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POWER, AID AND IMPUNITY: How the aid industry sexually exploited the world’s poor

When reports emerged that senior aid officials in OXFAM, the world’s biggest humanitarian charity, had routinely sexually exploited vulnerable young women in Haiti, it touched off a scandal that has left the Western humanitarian industry reeling. It was merely the tip of the iceberg, as a recent UK House of Commons report attests. Impunity is rife within the UN system and the NGOs associated with it. How to rein it in? By RASNA WARAH  

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POWER, AID AND IMPUNITY: How the aid industry sexually exploited the world’s poor

For decades, sun-drenched Haiti, with its beautiful beaches and Third World-type poverty, has attracted a vast array of aid and humanitarian workers who have set up camp in this Caribbean nation ostensibly to lift its people out of their miserable conditions. Because of the huge number of local and international NGOs in the country, Haiti is often described as “The Republic of NGOs”.

Despite the large presence of NGOs and aid agencies, however, Haiti remains one of the poorest countries in the world, and the most impoverished nation in the Western hemisphere. Both natural disasters and political unrest, combined with a culture of aid dependency, have contributed to this state of affairs. A Western journalist writing about Haiti has described the country as “a poster child for the inadequacies of aid”.

The presence of large numbers of mostly young, naïve and sexually active foreign and local aid workers has also created an environment where vulnerable women and children are being sexually exploited or abused by the very people who are supposed to be helping or protecting them, including United Nations peacekeepers. According to an internal United Nations report obtained by the Associated Press in 2017, at least 134 Sri Lankan UN peacekeepers exploited nine Haitian children in a sex ring from 2004 to 2007. One of the victims said that the soldiers would pass her number along to incoming contingents, who would then call her for sex. One boy claimed that he had had sex with more than 20 Sri Lankan soldiers. Another teenage boy claimed that he had been gang-raped by Uruguayan soldiers who even had the audacity to film the attack on a cellphone. Although 114 of these peacekeepers were sent home after the report came out, none of them was prosecuted or court martialed.

Despite the large presence of NGOs and aid agencies, however, Haiti remains one of the poorest countries in the world, and the most impoverished nation in the Western hemisphere. Natural disasters and political unrest, combined with a culture of aid dependency, have contributed to this state of affairs. A Western journalist writing about Haiti has described the country as “a poster child for the inadequacies of aid”.

These incidents are not confined to Haiti. A separate investigation published by the Associated Press last year revealed that nearly 2,000 allegations of sexual abuse and exploitation by UN peacekeepers have been made in other troubled parts of the world. However, this number could be a gross underestimation as the majority of victims of sexual exploitation or abuse do not report their cases.

“Sexual exploitation” is defined by the UN as “an actual or attempted abuse of a position of vulnerability, differential power, or trust, for sexual purposes, including, but not limited to, profiting monetarily, socially or politically from the sexual exploitation of another”. “Sexual abuse” is defined as “the actual or threatened physical intrusion of a sexual nature, whether by force or under unequal or coercive conditions”.

Stories of aid workers, UN peacekeepers and UN employees using their privileged positions to sexually exploit or abuse women and children in poor countries have been in the public domain for a long time but it is only now that the international development community has taken notice and decided to do something about it.

It all started in February this year, when the Times newspaper revealed that staff at Oxfam GB, one of Britain’s most respected charities, had paid local women for sex while carrying out humanitarian work in Haiti in the aftermath of the 2010 earthquake that devastated the country and which led to widespread internal displacement of the quake’s victims. This revelation, at a time when the #MeToo movement was gaining momentum, resulted in several similar exposés, the latest being of a senior UN gender advisor – an Indian male called Ravi Karkara – who is currently being investigated for sexually harassing young men in his office.

Stories of aid workers, UN peacekeepers and UN employees using their privileged positions to sexually exploit or abuse women and children in poor countries have been in the public domain for a long time but it is only now that the international development community has taken notice and decided to do something about it.

The Oxfam scandal also set in motion a series of events, including withdrawal of funding to Oxfam by its leading donors, including the UK’s Department of International Development (DfID), and calls for thorough investigations into allegations of sexual exploitation and abuse by those working in the aid sector globally.

This particular scandal prompted the UK’s House of Commons to carry out further investigations, not just on the conduct of Oxfam staff, but on the conduct of staff working for other charities and aid organisations as well. The House of Commons’ final report, released on 31 July this year, sent shockwaves across the aid sector, and has led to demands for stricter measures to be taken against those who commit sexual crimes against vulnerable populations. The report states that “sexual violence, exploitation and abuse against women and girls in endemic in many developing countries, especially where there is conflict and forced displacement.”

The UK legislators who drafted the report and carried out the investigations also found that the aid industry’s response to sexual misconduct had been “reactive, patchy and sluggish” and that very few organisations actually follow up on reports that have raised the red flag about sexual exploitation or abuse by their employees. For instance, no action was taken after the release of a 2002 assessment by the UN’s refugee agency UNHCR and the charity Save the Children of the effects of sexual violence on children in conflict areas. That assessment documented 67 cases of sexual exploitation and abuse of refugee children in Liberia, Guinea and Sierra Leone in which 40 aid agencies and 9 peacekeeping missions were implicated; the majority of the victims were aged between 13 and 18.

And, despite being warned three years ago that internally displaced and refugee Syrian women were being sexually exploited by men delivering aid on behalf of the UN, the UN did little to arrest the problem, even though the UN’s Population Fund had conducted a gender assessment last year that showed that Syrian women were being forced to engage in “food-for-sex” arrangements with aid workers. The House of Commons report, titled “”Sexual exploitation and abuse in the aid sector”, states that “sexual exploitation and abuse by aid workers, amongst others, is an entrenched feature of the life experience of women and girls in Syria in the eighth year of the conflict there” and that similar cases around world are merely “the tip of the iceberg”.

