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The following article was written by Rami Khouri, Executive Editor of the Daily Star newspaper in Beirut. It is posted here with permission.
The “Agreement on Political Process” that was signed days ago by the US occupation authority in Iraq and the American-appointed Iraqi Governing Council is an important document that will be interpreted in different ways. It is idealistic, bold and ambitious in its stated quest to define a transition from American-occupied Iraq to a situation of full Iraqi sovereignty in a free and democratic country.
The agreement embodies powerful principles of democratic pluralism, equality before the law, representational federalism and the consent of the governed. It is audacious in the sweep, speed and clarity of the proposed democratic transition (the text is available at the Coalition Provisional Authority website: http://www.cpa-iraq.org). In just 66 lines it offers a blueprint to wipe out three decades of Iraqi-engineered Baathist tyranny and the previous five decades of British-made post-colonial incoherence, and replace them with an American-inspired Thomas Jefferson on the Tigris.
The specifics are impressive, and hard to argue with. The document drips with references to “freedom,” “equality,” “rights,” “due process,” “independence of the judiciary,” “transparency” and other such fine political values. Its democratization procedures include selection of representative individuals to regional bodies that will ultimately draft a national constitution, ratification of the constitution by the citizenry, caucuses at governorate level to select individuals who will collectively form a transitional national assembly, a constitutional convention of directly elected Iraqis, and other such ringing aspects of accountable democratic governance as it has been successfully practiced for many decades in … Iowa and Idaho.
This document encapsulates the best and worst of America today. It spells out and offers others the finest American governance traditions. If this were a commercial website, I would want to put all these democratic values in my shopping cart. The US gets an A+ for intent. But it gets a D- for implementation. For the manner of Washington’s attempt to transform Iraqi despotism into Iraqi democracy is naive and unrealistic, and its realization will be bumpy for at least four main reasons:
l It totally ignores the points of tension, even incompatibility, that will surface during the meeting of American and indigenous Iraqi-Arab-tribal-Islamic-Kurdish-etc. cultural values (these tensions will be resolved over time by Iraqis, just as they were resolved in the European and American transitions from feudalism-and-slavery to democracy from the 16th to the mid-20th centuries). Forging a new Iraqi nationalism and democracy with the crucible and moulds of American republicanism is as unrealistic as it is noble.
l This agreement is fundamentally imposed by the US, and includes numerous explicit American veto powers over implementation; this “democratization” process is also peculiarly undemocratic, and at second glance seems more colonial than collegiate.
l The Governing Council itself was appointed by the US occupation authority. Many of its members are credible national or tribal leaders, but the council collectively enjoys very mixed legitimacy and credibility among Iraqis (flashback to the Israeli occupation of Palestinian lands: Two decades ago, the Israeli occupation authority created Palestinian “village leagues,” tried to reach political accords with them and failed miserably and predictably. Why? Because political bodies appointed by an occupying military power and designed to achieve the occupier’s strategic goals enjoy no indigenous legitimacy or credibility, whether in Palestine, Iraq, South Vietnam, Afghanistan or 18th-century Virginia.)
l This agreement reflects American policymaking by panic, which is dangerous for all concerned. The agreement’s content, power balance and hasty promulgation suggest that it aims more to get the US out of Iraq than to allow Iraq to define itself. Intent and credibility usually drive implementation in the adult world, and Washington’s intent and credibility here just as before its war on Iraq remain culturally confused, politically simplistic, motivationally suspect and diplomatically hasty. Washington has taken a good idea transforming tyranny into democracy and implemented it badly, because it largely acts unilaterally, militarily and through narrow American worldviews.
This agreement to turn over sovereignty to Iraqis is flawed but fascinating, and imposed but important. It mirrors a deeper history of how power and culture are exercised in the world how the strong influence the weak and try to reshape them in their own image, and how colonial adventures end.
This process in Iraq today is sad and ugly on two counts: The United States embarrasses itself as an incompetent and dizzy colonial power, as it changes governments and tries to reshape the entire Middle East; but also the Arab governments and peoples throughout the Middle East embarrass themselves even worse, as they prove to be incompetent and docile spectators, passively watching their own post-colonial history of autocracy, passivity and powerlessness replayed over and over again.
The antidote must include a more realistic, humble and multilateral American policy, along with a more profound, activist, honest and credible policy from the Arab countries. Iowa and Idaho became prosperous and democratic because their people demanded, and forged, good governance. America offers us ennobling lessons, along with ugly, imposed colonial treaties. We should beware of, renegotiate and improve the bad treaties, but embrace and achieve the promise of good governance.
Saturday, November 22, 2003
Tuesday, November 11, 2003
WHY ARE THE RICH JUST GETTING RICHER?
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By William Fisher
Donor governments and institutions worldwide have long recognized that the private sector is the engine for economic growth, job-creation and poverty reduction in poor countries. It is private sector growth that attracts foreign investment and the transfer of technology and know-how. It is the private sector that provides productive employment. And it is the private sector that gives rise to a middle-class -- historically the catalyst for social reforms and political stability.
The most dynamic and potentially promising part of the private sector in poor countries consists of millions of small and medium-sized companies (SMEs). Yet only a relatively small proportion of foreign aid has been directed toward this part of the private sector. While World Bank assistance to this sector has increased by dramatically over the past few years, individual country donors have traditionally paid relatively little attention to SMEs. One of the results is that, in poor countries, the rich are getting richer while the gulf between luxury and poverty is widening. Yet, even given the enormous challenges these small companies face, they provide more jobs in most developing countries than all the (few) large companies combined!
Why then are aid agencies so reluctant to devote more resources to this part of the private sector? The reasons are many.
Donors: In the US, as in most other donor countries, foreign aid needs to show quick success, principally because of Congressional requirements and the very short time horizons of most members of both houses. Working with large companies – those who need aid least – is most likely to produce these kinds of results (and even this effort has been far from a roaring success). Both Congress and our aid agency, the U.S. Agency for International Development (USAID), are fond of programs that lend themselves to cost/benefit analyses. In working with small and medium-sized companies, the benefits are often not measurable for considerable periods after the work ends. USAID officers in the field move frequently from one country to another; they tend to favor those programs that can show positive results – the more dramatic, the better – on their watch. USAID is a multi-mission agency, handling everything from humanitarian assistance to democratization; it is unreasonable to expect that it give top priority to all these tasks. Because USAID is a relatively small agency, it uses contractors to implement most its programs. This contractor-driven approach has produced some outstanding results, but contractors tend to ignore or to place in subsidiary sub-contractor positions one of our most powerful resources: non-governmental organizations who frequently do their work with all-volunteer personnel. Finally, within the US aid agency, there is little private sector experience in general, even less with small and medium-sized companies.
Recipients: In poor countries, smaller companies rarely have access to credit; banks tend to lend to those they know, who are usually least in need of working capital. Child labor and unhealthy working conditions are the norm. Small companies – in fact, the entire private sector – usually operate in a policy and regulatory environment that places incredible obstacles in the path of private sector growth. Much of this attitude springs from rampant corruption and a tradition of ‘crony democracy’; as one Egyptian tycoon said to me, “Only small companies have problems. Big ones don’t, because we can go talk to the decision-makers or pay someone to fix our problem.” When I worked in Jamaica as a USAID consultant back in the 1980s, large and small companies like – and potential foreign investors – had to visit more than 50 different offices to obtain permission to set up and begin running a business. The so-called ‘one-stop-shop’ we persuaded the Jamaican government to establish promised to reduce these bureaucratic obstacles substantially, but it soon became apparent that those staffing the one-stop-shop had neither the skills nor the motivation to take their mission seriously. While one-stop-shops became the flavor of the day in many developing countries, few worked efficiently. Ludwig Rudel, a veteran of more than 20 years in USAID and countless consulting assignments thereafter, points out that today it still takes an average of 66 days to form a new business in a developing country; in Canada, the time required is two days.
Moreover, in many of the countries where we provide aid, for example, the former Soviet Union and its satellite states, as well as in many other countries, economies based on free markets are a new experience. Governments have traditionally been the country’s principal employers and owners/operators of most of its basic industries, and tradition dies slowly.
As a result of all of the above, most aid recipient countries lack any semblance of pro-growth physical and intellectual infrastructure. Even the few institutions purportedly dedicated to business – chambers of commerce, trade associations, etc. – often tend to be elitist, excluding all but the most powerful commercial interests. A further complication is that recipient governments are often reluctant to take advice from donor governments or their contractors. To this daunting array of constraints, add the fact that small and medium-sized companies usually lack the most basic ingredients of management, technology, marketing and sales, human resources development, performance monitoring and accountability. About the only thing they do not lack is the entrepreneurial will to improve their lives.
