The FCRA: Modi’s Secret Weapon

On April 30, 2013, the Indian Social Action Forum (INSAF)—an umbrella organization of over 700 civil society organizations—received a non-descript notice from the Ministry of Home Affairs that revoked the INSAF’s registration and froze its assets in an effort to allegedly protect “the public interest.” This was not the first time that the INSAF had encountered resistance to its activities. Both the INSAF and its member organizations had often sparred with the Indian government over issues of environmental policy including the construction of nuclear power plants and the legalization of GMOs. Thanks to an ambiguous new section of the legal code, however, the Indian government has the authority to freeze assets and rescind the registration of organizations that receive unapproved foreign funds and/or pose a threat to “the public interest.” The true motivation behind the deregistration of the INSAF was immediately obvious to the organization’s leadership: they were being targeted for their activism.

Prime Minister Narendra Modi addresses the 2014 UN General Assembly  (UN Photo/Cia Pak)
Prime Minister Narendra Modi addressing the 2014 UN General Assembly (UN Photo/Cia Pak)

The notice delivered to the INSAF in April was issued in accordance with Sections 13(1) and 14(1-2) of the Foreign Contribution Regulation Act of 2010. Based on an older 1973 law designed to shore up foreign currency reserves, the ambiguity of the amended FCRA allows for nefarious government overreach. Section 13(1) states: “Where the Central Government, for reasons to be recorded in writing, is satisfied that pending consideration of the question of canceling the certificate on any of the grounds mentioned in sub-section (I) of section 14…[it may] suspend the certificate for such period not exceeding one hundred and eight days.” Section 14 is more severe: “The Central Government may, if it is satisfied after making such inquiry as it may deem fit cancel the certificate if, in the opinion of the Central Government, it is necessary in the public interest to cancel the certificate…”

Objecting particularly to the ambiguity of Section 14, and drawing significant support from the American Bar Association’s Center for Human Rights as well as the international CSO community, the INSAF filed a strongly worded petition with the High Court of Delhi. In September, five months after the Ministry’s notice had been delivered to the INSAF, the High Court finally dismissed the deregistration and thawed the organization’s accounts. The FCRA, however, was upheld.

The attack on the INSAF was just the beginning. In the last two years, Modi’s government has used the FCRA to target thousands of CSOs that have criticized government policies. On June 9, 2015, 971 organizations, including several prominent public universities and local chapters of international NGOs, were stripped of their registration for accepting unapproved funds. Greenpeace activist Priya Pillai, herself a recent victim of FCRA regulations, noted that “The issue is not related to the source of our funding or FCRA. It is a larger political issue under which NGOs are being targeted and persecuted for working, as well as, raising the voice of the poor, weak, and the deprived.” Ms. Pillai is partially correct. While the government’s use of the FCRA is, indeed, a reflection of larger political issues, repeal of the amended FCRA would be an appropriate first step on the road to philanthropic freedom in India.

In the 2015 Index of Philanthropic Freedom, India maintains a mid-range composite score of 3.2, but in the area of cross border flows it scores just 2.1 out of a possible 5. In his justification of this low score, Noshir Dadrawala of the Centre for Advancement of Philanthropy emphasized the onerous requirements of the FCRA: “It is important to note that no CSO operating in India whether registered or not can receive foreign contributions without first obtaining prior permission from the Home Ministry.” In order for civil society to thrive and international philanthropic funds to flow into India, the government must amend the FCRA and end its attack on the third sector.


Money For Nothing: Overstating Official Development Assistance

Aid projects can help young children in Africa obtain access to fresh drinking water.
Aid projects can help young children in Africa obtain access to fresh drinking water.

Recently a report by The Guardian exposed the troubling reality that some nations overvalue their ODA. By exploiting the antiquated formula for calculating ODA, which calls for interest rates on foreign aid loans to be less than 10% (grants are held to a 25% rate), countries like Germany, France and Japan, are taking credit for more aid than they actually give. Just how much more? David Roodman, the author of the Guardian article, estimated that billions of dollars in ODA is tacked on each year by manipulating one simple calculation. Last April, former chairman of the DAC Richard Manning warned in a letter to the Financial Times that fewer and fewer loans given by OECD countries are “concessional in character.”

The 2008 Financial Crisis upset the ODA equilibrium.
The 2008 Financial Crisis upset the ODA equilibrium.