The UK legislators further found that a 2007 study for the Humanitarian Partnership conducted in Kenya, Namibia and Thailand found that although the beneficiaries of aid knew that sexual exploitation and abuse was going on, the majority said that they would not report these cases because they didn’t want to risk losing the aid. On their part, humanitarian aid workers were reluctant to report their fellow workers for fear of retaliation.

The House of Commons report does not spare any organisation, not even in the much-revered United Nations, for allowing such abuse to continue. “When it comes to investigating sexual exploitation and abuse allegations, the UN’s approach lacks coherence,” it states. “There is no single body taking an overall interest in the outcomes of investigations or driving them towards resolution…”

What the report failed to recognise is that although the UN has a stated “zero tolerance” for sexual abuse and exploitation, few, if any, of the perpetrators face justice – not only because the UN’s internal justice system is flawed but also because international UN staff enjoy immunity from prosecution, which means such cases are not likely to end up in court.

In addition, because the UN is more concerned about protecting its reputation than about bringing justice to victims, those who are perceived to be tainting the organisation (the people who come out and report such cases) are quickly sacrificed. In 2014, for example, Anders Kompass (who has since resigned as the director of field operations at the Office of the UN High Commissioner for Human Rights) was suspended after he sent an internal UN report to French authorities detailing cases of French peacekeepers sexually exploiting internally displaced boys in the Central African Republic. At that time the UN claimed that Kompass had put the victims at risk but it soon became evident that the UN had no intention to act on the report or to make its findings public. Kompass was only reinstated after there was an outcry in the media about the case, but by then he had already made the decision to resign. He said that his ordeal had left him “disappointed and full of sadness”.

The House of Commons report does not spare any organisation, not even in the much-revered United Nations, for allowing such abuse to continue…What the report failed to recognise is that although the UN has a stated “zero tolerance” for sexual abuse and exploitation, few, if any, of the perpetrators face justice – not only because the UN’s internal justice system is flawed but also because international UN staff enjoy immunity from prosecution, which means such cases are not likely to end up in court.

This is one of the problems afflicting all aid and humanitarian organisations. Because these organisations survive on donations, the whiff of sexual or other type of scandal could mean the drying up of donor funds, which could affect jobs and projects. So to keep the donor funds flowing, incidents of misconduct are quickly covered up or not investigated. In some cases, the perpetrators are allowed to resign quietly or are transferred to a remote duty station. Meanwhile those who report these cases often find themselves out of a job – the UN, in particular, is notorious for not renewing the contracts of whistleblowers.

However, things are likely to change. Aid and humanitarian organisations that fail to report or address the issue of sexual crimes or misconduct by their employees could find themselves having to close shop, especially if their biggest donors pull out. Since the Haiti scandal, for example, Oxfam has been struggling to survive. Bigger multilateral organisations like the UN, which are funded by member states are, however, unlikely to face such threats because “they are too big to fail”, which is a pity because levels of impunity at the UN are extremely high. Whereas small charities and international NGOs have to be accountable to their donors to survive, the UN can basically get away with all manner of wrongdoing because the UN is accountable only to itself. Few, if any, member states have threatened to pull out of the organisation because of its lack of accountability or because its employees are behaving badly.

Former UN employees who have suffered retaliation as a result of their reporting complain that the UN’s internal justice system is heavily biased in favour of the perpetrator, particularly if he or she is a senior manager. Experiences of UN whistleblowers indicate that those who file a complaint against a senior UN official are not tolerated within the organisation and that the majority of whistleblowers suffer severe retaliation, despite the UN’s whistleblower protection policy. For instance, recently the country director for UNAIDS in Ethiopia, who was a key witness in a sexual harassment and assault investigation involving the UNAIDS deputy director, was suspended from her job in March this year, an action that smacks both of a cover-up and retaliation. As a result, several African women activists called for the resignation of the UNAIDS Executive Director, Michel Sidibé, but he has consistently ignored this call, as has the UN Secretary-General Antonio Guterres.

Current and former UN employees have reported a flawed grievance system that is stacked against the victims. One woman told the UK’s Guardian newspaper that she was raped by a senior UN staff member while working in a remote location but did not obtain justice despite medical evidence and witness testimonies. Because UN staff members cannot take their cases to national courts, (because UN employees enjoy immunity from prosecution), they have to rely on the UN’s internal justice systems, which are deeply flawed and which rarely deliver justice. As I have argued in previous articles, the UN has to overhaul its internal justice system and put in place external independent mechanisms that are more transparent and accountable – and which do not victimise whistleblowers.

Now, finally, such an external independent mechanism might just see the light of day. The House of Commons report makes a recommendation that could radically transform how sexual exploitation and abuse cases are handled within the aid sector: the establishment of “an independent aid ombudsman to provide the right to appeal, an avenue through which those who have suffered can seek justice by other means”. This recommendation, which will be discussed at an International Safeguarding Conference in October this year, could drastically alter the way aid organisations operate and could be a game changer for victims of sexual abuse and exploitation. It is undoubtedly one of the best recommendations to be put on the table of an industry that has become a cesspit of impunity and which is more interested in self-preservation than actually doing good in this world.

However, my fear is that if this ombudsman lacks the power to investigate and prosecute, then it will merely become an entity that collects and documents complaints rather than one that carries out investigations and brings cases to trial, or one that has the authority to force aid organisations to dismiss or penalise employees who are implicated in sexual harassment, exploitation or abuse.

