[This report does not necessarily reflect the views of the United Nations]
JOHANNESBURG, 9 February2007 (IRIN) - The United Nations Food and Agriculture Organisation (FAO) has suggested major reforms in the way food aid is managed and distributed in its annual report.
"In many cases, food aid is used because it is the only available resource, not because it is the best solution to the problem at hand. Increased and more flexible resources are needed to address food insecurity," said Jacques Diouf, Director-General of the FAO.
Food aid should not be linked, either explicitly or implicitly, to commercial transactions or services in the donor country, the report proposed, reiterating what most development agencies, such as Oxfam, have been saying for years.
The 2006 'State of Food and Agriculture (SOFA)' report, released in January, recommended that aid be provided in the form of cash or food coupons rather than food-aid shipments, which can affect producers and markets in recipient countries and distort international trade.
All World Trade Organisation (WTO) members are required to ensure that food aid is not directly or indirectly tied to commercial exports of agricultural products, "but the disciplines do not specify what this means and do not provide for raising disputes or resolving them", wrote Gawain Kripke, of Oxfam, in a briefing paper, 'Food aid or hidden dumping?'. Nongovernmental organisations (NGOs) have often cited evidence of food aid being used to capture new markets, and have questioned why in-kind food aid, rather than cash, is consistently provided by the United States of America (USA), in particular.
Almost all food aid donated by the USA is tied to domestic requirements for procurement, processing and shipping, and many other donors have similar requirements, the SOFA report said.
Some donors have stopped donating food aid in the form of commodities, providing cash instead, and up to 15 percent to 25 percent of all food aid is now purchased in the country or region where it is needed, according to the UN's World Food Programme (WFP). "Such transactions are generally referred to as 'untied', although donors may stipulate where purchases are to be made, thus reducing the overall flexibility of the procuring agency and raising costs," the SOFA document commented.
While food aid is relatively small in terms of the global food economy, it constitutes a significant share of the total food supply in individual countries in certain years. During the 1992/93 drought in Mozambique, for example, food aid in the form of yellow maize contributed about 60 percent to total cereal availability in the country, and represented 20 percent to 35 percent of cereal supplies throughout the first half of the 1990s.
Oxfam found that in 2002/2003, food aid donors over-reacted to a projected 600,000 metric tonne food deficit in Malawi, causing a severe drop in cereal prices, which hurt local producers.
The FAO found that in recent years food-aid value, calculated on the basis of global annual cereal export unit values, has averaged about 10 million tonnes, worth about US$2 billion per year.
Cereals account for the largest component, with the USA identified as the biggest donor: since 1970 it has contributed an average of six million tonnes of cereal food aid annually, funding about half the work of WFP, which handles 40 percent to 50 percent of global food aid, according to the agency.
The SOFA 2006 report identified the Democratic People's Republic of Korea as the biggest recipient of food aid in the five-year period from 2001 to 2005, when it received more than 1.1 million tonnes of grain equivalent per year on average. Ethiopia received almost as much on average, but the amounts varied from year to year.
Types of Food Aid
There are essentially three major types of food aid: programme, project, and emergency. Programme food aid is a contribution of food produced by a rich country to the government of a recipient country. "Virtually all programme food aid is 'monetised', i.e., sold on a recipient country's markets to generate cash," said Oxfam's Kripke. "The US is the only country that sells 'food aid' to recipient countries, although it [selling] is being phased out." Oxfam said the USA also provided loans to countries to buy food aid.
Monetisation is used by NGOs implementing project aid, mainly from the USA, the FAO report noted. "In the late 1980s, only about 10 percent of all project food aid was monetised, but this has increased to more than 30 percent in recent years", it added, citing WFP as the source of information.
Project food aid is donated to support specific activities and projects, and is often related to promoting agricultural or economic development, nutrition, and food security directed at programmes such as food-for-work and school feeding.
Emergency food aid is distributed free to the food-insecure in times of crisis, such as war or famine, but this aid is an expensive and slow intervention, especially when sourced in a donor country. "Experience shows that timely deliveries of appropriate resources can enable people to manage shocks and avoid slipping into severe food insecurity ... [but] emergency measures commonly fail to appreciate the extent to which people rely on markets for their livelihoods and food security," the FAO report said.
Interventions aimed at rebuilding market infrastructure and restoring trade links can often achieve lasting improvements in food security without the need for massive food aid, the agency pointed out.
Demand-driven Food Aid
In the civil society input to the FAO report, Michael Windfuhr, human rights director of the German charity, Bread for the World, emphasised the necessity of a sound needs assessment of food-insecure and vulnerable groups ahead of distributing food aid.
Windfuhr told IRIN, "Food aid must be demand-driven and not donor-driven. Studies have shown that there is a correlation between a large surplus [of food] in certain donor countries, global prices and the flow of aid. It is evident in the case of the United States and, to some extent, with the European Union (EU)."