Technology transfer provides a microcosmic example of the kinds of problems faced by both SMEs and larger companies. In this area, there have been some outstanding successes; for example, ACDI/VOCA, an NGO, has successfully transferred simple technologies to small farmers in a host of countries by working with cooperatives and one-on-one with growers. But there have been numerous disasters as well. Ludwig Rudel points out that “multinational companies have shown that they will not transfer the latest technologies. They will provide the last generation while they develop the next one so that they keep one leg up over their foreign partners. The Japanese overcame the problem in the 1950s by picking sectors including textiles, optics, steel, and ship building and sending a steady flow of their best young minds to study abroad for long periods. They brought them back to be embedded into local research institutions and companies and then to keep abreast of the state of the art as it matured. Once they got these sectors going, they chose additional ones. Now they operate on a par with many western countries.”
Rudel adds: “The United Nations Development Programme (UNDP) tried to do this with integrated circuits in India. They trained about 50 scientists, tried to get them to return to India (most did) and built an excellent R&D institution at Pilani. It was first class but maybe a half generation behind the rest of the world. Then two problems arose. The institution did not find it in its interest to share the technology with the industry on acceptable terms. And when they went to the Ministry of Finance for funding to attend conferences to keep abreast of the field, they got cut out. "You chaps got lots of assistance in the past while the project was building. Now let others have their turn!" was the reaction from the bureaucrats. The whole thing is in the doldrums now.”
There are other major obstacles. For example, according to Ludwig Rudel: “We are clueless how to foster transition to open market economies in formerly totalitarian societies, much less help SMEs. In these countries, the transition from command economies to free markets has provided a fertile field for organized crime – whose membership now comprises most of these countries’ new-rich. Liberia may be an African example but there are others in lily-white societies that are every bit as bad. In the Baltic states the mafia was (is) a part of (or consequence of) the open markets fostered by our efforts; extortion (protection) runs rampant. In Latvia, the links to the Russian mafia overlay the entire private sector operation and abuses are growing. I know of one case where those resisting illegal pay offs were hounded by former KGB agents who became hit men after being laid off by the KGB.”
The relationship between donor and host government is yet another problem. Before any donor can initiate a new program, it must first obtain the agreement and cooperation of the host government. Private sector development can be particularly problematic. Says Wallace E. Tyner of Purdue University’s Department of Agricultural Economics, a veteran of many consulting assignments for USAID and other donors: “Most of these governments also are trying to retain their power over the economy, so private sector development is not necessarily a priority.”
Yet another problem is endemic to foreign aid generically: There is little or no cooperation or coordination among donors. When I was managing a USAID program in Egypt a few years ago, my team produced an annual review of all donors programs. It was widely distributed, but most of the interest in it came from the donors themselves, many of whom were unaware of the complimentary – or duplicative – programs of other donors. As with most USAID Missions, the Egypt Mission participated in a donor committee, which met monthly. But the information gathered by its senior-level members rarely trickled down to program officers or contractors ‘in the trenches’, where genuine cooperation would need to begin.
Given all these constraints, it is not rocket science to understand why the ‘government should just get out of the way’ dictum so often falls on deaf ears, or to appreciate why aid agencies have not been eager to embrace the SME challenge. The ongoing result is been that the rich have been getting richer while the gulf between rich and poor has been getting bigger.
Is there a solution? There is no one-liner to answer this question. But there are many innovative ideas that are being tried and others that deserve to be tried. And there is enough anecdotal evidence of ’success’ with SMEs to believe that some of these ideas – given more resources, and the right kinds of resources – can help these little enterprises grow larger, employ more people, and help narrow the gulf between opulence and poverty.
What might work?
Dr. Jack N. Behrman of the University of North Carolina – founder of the MBA Enterprise Corps and former Assistant Secretary of Commerce for International Business – finds that host governments may be reluctant to take advice from donor governments or aid agencies, but will frequently listen to private sector volunteers. “NGOs and PVOs have been sending volunteers overseas for many years, but generally they have not been made an integral or large part of the overall effort, mainly because USAID has never given high priority to business or private sector development. “
Behrman adds: “In Eastern Europe, however, USAID and its Missions relied on several PVOs -- notably the merged Agriculture Cooperative Development Initiative and Volunteers for Overseas Cooperative Action (ACDI/VOCA), Citizens Democracy Corps (aka Citizens Development Corps – CDC), International Executive Service Corps (IESC), and MBA Enterprise Corps (MBAEC). These groups were given separate contracts, or worked in collaboration with each other or with private consulting firms. Their volunteers were used successfully in almost every aspect of private sector development -- mainly in direct firm-level assistance, but including teaching in business schools and institutes and in programs to train future
trainers. “
Says Behrman: “In Russia, which initially followed some very irresponsible advice for transforming itself to a market economy overnight, private sector volunteers have recently concentrated on strengthening associations representing SMEs. As a result, President Putin is listening to these small companies for the first time. This also demonstrates that this kind of pressure comes best when it is generated from within -- from SMEs and their associations. The advice of NGO and PVO volunteers is being appreciated, understood, and accepted.”
However, Behrman points out, this process is lengthy and does not fit with the ‘quantifiable goals’ sought by USAID and Congress.” So, first, he contends, there needs to be an ongoing educational process within the US Government. We should be able to learn new approaches, since we now have nearly 60 years of experience with inadequate results. SMEs will arise when there is income to be earned and the policy and physical infrastructure is adequate. Policies are needed to remove obstacles, ease company formation, provide for and protect private property, maintain competitive markets, and establish fair and reasonable regulations on business to protect the consumer and environment. “And these,” he says, “are all areas where knowledgeable volunteers can become credible players – and produce better results at less cost.”
Dr. Wallace E. Tyner of the Department of Agricultural Economics at Purdue University – and a veteran of dozens of overseas development projects for USAID and other donor agencies – suggests another approach. Says Dr. Tyner: “The reality is that we carry out development projects in ‘rent seeking’ (rather than profit seeking) economies. That is, people in both the public and private sectors are accustomed to earning and increasing incomes through favors from the public sector. Instead of trying to become more efficient or effective at what they do or produce, businesses invest more in seeking rent. When a donor project comes along, it is usually the established or well connected that have access to the donor(s). Smaller businesses get left out of the process altogether. Thus, the relatively rich get richer.”
Moreover, Tyner notes, “USAID and other donor organization find it difficult to work directly with the private sector. For better or worse, most aid is channeled through governments. And even if the host government is cooperative, it is still difficult to find mechanisms to aid SMEs directly with donor funds. That is why the indirect mechanisms are so important - infrastructure (to lower business costs), training (to increase business efficiency), and policy reform (to enable the private sector to function to its potential).”
Tyner recommends: “Do everything possible to change the rules of the game towards profit seeking instead of rent seeking”. He suggests investing more in social and physical infrastructure, adding: “This is definitely out of vogue, and that is unfortunate because good roads, electricity, education, etc. create the possibility for people at lower levels to become more productive. Infrastructure is more enabling across a broader segment of the economy than a lot of things we do.”
Perhaps, he adds, “we could do a combination of these things. For example, we might make it clear to citizens and government in X country that the US is prepared to build a road from A to B, if high transport costs are a major barrier to trade, but that this will happen only if regulations x, y, and z are changed. Then those who would benefit from the road would become a domestic lobby to get those regulations changed.”
Part of the reason why the really poor cannot often benefit directly, Tyner says, is that “they are uneducated or relatively less well educated, and thus, their absorptive capacity for assistance is lower than that of the relatively well off. They have to be concerned more with day-to-day survival and cannot afford entrepreneurial endeavors. So we need to invest more resources in basic business education. Entrepreneurship will emerge when social and physical infrastructure creates conditions conducive to change.”
The World Bank Group, which for many years virtually ignored the private sector in favor of government-to-government initiatives, has recently demonstrated a new awareness of the role of business in promoting economic growth and poverty reduction. It has focused much of its effort on the potential of SMEs and has identified lack of access to credit as perhaps the single largest problem facing this group.
Says Harold Rosen, Director of the World Bank Group’s SME Department: “One of the first steps toward a vibrant SME sector is the opening of more financing channels, and ensuring that they are focused on building strong partnerships and trust between SMEs and their local banks. This would have lasting impacts in helping local entrepreneurs obtain the capital they need to build their businesses and create more jobs in economies that sorely need new employment opportunities…The entrepreneurs behind SMEs could -- and should -- play a much larger role in development, but too often are held back by a lack of ready access to financing from local formal sector financial institutions. Viewing these smaller firms as costly, high-risk credits, many commercial banks avoid lending to them, concentrating instead on ‘safer’ options such as financing larger local or multinational corporations, or holding high-yield government bonds….”
