Buying food aid locally cuts costs in half, says report

by Reuters
Wednesday, 28 September 2005 00:00 GMT

A young boy tills a field in southern Niger in July 1 2005. REUTERS/FINBARR O'REILLY

LONDON (AlertNet) -

Changing the food aid system to cut the amount of aid shipped from wealthy countries and increase the amount bought locally would not only be better for people on the receiving end but would save a huge amount of money for donors, according to a new report.

The report from the Organisation for Economic Cooperation and Development (OECD) says big food aid donors ' especially the United States ' still ship most of their food from surpluses in their own countries, but it actually cuts costs in half to source food aid directly in the country where it's going.

When that's not possible, the OECD report finds, it's still 33 percent cheaper to buy it from a neighbouring country in the region.

If donors put this change into practice, they would save about $750 million a year, according to the report's main author, Edward Clay of British-based think tank Overseas Development Institute.

Canada announced a change of policy in late September to purchase up to 50 percent of its food aid in developing countries, a big increase from the previous limit of 10 percent.

Officials cited the OECD report findings in their decision to make the change.

'This new policy gives us the ability to respond more quickly and with greater flexibility to disasters worldwide, buying more food and feeding a greater number of people in need,' the Canadian minister of agriculture and agri-food, Andy Mitchell, said in a statement.

'It will help lower transportation costs, provide more culturally appropriate food, and allow Canada's aid dollars to go further while supporting farmers in developing countries.'

'TIED' AID

About 75 percent of the world's food aid is currently distributed 'in kind' as food from the donor country, the report says.

The OECD report says there is a near consensus among independent researchers that cash would be a better form of aid in most cases because food aid leads to low prices for local farmers, making recovery much harder.

Donations shipped long-distance typically take four to five months to arrive, often reaching crisis areas just in time to disrupt the following harvest. Clay said there was a serious danger of this happening in Niger right now.

Susanne Jaspars, a nutrition expert with Oxfam, said imported food aid was often inappropriate. Instead of familiar grains, pulses and cooking oil, recipients often found themselves with cereals they didn't want or know how to prepare.

The United States is the biggest food donor, supplying more than half of global food aid. In 2004, 99 percent of U.S. food aid was 'tied' ' sourced from home producers - not cash.

A proposal by the head of the U.S. international aid department, USAID, had the president's backing to cut the amount of tied aid to 75 percent, but was soundly rejected by the Congress.

The United States is generally singled out as the worst culprit, but Clay said some other countries ' like Japan and new donors including India, China and South Korea ' had similar practices, although the volume was far less.

Japan provides about eight percent of the world's food aid, of which 58 percent was tied in 2004, according to Clay. India, China and South Korea have just started donating their surplus food, so virtually all of it is tied.

Australia and Canada each provided a little more than two percent of world food aid in 2004, but 82 percent of it was tied.

In contrast, the European Union provides eight percent of global food aid and only 11 percent of that was tied in 2004.

Like Canada, Australia is starting to move towards greater flexibility, while the Europeans ' including Norway and Switzerland ' have moved away from tied aid since the 1980s and want the United States to stop tying food aid to subsidised surpluses from its own farmers.

DEADLOCK

There is currently deadlock on the issue in the Doha round of World Trade Organisation talks.

The OECD report says the link between food aid and surpluses in donor countries means the provision of food aid fluctuates unreliably.

The OECD examines the effectiveness of food aid, and finds that in emergencies it saves lives and protects livelihoods, but has a patchy record as a tool for promoting development.

Clay said: 'When something has been researched for 30 or 40 years and there is no conclusive evidence (that food aid is effective for development), you have to wonder what further research could find.'

The U.N. World Food Programme ' the main channel for food aid ' argues that even though it would prefer to receive cash, a change to the system would lead to a drop in food aid.

But Frans Lammerson of the OECD said: 'You could reduce your food aid budget by 50 percent and still have the same effectiveness.'

Clay said no one was proposing making the changes overnight, and a gradual transition would probably iron out any problems.

Lammerson said that when donors wanted to come up with cash for food, they found ways.

'When push came to shove, in 2003, the U.S. managed to find money to buy food for Iraq in the Middle East,' he said.

'The argument that if it's not tied, there is no aid, is not true. If something happens, they can come up with it.'

Access the full OECD report online

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