After the 2008 Financial Crisis, interest rates fell but the 10% discount benchmark rate for ODA loans stayed the same, causing the imbalance that upset the equilibrium of ODA calculations. Roodman writes, “Today, rich nations can borrow at 2% or 3%, lend at 4% or 5%, and make a profit while calling the loan aid.” Further compounding the problem, the profits made on these loans go back into the financial system of the lending country.  These interest repayments, as they are called, are not subtracted from net ODA like capital repayments, skewing the final figures. In the case of Japan, who in 2011 took in $2.6 billion in interest repayments, a nation can actually receive more money from developing countries than it gives to them in ODA.

But which nations are receiving these loans? Manning explains in his letter that “France, Germany and the European Investment Bank” give loans to the middle-incomes countries of Latin America and Asia. These loans count as concessional ODA, but in reality they do not reflect the “real cost of capital” and rake in huge profits for the lending countries. As more countries have discovered this type of loan practice, Manning writes, we have seen a recent surge in ODA to middle-income countries and a slight drop-off in ODA to sub-Saharan Africa. In their defense, some lending countries argue that the rates also must reflect default risk. And to be fair, default risk is always a factor when lending to countries in dire straits.

Thankfully, Roodman reports, nearly all of the DAC countries employ a more effective calculation method in their handling of export credit arrangements. This method uses calculated differentiated discount rates based on currency values and the rate at which each country pays to borrow money. Unlike the 10% benchmark, which has held steady since 1972, differentiated discount rates are updated yearly to reflect current market forces.  In applied, this could be an effected method of calculating rates for ODA as well. But no matter the ultimate solution, the fact remains that our fifty-year-old method of ODA calculation is in desperate need of an update.

A Not So Indecent Proposal

Last week the White House Administration released the budget proposal for Fiscal Year 2015 (FY15). The proposal included a $700 million (1.4%) overall decrease in foreign assistance compared to the FY14 levels. Some assert this is the manifestation of the American public’s disapproval and disregard for foreign assistance and international development. In reality, however, the new budget demonstrates a continued commitment to foreign assistance and the Obama Administration’s reprioritizing of development goals.

imgresThe overall decrease in aid is largely due to America’s reduced presence in Afghanistan and Pakistan, whose operations formerly made up large parts of the US foreign aid budget. The new budget would not entirely remove aid to these countries, but would remove several on the ground operations focused on post-conflict reconstruction. The country would not necessarily lose its direct monetary assistance from the US, but would lose its technical assistance in infrastructure rebuilding. The decrease in US technical assistance equates to a high monetary loss for each country and makes it appear as though the US is scaling back its overall foreign assistance program. Rather, the US is maintaining its overall monetary assistance but decreasing its capital assistance in certain countries.

The dire picture many paint of the FY15 budget ignores the many strategic aid increases the Obama Administration proposes. The FY15 budget proposal would increase funding for the US Trade and Development Agency (USTDA) by 22%. This agency’s purpose in foreign assistance is to connect American companies with infrastructure investment opportunities in developing nations. By increasing funding for USTDA, the Obama Administration seems to be encouraging the development of public-private partnerships between US private companies and developing countries. This demonstrates not only a shift in America’s approach to foreign aid but also demonstrates the government’s recognition of the large role private corporations could play in the future of development.

imagesThe proposal would also increase funding for the US Millennium Challenge Corporation (MCC), which focuses on aid for countries prioritized by the UN’s Millennium Development Goals (MDG). While overall funding may fall, the increased funding for the MCC demonstrates a stronger commitment to UN development initiatives. The proposal suggests that the US is beginning to prioritize not only its own development interests but global development issues as well.

What does Obama’s budget proposal indicate about his views for the future of US foreign aid? The budget demonstrates a shift in foreign aid priorities. Previously, US foreign aid focused heavily on infrastructure improvements and post-conflict rebuilding. America was especially involved in rebuilding war torn countries in the Middle East. Just look at Afghanistan or Pakistan or Syria as examples. But with a decrease in technical aid towards those countries and an increase in funding to the USTDA, Obama seems to be outsourcing infrastructure reconstruction to private companies. The administration would instead have the US government prioritize economic development. This becomes especially apparent when also considering the increased funding for the MCC. The MCC and the UN’s MDGs focus more on economic and community development in addition to overall capacity building.