My hope is that this ombudsman will not just address the issues of sexual harassment, exploitation and abuse, but will also be receptive to receiving cases of other types of abuse within the aid sector, particularly the abuse of power and authority, which allows all manner of wrongdoing, including fraud, corruption, nepotism, and gross mismanagement, to continue.

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Rasna Warah

Ms Warah, the author of War Crimes, a sweeping indictment of foreign meddling in Somalia, and A Triple Heritage, among several other books, is also a freelance journalist based in Malindi, Kenya.

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Shopping Mall Economics: A note on the value of the Kenya shilling

What does a recent spat between the IMF and the Central Bank’s Prof Patrick Njoroge, himself a veteran of the Fund, tell us about the state of the Kenya shilling? By DAVID NDII.

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Shopping Mall Economics: A note on the value of the Kenya shilling

Is the Kenya shilling overvalued or not? According to the IMF it is currently overvalued by 17 percent. In an unusually combative response to his former employer the Central Bank governor says that is only off-kilter by 5 percent and accuses the IMF of making Kenya a “guinea pig in its new approach.” The offensive claim, contained in the IMF’s latest report on the country dated October 2018, states as follows:

“The EBA-lite methodology for the exchange rate suggests that the external position is weaker than fundamentals. The current account approach shows that the current account deficit (both actual and cyclically adjusted) are above the norm (the CA gap is -2.5 percent), suggesting an overvaluation of about 17.5 percent of the real exchange rate. This can only marginally be explained by the policy gap. The REER approach also shows a similar-size of overvaluation, equivalent to about 18.0 percent. Again, the policy gap is marginal. Given the continued appreciation of the real exchange rate, the external position is assessed to be weaker than fundamentals. Regarding the last approach, the external sustainability approach, it was not possible to use it as the international investment position data is not yet produced by the authorities.”

This needs a fair amount of disambiguation. EBA is a needless acronym that stands for external balance approach for exchange rate assessment. The methodology is described in an IMF paper published in 2013 as an update of a previous methodology known as CGER. CGER is another needless acronym for consultative group for exchange rate assessment. This EBA thing appears to be what the CBK governor is referring to as a new approach.

The methodological spat is a red herring. Economic models are tools, not oracles. What we have here is workmen quarrelling over tools. Our top three economic mandarins are former IMF staffers. Surely, they can sit together with their colleagues and their models and converge on an assessment as to whether the shilling is overvalued or not?

The IMF refers to three methodologies: the Real Effective Exchange Rate (REER), the current account and external sustainability approach. Of the three, the REER is the most intuitively understandable and also the one for which we have data. But what is this animal the REER?

The methodological spat is a red herring. Economic models are tools, not oracles. What we have here is workmen quarrelling over tools. Our top three economic mandarins are former IMF staffers. Surely, they can sit together with their colleagues and their models and converge on an assessment as to whether the shilling is overvalued or not?

Suppose bananas are retailing at KSh 100 shillings a bunch in Kenya. The Kenya/Uganda shilling exchange rate is one to ten. At this exchange rate and banana price, 20 percent of bananas are coming from Uganda. Suppose price of Kenyan bananas goes up to KSh 125 a bunch (e.g. because of increase in taxes), and exchange rate remains the same. Ugandans can continue to sell bananas in Kenya profitably at KSh 100 while many Kenyan producers cannot. In fact, Ugandans are likely to hike their price to let us say KSh.110 making Kenya an even more profitable market than their home market. Uganda bananas will flood the market and put Kenyan producers who are not profitable at Ksh. 110 out of the banana business. For the market to remain at the old equilibrium (i.e. 20/80 Uganda/Kenya market share) requires Kenya shilling to fetch USh. 8.00 so that to get USh. 1000 as before, the Ugandans will also have to sell their bananas at KSh125.

Its readily apparent that if our domestic prices go up faster than those of our trading partners, then foreign goods will keep becoming cheaper. But you cannot tell by just looking at the dollar shilling exchange rate. We need to factor in the price movements with every trading partner. The REER is an index that combines the relative exchange rate and price movements of all our trading partners.

If the REER is rising our goods are becoming more expensive. We can expect to import more and export less. If this happens our trade deficit will widen. If the trade deficit continues to widen, we run the risk of defaulting on our international obligations in particular debt service and repatriation of profits and capital. This is where the IMF comes in. The IMF’s mandate is to maintain international financial stability. The IMF is a financial cooperative whose job it is to ensure members do not run into external payments difficulties, and to bail them out when they do, in order to keep global finance and commerce going.

The spat between the IMF and the CBK is therefore about our external creditworthiness. The key indicator for this is the current account balance. The current account balance has two components: trade and income. The trade account I have already mentioned. The income account consists of payments for “factor services” such as interest (use of capital), payments for services of Kenyan troops abroad (labour services) and another component we call unrequited transfers (meaning money we have not earned) such as diaspora remittances and grants. The external account in turn, has a third component, the capital account where, as the name suggest, we record investment transactions.

The spat between the IMF and the CBK is…about our external creditworthiness. The key indicator for this is the current account balance.

This is how it works. Kenya Airways buys an aircraft using a foreign loan. The aircraft is entered in the trade account as an import and simultaneously in the capital account as a capital inflow. The following day it ferries passengers from Lagos to Dubai. The income is recorded in the trade account as a service export. At the end of the month it remits repayment on the loan. The interest is recorded in the income account as a factor service payment and the principal is in the capital account as a capital outflow.

The net of the current account and the capital account are added together to give the overall balance. An increasing overall deficit depletes foreign reserves, while a surplus leads to a build up of reserves. Current account surpluses mean that a country’s savings exceed its investment; it can, therefore, export capital, like China. A current account deficit means that a country is investing more than its savings, in other words, it is importing capital (either debt, FDI, remittances, grants etc).

