INSIGHT

China's Billion-Dollar Aid Appetite

Why is Beijing winning health grants at the expense of African countries?

Report by Jack C. Chow

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.

This is not to say, of course, that China's health system does not face formidable challenges. Indeed, global health policymakers worry that HIV/AIDS and tuberculosis in particular could rise dramatically as the country urbanizes and industrializes and a new middle class veers away from traditional social mores. Everyone remembers the SARS outbreak in 2002 and 2003 that practically shut down major cities in China. And beyond specific threats, the Chinese Center for Disease Control and Prevention, the chief implementer of the Global Fund portfolio and officiator of the government's public health strategy, has hard work ahead to build up China's health workforce and medical infrastructure.

But China might want these grants for reasons having more to do with politics than public health. The Health Ministry is the only member of China's policymaking State Council not led by a political party member. As such, its ability to compete for domestic funds pales in comparison with other assertive, powerful ministries led by longstanding party leaders. So the Health Ministry might be driven to external funding by political necessity. Or, China might value obtaining the technical assistance of international health agencies such as the World Health Organization, UNAIDS, and the U.S. Centers for Disease Control and Prevention; Global Fund grants provide a means of securing their advice and services. China's participation on the fund's board might also be useful to Beijing's global politics, confirming its importance on the world stage.

Whatever benefits China gains from seeking grants, however, stack up poorly against expensive opportunity costs exacted upon needier countries. The $1 billion awarded to China could have been used by the poorest countries to distribute 67 million anti-malarial bed nets, 4.5 million curative tuberculosis treatments, or nearly 2 million courses of anti-retroviral therapy for AIDS patients (a number equivalent to all those living with the disease in Kenya).

Sudan Update: U.S. Dept. of State re. Darfur

This following is a blog posting from http://blogs.state.gov/sudan/index.php/site/entry/darfur_peace authored by Major General (Ret) Scott Gration who serves as the U.S. Special Envoy to Sudan.

Just six months to go until the referenda on Southern Sudan's independence and the status of Abyei. As the international community turns its attention to planning for January 9, 2011, I believe continued engagement on Darfur is as important and relevant as it ever was. The (U.S.) President's Strategy calls for a holistic approach to resolving conflict in Sudan, and peace in Darfur remains a critical pillar of that strategy. At the same time, there is no single government, institution, or organization alone responsible for ending the Darfur conflict. Partnership and collaboration are essential to our efforts in the region, and I'm working closely with the African Union, United Nations, Arab League members, and my fellow Envoys from the UK, EU, France, Russia, and China to ensure success. The Government of Sudan and rebel groups, of course, have special responsibility to refrain from further violence and to create conditions on the ground conducive to international peace-building efforts. This charge remains a significant part of my ongoing discussions with these groups.

The peace process in Doha (Qatar) is still a priority. We continue to support the work of the AU/UN Joint Chief Mediator and the Government of Qatar to facilitate peace talks between the Government of Sudan and Darfur movements. I was encouraged earlier this year when Chad-Sudan relations improved and several Darfur factions united under the umbrella of the Liberation and Justice Movement catalyzed progress in negotiations. I'm disappointed, however, that Justice and Equality Movement (JEM) leader Khalil Ibrahim has chosen to abandon the negotiations. Last month I traveled to Tripoli to urge him to send his delegation back to Doha. Later this month will make my sixth trip to Qatar where I hope to meet with representatives of Abdul Wahid's Sudan Liberation Movement (SLM).

As talks in Doha proceed with the long-term aim of reaching a comprehensive peace agreement, we are taking all steps possible in the near-term to improve the security and living conditions of Darfuris. The recent spike in casualties caused by increased fighting between the Government of Sudan and JEM is deeply troubling. I'm also gravely concerned about reports of continued banditry, assaults, and gender-based violence targeting civilians, as well as recent kidnappings of peacekeepers and humanitarian workers. I believe we must improve the operating environment and safety for those who are working in Darfur. To that end, we are working closely with the Government of Sudan, with the African Union-United Nations Mission in Darfur, and with the African Union High-Level Implementation Panel to increase security and stability.

While planning for the referenda is of the utmost urgency, we must not and will not lose sight of Darfur. The United States has allocated more than $1.1 billion in FY 2009 funds to support humanitarian, early recovery, security, and peacekeeping activities in Darfur and Eastern Chad, and this assistance will continue. We're also directly supporting organizations that will build the capacity of Darfuri development NGOs, identify opportunities for reconciliation activities, and conduct outreach to internally displaced persons (IDPs), refugees, and Arab and nomadic tribes to ensure their voices are heard in the peace process. I will travel to El Fasher later this month for consultations on these initiatives, as well as agriculture and education projects. I'm committed to bringing sustainable peace to Darfur and the region.

The United States and Africa: Partnering for Progress

EDITOR NOTE: Following is a U.S. State Department Policy Paper dealing with America’s relationship with Africa.

The United States has been a strong advocate of the nations of Africa since their independence, and remains determined to support its African partners in achieving the shared long-term goals of democracy, stability, and prosperity.

U.S. - Africa Policy Priorities

• To help build strong and stable democracies
• To support economic growth and development
• To strengthen public health
• To help prevent, mitigate and resolve armed conflicts
• To address transnational challenges

Building Strong and Stable Democracies
Governments that respect the will of their peoples and govern by consent are more successful and more stable than governments that do not. The United States will work with the international community and civil society in Africa to strengthen democratic institutions, including independent elections commissions, and to preserve the democratic gains made in recent years.

Supporting Economic Growth and Development
The Obama Administration’s new $3.5 billion dollar food security initiative, Feed the Future, will assist 12 African focus countries. It will complement their own efforts under the Comprehensive Africa Agriculture Development Program to provide critical tools to farmers, allowing them to build local capacity to expand production. The U.S. is also committed to working with our African partners to maximize the opportunities created by the African Growth and Opportunity Act.

Strengthening Public Health Systems
The African continent continues to suffer from the ravages of HIV/AIDS, malaria, cholera, tuberculosis, and hepatitis. The United States is a leading provider of drugs and treatment to those affected by these diseases, and the Administration has pledged to continue the President’s Emergency Plan for AIDS Relief (PEPFAR) program and to commit an additional $63 billion over the next five years to meet public health challenges throughout Africa. The United States remains committed to working side-by-side with African governments and civil society to ensure that quality treatment, prevention, and care are easily accessible to communities throughout Africa.

Helping To Prevent, Mitigate, and Resolve Armed Conflicts
Africa contains many fragile states. Somalia remains locked in a state of war while the Democratic Republic of the Congo continues to struggle to defeat rebel forces operating in the eastern part of the country. Tensions are mounting in Southern Sudan. President Obama has demonstrated his commitment to ending armed conflict on the continent by appointing a Special Envoy for Sudan and a Special Advisor for the Great Lakes. The United States is committed to supporting the African Union’s vision of an African Peace and Security Architecture, including the African Standby Force.

Working To Address Transnational Challenges
Many problems – including narcotics trafficking, climate change, trafficking in persons, and violent extremism – jump across national borders and defy easy solutions. The United States is working to help address transnational challenges by bolstering African maritime security and supporting the fight against violent extremism through programs like the Trans-Sahara Counterterrorism Partnership and the East Africa Regional Strategy Initiative. The United States is committed to working with Africans to find viable solutions to the severe consequences of climate change and to build a sustainable, clean-energy global economy.

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