Alfred Hamadziripi of the Southern African Regional Poverty Network, a South Africa-based NGO that promotes debate on poverty-reduction strategies, also underlined the need to conduct studies on the impact of food aid and other interventions on the recipients, so as to inform donors of the best relief options.
Oxfam pointed out that the USA was also the only major donor to disburse a large proportion of its food aid on a bilateral basis, rather than channelling it through organisations such as the WFP.
US legislation provides for the priority export of agricultural commodities to developing countries that have demonstrated the potential to become commercial markets. "This is a major, and unfair, subsidy to exporters of the donor country," Oxfam commented. USAID, the American government agency responsible for humanitarian aid, is not affected by such legislation.
Global Food Prices
Critics have often pointed out that "the quantity of food aid available from year to year varies inversely with world prices, rising when supplies are plentiful and prices low, but falling when supplies are tight and prices high - just when it is needed most". The FAO provided historical data to prove the point.
"Food aid volumes fell by half between 1970 and 1974, a period when world cereal prices almost trebled. In the mid-1990s, agricultural policy reforms in several major cereal-producing countries led to sharp reductions in surplus stocks, which, together with short harvests in 1996, led to a spike in world cereal prices and another precipitous drop in food-aid shipments."
Aid in Cash or Kind?
The debate on providing cash or aid in kind has been running for some time, and in 1996 the European Commission (EC) opted for a "cash only" approach to providing food aid.
Gaddi Vasquez, US Ambassador to FAO, concurred in a statement that food aid was only one of many tools that could be used to tackle hunger, and said his government supported the report's call for renewed efforts to improve the management and governance of food aid. In reference to the FAO's suggestion that cash transfer and food coupons were a better option, he said his country was "keenly interested in improving the effectiveness, efficiency and flexibility of food aid. However, the primary rationale for providing food for reducing food insecurity should be humanitarian rather than economic."
He said the US had over 50 years of experience of food aid, and reaffirmed the "belief that those who require donor assistance would rather have 'good' assistance made available on a timely basis, than have 'theoretically better' assistance that never arrives." Vasquez did not comment on the correlation between surpluses, global food prices and the flow of aid.
The US government has maintained that humanitarian crises around the world call for different types of aid.
"The principal cause of famine in the last several decades has been a collapse of production, usually caused by war or drought or some kind of locust infestation, where the crop collapses. If you go in and do local purchase on regional markets, you drive food prices up," Andrew Natsios, the then administrator of USAID, told a WTO ministerial meeting in 2005.
"During the Somali famine of 1992, where 300,000 people died and there was military intervention to stop it ... the cost of food went up 700 percent to 1,200 percent over a four-month period. That was the principal cause of the famine," Natsios was quoted as saying on the website of the United States Mission to the EU.
However, aid workers in Southern Africa have pointed out that there were major issues related to the efficiency and cost of US aid. "Since food aid has to be procured in the US, it takes months to get here, often too late. The European Commission-funded aid, as it is procured regionally, can be transported to the affected country within weeks," an aid worker said.
American legislation requires that 50 percent of commodities be processed and packed (value added) before shipment; and that 75 percent of food aid managed by USAID, and 50 percent of the food aid managed by the US Department of Agriculture, be transported in "flag-carrying" US-registered vessels, resulting in high costs, the SOFA report noted. The authors referred to research which had estimated that approximately half the total US food-aid budget was captured by domestic processing and shipping firms as a result of various tying requirements, but "American farmers generally do not benefit because food aid is too small to influence domestic prices".
The first international governance institution for food aid, the FAO Consultative Sub-Committee on Surplus Disposal (CSSD), was established in 1954 to provide a forum for consultation among food-exporting countries, with the aim of minimising commercial market disruption.
Food aid flows have to be reported to the CSSD, the Food Aid Convention (FAC), WFP and the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD), but the SOFA report noted that none of these organisations has the capacity or mandate to govern food aid effectively from a food-security perspective. "Of these, only the FAC is a formal international accord, but it has no mechanism for enforcing compliance of signatories to their commitments."
The risk of food aid displacing commercial trade has been recognised for a long time. Although food aid can be beneficial to recipient countries, enabling them to save scarce foreign exchange, Diouf commented that many commercial exporters and importers considered it a form of unfair competition, which had made it one of the most contentious issues discussed in the Doha Round of WTO negotiations.
These negotiations were suspended in July 2006, but the FAO said there was some agreement that food aid should be needs-driven; should result in additional consumption; be provided fully in grant form; and not be tied directly or indirectly to commercial exports of agricultural products.
The Doha negotiations are expected to resume soon, as members now have only a few months to reach a breakthrough.