Chart 1

The country’s creditworthiness thus depends not just on trade but also on other financial flows, that are determined by factors other than trade competitiveness, both economic and non-economic. Complicated stuff.

Both the IMF and CBK agree that the shilling has appreciated, but they disagree on the magnitude. The IMF also implies that the appreciation is a reflection of policy action while the CBK maintains that it is a reflection of market forces. The IMF view translates to accusing the CBK of misleading the public by espousing a monetary policy that claims to target inflation, while in practice it is actually targeting the exchange rate. The IMF’s “smoking gun” is the fact that the NEER has flatlined for the past six years (see Chart).

Recently the IMF re-classified the Kenya shilling from a “floating” (meaning market determined) to “other managed arrangement.” This means the IMF is convinced that the Central Bank is propping up the shilling. What reason would the Central Bank prop up the shilling especially if it undermines the country’s competitiveness and solvency?

Foreign currency debt exposure is one reason. The interest payments on the first Eurobonds issued in 2015 ($185 million a year) has increased by KSh 3 billion, KSh 16 billion to KSh 19 billion on account of the depreciation of the shilling. Translate that to the total interest payments this year which are in the order of $1.4 billion dollars. The shilling has weakened by about three shillings to the dollar since the beginning of the financial year. This translates to a KSh 4 billion squeeze on a government that is already living way beyond its means. The last thing the Treasury wants to hear is that the shilling should be trading at about 120 to the dollar.

Recently the IMF re-classified the Kenya shilling from a “floating” (meaning market determined) to “other managed arrangement.” This means the IMF is convinced that the Central Bank is propping up the shilling. What reason would the Central Bank prop up the shilling especially if it undermines the country’s competitiveness and solvency?

Another reason is pressure to keep low interest rates. Interest rate is the policy instrument in an inflation-targeting monetary policy regime such as we claim to have. Central Banks are given statutory independence to insulate them from such pressure so that they can raise interest rates when they need to, even when it is politically costly for the government. But that does not make Central Banks immune from the pressure to accommodate political objectives of the government of the day. Parliament’s capping of interest rates two years ago is ample demonstration that political pressure on Central Banks is real.

Keeping interest rates artificially low puts pressure on the exchange rate. A weakening currency creates inflationary pressures, which is what the Central Banks are mandated to control in the first place. The Central Banks end up trying to meet incompatible objectives, low interest rates, low inflation and a stable currency.

This is precisely what happened from mid-2009 to September 2011. The Central Bank bent over backwards to accommodate the government’s economic stimulus meant to respond to both the post-election violence and the global financial crisis. Interests rate were driven to the floor. From mid-2010 to mid-2011 the benchmark 90-day Treasury bill rate was kept below 3 percent. The IMF’s charts show how this ended— with a very hard landing. The shilling which had been propped up at about 80 to the dollar, started unravelling in April peaking at KSh100 to the dollar in September. The Central Bank was forced to jack up interest rates in a hurry. By the end of 2011, the T-bill rate was heading to 20 percent.

The IMF seems to believe that, left to market forces, the shilling will depreciate in real terms. The IMF’s REER chart covers eight years, from 2010 to 2017. A longer timespan does not necessarily support this contention (see Chart). My chart goes back to the beginning of the liberalized regime in 1994. What do we see? The shilling has been appreciating in real terms since it was liberalized. Overall it has appreciated 157 percent, by 9 percent per year on average. This could mean that the Government has been propping up the shilling all these years, or that market forces are not working the way the IMF expects.

Chart 2

Many Kenyans have observed that we have become an importing country. One also hears policymakers lamenting that we are losing our markets in the region and blaming all manner of things. There is no mystery to it.

My [assessment is that] the shilling has been appreciating in real terms since it was liberalized. Overall it has appreciated 157 percent – by 9 percent per year on average. This could mean that the Government has been propping up the shilling all these years, or that market forces are not working the way the IMF expects.

But is the Central Bank propping up the shilling? That we cannot be able to tell that easily. There are lots of moving parts. It can also be on account of some trading partners manipulating their currencies: China, for example, is regularly accused of maintaining an artificially weak currency. China has a big weight in our REER and it’s been growing over time.

The ultimate question is whether it is sustainable. There are two parts to this, financial and economic. The widening trade deficit has been plugged by remittances and portfolio inflows (money flowing into the stock exchange and government securities), not all of it honest money, and lately, government commercial borrowing, the ubiquitous eurobonds and syndicated loans. As long as these keep flowing, the show can go on.

Why are we told the economy is growing and yet we cannot feel it? This is the shopping mall economy. How long can we keep that going?

The economics is a different story. It is not good for employment and equity. It is part of the answer to the question that Kenyans keep asking: why they are told the economy is growing and they are not feeling it. This is the shopping mall economy. How long can we keep that going? Your guess is as good as mine. Governments are known to manipulate currencies and to distort financial markets generally. The IMF is known to (a) have more faith in market forces than warranted and (b) get the workings of those market forces wrong. What to do?

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70 Years After the UN’s Declaration on Human Rights, the Struggle Continues Against Poverty, War, Disease – and Whistleblowers

The UN’s internal benchmark of success is the amount of money raised, not the successful execution of a programme. War and poverty remain necessary for the functioning of a system of phantom projects characterised by waste, mismanagement and corruption. And since the Iraq Oil-for-Food scandal of the early 2000s, in which billions went missing and the perpetrators scot-free, senior management has waged a silent war against its own whistleblowers. Who will police the world’s watchdog? By RASNA WARAH

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70 Years After the Un’s Declaration on Human Rights, the Struggle Continues Against Poverty, War, Disease - and Whistleblowers

The resignation last month of the Executive Director of the United Nations Environment Programme (UNEP), Erik Solheim, after an internal audit found that he had misused funds from the organisation, has been construed as a sign that the UN is serious about tackling wrongdoing within its ranks. However, this high-profile case should not distract us from the fact that waste, fraud and corruption are rarely punished in the UN system, and that the majority of offenders get away scot-free.