The SME Department, a joint effort of the World Bank and International Finance Corporation (IFC), is taking on this agenda, using several strategies to increase SME access to capital.
Rosen explains: “This involves not only supporting the traditional WBG product of channeling of medium-term hard currency loans channeled through local banks, but also several newer capacity building initiatives started by our multi-donor Project Development Facilities (PDFs) to improve commercial banks’ SME lending skills and thus help tap into a potentially large and lucrative domestic markets.”
The IFC currently manages nine multi-donor IFC-managed SME facilities around the world. These facilities, typically funded 20 percent by IFC and 80 percent by our donor partners, are building the capacity of SME lenders in their target regions as part of a broader service package that also includes management training, technical assistance (TA) to businesses and business associations, and helping create greater employment opportunities through large company/small company linkages programs.
In Vietnam, for example, the Mekong Project Development Facility (MPDF) is working to improve SMEs’ access to finance through a Ho Chi Minh City-based commercial Bank Training Center (BTC) it launched in 2001. This initiative began with MPDF analysis that identified internal obstacles keeping Vietnam’s banks from doing more profitable SME lending, leading to a BTC business plan that attracted seed capital of $100,000 from 10 private local banks serving mainly SMEs. These small banks lacked the resources to organize in-house training programs, but have now come together to create a for-profit solution that will provide fee-based training courses to themselves, their competitors, and similar banks in Cambodia and Laos. In its first year, the BTC provided top-quality commercial training courses to more than 2,700 local bankers, offering 30 different courses covering such important areas as Customer Focus and Service Quality, Credit Risk and Lending to the Household and SME Sectors, Risk Management in Banking, and others.
Similar objectives are being met in other countries as well. PDFs have also recently held seminars to introduce local bankers in Bangladesh, China, India, Indonesia and Nigeria to successful foreign models of SME lending. This, says Rosen, “creates new opportunities for knowledge transfers that will enable them to take advantage of the vast underserved ‘middle’ market represented by SMEs in their region. “
In western China’s Sichuan province, where incomes lag far behind those of the more prosperous coastal regions, the China Project Development Facility (CPDF) organized a lending workshop for the management of Chengdu City Commercial Bank. This institution has a solid track record in SME lending with 80 percent of its loanable funds concentrated in financing over 3,000 local SMEs. For a city like Chengdu that is home to more than 129,000 SMEs accounting for 99 percent of the total number of firms, the "Best International SME Lending Practices" conference was an important means by which Chengdu’s bankers and entrepreneurs could learn about successful SME lending models in other parts of the world, to help overcome the "access to knowledge" problem faced in many frontier markets.
A similar approach is being taken by the South Asia Enterprise Development Facility (SEDF). This newly launched initiative, funded by the IFC and other donors, has targeted its efforts towards greater SME financing from local Bangladeshi banks. The Africa Project Development Facility (APDF) is pursuing this agenda as well. In Francophone West and Central Africa, in cooperation with the European Union, it has recently provided training in SME Credit Risk assessment to 241 loan officers from 66 different local and regional financial institutions spanning 13 different countries.
However, increasing credit flows to SMEs is not without its catalog of horror stories. Ludwig Rudel recalls: “ I once evaluated a couple of loans made by USAID in 1982 to The Siam Commercial Bank and the Kenya Commercial Bank. In Thailand, the bankers assured AID that the money would be safely invested. They had some good projects that fit the criteria (rice mills) and they were owned by relatives of the bankers who were excellent credit risks. No danger of loss there. It would all be repaid… In Kenya, the bankers said they would have to find borrowers of Indian origin because the Africans would not repay. Nor could most Africans raise the required 200% collateral required by the banks. The Dutch aid program tried to beat this system by offering tractor loans with no collateral. The farmers ran the tractors until they gave out, then cannibalized them to sell the working parts on the cash market and left the frame in the field.”
So the road to SME growth is, at best, a minefield. Yet, as Harold Rosen says, “No effort toward poverty reduction in developing nations is sustainable without growth of SMEs.” Let us hope that both donors and beneficiaries are getting the message.
* * *
The writer is a specialist in international private sector growth issues, and has managed or participated in dozens of overseas assignments for the US Agency for International Development and other donor organizations.
By William Fisher
Donor governments and institutions worldwide have long recognized that the private sector is the engine for economic growth, job-creation and poverty reduction in poor countries. It is private sector growth that attracts foreign investment and the transfer of technology and know-how. It is the private sector that provides productive employment. And it is the private sector that gives rise to a middle-class -- historically the catalyst for social reforms and political stability.
The most dynamic and potentially promising part of the private sector in poor countries consists of millions of small and medium-sized companies (SMEs). Yet only a relatively small proportion of foreign aid has been directed toward this part of the private sector. While World Bank assistance to this sector has increased by dramatically over the past few years, individual country donors have traditionally paid relatively little attention to SMEs. One of the results is that, in poor countries, the rich are getting richer while the gulf between luxury and poverty is widening. Yet, even given the enormous challenges these small companies face, they provide more jobs in most developing countries than all the (few) large companies combined!
Why then are aid agencies so reluctant to devote more resources to this part of the private sector? The reasons are many.
Donors: In the US, as in most other donor countries, foreign aid needs to show quick success, principally because of Congressional requirements and the very short time horizons of most members of both houses. Working with large companies – those who need aid least – is most likely to produce these kinds of results (and even this effort has been far from a roaring success). Both Congress and our aid agency, the U.S. Agency for International Development (USAID), are fond of programs that lend themselves to cost/benefit analyses. In working with small and medium-sized companies, the benefits are often not measurable for considerable periods after the work ends. USAID officers in the field move frequently from one country to another; they tend to favor those programs that can show positive results – the more dramatic, the better – on their watch. USAID is a multi-mission agency, handling everything from humanitarian assistance to democratization; it is unreasonable to expect that it give top priority to all these tasks. Because USAID is a relatively small agency, it uses contractors to implement most its programs. This contractor-driven approach has produced some outstanding results, but contractors tend to ignore or to place in subsidiary sub-contractor positions one of our most powerful resources: non-governmental organizations who frequently do their work with all-volunteer personnel. Finally, within the US aid agency, there is little private sector experience in general, even less with small and medium-sized companies.
Recipients: In poor countries, smaller companies rarely have access to credit; banks tend to lend to those they know, who are usually least in need of working capital. Child labor and unhealthy working conditions are the norm. Small companies – in fact, the entire private sector – usually operate in a policy and regulatory environment that places incredible obstacles in the path of private sector growth. Much of this attitude springs from rampant corruption and a tradition of ‘crony democracy’; as one Egyptian tycoon said to me, “Only small companies have problems. Big ones don’t, because we can go talk to the decision-makers or pay someone to fix our problem.” When I worked in Jamaica as a USAID consultant back in the 1980s, large and small companies like – and potential foreign investors – had to visit more than 50 different offices to obtain permission to set up and begin running a business. The so-called ‘one-stop-shop’ we persuaded the Jamaican government to establish promised to reduce these bureaucratic obstacles substantially, but it soon became apparent that those staffing the one-stop-shop had neither the skills nor the motivation to take their mission seriously. While one-stop-shops became the flavor of the day in many developing countries, few worked efficiently. Ludwig Rudel, a veteran of more than 20 years in USAID and countless consulting assignments thereafter, points out that today it still takes an average of 66 days to form a new business in a developing country; in Canada, the time required is two days.
Moreover, in many of the countries where we provide aid, for example, the former Soviet Union and its satellite states, as well as in many other countries, economies based on free markets are a new experience. Governments have traditionally been the country’s principal employers and owners/operators of most of its basic industries, and tradition dies slowly.
As a result of all of the above, most aid recipient countries lack any semblance of pro-growth physical and intellectual infrastructure. Even the few institutions purportedly dedicated to business – chambers of commerce, trade associations, etc. – often tend to be elitist, excluding all but the most powerful commercial interests. A further complication is that recipient governments are often reluctant to take advice from donor governments or their contractors. To this daunting array of constraints, add the fact that small and medium-sized companies usually lack the most basic ingredients of management, technology, marketing and sales, human resources development, performance monitoring and accountability. About the only thing they do not lack is the entrepreneurial will to improve their lives.
Technology transfer provides a microcosmic example of the kinds of problems faced by both SMEs and larger companies. In this area, there have been some outstanding successes; for example, ACDI/VOCA, an NGO, has successfully transferred simple technologies to small farmers in a host of countries by working with cooperatives and one-on-one with growers. But there have been numerous disasters as well. Ludwig Rudel points out that “multinational companies have shown that they will not transfer the latest technologies. They will provide the last generation while they develop the next one so that they keep one leg up over their foreign partners. The Japanese overcame the problem in the 1950s by picking sectors including textiles, optics, steel, and ship building and sending a steady flow of their best young minds to study abroad for long periods. They brought them back to be embedded into local research institutions and companies and then to keep abreast of the state of the art as it matured. Once they got these sectors going, they chose additional ones. Now they operate on a par with many western countries.”
