There is a growing concern among the Third World nations of Asia, Africa and Latin America that the United States is backing away from its historic commitment to help the less-developed nations.
The focus of this concern is the fate of the International Development Association (IDA), the World Bank's soft-loan affiliate which makes interest-free loans for a period of 50 years at a nominal service charge to finance projects in the world's poorest developing countries.
Currently in its sixth replenishment, IDA ran into difficulties in fiscal 1982 because the United States cut back its planned commitments for the lending program. The Reagan administration, despite its declared intention of honoring the Carter administration's pledge of a $3.24 billion to the program, could convince a reluctant Congress to approve only a $1.1 billion contribution, a level that virtually crippled the lending program.
Cutbacks in U.S. funds do more than drastically curtail the amount of resources available for lending: they could bring into play a clause governing the structure of the IDA program that forbids the lending out of any IDA funds until 80 percent of the total resources scheduled for commitments are in the bank's coffers.
Third World anxieties about a sustained U.S. commitment to multilateral aid come at what most Americans would consider a particularly painful moment. With the economy in a recession and double-digit unemployment, questions are being asked as to why the American taxpayer should continue to spend money on foreign aid when staggering problems need to be dealt with at home. Americans are unwilling to take on what they believe to be other people's problems before setting their own house in order.
Third World representatives and World Bank spokesmen argue that the amounts needed for IDA are relatively insignificant and will in no way add a burden to the strained U.S. economy. They note that the preoccupation with internal economic problems does not seem to stop heavy defense spending or bilateral aid to the Middle East. "If you're really worried about the pockets of your own poverty," argues one World Bank official, "what on earth are you doing funding Egypt and Israel for stability in the Middle East?"
Third World government representatives complain that over two-thirds of U.S. bilateral aid continues to flow to the Middle East, while they claim that less than 30 percent of bilateral assistance goes to developing countries. They maintain that security considerations are as valid in the case of assistance to the developing nations of Asia, Africa and Latin America.
Representatives of governments from the Third World realize that when the Reagan administration is trying to cut back spending on domestic poverty programs it is reluctant to fund international programs with similar goals. And they are aware that the administration prefers bilateral aid because it gives the United States greater leverage over the recipient country. But they are anxious that the U.S. perceive multilateral institutions as useful in furthering its national security interests.
"It's not a question of feeding hungry mouths in India as opposed to feeding hungry mouths in Alabama," said a senior bank official. "It's an issue of what are the vital worldwide interests of the United States."
Moreover, he argued, the amounts requested in the IDA contribution were "trifling." For an economy that "accounts for 33 percent of the free world's GNP, 37 percent of the free world's trade, the amounts are almost laughable," he said.
A troubled and restless Third World, government representatives say, could be the breeding ground of political instability that threatens U.S. interests. China's alternate executive director at the World Bank, Chen Hui, reasoned that money for IDA was not "charity" because "politically, if developing countries continue to grow, it becomes difficult for expansionist forces to exploit the unrest arising out of the poverty in developing countries" -- implying that otherwise the Soviet Union would make political capital out of the situation.
"The U.S. argues that its contribution to all the poorer developing world for one year through IDA of $945 million is too much," said Dr. Y. Seyyid Abdulai, who resigned last month as one of the bank's executive directors for Africa, "yet at a moment's notice they will send whatever it costs to Lebanon and Israel . . . the priorities are just not right." He sees the problem of U.S. funding for IDA as being a "shortage of political will to help the developing countries" and "not financial constraints."
Underlying most Third World demands on the United States and other industrialized nations is a perception of a historic legacy of colonialism. Many in the Third World believe that the Western nations imposed colonialism on the Third World at a crucial point in its economic development, destroying incipient industrialization by taking away essential resources to further their own industrial growth.
Third World economies, it is believed, were converted into satellites providing raw materials for the West, which now owes its advanced state of industrial growth to this colonial process, and getting Third World economies back on the road to self-sufficiency is only redressing this historic imbalance.
European nations differ sharply with the United States in their view of IDA and the World Bank. They believe that economic ties with developing countries are of value to their recession-hit economies, and they have therefore stepped in to save IDA and the multilateral aid process.
Last year's lending crisis could have resulted in the death of IDA if the other industrialized nations had stuck to their right to scale down their contributions when the United States did. But fearing that the crisis would have a devastating impact on the world's poorest countries, other donor countries decided to make full payment.
Yet even after these attempts to rescue IDA's lending operations, the agency was far short of its normal lending authority and had to curtail its lending by about $1.5 billion. South Asian countries were the major losers--regular World Bank loans were substituted for IDA funds on the grounds that these countries were creditworthy enough to bear harder terms. Lesser cuts in IDA funding were made for countries in Sub-Saharan Africa because many of them have no access to funds on commercial terms, either from the World Bank or elsewhere.
Third World representatives at the World Bank are concerned that last year's lending crisis might not be an isolated event, especially since the United States is yet to get its final contribution to IDA-6 through Congress this year. The Reagan administration is requesting $945 million, but whether Congress will go along in a time of sharply contested spending needs and an increasing budget deficit is the question.
Even if the administration manages to get the $945 million appropriation through Congress, the United States will still be $1.095 billion short of its promised IDA-6 contribution. The administration has indicated that it will pay this balance in fiscal 1984, thereby stretching out the life of the sixth replenishment another year. This unprecedented addition of a fourth year to a three-year IDA replenishment delays the starting of IDA-7 negotiations.
But IDA-7 is expected to take off in fiscal 1985. The other industrialized nations have agreed to tide IDA over fiscal 1984, contributing an additional $2 billion. These donors have not decided how their additional $2 billion is to be used, whether through the normal IDA account or through a parallel fund from which procurements can be made only in donor countries contributing to the fund and recipient countries. This would exclude the United States, which would still be paying up the arrears of its IDA-6 contributions.
Meanwhile, the bank is searching for ways of getting around the capital constraints. One possibility being considered is an altering of the structure of IDA.
At present, its loans are interest-free with a maturity of 50 years. Some donor countries believe these terms should not apply to some recipients like India and China which are thought capable of coping with harder lending terms. A differentiation of interest rates and shorter maturities is being suggested for the "blend countries"--borrowers of both IDA and regular bank loans. The poorer countries like those in Sub-Saharan Africa, which are totally dependent on IDA because they can't borrow elsewhere, would continue to receive IDA loans on the same terms.
India has the largest concentration of the world's absolute poor and one of the lowest per-capita incomes among IDA borrowers, entitling it to a large percentage of IDA funds (40 percent until recently, when it was cut to 33 percent because of the shortfall in resources). But in the bank's eyes India has reached such a creditworthy state that it can handle harder terms.
The bank's own World Development Report, however, notes that India's credit standing might be undermined by "too great a reliance on private capital markets." Indian officials have claimed that its creditworthiness is a result of a judicious use of commercial funds and that more commercial borrowing could destroy its standing.
India's claims based on low per-capita income and a large population are matched by China's. Chen Hui indicated that the Chinese expected a percentage roughly equal to India's. "China and India are at the same level of economic development and at the same level of income; therefore the share of India and China should be about the same," he said.
Unlike India or China -- countries having an industrial base attractive to commercial lending -- the economy of Sub-Saharan Africa remains largely agricultural. Projects in agriculture have not been known to attract commercial capital because of the relatively low rates of return compared with industrial projects. Africa therefore remains a major candidate for IDA borrowing.