Solheim is accused of spending nearly half a million dollars on unnecessary travel within a period of less than two years. The audit showed that between May 2016 and March 2018 he spent 529 days travelling and only stayed in Nairobi, where UNEP has its headquarters, for about 20 per cent of the time.

Much of this travel was wasteful. For instance, in July 2016, he travelled to Paris for a one-day official meeting but decided to stay on in the French capital for a whole month (at taxpayers’ expense). In the following two months, he travelled for 42 days to 24 destinations. One official trip to Addis Ababa was routed through Oslo in his home country Norway, even though the Ethiopian capital is just a two-hour flight from Nairobi. The audit report also showed that Solheim was not the only culprit – other senior managers at UNEP have been accused of spending a whopping $58.5 million on travel alone over a two-year period – and this, from an organisation that advocates for the reduction in the use of fossil fuels.

Solheim is accused of spending nearly half a million dollars on unnecessary travel in less than two years. Between May 2016 and March 2018 he spent 529 days travelling and only stayed in Nairobi, where UNEP has its headquarters, for 20 percent of the time.

This blatant abuse of taxpayers’ money is not new at the UN and Solheim’s conduct is hardly unique. The differences between Solheim’s case and others are: one, his case managed to reach the internal investigation stage, which only happens when there is political will to carry out such an investigation; two, the findings of the investigation were made public, which is usually not the case; the case against him was strong because the trail of misused funds could be traced through flight and hotel bookings, which is not normally the case when deceptive UN managers make UN money disappear without a trace.

One common way of diverting or stealing funds in the UN is to create phantom projects. Let me give you a personal example. Sometime in 2009, my boss at the United Nations Human Settlements Programme (UN-Habitat) called me into his office to tell me that he urgently needed to spend $100,000 of donor money before the end of the year because if he didn’t, he’d have to return the funds to the donor country. So he appointed me to manage a $100,000 project that would result in a book on cities for which he said he would hire consultants from abroad to research and write such a book. The consultants (some of whom were friends of the boss’s boss) were hired and a phantom book project was created.

Two months later, the book project was “closed” (without my knowledge, yet I was supposedly heading the project) even though no manuscript or book had materialised. When I realised that the project was fake and that money may have been diverted to a personal project, I reported the matter to the project/funds manager (a junior officer, essentially a bookkeeper, who had no say in how money in the organisation was spent and who only followed the instructions of her bosses). There was no response and within hours of my email, the process of eliminating me from the organisation began. I suffered retaliation, threats of non-renewal of contract and a whole range of psychological warfare tactics that eventually made me leave the organisation. I realised then that I had inadvertently become a “whistleblower”.

One common way of diverting or stealing funds in the UN is to create phantom projects. Millions of dollars have disappeared from the UN’s coffers through such opaque practices, the fiddling of books, and even downright theft, but few of the culprits are reprimanded, fired or even identified.

When I eventually took UN-Habitat to task through the UN Ethics Office – which was created in response to the Oil-for-Food debacle in Iraq, and which is mandated to look into whistleblower cases – I was enmeshed in a labyrinth of doublespeak and obfuscation that convinced me that the UN Ethics Office was created to muzzle and suppress whistleblowers so that the UN’s reputation would not be tarnished. I got no support from the office; on the contrary, I was told, both by the Ethics Office and UN-Habitat’s senior bosses, that the whole thing was a figment of my imagination. I have had to live with that “gaslighting” humiliation for the last nine years.

Millions of dollars have disappeared from the UN’s coffers through such opaque practices, the fiddling of books, and even downright theft, but few of the culprits are reprimanded, fired or even identified. (Even Solheim was allowed to quietly resign.) On the contrary, whistleblowers find themselves out of a job or demoted.

For instance, senior UN officials implicated in the scandalous UN Oil-for-Food Programme in Iraq are still walking around freely, enjoying their UN perks and benefits. A 2005 investigation led by Paul Volcker – who was appointed by the then UN Secretary-General Kofi Annan after a series of exposés about money being diverted from the programme appeared in the media – found that billions (yes, billions!) of dollars had been lost through a network that included Saddam Hussein, dubious foreign companies and individuals who paid bribes or received kickbacks to participate in the programme and UN employees who received bribes or chose to look the other way. Not one person identified as having fraudulently benefitted from the programme – it was supposed to help the Iraqi people cope with the sanctions imposed after Saddam invaded Kuwait – has been charged with this crime in any national court. (Saddam Hussein was eventually tried and executed by a kangaroo court, not for diverting funds from the programme, but for crimes he had committed against the Iraqi people.)

Meanwhile, the UN simply noted the findings of the Volcker investigation and UN member states continued with business as usual. Besides, by the time the findings of the Volcker investigation were made public, the United States and Britain, two of the five veto-holding powers in the UN Security Council, were embroiled in an illegal war in Iraq, which diverted the public’s attention from one of the biggest scams the world has ever witnessed.

The Oil-for-Food Programme put a huge dent in the UN’s reputation because of the scale of the theft, but this particular UN-managed initiative only got exposed because there were people within the organisation, such as Michael Soussan, author of Backstabbing for Beginners, and Rehan Mullick, a database manager, who were willing to blow the whistle on wrongdoing within the programme. Many smaller-scale thefts are taking place every day under the noses of UN bosses, and sometimes with their collusion.