Rudel adds: “The United Nations Development Programme (UNDP) tried to do this with integrated circuits in India. They trained about 50 scientists, tried to get them to return to India (most did) and built an excellent R&D institution at Pilani. It was first class but maybe a half generation behind the rest of the world. Then two problems arose. The institution did not find it in its interest to share the technology with the industry on acceptable terms. And when they went to the Ministry of Finance for funding to attend conferences to keep abreast of the field, they got cut out. "You chaps got lots of assistance in the past while the project was building. Now let others have their turn!" was the reaction from the bureaucrats. The whole thing is in the doldrums now.”
There are other major obstacles. For example, according to Ludwig Rudel: “We are clueless how to foster transition to open market economies in formerly totalitarian societies, much less help SMEs. In these countries, the transition from command economies to free markets has provided a fertile field for organized crime – whose membership now comprises most of these countries’ new-rich. Liberia may be an African example but there are others in lily-white societies that are every bit as bad. In the Baltic states the mafia was (is) a part of (or consequence of) the open markets fostered by our efforts; extortion (protection) runs rampant. In Latvia, the links to the Russian mafia overlay the entire private sector operation and abuses are growing. I know of one case where those resisting illegal pay offs were hounded by former KGB agents who became hit men after being laid off by the KGB.”
The relationship between donor and host government is yet another problem. Before any donor can initiate a new program, it must first obtain the agreement and cooperation of the host government. Private sector development can be particularly problematic. Says Wallace E. Tyner of Purdue University’s Department of Agricultural Economics, a veteran of many consulting assignments for USAID and other donors: “Most of these governments also are trying to retain their power over the economy, so private sector development is not necessarily a priority.”
Yet another problem is endemic to foreign aid generically: There is little or no cooperation or coordination among donors. When I was managing a USAID program in Egypt a few years ago, my team produced an annual review of all donors programs. It was widely distributed, but most of the interest in it came from the donors themselves, many of whom were unaware of the complimentary – or duplicative – programs of other donors. As with most USAID Missions, the Egypt Mission participated in a donor committee, which met monthly. But the information gathered by its senior-level members rarely trickled down to program officers or contractors ‘in the trenches’, where genuine cooperation would need to begin.
Given all these constraints, it is not rocket science to understand why the ‘government should just get out of the way’ dictum so often falls on deaf ears, or to appreciate why aid agencies have not been eager to embrace the SME challenge. The ongoing result is been that the rich have been getting richer while the gulf between rich and poor has been getting bigger.
Is there a solution? There is no one-liner to answer this question. But there are many innovative ideas that are being tried and others that deserve to be tried. And there is enough anecdotal evidence of ’success’ with SMEs to believe that some of these ideas – given more resources, and the right kinds of resources – can help these little enterprises grow larger, employ more people, and help narrow the gulf between opulence and poverty.
What might work?
Dr. Jack N. Behrman of the University of North Carolina – founder of the MBA Enterprise Corps and former Assistant Secretary of Commerce for International Business – finds that host governments may be reluctant to take advice from donor governments or aid agencies, but will frequently listen to private sector volunteers. “NGOs and PVOs have been sending volunteers overseas for many years, but generally they have not been made an integral or large part of the overall effort, mainly because USAID has never given high priority to business or private sector development. “
Behrman adds: “In Eastern Europe, however, USAID and its Missions relied on several PVOs -- notably the merged Agriculture Cooperative Development Initiative and Volunteers for Overseas Cooperative Action (ACDI/VOCA), Citizens Democracy Corps (aka Citizens Development Corps – CDC), International Executive Service Corps (IESC), and MBA Enterprise Corps (MBAEC). These groups were given separate contracts, or worked in collaboration with each other or with private consulting firms. Their volunteers were used successfully in almost every aspect of private sector development -- mainly in direct firm-level assistance, but including teaching in business schools and institutes and in programs to train future
trainers. “
Says Behrman: “In Russia, which initially followed some very irresponsible advice for transforming itself to a market economy overnight, private sector volunteers have recently concentrated on strengthening associations representing SMEs. As a result, President Putin is listening to these small companies for the first time. This also demonstrates that this kind of pressure comes best when it is generated from within -- from SMEs and their associations. The advice of NGO and PVO volunteers is being appreciated, understood, and accepted.”
However, Behrman points out, this process is lengthy and does not fit with the ‘quantifiable goals’ sought by USAID and Congress.” So, first, he contends, there needs to be an ongoing educational process within the US Government. We should be able to learn new approaches, since we now have nearly 60 years of experience with inadequate results. SMEs will arise when there is income to be earned and the policy and physical infrastructure is adequate. Policies are needed to remove obstacles, ease company formation, provide for and protect private property, maintain competitive markets, and establish fair and reasonable regulations on business to protect the consumer and environment. “And these,” he says, “are all areas where knowledgeable volunteers can become credible players – and produce better results at less cost.”
Dr. Wallace E. Tyner of the Department of Agricultural Economics at Purdue University – and a veteran of dozens of overseas development projects for USAID and other donor agencies – suggests another approach. Says Dr. Tyner: “The reality is that we carry out development projects in ‘rent seeking’ (rather than profit seeking) economies. That is, people in both the public and private sectors are accustomed to earning and increasing incomes through favors from the public sector. Instead of trying to become more efficient or effective at what they do or produce, businesses invest more in seeking rent. When a donor project comes along, it is usually the established or well connected that have access to the donor(s). Smaller businesses get left out of the process altogether. Thus, the relatively rich get richer.”
Moreover, Tyner notes, “USAID and other donor organization find it difficult to work directly with the private sector. For better or worse, most aid is channeled through governments. And even if the host government is cooperative, it is still difficult to find mechanisms to aid SMEs directly with donor funds. That is why the indirect mechanisms are so important - infrastructure (to lower business costs), training (to increase business efficiency), and policy reform (to enable the private sector to function to its potential).”
Tyner recommends: “Do everything possible to change the rules of the game towards profit seeking instead of rent seeking”. He suggests investing more in social and physical infrastructure, adding: “This is definitely out of vogue, and that is unfortunate because good roads, electricity, education, etc. create the possibility for people at lower levels to become more productive. Infrastructure is more enabling across a broader segment of the economy than a lot of things we do.”
Perhaps, he adds, “we could do a combination of these things. For example, we might make it clear to citizens and government in X country that the US is prepared to build a road from A to B, if high transport costs are a major barrier to trade, but that this will happen only if regulations x, y, and z are changed. Then those who would benefit from the road would become a domestic lobby to get those regulations changed.”
Part of the reason why the really poor cannot often benefit directly, Tyner says, is that “they are uneducated or relatively less well educated, and thus, their absorptive capacity for assistance is lower than that of the relatively well off. They have to be concerned more with day-to-day survival and cannot afford entrepreneurial endeavors. So we need to invest more resources in basic business education. Entrepreneurship will emerge when social and physical infrastructure creates conditions conducive to change.”
The World Bank Group, which for many years virtually ignored the private sector in favor of government-to-government initiatives, has recently demonstrated a new awareness of the role of business in promoting economic growth and poverty reduction. It has focused much of its effort on the potential of SMEs and has identified lack of access to credit as perhaps the single largest problem facing this group.
Says Harold Rosen, Director of the World Bank Group’s SME Department: “One of the first steps toward a vibrant SME sector is the opening of more financing channels, and ensuring that they are focused on building strong partnerships and trust between SMEs and their local banks. This would have lasting impacts in helping local entrepreneurs obtain the capital they need to build their businesses and create more jobs in economies that sorely need new employment opportunities…The entrepreneurs behind SMEs could -- and should -- play a much larger role in development, but too often are held back by a lack of ready access to financing from local formal sector financial institutions. Viewing these smaller firms as costly, high-risk credits, many commercial banks avoid lending to them, concentrating instead on ‘safer’ options such as financing larger local or multinational corporations, or holding high-yield government bonds….”
The SME Department, a joint effort of the World Bank and International Finance Corporation (IFC), is taking on this agenda, using several strategies to increase SME access to capital.
Rosen explains: “This involves not only supporting the traditional WBG product of channeling of medium-term hard currency loans channeled through local banks, but also several newer capacity building initiatives started by our multi-donor Project Development Facilities (PDFs) to improve commercial banks’ SME lending skills and thus help tap into a potentially large and lucrative domestic markets.”
