Recently, the U.S. Government pledged $10 million USD to Ukraine with the intent of fighting corruption. At face value, donating money to combat corruption seems like a worthy cause. But will there be a lasting impact on corruption due to this contribution? What will the long-term effects of this donation be? If we are aware that foreign nations have exploited situations like this in the past, how do we know that this financial aid will be used for the right purposes? And the simplest of questions, is money the best solution to a corruption problem?
Over the next few weeks I will examine similar and contrasting donations made to other nations in the past. Investigating the impact that they had will help us to make an educated estimate about the lasting effects of the pledged money to the Ukraine. This first installment will focus on a large sum of money granted to the African country of Senegal 4 years ago.
Back in 2010, the Millennium Challenge Corporation began distributing $540 million USD in aid to the country of Senegal. The Millennium Challenge Corp (MCC) is a U.S. government agency that serves to administer large-scale grants to fight poverty and stimulate healthy economic growth in selected countries. The money appropriated can be used for a variety of causes to help bolster the economy and government of a foreign nation. Senegal was chosen to receive the grant based upon their status as a democratic nation, and their high level of impoverished citizens. However, many U.S. Congressmen were skeptical about Senegal’s commitment to “good government and democracy.” Essentially, many were worried that the money sent to Africa would be wasted, or at least not used effectively, due to corruption.
The democratic leader of Senegal at the time was President Abdoulaye Wade, elected first in 2000 and reelected in 2007. Wade’s presidency was sullied by accusations of corruption, however, as he allegedly engaged in and approved of many questionable acts during his two terms of office. These controversial decisions included President Wade’s creation of a government position for the purpose of giving his son a job, and Wade’s commissioning of a 160 foot bronze statue costing roughly $27 million USD. Wade claimed that he personally was entitled to 35% of all tourist profits the statue generated, as he conceived the idea and deserved compensation for his intellectual property, causing outrage amongst citizens. Construction of the statue began in 2008, handled by the North Korean company Mansudae Overseas Projects. Citizens protested the massive expense, but were subsequently suppressed by riot police. The statue was completed on April 4th 2010, roughly 5 months before the Millennium Challenge Corporation began their donations.
In September of 2010, the MCC began a five-year plan to break up the $540 million USD and appropriate the funds over time. The main focus of the money was to improve irrigation, therefore increasing crop output and building up infrastructure by constructing and renovating roads. The Senegalese government was required to fill out extensive paperwork and keep comprehensive records of all the transactions, as well as report status updates quarterly, which in theory would ensure that the money was used most effectively and help protect it from corruption. Compliance with these strict requirements would certainly help keep track of all expenditures and make sure that the grant from Millennium Challenge Corp. would not go to waste.
During this time, President Wade’s son, Karim Wade, from his position as Minister of State for International Cooperation, managed to amass a $1.32 billion USD fortune that he kept in Monacan banks. Monacan authorities reported that all of the deposits occurred during the time his father was in office as President. This is how the Senegalese leadership acted during a time when the government was receiving millions of dollars to alleviate poverty. An administration that laundered money, committed fraud, and paid millions to North Korea for a bronze statue while citizens starved was seen as the “shining star of democracy” in Africa. Fortunately, the next change of regime would bring a sense of justice back to Senegal.
When it comes to analyzing the corruption index in governments around the world such as Senegal, Transparency International has the background and experience to do so. TI is an organization that surveys countries and ranks them based on their “perceived corruption”. Based off of their index, with a 0 score representing a “highly corrupt” government and a 100 score representing a “very clean” government, Senegal was rated a 29 in the year 2010. The following year the score remained the same. In 2012, the Senegal’s rating rose to a 36. While this change is not a drastic increase, the shifts in Senegal’s government were significant enough to move the country’s rank up the scale. The increased focus on anti-corruption continued into 2013, where Senegal’s score moved up to a 41 on the Transparency International scale. The country’s rating began to improve after President Wade was defeated in the 2012 election by Macky Sall. The new President Sall helped establish Senegal’s own anti-corruption commission. During the new administration’s clean-up of the government, Karim Wade was arrested on charges of corruption.
Pledging any amount of money to a government riddled with corruption is risky business. Looking back at the Senegalese administration when the MCC selected the country to receive their grant, the people in power did not seem trustworthy enough to allocate and use the money effectively. This is evident when looking at the corruption index for 2010-2012. Only after a change in power to a more anti-corruption friendly leader did Senegal’s rank improve.
While this is just one specific instance of the effect corruption can have on donated aid, I believe it accurately reflects what most people (and the Millennium Challenge Corporation) should realize. Corruption in government must be handled before financial aid can be effective in any way. Sending money to a country known for its questionable leadership and probable corruption will not make much impact on the citizens there that need aid, unless the problem is dealt with first.
Next week, I will examine the country of Afghanistan and the $16 billion USD that was pledged back in 2012. In a country recovering from conflict, that much money could have a huge impact on the welfare of the citizens. And surely, with major donors from a multitude of different nations, the money must have been regulated closely to avoid corruption. I suppose we’ll find out in the next installment, Donations in Corrupt Nations Part 2: Afghanistan.