The reason why such thefts and cover-ups are so common in the UN is that UN agencies are often deliberately vague about how they spend their money. A NORAD-commissioned investigation in 2011 found that most of the UN agencies surveyed had difficulty explaining where their money had gone or to which specific projects, and that information about expenditure was either limited or fragmented.

The Oil-for-Food Programme put a huge dent in the UN’s reputation because of the scale of the theft, but this particular UN-managed initiative only got exposed because there were people within the organisation, who were willing to blow the whistle on wrongdoing within the programme. Many smaller-scale thefts are taking place every day under the noses of UN bosses, and sometimes with their collusion.

When internal investigations are carried out, it usually means that things have gone out of hand (or that enough people in the organisation are pissed off and are complaining), which is what happened with Solheim at UNEP and also at the UN’s refugee agency in Uganda recently. An internal audit of UNHCR’s operations in Uganda found that the agency wasted tens of millions of dollars in 2017 by overpaying for goods and services, awarding major contracts improperly and failing to prevent fraud and waste. In addition, thousands of blankets, wheelbarrows and solar lamps meant for South Sudanese refugees went missing. The UN agency also entered into inappropriate arrangements with Ugandan government officials. For instance, it paid the Office of the Prime Minister $320,000, ostensibly to buy a plot of land to expand the government’s refugee-handling capacity; yet the Office of the Prime Minister could not produce a title deed to prove ownership and the land is now being used as a parking lot.

Part of the problem is that UN agencies are expected to monitor, evaluate and audit their own programmes and projects – the poacher as game-keeper. Donors to the UN expect the global body to report on the the projects they fund. This is problematic because it means that UN agencies can easily manipulate their monitoring and evaluation reports to suit their own agendas, needs and funding requirements. Besides, success is often measured by how much money was raised and spent, not on whether the project achieved its goals. There is, therefore, a desire to spend large amounts of money in the quickest way possible – even if it means travelling first class to a vague conference in a distant part of the world.

An internal audit of UNHCR’s operations in Uganda found that the agency wasted tens of millions of dollars in 2017…Thousands of blankets, wheelbarrows and solar lamps meant for South Sudanese refugees went missing. The UN agency paid the Office of the Prime Minister $320,000 to buy a plot of land to expand the government’s refugee-handling capacity. Yet the Prime Minister’s office could not produce the title deed to prove ownership. The plot is now a parking lot.

Moreover, a project is not “closed” because it was successful (which should be the ultimate aim of any project); rather, it remains “ongoing” even when the situation on the ground has changed (which explains why there are still UN peacekeepers in Haiti even though the civil conflict there ended years ago). No one wants to know how many people’s lives improved significantly as a result of the project or why the crisis that led to the project keeps recurring.

This explains why, year after year, the UN fabricates or exaggerates a humanitarian crisis in some part of the world. A few years ago it was Somalia; today it is Yemen. No one wonders why, if the UN has been so successful in stemming the scourge of war around the world the refugee crisis today is bigger than it was when the UN was established. To avert a humanitarian crisis in Yemen, would it not have been wiser to sanction Saudi Arabia for going to war with Yemen or to sanction the United States, the main supplier of arms to Saudi Arabia?

But these are the uncomfortable questions that UN bureaucrats – and the power wielders at the UN Security Council – do not worry too much about as they travel in luxury around the world to some god-forsaken country whose people will never be lifted out of misery because the UN will not have it any other way: too many UN jobs depend on people remaining poor, hungry and homeless.

What can be done to reverse this situation? Well, for starters, as the world celebrates the 70th anniversary of the Universal Declaration of Human rights on 10 December, there has to be an honest discussion about whether the UN has fulfilled its mandate of promoting peace, human rights and development around the world. A scorecard would indicate success in some areas (e.g. smallpox eradication and child vaccination programmes) but dismal failures in others (e.g. wars in Iraq, Syria and Yemen and genocides in Rwanda and Srebrenica). If the UN cannot prevent wars and suffering, then what is its purpose?

As the world celebrates the 70th anniversary of the Universal Declaration of Human rights on 10 December, there has to be an honest discussion about whether the UN has fulfilled its mandate of promoting peace, human rights and development around the world.

Secondly, we need to democratise the UN Security Council, which is currently the bastion of only five veto-holding countries – the United States, Britain, France, China and Russia – which also happen to be the world’s leading weapons manufacturers and suppliers and who, therefore, have a vested interest in conflicts outside their borders. These countries decide which countries can go to war and which can’t (which is why no sanctions were imposed on the United States and Britain when they went to war in Iraq). All permanent members of the UN Security Council should have an equal say in matters concerning global security, and should be working towards preventing wars, not starting them.

We need to democratise the UN Security Council, which is currently the bastion of only five veto-holding countries, which also happen to be the world’s leading weapons manufacturers and suppliers and who, therefore, have a vested interest in conflicts outside their borders.

Thirdly, the UN’s internal oversight system needs to be overhauled. The UN’s internal justice systems, including the UN Ethics Office, should be abolished in favour of an external, independent mechanism that can provide the checks and balances that the UN so desperately needs. This mechanism, possibly in the form of a tribunal, would also allow UN whistleblowers to present their cases without fear of retaliation. Such a mechanism would, hopefully, also permit perpetrators of crimes committed by UN personnel to be brought to justice in national courts, rather than the current system that gives immunity to UN employees implicated in crimes and wrongdoing (which means they cannot be tried in any court, not even in their own country).

The UN cannot – and should not be allowed to – police itself. Given all the scandals at the UN, I think it is time an independent entity be entrusted with the responsibility of watching the world’s watchdog.

