Canada takes a fresh look at foreign aid, and cuts strings

Like the individual who deducts his charitable contributions from taxable income, the world's industrial nations usually try to obtain some domestic benefit from their aid to developing countries. Canada has just decided to be somewhat more altruistic in its foreign aid. Poor countries receiving Canadian aid dollars will have to use less of that money in Canada.

Instead of being required to spend 80 cents of every dollar received in bilateral foreign assistance on the purchase of Canadian goods and services, the poorest aid recipients will need to spend only 50 cents in Canada. Better-off developing countries must spend 66 cents of each dollar in Canada.

``That's a step in the right direction,'' comments Roger Young, who follows foreign aid issues for the North-South Institute, a small think-tank in Ottawa. ``But we had nowhere to go but up.''

Canada has been almost the worst among the 18 major donor nations in tying aid to domestic purchases. But it is fairly generous in giving assistance. Canada donates $2.9 billion in aid, 0.50 percent of total national output, to the poorer countries, well above the 0.23 percent for the United States or 0.33 percent for Britain.

Business is less happy about the change. About 200 exporters met with Canadian International Development Agency (CIDA) officials in May and offered some objections to untying in their private sessions.

``In a perfect world we would agree that untying is desirable,'' says Frank Petrie, president of the Canadian Exporters Association. ``But it is not a perfect world.'' He fears that former colonial powers, such as Britain, France, or Belgium, will use their long-established contacts to take away business from Canadian firms once aid is untied.

In the case of food aid, 95 percent will remain tied. Since Canadian farmers usually have surplus grain to dispose of, the plan arouses Mr. Young's suspicion.

``We will have to watch that our food-aid program is developmental and not aid to our farmers,'' he says.

Fran,cois Pouliot, CIDA's policy branch chief, says food aid will be dispersed bilaterally ``only when we are satisfied that a country has a policy for the rehabilitation of its agricultural sector.''

Foreign-aid critics charge that shipments of grain and other foods to a developing nation will sometimes depress prices sufficiently to discourage domestic food production.

``We are sensitive to this,'' says Mr. Pouliot.

Canada's foreign aid program is unique in the extent to which it relies on nongovernmental organizations. Churches, service clubs, relief agencies, universities, unions, cooperatives, professional associations, and other such bodies deliver about 11 percent of the nation's foreign aid, above the 7 percent in the US and way above the percentage in Western Europe.

Other aspects of CIDA's new strategy include:

A nation's human-rights record will be taken into account in dispensing foreign aid.

CIDA will double the number of scholarships for third-world students over the next five years to a total of 12,000 per year.

The agency will decentralize its operations from its headquarters in Hull, across the Ottawa River from Ottawa, putting more decisionmaking power in offices in developing nations.

CIDA will emphasize even more ``human resource development,'' helping third-world nations train and educate their people.