This is an interesting approach to foreign aid because Obama appears to be taking advantage of the growing role of private companies in development. Development is no longer just for DAC donors or federal governments. Public-private partnerships have the potential to transform and improve foreign assistance. Using Obama’s strategy, if the private sector focuses on infrastructure development that leaves the US government free to prioritize economic development.

Picking up the Pieces

Typhoon Haiyan On November 8, 2013 the whole world watched as the most powerful storm in recorded history smashed into the Philippines.  Typhoon Haiyan, known locally as Yolanda, struck the central region of Philippines with sustained winds of 195 mph and wind gusts of up to 235 mph.  Since its landfall, Haiyan is believed to have affected around 12 to 16 million people – with millions displaced, more than 6,000 dead, and nearly 1,800 still missing.

Countries and organizations around the world quickly scrambled to deliver aid to the devastated area.  The relief effort has come in various forms; military aid, hospital ships, and millions of dollars from both organizations and countries.  While countries have been quick to respond to the catastrophe, the Philippines is not in the clear yet.  Three months later bodies are still being found, people are still missing, and aid is difficult to deliver to the islands that are only reachable via boat or helicopter.

Lack of electricity remains a huge problem in the Philippines.  Not only did the storm knock down power lines, but looters looking to make money have broken into transformers to take out the copper cores and sell them on the black market.  Additionally, looters have also cut open the downed power lines and have taken the copper inside.  With many people still missing, the lack of electricity poses a serious communication issue.  People are having a difficult time contacting their loved ones who live in different parts of the country, or even around the world, to let them know that they’re alive.

Corruption continues to be a constant fear in the rebuilding efforts.  There have been reports of local officials selling aid supplies for profit.  This type of post-disaster corruption is not new to the Philippines; $20 million in government funds meant for rebuilding towns in northern Luzon Island after a 2009 storm were allegedly stolen by local officials using fake non-government agencies.  Haiyan has revealed to the world the extent of Filipino corruption; money to maintain and build roads were diverted, hospitals have not received resources they needed, and many buildings have not been built to code – which is evident by the fact that cities like Tacloban, the city hit hardest, are flattened.

US Marines were among the many that aided in the relief efforts.
US Marines were among the many that aided in the relief efforts.

Filipino political officials are well aware that the Philippines is known for corruption, and many citizens have been demanding improvement for years.  President of the Philippines, Benigno Aquino III, has made it his mission to eliminate corruption, and has begun to deliver by establishing a new website called the Foreign Aid Transparency Hub.  FAiTH, as the website is called, is open to the public and allows people to track funds given to the Philippines by foreign donors.  On the website people can see how much a foreign country has donated and what kind of assistance was provided.  This website has helped the Philippine government and President Aquino gain some credibility in the battle against corruption, but many Filipinos remain skeptical.

In addition to foreign assistance, Filipinos are helping each other out.  Organizations like the Philippine Disaster Recovery Foundation (PDRF) and Philippine Business for Social Progress (PBSP) aim to help out communities ravaged by the typhoon.  PDRF has been able to deliver relief supplies such as food, water, clothes, satellite phones, mobile ATMs, solar-powered lamps, and tents to Haiyan survivors.  PBSP has been able to rally Philippine businesses to donate hygiene kits, blankets, clothes, food, and other forms of relief aid to those affected by the storm.

Even after the typhoon, Filipino resilience is strong.  Shops and markets in areas destroyed by Haiyan have begun to reopen.  Aid organizations, knowing that they need to make money, pay displaced Filipinos to clear debris and make repairs on buildings.  Tacloban even celebrated Christmas by illuminating a church and erecting a Christmas tree in front of city hall.  While it is apparent that Filipinos want to return to normalcy, it is clear that relief efforts will continue in the Philippines for the foreseeable future.  For now, many Filipinos are just happy to be alive.

Mind the Gap: The Girl Effect and ODA

Debate has begun on gender considerations and ODA
Debate has begun on gender considerations and ODA

This week, the House of Commons in the UK Parliament passed a law addressing gender biases in the UK’s international development aid. The law calls for a closer examination of British ODA to see the impact it has on gender development. Essentially, it asks whether British aid promotes equal assistance and opportunities for men and women. While the bill is still under consideration in the House of Lords, supporters expect it to quickly pass thanks to its cross-party support.