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Fake It till You Make It Nations and Bling Bling Economics: Debt, Dictatorship and Underdevelopment

Once upon a time, financial recklessness was the preserve of resource-rich nations. Now, resource-poor African nations, their thoughtless leaders seduced into taking printed money circulated by the US Federal Reserve after the global financial crisis a decade ago, have become the new sultanates of debt distress. DAVID NDII ponders a different path.

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Fake It till You Make It Nations and Bling Bling Economics: Debt, Dictatorship and Underdevelopment

Not too long ago, Angola opened an embassy in Nairobi on a quite well-appointed address on Redhill Road in the diplomatic suburb of Gigiri, a road I use frequently. You couldn’t miss it. It had an outlandish gate and a black granite signboard with gold lettering. I was rather intrigued that Angola would need such a large embassy in Kenya. I have made a point of observing how much activity was going on there— very little. I passed there the other day and lo and behold, the outlandish gold lettered black granite signboard was gone, replaced by a more modest one announcing the Botswana High Commission. The Angolan foray would have cost no less than $10 million, and I would imagine that Kenya was not the only country that Angola had spread its diplomatic footprint. What has changed?

Angola has squandered the oil bonanza of the last decade. Angola is Africa’s second-biggest oil producer after Nigeria, with a daily output of 1.6 million barrels of crude and 18 million cubic metres of natural gas. There is an economic principle that windfall earnings should be saved. Angola did not save. Instead, it leveraged the oil boom to pile up debt. Angola is China’s biggest debtor in Africa, owing US$ 23 billion accounting for about a fifth of Africa’s debt to China.

If Angola had set a windfall benchmark at $50 per barrel, its nest egg for the five and a half year oil boom (April 2009 to May 2014) would have been in the order of $100 billion on crude oil alone ie. excluding natural gas. A conservative investment yielding 5 percent a year would be earning Angola $5 billion a year to invest in infrastructure or whatever else it chooses. This is how Norway got rich on oil. Norway’s sovereign wealth fund, the worlds largest, is now worth a trillion dollars. If Norway was to pay dividends from the fund to its 5.2 million citizens, each would get US$9,000 a year.

There is an economic principle that windfall earnings should be saved. Angola did not save. Instead it leveraged the oil boom to pile up debt. If Angola had set a benchmark of $50 per barrel of petroleum, its windfall for the five and a half year oil boom (April 2009 to May 2014) would have been in the order of $100 billion on crude oil alone… A conservative investment yielding 5 percent a year would be earning Angola $5 billion a year to invest in infrastructure or whatever else it chooses.

They say once bitten twice shy. Not Zambia. When I was a college student eons ago, Zambia was a case study on how not to manage an economy. Zambia rode the post independence commodity boom into middle income status by the early seventies. At $600, Zambia’s income per person was one-third higher than the Sub-sahara Africa average. In Nairobi, Zambia’s heydays are represented by its well-appointed embassy property on Nyerere Road, overlooking Uhuru Park. When commodity prices receded from the late seventies, Zambia plugged its finances by borrowing – and borrowed itself into poverty. Over the next decade, Zambia’s foreign debt increased seven-fold, from one to seven billion dollars. By the mid-90s when it got HIPC (Highly Indebted Poor Countries) debt relief, average income adjusted for inflation was half of the mid-1970s level.

Zambia rode the post independence commodity boom into middle income status by the early seventies. When commodity prices receded from the late 1970s, Zambia plugged its finances by borrowing – and borrowed itself into poverty.

Copper prices surged again in the 2000s peaking in 2011 at $4.60 a pound, about the same in inflation-adjusted terms, as at the 1970s peak. In 2012, against the backdrop of retreating copper prices, Zambia debuted in the Eurobond market, borrowing $750 million. It also borrowed heavily from China. Copper prices have fallen again and Zambia is in debt distress. The eurobonds are now trading at around15 percent yield, almost three times the debut bonds 5.6 percent yield at issue. What this means is that the bonds for which investors paid $94 are now trading at $34. It means that Zambia is now effectively locked out of any more borrowing in the sovereign bond market. Will Zambia turn around its finances before the bonds are due for re-financing? Doubtful.

Zambia is only slightly less dependent on copper now than it was in the 1970s. Copper still accounts for two-thirds of exports. Zambia has no shortage of low-hanging fruit in terms of diversification options: it has plenty of idle arable land and underexploited tourism potential. Chile was once as copper dependent as Zambia. In fact, copper still accounts for half of Chile’s exports. But Chile has diversified its economy and worked its way up to being the first Latin American country to be admitted to the OECD club of rich countries. Interestingly, Chile has become a wealthy country without following the Asian Tiger holy grail of export manufacturing, but rather by diversifying to services and agricultural exports. Its other key exports are agricultural including horticulture, wine and fish, especially farmed salmon.

Chile was once as copper dependent as Zambia. Copper still accounts for half of Chile’s exports. But Chile has diversified its economy and worked its way up to being the first Latin American country to be admitted to the OECD club of rich countries. Interestingly, Chile has become a wealthy country without following the Asian Tiger holy grail of export manufacturing, but rather by diversifying to services and agricultural exports.

Historically, financial recklessness on this scale was the preserve of resource-rich African countries. But the disease has spread all over the continent. Resource-poor countries such as Ethiopia and Kenya are now just as reckless as the resource-cursed. In the past, resource-poor countries simply did not have access to the money to steal or finance megalomania. When they tried to do so by domestic borrowing and printing money, the macroeconomic feedback loop quickly kicked in and wreaked financial havoc. Moi learned this lesson. Mugabe did not. He ended up with a hyperinflation for the ages, and the demise of the Zimbabwe dollar.

There are two reasons why resource-poor countries have also caught the disease: the 2008 global financial crisis, and China.