The IFC currently manages nine multi-donor IFC-managed SME facilities around the world. These facilities, typically funded 20 percent by IFC and 80 percent by our donor partners, are building the capacity of SME lenders in their target regions as part of a broader service package that also includes management training, technical assistance (TA) to businesses and business associations, and helping create greater employment opportunities through large company/small company linkages programs.
In Vietnam, for example, the Mekong Project Development Facility (MPDF) is working to improve SMEs’ access to finance through a Ho Chi Minh City-based commercial Bank Training Center (BTC) it launched in 2001. This initiative began with MPDF analysis that identified internal obstacles keeping Vietnam’s banks from doing more profitable SME lending, leading to a BTC business plan that attracted seed capital of $100,000 from 10 private local banks serving mainly SMEs. These small banks lacked the resources to organize in-house training programs, but have now come together to create a for-profit solution that will provide fee-based training courses to themselves, their competitors, and similar banks in Cambodia and Laos. In its first year, the BTC provided top-quality commercial training courses to more than 2,700 local bankers, offering 30 different courses covering such important areas as Customer Focus and Service Quality, Credit Risk and Lending to the Household and SME Sectors, Risk Management in Banking, and others.
Similar objectives are being met in other countries as well. PDFs have also recently held seminars to introduce local bankers in Bangladesh, China, India, Indonesia and Nigeria to successful foreign models of SME lending. This, says Rosen, “creates new opportunities for knowledge transfers that will enable them to take advantage of the vast underserved ‘middle’ market represented by SMEs in their region. “
In western China’s Sichuan province, where incomes lag far behind those of the more prosperous coastal regions, the China Project Development Facility (CPDF) organized a lending workshop for the management of Chengdu City Commercial Bank. This institution has a solid track record in SME lending with 80 percent of its loanable funds concentrated in financing over 3,000 local SMEs. For a city like Chengdu that is home to more than 129,000 SMEs accounting for 99 percent of the total number of firms, the "Best International SME Lending Practices" conference was an important means by which Chengdu’s bankers and entrepreneurs could learn about successful SME lending models in other parts of the world, to help overcome the "access to knowledge" problem faced in many frontier markets.
A similar approach is being taken by the South Asia Enterprise Development Facility (SEDF). This newly launched initiative, funded by the IFC and other donors, has targeted its efforts towards greater SME financing from local Bangladeshi banks. The Africa Project Development Facility (APDF) is pursuing this agenda as well. In Francophone West and Central Africa, in cooperation with the European Union, it has recently provided training in SME Credit Risk assessment to 241 loan officers from 66 different local and regional financial institutions spanning 13 different countries.
However, increasing credit flows to SMEs is not without its catalog of horror stories. Ludwig Rudel recalls: “ I once evaluated a couple of loans made by USAID in 1982 to The Siam Commercial Bank and the Kenya Commercial Bank. In Thailand, the bankers assured AID that the money would be safely invested. They had some good projects that fit the criteria (rice mills) and they were owned by relatives of the bankers who were excellent credit risks. No danger of loss there. It would all be repaid… In Kenya, the bankers said they would have to find borrowers of Indian origin because the Africans would not repay. Nor could most Africans raise the required 200% collateral required by the banks. The Dutch aid program tried to beat this system by offering tractor loans with no collateral. The farmers ran the tractors until they gave out, then cannibalized them to sell the working parts on the cash market and left the frame in the field.”
So the road to SME growth is, at best, a minefield. Yet, as Harold Rosen says, “No effort toward poverty reduction in developing nations is sustainable without growth of SMEs.” Let us hope that both donors and beneficiaries are getting the message.
* * *
The writer is a specialist in international private sector growth issues, and has managed or participated in dozens of overseas assignments for the US Agency for International Development and other donor organizations.
Monday, November 10, 2003
WHAT OTHER WAR ?
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WHAT OTHER WAR?
By William Fisher
Iraq has turned the media’s (and perhaps the US Government’s) attention away from that other war. Yes, the one in Afghanistan. About the only time we hear about it these days is when a US soldier gets killed in efforts to ‘mop up’ the Taliban.
But these two conflicts have many things in common. First, we were told they were both part of the war on terror – and indeed some very evil people got kicked out of power. Second, in both cases, we won quick military victories. Third, we haven’t found the leaders of the bad guys yet. Finally, large parts of both countries are in chaos, demonstrating that the Administration apparently had no real plan to deal with winning the peace.
One major difference is that, in the case of Iraq, the Congress has now authorized a large amount of money for reconstruction, others like the Japanese and the Saudis are contributing (however meager their contributions), and contracts are being let (however suspect some of them may be) to get the reconstruction work started.
The war in Afghanistan was declared by President Bush to have ended in May 2003 – at the same time he hailed the end of major combat in Iraq. That was six months ago, though the Afghan military campaign was over much before that. We backed the presidency of Hamid Karzai, then left him without an army, without any power outside Kabul, and without the funds he needs to start rebuilding his country after decades of war and occupation. In the $20 billion President Bush requested for reconstruction, only $1 billion was allocated to Afghanistan. The ‘international community’ is not being even as generous as the Americans. And President Karzai has been saying since the get-go that he needs $20 billion. The television images of Afghanistan inside and outside Kabul are more a moonscape than a country!
The good news is that Afghan women have been freed from the burka, are able to work and go to school, and a few schools and hospitals have been refurbished, largely by the military. The bad news is that the ‘war lords’ are back in control of most of the country, the Taliban and their Al Queda pals are regrouping, infrastructure is nonexistent, poppies for heroine and cocaine production are once again the country’s leading export, and Afghanistan remains an economic, social and political basket case.
This will not come as news to the White House. Many in Congress have been voicing their concerns over US neglect of Afghanistan for months. For example:
Sen. Joseph R. Biden, the ranking Democrat on the Senate Armed Services Committee, says the Bush administration, in not devoting enough funds to the rebuilding of Afghanistan, has "basically turned it over to the warlords." Mr. Biden believes the Bush administration has "already given up the ghost on Afghanistan" -- in funding and military commitments. He proposes giving the Bush administration $100 million in additional funds to help rebuild postwar Afghanistan.
Sen. Carl Levin, Michigan Democrat, has also questioned the monetary commitment to complete the rebuilding of Afghanistan. He is urging the Administration to display “the kind of commitment to staying the course that is absolutely essential if we're not going to see a repeat of Afghanistan in Afghanistan and in other places."
Nor are these Congressional voices coming only from the Democratic side of the aisle. For example:
Senator Richard Lugar: ”We should see Afghanistan as not just a problem, but rather as an opportunity. Afghanistan was the opening front in the war on terrorism, and visible progress there will resonate for an international audience. Moreover, our experiences in Afghanistan can help us succeed in Iraq…Afghanistan still presents enormous challenges. As in Iraq, security is the chief obstacle to achieving our post conflict goals in Afghanistan…The security situation has been declining over the last few months, forcing the suspension of critical assistance and undermining reconstruction and transition efforts. Establishing security is essential to begin the process of building a viable economy in Afghanistan, encouraging investment and developing a private sector that can generate income and jobs that are not tied to foreign assistance or the illicit drug trade…Afghanistan’s population is far less educated than Iraq’s, and it lacks abundant oil resources that can serve as an engine for reconstruction. Many areas of Afghanistan lack even rudimentary infrastructure, and the infrastructure that does exist is in disrepair…We also must continue to support efforts to improve education and expand the role of women in Afghan society….”
Senator Chuck Hegel: “Afghanistan has not gone as we had hoped. While the Taliban no longer rules, the government of President Hamid Karzai has gained little ground. Warlords, and those who may sympathize with al-Qaeda and extremists, still control much of the country-side. Afghanistan could descend into civil war, or perhaps a failed state, which would have grave consequences for stability in South and Central Asia… America will remain committed to help re-build Afghanistan...Afghanistan is the first test in the war on terrorism, and we cannot fail.”
Does anyone believe that the Iraqis are unaware of this shameful neglect? And wonder if they will be the next Afghanistan? Does anyone doubt that the world’s perception is that the US is walking away from Afghanistan, and that this inaction can only contribute further to the plummeting credibility of the United States?
We can no more walk away from Afghanistan than we can walk away from Iraq. Deficit or not, we need to stay the course in both countries. For the US, that means moving Afghanistan back to the front burner, using all our power and our skills in public diplomacy to mobilize help from other countries, and – if necessary – asking Congress to write another check. Most importantly, President Bush has to get personally involved -- even if an election is just over the horizon, and even if getting the Congress to pony up more money is going to be the hardest sell he’s ever been asked to make.
About the author: William Fisher has spent more than 25 years as an international development professional, working throughout the Middle East as well as in Asia and Latin America for the US Department of State and the US Agency for International Development.
WHAT OTHER WAR?