Britain is not the first DAC country to incorporate gender into its programming. USAID passed the Gender Equality and Female Empowerment Act in 2012 which incorporated gender considerations into all of the organization’s programming. The country’s differ, however, in how they approach gender inequality. The USAID approach incorporates gender into their own development programs but does not address gender inequality in aid recipients or partner organizations. Britain, on the other hand, focuses on gender discrimination primarily in partner organizations and aid recipients, by limiting their ODA based on recipient treatment of gender. Both approaches have their strengths and weaknesses.

The UK makes new strides in closing the gender gap
The UK makes new strides in closing the gender gap

The Girl Effect, a campaign started by the Nike Foundation in 2008, supports the development of females as essential to global development. The campaign shows that gender equality largely affects economic development. According to Girl Effect, increasing female employment could improve GDP by at least 1.2% every year. Both the US and British governments’ take on the Girl Effect could be a huge step forward in achieving several Millennium Development Goals. If every DAC and developing nation prioritized gender the way the US or Britain does then there may be improved economic development across the globe.

Additionally, both laws protect gender considerations in development aid from political influence. No matter which party controls the government, they have a legal obligation to consider gender in all development decisions concerning programming for the US and funding for Britain. This ensures that gender equality is a long-term development goal and not just initiative of a single political party. The law could transform the way all DAC countries approach gender and development. It is no longer just an issue for one party to campaign on but a development issue with cross-party support. 

UK's Department for International Development could revolutionize foreign aid
UK’s Department for International Development could revolutionize foreign aid

In an age where ODA is already on the decline, Britain’s approach could further decrease ODA. If the government finds that part of its assistance disproportionately favors the development of one gender, this law gives the British government a reason to withdraw their foreign aid from that country or program and does not stipulate that the funds must be reallocated to a more gender-friendly program. This could result in an overall decline in British foreign aid, which could harm the development of aid beneficiaries who are not at fault for the gendered nature of development aid and programs. Which begs the question, is gendered aid better than no aid at all? There is no evidence that British aid will decline, other than the stringent gender requirements creating the possibility. But Britain has previously threatened to decrease aid for homophobic nations.

With USAID’s approach, it is possible that the efforts to incorporate gender are simply posturing. The policy claims to hold programs accountable for their treatment of gender but there are no consequences when programs violate the policy. Program coordinators have no incentive to change their programs, especially if it interferes or delays the achievement of overall goals. USAID has yet to publish any statistics on the success of their policy in creating gender equality since its implementation. While the program could be successful, it could also just be more red tape for employees to work through in an organization constantly facing bureaucratic challenges.

It will be interesting to track the efficacy of Britain and the US’s attempts at eliminating gender equality. Will one program be more effective than the other? Examining the progress of each over time could provide indicators for other countries wanting to incorporate gender into development work.

Cholera in Haiti: 3 Years Later, Solutions Still Needed

October 2013 marked the 3rd anniversary of the widely-documented 2010 cholera outbreak in Haiti, a small developing Caribbean country which shares the island of Hispaniola with the Dominican Republic.   Haiti first reported cases of cholera in October 2010; within one month cholera had spread to all parts of Haiti and the Dominican Republic.  “Between October 2010 and August 2013, more than 670,000 people in Haiti were treated for cholera, with around 8,200 deaths attributed to the outbreak.”

UNICEF and NGOs Provide Cholera Assistance to Haiti Area Cut off by Flooding

Cholera is an intestinal infection, caused by ingestion – usually in contaminated food or water – of the bacterium Vibrio cholerae.  Cholera causes diarrhea and vomiting, symptoms that can lead to dehydration and death within hours.   Every year, 3-5 million people develop symptoms and 100,000-200,000 people die due to cholera worldwide.  Many developed countries, like the United States and Canada, have largely eliminated domestic cholera.  However, global cholera incidence has increased since 2005; in 2011, more than 60% of reported cases occurred in the Americas- mostly in Haiti.

As with many other diseases, cholera usually affects vulnerable populations.  Those with low immunity are most likely to develop symptoms if exposed, and cholera can spread easily in areas with poor infrastructure and sanitation facilities.  While cholera has been largely eradicated in most of the developed world, “cholera remains a global threat to public health and a key indicator of lack of social development. Recently, the re-emergence of cholera has been noted in parallel with the ever-increasing size of vulnerable populations living in unsanitary conditions.”

