Why does a surgical facemask cost the Kyrgyz government $4.63, while it costs the United Nations $0.87? What about an HIV test for which the government has paid $547, but costs the UN only $20?
Foreign donors are often hesitant to provide cash to Kyrgyzstan’s government, fearing much of it will be improperly spent, or siphoned off. Newly compiled data for one international aid project appears to justify those concerns. The case study involves assistance provided by the Global Fund to Fight AIDS, Tuberculosis and Malaria, which has spent $62 million in Kyrgyzstan since 2003.
Between 2003 and late 2010, most of the Global Fund money was funneled directly to the Kyrgyz government via the Health Ministry’s Republican AIDS Center. In February 2011, citing concerns with how the money was being spent, the Global Fund decided to shift money for its programs to the United Nations Development Program (UNDP). The move, which has saved the Global Fund at least a million dollars, sparked protests outside UN offices in Bishkek and at least one UN official describes receiving anonymous threats.
Donors suspect the price differences for supplies are due to procurement fraud, and point to Kyrgyzstan’s opaque, and thriving, pharmaceutical-imports industry.
Kyrgyzstan’s aid dependence is no point of pride for either the government or its foreign backers. This year, foreign cash grants will cover $113 million of the government’s basic operating budget of $2 billion, according to estimates from the Ministry of Finance published by K-News. The ministry estimates donors will provide another $229 million in grants and soft loans to the state investment fund, which manages nearly all of the country’s infrastructure projects. The government also continues to hold out hope for an oft-promised $107 million grant from the Russia-led Eurasian Economic Community’s stabilization fund.
Other donors, particularly individual foreign governments or UN agencies, provide additional indirect support in the form of technical expertise, training, and donations of goods and equipment. The US government’s development agency, USAID, intends to spend $47 million in 2012 on such projects in Kyrgyzstan.
As a candidate for direct budget support, Kyrgyzstan is a troublesome case. The country ranks 126 out of 146 countries in budget openness, according to the corruption watchdog Transparency International.
International aid workers interviewed by EurasiaNet.org on the subject requested anonymity due to concerns about reprisals from superiors, or political backlash from government partners. Many argue that donor programs directly subsidizing government activities are wasteful and can undermine much-needed political and structural reforms. Proponents of direct aid, meanwhile, argue that “ownership” of the country’s problems and the resources to fix them will push the government to change.
One senior international trade expert decried as a “disaster” a $7.5 million Asian Development Bank-funded trade-streamlining project. “Government officials spent their time stalling on the reforms while making arrangements on the side to siphon off money through subcontracts and payroll. Now it is years later, and there is still no result,” the expert told EurasiaNet.org.
The World Bank has had similar problems. In July, the bank demanded the Ministry of Finance return $425,000 in improperly documented expenses charged to its potable water infrastructure project, according to local press reports.
Neither the Asian Development bank nor the World Bank could respond to EurasiaNet.org’s repeated requests for comments within a reasonable timeframe.
Since losing the lucrative Global Fund grant, government officials comprising half of its Country Coordinating Mechanism (CCM), have tried doggedly to restore the old funding mechanism, UN sources say.
At a board meeting in July, the UNDP claimed it has saved $1.7 million in one year by moving away from the Kyrgyz government’s preferred local suppliers and contractors. The Republican AIDS Center, and government medical facilities dealing with tuberculosis and malaria, paid premiums of over 100 percent on 22 classes of medical supplies and nine drugs in 2009-2010. The prices for 13 essential items, many of them basic (such as boxes for syringe collection), were over 300 percent higher when sourced by the Kyrgyz government, data given to EurasiaNet.org show. Over eight years, a UN source said, the Republican AIDS Center overspent at least $5 million in Global Fund money.
Government representatives on the CCM brush aside transparency concerns, declaring that parliament wants the money back, and demanded an open vote, according to attendees at the board meeting. International donor delegates to the CCM, all of them Kyrgyz citizens, largely abstained from the subsequent vote, preferring not to risk personal relationships, or political backlash, by publicly opposing their government’s preference.
The government won the vote, and the CCM’s recommendation was sent to the Global Fund’s secretariat in Geneva for approval. The stakes are high—the Global Fund has approved another $35 million to treat HIV and tuberculosis in Kyrgyzstan in the coming years. Foreign governments, particularly the United States and European countries, largely finance the fund.
The Ministry of Health has tacitly acknowledged the failure of its HIV/AIDS efforts, and has promised to restructure the Republican AIDS Center. But speaking with EurasiaNet.org, Deputy Health Minister Marat Kaliev denied wrongdoing at the Center. He also attributed price differences to market changes between 2010 and 2011 and said the government has difficulty participating in international tenders. While the UN does have longstanding relationships with international wholesalers, that alone cannot account for these vast price discrepancies, UN officials contend. Instead they suspect opaque tenders with local middlemen account for most of the markups.
Several aid experts say the Country Coordinating Mechanism is part of the problem.
“The CCM is supposed to provide accountability and oversight over how the money is spent,” said one senior international HIV expert familiar with the Global Fund’s procedures. “But in practice, CCMs simply reflect the larger society. Free and fair elections of members do not occur. […] There is no sense of governing for public, rather than private, benefit. Thus, the CCM is poorly equipped to oversee the use of the Global Fund’s grants to Kyrgyzstan.”
“If the government is not fulfilling its obligations with the funding it currently has, giving them more will not fix the problem,” the HIV expert added.