By William Fisher
Iraq has turned the media’s (and perhaps the US Government’s) attention away from that other war. Yes, the one in Afghanistan. About the only time we hear about it these days is when a US soldier gets killed in efforts to ‘mop up’ the Taliban.
But these two conflicts have many things in common. First, we were told they were both part of the war on terror – and indeed some very evil people got kicked out of power. Second, in both cases, we won quick military victories. Third, we haven’t found the leaders of the bad guys yet. Finally, large parts of both countries are in chaos, demonstrating that the Administration apparently had no real plan to deal with winning the peace.
One major difference is that, in the case of Iraq, the Congress has now authorized a large amount of money for reconstruction, others like the Japanese and the Saudis are contributing (however meager their contributions), and contracts are being let (however suspect some of them may be) to get the reconstruction work started.
The war in Afghanistan was declared by President Bush to have ended in May 2003 – at the same time he hailed the end of major combat in Iraq. That was six months ago, though the Afghan military campaign was over much before that. We backed the presidency of Hamid Karzai, then left him without an army, without any power outside Kabul, and without the funds he needs to start rebuilding his country after decades of war and occupation. In the $20 billion President Bush requested for reconstruction, only $1 billion was allocated to Afghanistan. The ‘international community’ is not being even as generous as the Americans. And President Karzai has been saying since the get-go that he needs $20 billion. The television images of Afghanistan inside and outside Kabul are more a moonscape than a country!
The good news is that Afghan women have been freed from the burka, are able to work and go to school, and a few schools and hospitals have been refurbished, largely by the military. The bad news is that the ‘war lords’ are back in control of most of the country, the Taliban and their Al Queda pals are regrouping, infrastructure is nonexistent, poppies for heroine and cocaine production are once again the country’s leading export, and Afghanistan remains an economic, social and political basket case.
This will not come as news to the White House. Many in Congress have been voicing their concerns over US neglect of Afghanistan for months. For example:
Sen. Joseph R. Biden, the ranking Democrat on the Senate Armed Services Committee, says the Bush administration, in not devoting enough funds to the rebuilding of Afghanistan, has "basically turned it over to the warlords." Mr. Biden believes the Bush administration has "already given up the ghost on Afghanistan" -- in funding and military commitments. He proposes giving the Bush administration $100 million in additional funds to help rebuild postwar Afghanistan.
Sen. Carl Levin, Michigan Democrat, has also questioned the monetary commitment to complete the rebuilding of Afghanistan. He is urging the Administration to display “the kind of commitment to staying the course that is absolutely essential if we're not going to see a repeat of Afghanistan in Afghanistan and in other places."
Nor are these Congressional voices coming only from the Democratic side of the aisle. For example:
Senator Richard Lugar: ”We should see Afghanistan as not just a problem, but rather as an opportunity. Afghanistan was the opening front in the war on terrorism, and visible progress there will resonate for an international audience. Moreover, our experiences in Afghanistan can help us succeed in Iraq…Afghanistan still presents enormous challenges. As in Iraq, security is the chief obstacle to achieving our post conflict goals in Afghanistan…The security situation has been declining over the last few months, forcing the suspension of critical assistance and undermining reconstruction and transition efforts. Establishing security is essential to begin the process of building a viable economy in Afghanistan, encouraging investment and developing a private sector that can generate income and jobs that are not tied to foreign assistance or the illicit drug trade…Afghanistan’s population is far less educated than Iraq’s, and it lacks abundant oil resources that can serve as an engine for reconstruction. Many areas of Afghanistan lack even rudimentary infrastructure, and the infrastructure that does exist is in disrepair…We also must continue to support efforts to improve education and expand the role of women in Afghan society….”
Senator Chuck Hegel: “Afghanistan has not gone as we had hoped. While the Taliban no longer rules, the government of President Hamid Karzai has gained little ground. Warlords, and those who may sympathize with al-Qaeda and extremists, still control much of the country-side. Afghanistan could descend into civil war, or perhaps a failed state, which would have grave consequences for stability in South and Central Asia… America will remain committed to help re-build Afghanistan...Afghanistan is the first test in the war on terrorism, and we cannot fail.”
Does anyone believe that the Iraqis are unaware of this shameful neglect? And wonder if they will be the next Afghanistan? Does anyone doubt that the world’s perception is that the US is walking away from Afghanistan, and that this inaction can only contribute further to the plummeting credibility of the United States?
We can no more walk away from Afghanistan than we can walk away from Iraq. Deficit or not, we need to stay the course in both countries. For the US, that means moving Afghanistan back to the front burner, using all our power and our skills in public diplomacy to mobilize help from other countries, and – if necessary – asking Congress to write another check. Most importantly, President Bush has to get personally involved -- even if an election is just over the horizon, and even if getting the Congress to pony up more money is going to be the hardest sell he’s ever been asked to make.
About the author: William Fisher has spent more than 25 years as an international development professional, working throughout the Middle East as well as in Asia and Latin America for the US Department of State and the US Agency for International Development.
HAIL TO THE CHIEF!
Feedback to: wfisher206@aol.com
Mr. Bush, you’re no Woodrow Wilson!
By William Fisher
I listened to President Bush’s speech to the National Endowment for Democracy last week (Nov. 6). The speech was well delivered. The language was eloquent. The vision was sweeping -- almost Wilsonian. Yet when I put the man and the words together, I somehow felt hollow, disappointed, uninspired. Then the light went on: I found I couldn’t believe that the President actually believed a single word he said. What I heard told me more about White House strategists and speechwriters than it did about the messenger.
I can understand the sense of urgency among White House spinmeisters to try to restore the post 9/11 confidence of the American people in their leader. But the whole performance left me with the sinking feeling that this was merely the latest chapter in the vast White House conspiracy to get the President looking Presidential again. Maybe the President is sincere; I hope so. But the speech didn’t work for me. And the reason was the credibility thing. The American people – and the rest of the world -- have been misled too many times.
We invaded Afghanistan, threw the bad guys out, promised billions to catch Osama and rebuild the country – and then did neither. We repackaged a bunch of mostly old ideas and came up with a ‘roadmap’ for Israeli-Palestinian peace. The President promised to remain personally engaged, and then didn’t. We attacked Iraq – an ‘imminent threat’ to our national security – following one of the truly colossal diplomatic failures in our history. No matter, we were told, we had a ‘coalition of the willing’, including such mighty allies as Portugal and Guinea. We were going to find and destroy Saddam’s weapons of mass destruction, including his imported uranium. We didn’t. Or maybe our mission was to find and capture an unspeakable despot? We haven’t. We were told we were not at war with Islam; then every Muslim not nailed down was rounded up by Mr. Bush’s Department of Justice. We were told that Iraq’s oil would pay for it’s the country’s reconstruction; $20 billion later, we have reason to suspect that isn’t going to happen. We were told our service men and women would be welcomed as heroes, so the post-war plan we had must have been for some other war. Today, our heroes are in a shooting gallery. Or maybe our real reason for going to war was to bring democracy to Iraq, even though nation-building has always been a dirty word in this Administration.
Now, having consistently equated nation-building with something more awful than the plague, the President is proposing to bring democracy not only to Iraq, but to the entire Middle East – the neighborhood of theocratic and authoritarian governments we have cozied up to for half a century and supported with billions of dollars in US aid funds.
The President said: “Sixty years of Western nations excusing and accommodating the lack of freedom in the Middle East did nothing to make us safe -- because in the long run, stability cannot be purchased at the expense of liberty. As long as the Middle East remains a place where freedom does not flourish, it will remain a place of stagnation, resentment, and violence ready for export...Therefore, the United States has adopted a new policy, a forward strategy of freedom in the Middle East. This strategy requires the same persistence and energy and idealism we have shown before. And it will yield the same results. As in Europe, as in Asia, as in every region of the world, the advance of freedom leads to peace... The advance of freedom is the calling of our time; it is the calling of our country. From the Fourteen Points to the Four Freedoms, to the Speech at Westminster, America has put our power at the service of principle…We believe that freedom -- the freedom we prize -- is not for us alone, it is the right and the capacity of all mankind….”
Right, no argument there. But just how is the President going to do all this? Cut off aid to the sinners? Increase aid to foster democracy and civil society? Work with the UN? Make preemptive strikes? Well, Mr. Bush’s speech was a tad short on details. Like none. This speech, White House spinners told reporters, was about the vision, not the details.
So, to try to calibrate the probabilities of this vision ever becoming reality, the only thing we have to go on is Mr. Bush’s past record of keeping his promises and telling us the truth. On that basis, we will be waiting a very long time for Saudi Arabia’s first presidential primary!
