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China’s Billion-Dollar Aid Scam: winning health grants at the expense of African countries

Posted by Author on July 21, 2010

BY JACK C. CHOW |The Foreign Policy,  JULY 19, 2010 –

Back in 2001, I was the lead U.S. negotiator in international talks meant to transform the way that poor countries fight some of the world’s most pernicious diseases — HIV/AIDS, tuberculosis, and malaria. Our vision looked like this: Instead of each country spending on its own, rich countries would pool donations into one coordinated fund that would give grants to help resource-strapped countries purchase medicines, build health programs, and prevent the diseases from spreading. We imagined the bulk of the money ending up in places like Lesotho, Haiti, and Uganda, where these three diseases have reached crisis levels. So it might surprise and concern you — as much as it still does me — to learn that one of the top grant recipients isn’t in sub-Saharan Africa, Latin America, or impoverished Central Asia. It’s a country with $2.5 trillion in foreign currency reserves: China.

Over the eight years since the Global Fund to Fight AIDS, Tuberculosis and Malaria first launched, China has applied for and been awarded nearly $1 billion in grants, becoming the fourth-largest recipient of funds behind Ethiopia, India, and Tanzania. Already, the country has drawn nearly $500 million from this credit line and soon expects to receive $165 million in new grants. China’s aggregate award from the fund is nearly three times larger than that of South Africa, one of the most affected countries from these three diseases. Moreover, China has won malaria grant money totaling $149 million (and $89 million more might be on the way) — in a country where only 38 deaths from the mosquito-borne illness were reported last year. That is more than the $122 million awarded to the Democratic Republic of the Congo, which reported nearly 25,000 malaria deaths during the same period. In fact, only seven sub-Saharan African countries receive more malaria aid than China — and 29 countries in Africa get less. Combined, those 29 countries report 64,000 deaths from the disease each year.

China has aggressively pursued Global Fund grants and has continued to win significant amounts with every passing year. Beijing does make a nominal contribution to the fund of $2 million annually, meaning that it has donated $16 million over the last eight years. By comparison, the United States, the leading donor, has committed $5.5 billion, and France has offered $2.5 billion over the same period. These contributing countries expect no financial return for their gift, but China has recouped its spending by 60 times.

Even more alarming, China’s persistent appetite threatens to undermine the entire premise behind the Global Fund. The organization’s leadership is trying to solicit between $13 billion and $20 billion to cover its next three years of operations — a tall order at a time of global recession. Donors will grow even more reluctant if they realize that substantial funds are being awarded to a country that can more than pay for its own health programs.

How did China ever become eligible for grants in the first place? In short, because of a loophole. The Global Fund decides eligibility for grants based on the World Bank’s classification system, which divides countries by income. High-income countries such as the United States, the European industrial countries, and Japan are ineligible. Low-income countries, including many in sub-Saharan Africa, are grant-eligible. In between, so-called lower-middle-income countries like China are eligible if the grants are part of a cost-sharing program through which the fund pays up to 65 percent and the country pays the rest. (China stays in this lower-middle-income category because its huge population keeps per capita figures down.) The country competes with the likes of Bolivia, Cameroon, and India in this category. But because the fund’s pot of money isn’t allocated by income group, any grants that China wins reduce the remaining money available for all eligible countries.

For a country like Cameroon, cost-sharing grants make a lot of sense. By giving part of the full amount, the fund can spur the host government into investing more of its discretionary budget in health. The extra cash can build health infrastructure and capacity, preparing the country to wean itself from foreign funds. But in China’s case, the argument for a Global Fund grant is tenuous at best. During the depths of the world economic crisis in 2008, China put forth a massive economic stimulus package of $586 billion that included new health and education spending of $27 billion. The government announced its intention to boost rural health coverage with $125 billion in spending over the next several years. Even a fraction of that promised amount would negate any need by China to draw upon the Global Fund……. (more details from The Foreign Policy: China’s Billion-Dollar Aid Appetite)

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