on measures to minimize the capabilities of the LTTE to commit violence to a point that either decommissioning becomes a natural precondition for negotiations, or the LTTE's personal safety takes priority over their political agenda.
The commonly-held belief that Sri Lanka cannot survive without Foreign Aid has to be recognized as false. Despite the current Foreign Aid component for major Project Funding being insignificant, aid has given Donors the license to influence the direction of outcomes and define priorities relating to Sri Lanka's internal issues including security issues that are of interest to the Donors both directly and indirectly through their agents - the NGOs. Therefore, Sri Lanka must explore fresh and innovative arrangements to raise capital for development in order to be free to pursue what is best for Sri Lanka. What is best for Sri Lanka is to be guided by Napoleon's dictat that "The policy of a state is decided by its geography". Thus, securing the Eastern Province and consolidating the Government of Sri Lanka's writ by developing the economic potential of the province and empowering it politically by holding elections at all levels are in the nation's best interest. By consolidating the separateness of the Eastern Province the current Government would be positioned to direct the solution to Sri Lanka's national question in a form that would be acceptable to the overwhelming majority of the country.
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