Aid listen, George. (Feature).

The World Bank has launched a new development aid package called the Private Sector Development Strategy (PSD), while the american government has launched its own Millennium Challenge Account (MCA). But will these programmes make any difference?

The Private Sector Development Strategy (PSD) is expected to dovetail neatly with the agenda of the World Trade Organisation in the areas of investment and services. In this new approach, aid will be given in the form of grants, as opposed to loans. It will circumvent governments and go straight to NGOs and the private sector.

For an institution floundering helplessly to justify its existence, the World Bank had to salvage its credibility. For now PSD is the escape window.

"This is output-based-aid, we shall subsidise delivery," says Richard Uku, the development officer in the World Bank's Development Strategy unit in Washington.

Shaken by the recent widespread anti-globalisation protests, the World Bank and the US government now want to reinvent themselves by adopting the PSD and MCA.

The Bank became even more apprehensive against recommendations by an advisory commission to the US Congress two years ago, popularly known as the Meltzer Advisory Commission, which indicated that the US had become irrelevant to its developmental and poverty reduction mission.

Washington characterises President Bush's Millennium Challenge Account (MCA) as the third development initiative since World War II, following President Harry S. Truman's Marshall Plan and President J.F. Kennedy's Alliance for Progress. It will increase bilateral grant aid from $12 billion to $17 billion annually. This will go to a limited number of countries--about 20.

Kathryn Stratos, a spokesperson for the Washington-based International Aid Agency says MCA's goal must be to reward sound policies with decisions that support economic growth. "This was supposed to be launched in 2004, but some constituencies want it launched in September next year. Iris still being discussed," adds Stratos.

But like most of the World Bank's initiatives, the strategy is not without controversy. While some NGOs are against both the PSD and MCA, others are all for them.

Nancy Alexander, director of a Maryland-based NGO, Citizen Network, argued that the new approach to developmental aid threatens infrastructure and basic service provision for which user fees will be charged.

Another controversy emanates from the fact that the new aid paradigm empowers donors to interfere with recipient countries' domestic processes even more, by holding resources hostage until recipient governments lease or privatise services.

In Ghana, for example, Britain is withholding about $300m until the government commits itself to leasing water concessions to multinational corporations. For Ghana, like many other developing countries, sovereignty has almost been lost. The World Bank is in charge in Accra. If the government fails to comply with the conditionalities, it will lose access to as much as $1.2bn in foreign assistance.

Another thorny issue is the World Bank-sponsored Independent Power Producers (IPP) with Power Purchasing Agreements (PPAs) which are essentially output related. Pundits say these place risks and burden on the host countries.

One of the most controversial private infrastructure projects is the proposed 250-megawatt, $500m hydropower station in Bujagali in Uganda to be built and operated by a subsidiary company called Nile Power.

This will be East Africa's first private hydropower project and is the largest private investment in the region. It is a "Build-Operate Transfer" (BOOT) project scheduled to transfer to the government in 30 years. Under the terms of the project, there will be a 30-year power purchase agreement with the state-owned Ugandan Electricity Board.

Since the plant will sell more to the government than the country needs, the government will need to export power to neighbouring Kenya in order to meet the commitments contained within the PPA.

Christian Wright, head of Nile Power, however, insists that "Nile Power will not build the hydropower station in Bujagali without a government guarantee that the Uganda Electricity Board will buy the power produced there."

Similar Power Purchasing Agreements underpin World Bank-financed power projects in Kenya (Kipevu II), Mexico (Merida III), and Egypt under the PSD. That, arguably, burdens aid recipient countries under the PSD.

The strategy also demands that developing countries delegate basic service provision to private firms and NGOs under contracts that tie financial support to output-based-aid (OBA) or service delivered.

But that is not what the British NGO, Oxfam, wants to hear. The organisation that believes in "trade not aid", argues that while Foreign Direct Investment (FDI) which underpins PSD was good for economic growth, it may not benefit poor countries.

In a recent report titled Rigged Rules and Double Standards: Trade, Globalisation and the Fight against Poverty Oxfam revealed that "for every $1 offering investment, around 30 cents are repatriated through profit transfers. Not all investment is good investment. In development terms, a good-quality investment transfers skills and technology, and creates dynamic linkages with local firms. Much of FDI does not fit in that category."

This, according to Oxfam, has been worsened by the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement.

"Trade restrictions in rich countries cost developing countries around $100 billion a year--twice as much as they receive in aid.

"For every dollar given in aid, two are stolen through unfair trade. Developing countries are expected to lose up to $40 billion in the form of increased licence payment to Northern-based multinational corporations, with the US capturing around half of the total.

"Behind the complex arguments about intellectual property rights, the TRIPS agreement is an act of institutionalised fraud, sanctioned by WTO rules," the Oxfam report said.

And that is what worries Joseph E. Stiglitz, the former World Bank chief economist, whose recent book, Globalisation and its Discontents, is causing the IMF a lot of headache. No wonder, the IMF has been at pains to dismiss the book in which Stilitz vilifies the institution.

But Stiglitz is not an ordinary mind, he is a scion in the economic establishment with outstanding achievements. He is the winner of the 2001 Nobel Prize in economics, a former chairman of the President's Council of Economic advisors under President Bill Clinton, World Bank chief economist, and now professor at Columbia University in New York City.

Stiglitz bemoans the fact that in this era of abundance, incomes are not swelling in much of the world, and adoption of market-oriented policies such as open markets, free trade, and privatisation work better in a more and smarter environment of government intervention.

"Critics of globalisation accuse Western countries of hypocrisy," he writes in his book, "and the critics are right", adding that the "rich countries have held onto their trade barriers while demanding that developing countries lower theirs".

In this, Stiglitz is supported by the British prime minister, Tony Blair: "Encouraging investments; and access to our markets so that we practise the free trade we are so fond of preaching", was how Blair put it in his famous Brighton speech in October last year. Even the IMF, which has now trained all its top guns on Stiglitz, cannot dispute this.

Kenneth Rogoff, the IMF's economic counsellor and director of its research department, tried (some say, unconvincingly) to demolish Stiglitz in an open letter published on 2 July. On page 119 of his 282-page book, Stiglitz writes:

"It was not just that IMF policy might be regarded by soft-headed liberals as inhumane. Even if one cared little for those who faced starvation, or the children whose growth had been stunted by malnutrition, it was simply bad economics." What truth.