Reinventing CIDA – Some thoughts

On May 12th 2010, I attended a presentation by Barry Carin and Gordon Smith, both from the University of Victoria, on their latest publication entitled Reinventing CIDA. It attracted an overflow audience and vigorous discussion. Undoubtedly many in attendance were present or former CIDA employees or those who are, or are not and would like to be, recipients of CIDA’s largesse.

The presentation was first rate and the content thought provoking. It was the twenty-fifth review of CIDA in 40 years, an average of about 1.3 reports every twenty four months since 1969 (fn 8, p.4). To maintain this average, there must even now be a new report in the making. It is difficult to think of any other government organization that has received such scrutiny, suggesting that it is a difficult policy nut to crack, which it is.

As I listened, I started scribbling notes and will try to make these more coherent in a later posting, once I have reread the report. I began reacting to the analysis during the oral presentation before obtaining a copy to study. I have since read it once and learned a great deal more than I was able to absorb during the meeting. It is short, well written, fully documented and at times humorous.

My neighbor in the audience noted that I had jotted down Three Cups of Tea on my copy and asked me why. It is the title of a book authored by Greg Mortenson who singlehandedly took the initiative to raise private funds to build schools in the remote Karakoram Himalaya area of Pakistan. They provided education for both girls and boys in places where there was little if any schooling for either sex and often no school buildings at all. At last count there were 55 schools in what is Taliban breeding ground with no fondness for female education. What lessons are there from this obvious success story, by an individual with no public funding, in one of the harshest regions of the world? Some have suggested that Mortenson should be nominated for the Nobel Peace prize.

Following are some initial reactions to Reinventing CIDA in no particular order.

1. Canada’s annual aid budget is about $5bn. What does $5bn buy in 2010? Not much. In Ottawa, a detached bungalow costs about $330,000. The aid budget in 2010 would buy about 15,000 bungalows a year, spread out say 5,000 to each of all of Africa, Asia and Latin America. Use whatever good or service price you like and see how much can be purchased and distributed throughout the developing world with $5bn. If the aid is sprinkled globally, it will have a negligible impact. Canada is not doing much if the annual aid budget is the measure used. Mortenson’s schools cost about $16,000 per school to construct, staffed by local teachers and serving a number of children now and in the future with, I am guessing, strong prospects for aiding indigenous development.

2. Remittances from Canada mainly to developing countries (p.24) are $10bn a year through official channels and about $5bn more through informal channels, that is three times Canada’s official aid budget. Should remittances be considered a type of aid? It depends what it is used for, but we know that Canadian citizens, permanent residents, and foreign workers send money abroad. There is no large bureaucracy paid to administer these transactions although various financial institutions charge a fee to make the transfers. Some of the money is undoubtedly linked to less than savoury economic activities, and the informal $5bn is probably a low estimate of what is part of the underground economy, which cannot be measured accurately. Remittances are an increasingly important item in the balance of payments of many countries and may have a greater stimulative impact on developing countries per dollar spent than the dollar spent on official aid from Canada or anywhere else.

3. Still with remittances, the costs of transferring monies from Canada to India and Vietnam are 11.8% and 12.6% respectively. From the US the respective costs are 3.5% and 3.7%. Someone or some institutions have found a cozy market in Canada sheltered from competition, something we should be able to cure domestically and help those in developing countries. The comparative costs, US and Canada, suggest there is upward pressure to expand the informal market for remittances from Canada in order to avoid the higher costs.

4. When comparisons are made of a country’s aid as a percentage of GDP, some come off better than others – if a higher percentage is considered to be the objective. But is this a fair comparison? If countries like Canada, the UK, Germany and France (leave aside the US) are providing military support to operations in developing regions like the Middle East and Africa, is this not a contribution to at least the possibilities of future peaceful development, some form of democracy and human rights for these unfortunate countries? I would argue that narrow aid budget comparisons may not provide evidence from which to draw conclusions about donor country contributions.

5. What about the reverse flow of aid from developing to developed countries? Our immigration policy is harmful to development in poor countries that is CIDA’s mandate. Canada encourages the inflow of skilled immigrants to Canada, thereby decreasing the stock of skills where they are most needed. I have never understood the morality of this policy when it is just these people that developing countries need. In 2008, about 149,000 economic migrants came to Canada, most from developing countries. I find unpersuasive the arguments that they send back remittances and may even return and help their former homelands. They are more likely to encourage family members to follow them to Canada. I would. Immigration and aid policy operate in separate silos and their counter effects are seldom raised except by diplomats from these countries.

6. Designing institutions to perform certain functions and deliver particular services is central to the report. Here I am reminded of previous policy related research in which I was involved a longtime ago. How do you design programmes to organize and fund industrial research and development (Rand D), to promote the agricultural sector, cultural activities, health and education, all of which receive government funding, and there are others? Each is an idiosyncratic activity but each has institutional and funding features that may assist in designing an institutional model for aid. Consider the case of R and D and its similarities to aid and development (A and D).

7. Research is an activity similar to exploring unknown lands. You know generally where you want to go. You don’t quite know what you are looking for and certainly not what you will find and how long it will take and cost, but you are motivated by knowing that you might make a discovery that will be valuable to yourself , your country and perhaps even humanity – in that order. Research is an ill-defined process and the most valuable results occur more by chance than good planning. There are opportunities for private and social gain and many chances to misappropriate funds because research is difficult to monitor. Over time many vested interests arise who engage in rent seeking behavior. This does not appear to be the sort of thing that bureaucrats should be involved in given their training to monitor the prudent use of public funds with the Auditor General, Parliament, the press and lobbyists looking over their shoulders. And yet federal and provincial governments organize processes both to undertake R and D, for example NRC (the National Film Board in the cultural arena), and to fund private sector R and D through grants, subsidies and tax incentives. Administering these policies requires public servants to act more like venture capitalists by administering the use of public funds in activities where there is a less than 5% chance of success. Their training in managing the prudent use of public funds does not promote such actions. Reporting annually that 95% of approved expenditures failed is not something a bureaucrat would relish doing, especially year after year.

8. My argument here is that by looking at how other government supported activities in unlikely and risky situations are managed and institutions set up, we may find pointers for reinventing CIDA. In the future I hope to expand on these comparisons as well as react to other parts of the report.

I hope the aid conversation proceeds in a manner that is more fact based and emotional free than occurs for the issue of environmentalism, but I am not overly optimistic. Reinventing CIDA is a good starting point. It puts Canadian aid policy in the starting gate once again. For a reprise of “everything old is new again” see various versions available on YouTube.

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