When the President finished his speech, I somehow found myself thinking back twenty-five years, to the televised debate between vice presidential candidates Lloyd Bentsen and Dan Quayle. Fast-forward to the present and you can almost hear Sen. Bentsen saying to our current President roughly the same words Sen. Bentsen used regarding John F. Kennedy: “Mr. Bush, I knew Woodrow Wilson, and you’re no Woodrow Wilson.”
* * *
The author is an international economic development professional, having worked in many of the countries of the Middle East for the US Department of State and the US Agency for International Development. He served in the international affairs area in the Kennedy Administration.
Mr. Bush, you’re no Woodrow Wilson!
By William Fisher
I listened to President Bush’s speech to the National Endowment for Democracy last week (Nov. 6). The speech was well delivered. The language was eloquent. The vision was sweeping -- almost Wilsonian. Yet when I put the man and the words together, I somehow felt hollow, disappointed, uninspired. Then the light went on: I found I couldn’t believe that the President actually believed a single word he said. What I heard told me more about White House strategists and speechwriters than it did about the messenger.
I can understand the sense of urgency among White House spinmeisters to try to restore the post 9/11 confidence of the American people in their leader. But the whole performance left me with the sinking feeling that this was merely the latest chapter in the vast White House conspiracy to get the President looking Presidential again. Maybe the President is sincere; I hope so. But the speech didn’t work for me. And the reason was the credibility thing. The American people – and the rest of the world -- have been misled too many times.
We invaded Afghanistan, threw the bad guys out, promised billions to catch Osama and rebuild the country – and then did neither. We repackaged a bunch of mostly old ideas and came up with a ‘roadmap’ for Israeli-Palestinian peace. The President promised to remain personally engaged, and then didn’t. We attacked Iraq – an ‘imminent threat’ to our national security – following one of the truly colossal diplomatic failures in our history. No matter, we were told, we had a ‘coalition of the willing’, including such mighty allies as Portugal and Guinea. We were going to find and destroy Saddam’s weapons of mass destruction, including his imported uranium. We didn’t. Or maybe our mission was to find and capture an unspeakable despot? We haven’t. We were told we were not at war with Islam; then every Muslim not nailed down was rounded up by Mr. Bush’s Department of Justice. We were told that Iraq’s oil would pay for it’s the country’s reconstruction; $20 billion later, we have reason to suspect that isn’t going to happen. We were told our service men and women would be welcomed as heroes, so the post-war plan we had must have been for some other war. Today, our heroes are in a shooting gallery. Or maybe our real reason for going to war was to bring democracy to Iraq, even though nation-building has always been a dirty word in this Administration.
Now, having consistently equated nation-building with something more awful than the plague, the President is proposing to bring democracy not only to Iraq, but to the entire Middle East – the neighborhood of theocratic and authoritarian governments we have cozied up to for half a century and supported with billions of dollars in US aid funds.
The President said: “Sixty years of Western nations excusing and accommodating the lack of freedom in the Middle East did nothing to make us safe -- because in the long run, stability cannot be purchased at the expense of liberty. As long as the Middle East remains a place where freedom does not flourish, it will remain a place of stagnation, resentment, and violence ready for export...Therefore, the United States has adopted a new policy, a forward strategy of freedom in the Middle East. This strategy requires the same persistence and energy and idealism we have shown before. And it will yield the same results. As in Europe, as in Asia, as in every region of the world, the advance of freedom leads to peace... The advance of freedom is the calling of our time; it is the calling of our country. From the Fourteen Points to the Four Freedoms, to the Speech at Westminster, America has put our power at the service of principle…We believe that freedom -- the freedom we prize -- is not for us alone, it is the right and the capacity of all mankind….”
Right, no argument there. But just how is the President going to do all this? Cut off aid to the sinners? Increase aid to foster democracy and civil society? Work with the UN? Make preemptive strikes? Well, Mr. Bush’s speech was a tad short on details. Like none. This speech, White House spinners told reporters, was about the vision, not the details.
So, to try to calibrate the probabilities of this vision ever becoming reality, the only thing we have to go on is Mr. Bush’s past record of keeping his promises and telling us the truth. On that basis, we will be waiting a very long time for Saudi Arabia’s first presidential primary!
When the President finished his speech, I somehow found myself thinking back twenty-five years, to the televised debate between vice presidential candidates Lloyd Bentsen and Dan Quayle. Fast-forward to the present and you can almost hear Sen. Bentsen saying to our current President roughly the same words Sen. Bentsen used regarding John F. Kennedy: “Mr. Bush, I knew Woodrow Wilson, and you’re no Woodrow Wilson.”
* * *
The author is an international economic development professional, having worked in many of the countries of the Middle East for the US Department of State and the US Agency for International Development. He served in the international affairs area in the Kennedy Administration.
Sunday, November 02, 2003
LET US PRAY!
Feedback to: wfisher206@aol.com
LET US PRAY!
By William Fisher
Two things I read last week made a big impression on me. The first was a newspaper account of efforts to transform Saddam’s Hussein’s brutal police department into a positive force for security and civil society. The second was a description, in the US State Department’s Report on Human Rights, of the gross human rights abuses still being perpetrated by the police throughout most of the Middle East.
Why the big impression? These readings didn’t tell me anything I didn’t already know (I used to live in Cairo). But, for some reason, they took me back to another time in my life when I personally witnessed something very similar – and turned out being a victim of it myself. But I didn’t experience this police malfeasance in the Middle East. I experienced it in Volusia County, Florida.
Volusia County is in central Florida. The county seat is a small town named Deland, between Orlando and Daytona Beach. There, in the early 1950s, I worked as the county seat Bureau Chief for the Daytona Beach News-Journal. The local cops, the county sheriff’s office, and the county courts, were part of my beat. In fact, that was one of the attractions of the job; my college sociology textbook identified Volusia County as the most corrupt county in the United States. I wanted to see for myself. Here’s some of what I saw:
In those days, law enforcement officers worked on the ‘fee system’. That meant that their incomes were dependent on the number of citizens they arrested, plus a proportion of the bail bonds the ‘suspects’ posted. One of the results is this quaint entrepreneurial arrangement was that all the cops’ paddy-wagons were mobilized every day at around sundown for sorties into what was then referred to as ‘colored town’, i.e. the part of town on the wrong side of the tracks where the ‘black folk’ lived in their shanty shacks.
Once inside the war zone, the cops swooped down and arrested everything that wasn’t nailed down. Charges ranged from drunk and disorderly to disturbing the peace to resisting arrest to driving with a broken taillight to blocking police access to a crime scene. Each night, dozens of people were arrested, put in
paddy-wagons, and dispatched to the local jail, whereupon the ‘homeland security’ fleet turned around and went back for more. Everyone, that is, save those few lucky enough to have $25 in their pockets to pay off the arresting officer. Moreover, in the best spirit of Adam Smith, there was a healthy competition between the local police and the sheriff’s office to win the headcount.
Saturday night was the biggest night of the week; the headcount climbed into the hundreds. As there was no night court, the arrested who could not come up with the money to post bond spent the night in jail. In the morning, they appeared in court, were given a perfunctory chance to enter a plea, and then sentenced to various jail terms, usually up to 30 days. The length of the sentence was based solely on what the arresting officer had to say. Because, in these dark days of Jim Crow justice, defendants were terrified to say anything. ‘Uppity’ blacks got the stiffest sentences.
With the courageous encouragement of my editors and my newspaper’s reform-minded owners, I set out to write a series of articles about the corrupt fee system and the corrupt cops who profited from it. The series ran on page one for five days above the fold. Names were named. The named denied it all. The News-Journal supported my findings on the editorial page. Privately, some of the cops blamed it on the ‘Jewish Conspiracy’ – the owners of the News-Journal were Jewish. But most of the cops just went to ground, and in two weeks, it was back to business as usual.
Nor were my reports on corruption limited to law enforcement. The net was spread to include the County Court, where more serious felony cases were tried. Back in those days, most of the entire State of Florida was controlled by the Florida East Coast Railway and the Coca-Cola Company. Their money elected judges, un-elected judges, and bought and sold judges as if they were items on Ebay. On their payrolls was a courtly, white-haired southern gentleman who was a former Secretary of the Navy, and who was famous for being the ultimate ‘fixer’. And not only in Volusia County, but among state legislators in Tallahassee as well.
But the greatest misfortune was being black and being tried in County Court. It will come as no surprise to anyone who has seen ‘To Kill a Mockingbird’ that ‘nigra’ defendants were routinely referred to as ‘boy’ (and worse). Many of these defendants were illiterate and therefore unable to read Court documents. Few could afford a lawyer, even if they could have found someone willing to represent them. So the court appointed the lawyers. I named at least half a dozen who arrived at Court drunk and/or slept through the entire trial.
Following my articles, I was denied access to public records and to spokesmen for law enforcement or the judicial system. Doing my job became difficult, and I assigned our local society reporter to take on the police beat. But she got about the same treatment.