Since the global financial crisis, which began in 2007 and properly set in the next year, the financial markets have been awash with money churned out by the US Federal Reserve and other central banks, thereby depressing interest rates to near zero, prompting money managers to go looking for better returns in emerging markets in what is known in market lingo as “hunting for yield”. Aggressive salesmen were everywhere scouting for and massaging the egos of potential borrowers. When Kenya set out to debut in the Eurobond market it indicated that it would raise a $500m “benchmarking” bond whose proceeds were to retire a syndicated bank loan borrowed two years before, and which was the only foreign loan in Kenya’s books at the time. By the time the issue was going to the market, it had grown fourfold to $2 billion. By the time it closed, the government had borrowed $2.8 billion.

Within weeks of the successful debut, the treasury mandarins were talking of Sukuks (Islamic bonds) and Samurais (Japanese Yen denominated bonds), like children accidentally locked inside an ice cream parlour. Other than the syndicated loan repayment of $600 million there is no trace of anything financed with the money.

Since the global financial crisis, the financial markets have been awash with money churned out by the US Federal Reserve and other central banks, thereby depressing interest rates to near zero, prompting money managers to go looking for better returns in emerging markets. Aggressive salesmen were everywhere scouting for and massaging the egos of potential borrowers. Africa Rising.

China is getting more than its fair share of flak for Africa’s debt distress. The fear of the Dragon is over the top. Unlike the Western banks and markets which are embedded in the Western power structure, China will have little recourse when countries default. It cannot run them through the mill we saw “the troika” run Greece when it went into debt-distress in 2009. The head of China Export and Credit Insurance Corporation, known as Sinosure was recently quoted lamenting the poor quality of China’s infrastructure loans abroad. He went on to disclose that the agency is already a billion dollars out of pocket on Ethiopia’s new railway, whose preparation he termed “downright inadequate”. “Ethiopia’s planning capabilities are lacking, but even with the help of Sinosure and the lending Chinese bank it was still insufficient.”

It has also been reported that China may offload its infrastructure loans to the secondary market. The plan is to sell the loans to the Hong Kong Mortgage Corporation which will in turn repackage them, dice them up and sell them to investors, thereby releasing liquidity back to the primary lenders such as China Exim Bank to make more loans.   This is not funny. First, the lenders admit that they have made dud loans. Then they follow this with an announcement that they will sell the same to investors. It is a scheme such as this, which mixed up low risk and high risk (a.k.a sub-prime) mortgage loans into securities known as Collateralized Debt Obligations (CDOs) that precipitated the erstwhile mentioned global financial crisis. More poignantly, the Dragons debt trap diplomacy as it’s been called, begins to look uncannily like hunting for yield.

That is the supply side. On the demand side, you have African leaders who have no ideas of their own. From import substitution industrialization, to neoliberal orthodoxy in the 80s, to poverty reduction strategies and now infrastructure-led growth, they wander thoughtlessly from one aid paradigm to the next, all the while living up to Fanon’s prediction that they were destined to become “a transmission line between the nation and capitalism.”

The bigger problem is delusions of grandeur. Seemingly every one of these African big men has a Lee Kwan Yew complex. Even Uhuru Kenyatta, a man who couldn’t run an orderly kindergarten in a children’s park if his life depended on it, is prone to bouts of megalomania during which he comically dons military fatigues and goes around doing General Park Chung-hee skits.

On the demand side, you have African leaders who have no ideas of their own. From import substitution industrialization, to neoliberal orthodoxy in the 80s, to poverty reduction strategies and now infrastructure-led growth, they wander thoughtlessly from one aid paradigm to the next, all the while living up to Fanon’s prediction that they were destined to become “a transmission line between the nation and capitalism.

Africa has its economically successful nations: Botswana, Namibia, Mauritius, Cape Verde and the Seychelles. What do these successful African nations have in common? First, they are all small. Three of them are small island nations. Namibia is large geographically, but its population is only 2.5 million people. Second, they are also successful democracies. The five are consistently the highest ranked African countries in democracy league tables such as the Economist’s Democracy Index and the Freedom House Index.

Why are Africa’s small countries more politically and economically successful than the big ones?

Size matters. It is easier to build a small nation than a big one. Small islands are natural nations, hence it should not surprise that all the small island nations are successful. Madagascar is Africa’s sole big island nation, and it is not successful at all.

The big African countries are almost invariably very ethnically diverse. Recently, someone on social media asked me why benevolent dictatorship cannot work in Africa the way it worked in South Korea. My answer was a question: what tribe will the dictator be? He has not responded. Proponents of developmental autocracies fail to recognize that the East Asian countries are old nations, not the arbitrary colonial creations that African countries are. Korea is a culturally homogenous society with unified dynastic rule going back to 900 AD, and a political history, known as the Three Kingdoms, going back another millennium. The Thai Kingdom dates back 700 years.

Proponents of developmental autocracies fail to recognize that the East Asian countries are old nations, not the arbitrary colonial creations that African countries are. Korea is a culturally homogenous society with unified dynastic rule going back to 900 AD, and a political history, known as the Three Kingdoms, going back another millennium. The Thai Kingdom dates back 700 years.

Ethiopia is Africa’s oldest nation-state, and the only one that is not a colonial creation. It is also one of the largest and most diverse(100 million people, over 80 officially recognized ethnic groups). After the Derg’s reign of terror, Ethiopians adopted a constitution based on a loose ethnic federation. But Meles Zenawi could not resist the allure of the developmental autocrat. He borrowed and built like a man possessed but the economic miracle did not materialize, and Ethiopians, tired of autocracy without prosperity, took to the streets. The edifice has unravelled. The leadership is coming to terms with a historical fact that the rest will be reckoning with sooner or later: political development precedes prosperity.

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