While many other countries in the Americas dealt with cholera epidemics in recent decades, Haiti had not encountered cholera for 100 years when the 2010 outbreak began.  This meant that there was no natural immunity or protection within the Haitian population against this bacterium, which spread quickly.  The cholera epidemic also began a mere 9 months after a magnitude 7.0 earthquake hit Haiti, which had destroyed infrastructure and displaced 1.5 million people.  80% of cases can usually be successfully treated with oral rehydration salts, but cholera in Haiti has had a high fatality rate- partially because of limited access to health services.

Three years after the epidemic began, the emergency response is slowly winding down.  However, the underlying problems that allowed cholera to spread so quickly – most notably lack of access to clean water, sanitation facilities, and health services – remain unsolved.  Haiti has the lowest coverage of improved water and sanitation services in the Western Hemisphere.  According to the World Health Organization, in 2010 only 64% of Haitians had access to clean drinking water and only 26% had access to adequate sanitation facilities– and the number of people in Haiti with access to adequate sanitation has since decreased to 17%.  But the problems extend beyond merely providing access; one recent survey showed that 50% of improved water sources in rural Haitian households tested positive for e. coli.  To meet the Millenium Development Goal of halving the proportion of the world’s population without access to improved water and sanitation facilities by 2015, Haiti would need to achieve 74% and 63% coverage for improved water and sanitation facilities, respectively.  Unless the situation quickly improves, these goals likely will not be met.

Children in Haiti

These unsolved problems in Haiti could represent an international health threat as well.  In the years since the beginning of the epidemic in Haiti, cholera has spread to Cuba, most likely through international travel.  Health officials in Mexico detected cases of cholera in early September 2013; since then, there have been 171 reported cases in Mexico. 75% of individuals infected with the bacteria do not show symptoms- but can still infect others around them.  If cholera remains present in Haiti at current levels, many other countries are then at risk of ‘imported’ cases.

In February 2013, the Haitian government began a National Plan to eliminate endemic cholera in 10 years through improvements in water and sanitation, health care services, epidemiology and surveillance, and health and hygiene promotion.  It is estimated that the National Plan will need $2.2 billion to be successful; however, funds and resources are scarce.  A recent publication by the Center for Strategic and International Studies, Water and Sanitation in the Time of Cholera: Sustaining Progress on Water, Sanitation, and Health in Haiti, argues that the international community – specifically the United States – must step in and contribute to support these anti-cholera efforts.   Improvements in water and sanitation coverage and health care in Haiti could have far reaching effects, such as decreasing the disease burden from other diarrheal and water-born illnesses.  The report argues: “failing to adequately support Haiti’s water and sanitation activities threatens the sustainability of other U.S. development investments in the country, including improved population health, economic development, the empowerment of women, and progress toward democratic governance and political participation.”

Cholera is preventable with adequate water, sanitation, and healthcare services and treatable with oral rehydration salts; the most effective anti-cholera campaign in Haiti will combine all these strategies.  Three years after the epidemic began, international coverage, attention, and action are beginning to wind down.  However, these challenges persist and need permanent solutions to prevent future cases, future unnecessary deaths, and possible future epidemics in other countries.  Eliminating cholera in Haiti will require a sustainable and coordinated long-term strategy – and will require participation from a variety of actors, including domestic governments and communities, non-profits, and the international community.

Local Procurement for Global Success

Large companies obsess over their supply chains. Every item or component must be sourced from a producer, transported quickly and cheaply, and delivered on time. Maximizing a supply chain’s efficiency can lead to massive savings for a company.

In past years, large nongovernmental organizations and aid agencies have been taking a line from international corporations and improving their supply chains through local and regional procurement (LRP). Instead of purchasing their suppliers and goods in developed countries and shipping them where they are needed, organizations have started to carefully source their purchases from the country in which they’re operating or from neighboring countries.

This has several advantages. First, it cuts down on costs by minimizing transportation; USAID estimates that purchasing food through LRP would cost about 30% less per metric ton than purchasing it in the United States and shipping it abroad. Second, it sharply reduces the time it takes to have a purchase delivered where it is needed. Third, the economy of a region benefits from having a large organization purchasing large quantities of goods. With that impetus, farmers and producers have an incentive to increase the quality of their goods and bring them to market.

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