For me, the end came in the form of a lanky, sun-drenched, six-foot-five Chief Constable, who arrived at my office one afternoon, with a gleaming silver plated Colt 45 on his hip and a newspaper tucked under his arm. The newspaper was the Baltimore Afro-American, one of the best-known black-owned newspapers in America at the time. I had been writing freelance pieces for the Afro for a few months, and had filed a photo essay on Deland’s ‘colored town’ (I’m told I was the first white correspondent in the paper’s history).
My huge Deputy visitor spread open the paper and there was my story and photos. “You’ve been busy, haven’t you?”, the Deputy asked, smiling. He continued: “you know, you’re giving us a bad reputation” and added his thought that I might be happier somewhere else. Unashamedly terrified, I told him I liked Deland and was just doing my job, or some such rambling. At which point the Deputy said something like “you’re a good kid and I’d hate to see anything happen to you, but folks around here are pretty mad at you…If I were you, I’d plan to be out of this town by the end of the week.”
I was, but I can’t say I’m proud of it. In my lifetime catalogue of ‘things I’d do differently’, being chased out of redneck Florida is high on my list.
Reform came slowly but steadily to Volusia County. The fee system is long gone. The Civil Rights Movement and the legislation it triggered eventually put an end to the Saturday Night Massacres. African-Americans are no longer called ‘boy’ in the Courtroom. They vote. Disney World brought a new infusion of diversity to the whole area from Orlando to Deland, and opened this sleepy
cow-town to people from everywhere, with money to spend. Today law enforcement and the judicial system are not flawless, but are as efficient and honest as those in most places across the American South. The Deland Police Department and the Volusia County Sheriff’s offices, once the private preserves of white Protestants, now include African-American officers, as well as Latinos and women.
Which brings me back to the Iraqi Police and the State Department’s Human Rights Report. Change for the better is possible, if it is catalyzed by multiple social, political and economic forces, all moving in the same direction at the same time. Let us pray.
* *
About the author: Bill Fisher is a retired international development specialist who has managed economic development programs in more than twenty countries for the US State Department and the US Agency for International Development. He began his working life in journalism as a reporter for the Daytona Beach News-Journal (Fla.), a correspondent for the Associated Press, and a contributor to a number of newspapers including the Baltimore (Md.) Afro-American.
LET US PRAY!
By William Fisher
Two things I read last week made a big impression on me. The first was a newspaper account of efforts to transform Saddam’s Hussein’s brutal police department into a positive force for security and civil society. The second was a description, in the US State Department’s Report on Human Rights, of the gross human rights abuses still being perpetrated by the police throughout most of the Middle East.
Why the big impression? These readings didn’t tell me anything I didn’t already know (I used to live in Cairo). But, for some reason, they took me back to another time in my life when I personally witnessed something very similar – and turned out being a victim of it myself. But I didn’t experience this police malfeasance in the Middle East. I experienced it in Volusia County, Florida.
Volusia County is in central Florida. The county seat is a small town named Deland, between Orlando and Daytona Beach. There, in the early 1950s, I worked as the county seat Bureau Chief for the Daytona Beach News-Journal. The local cops, the county sheriff’s office, and the county courts, were part of my beat. In fact, that was one of the attractions of the job; my college sociology textbook identified Volusia County as the most corrupt county in the United States. I wanted to see for myself. Here’s some of what I saw:
In those days, law enforcement officers worked on the ‘fee system’. That meant that their incomes were dependent on the number of citizens they arrested, plus a proportion of the bail bonds the ‘suspects’ posted. One of the results is this quaint entrepreneurial arrangement was that all the cops’ paddy-wagons were mobilized every day at around sundown for sorties into what was then referred to as ‘colored town’, i.e. the part of town on the wrong side of the tracks where the ‘black folk’ lived in their shanty shacks.
Once inside the war zone, the cops swooped down and arrested everything that wasn’t nailed down. Charges ranged from drunk and disorderly to disturbing the peace to resisting arrest to driving with a broken taillight to blocking police access to a crime scene. Each night, dozens of people were arrested, put in
paddy-wagons, and dispatched to the local jail, whereupon the ‘homeland security’ fleet turned around and went back for more. Everyone, that is, save those few lucky enough to have $25 in their pockets to pay off the arresting officer. Moreover, in the best spirit of Adam Smith, there was a healthy competition between the local police and the sheriff’s office to win the headcount.
Saturday night was the biggest night of the week; the headcount climbed into the hundreds. As there was no night court, the arrested who could not come up with the money to post bond spent the night in jail. In the morning, they appeared in court, were given a perfunctory chance to enter a plea, and then sentenced to various jail terms, usually up to 30 days. The length of the sentence was based solely on what the arresting officer had to say. Because, in these dark days of Jim Crow justice, defendants were terrified to say anything. ‘Uppity’ blacks got the stiffest sentences.
With the courageous encouragement of my editors and my newspaper’s reform-minded owners, I set out to write a series of articles about the corrupt fee system and the corrupt cops who profited from it. The series ran on page one for five days above the fold. Names were named. The named denied it all. The News-Journal supported my findings on the editorial page. Privately, some of the cops blamed it on the ‘Jewish Conspiracy’ – the owners of the News-Journal were Jewish. But most of the cops just went to ground, and in two weeks, it was back to business as usual.
Nor were my reports on corruption limited to law enforcement. The net was spread to include the County Court, where more serious felony cases were tried. Back in those days, most of the entire State of Florida was controlled by the Florida East Coast Railway and the Coca-Cola Company. Their money elected judges, un-elected judges, and bought and sold judges as if they were items on Ebay. On their payrolls was a courtly, white-haired southern gentleman who was a former Secretary of the Navy, and who was famous for being the ultimate ‘fixer’. And not only in Volusia County, but among state legislators in Tallahassee as well.
But the greatest misfortune was being black and being tried in County Court. It will come as no surprise to anyone who has seen ‘To Kill a Mockingbird’ that ‘nigra’ defendants were routinely referred to as ‘boy’ (and worse). Many of these defendants were illiterate and therefore unable to read Court documents. Few could afford a lawyer, even if they could have found someone willing to represent them. So the court appointed the lawyers. I named at least half a dozen who arrived at Court drunk and/or slept through the entire trial.
Following my articles, I was denied access to public records and to spokesmen for law enforcement or the judicial system. Doing my job became difficult, and I assigned our local society reporter to take on the police beat. But she got about the same treatment.
For me, the end came in the form of a lanky, sun-drenched, six-foot-five Chief Constable, who arrived at my office one afternoon, with a gleaming silver plated Colt 45 on his hip and a newspaper tucked under his arm. The newspaper was the Baltimore Afro-American, one of the best-known black-owned newspapers in America at the time. I had been writing freelance pieces for the Afro for a few months, and had filed a photo essay on Deland’s ‘colored town’ (I’m told I was the first white correspondent in the paper’s history).
My huge Deputy visitor spread open the paper and there was my story and photos. “You’ve been busy, haven’t you?”, the Deputy asked, smiling. He continued: “you know, you’re giving us a bad reputation” and added his thought that I might be happier somewhere else. Unashamedly terrified, I told him I liked Deland and was just doing my job, or some such rambling. At which point the Deputy said something like “you’re a good kid and I’d hate to see anything happen to you, but folks around here are pretty mad at you…If I were you, I’d plan to be out of this town by the end of the week.”
I was, but I can’t say I’m proud of it. In my lifetime catalogue of ‘things I’d do differently’, being chased out of redneck Florida is high on my list.
Reform came slowly but steadily to Volusia County. The fee system is long gone. The Civil Rights Movement and the legislation it triggered eventually put an end to the Saturday Night Massacres. African-Americans are no longer called ‘boy’ in the Courtroom. They vote. Disney World brought a new infusion of diversity to the whole area from Orlando to Deland, and opened this sleepy
cow-town to people from everywhere, with money to spend. Today law enforcement and the judicial system are not flawless, but are as efficient and honest as those in most places across the American South. The Deland Police Department and the Volusia County Sheriff’s offices, once the private preserves of white Protestants, now include African-American officers, as well as Latinos and women.
Which brings me back to the Iraqi Police and the State Department’s Human Rights Report. Change for the better is possible, if it is catalyzed by multiple social, political and economic forces, all moving in the same direction at the same time. Let us pray.
* *
About the author: Bill Fisher is a retired international development specialist who has managed economic development programs in more than twenty countries for the US State Department and the US Agency for International Development. He began his working life in journalism as a reporter for the Daytona Beach News-Journal (Fla.), a correspondent for the Associated Press, and a contributor to a number of newspapers including the Baltimore (Md.) Afro-American.
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