Stolen assets: learning from the counterpart funds

Over the past 16 years, Switzerland has repatriated 1.7 billion Swiss francs in stolen assets to countries in the South. More stolen billions are presumably still sitting in Swiss numbered bank accounts. Officially, these funds are to be given back to the people who have been robbed.

But how is this to be done? The draft law on the restitution of stolen assets, discussed in the summer session of the Upper House and now headed for the Lower House in the autumn, offers no convincing answer to this question. What is also still unclear is what should happen if the country concerned does not request judicial assistance – whether because of the continuing influence of the dictatorial clans or because the government is not interested in «restitution to the people» but wants to use the monies otherwise.

Difficult «restitution to the people»

Often, «restitution to the people» is anything but simple. If in the country concerned, for example, the support goes to projects that are already foreseen in the budget or are being financed via other channels, the additional benefit is nil. At worst, this could «free up» funds which are not invested for the benefit of the people (but for example in military build-ups or other nonsensical projects) or which find their way into accounts in offshore centres.

Thus, there is no certainty as to what has become of the 1.7 billion repatriated by Switzerland and the extent to which the populations have in fact benefited from those funds. In the case of the roughly 500 million dollars of «Abacha funds» that went back to Nigeria in 2005, Switzerland entrusted a Nigerian coalition of non-governmental organisations with the monitoring. That was a first step in the right direction. This monitoring did indeed reveal that a considerable part of the funds had not benefited the population.

The case illustrates that it is not enough to charge independent organisations «retrospectively» with the monitoring process. Precisely in states that have no transparent budget, civil society organisations must be included in all phases of the restitution process. This however calls for a suitable mechanism. In that connection Switzerland could learn from the concept of the counterpart funds being implemented under the Swiss debt cancellation programme.

Counterpart funds – a success story

In 1991 the Swiss Confederation celebrated its 700th anniversary. The parliament used the occasion to approve an additional 700 million francs for debt reduction and environmental projects in the South. In so doing it was acceding to the petition «Development needs debt relief» for which the aid agencies had collected 250,000 signatures.

How should these sums be used however? How to ensure that the debt cancellation measures did in fact contribute to reducing poverty and benefit the poorest population groups? The monies could have been transferred directly into state coffers (as a contribution to the budget for development or poverty reduction programmes). Or it could have been disbursed through the Swiss Agency for Development and Cooperation (SDC) and the State Secretariat for Economic Affairs (Seco). Those responsible for the debt reduction programme decided on a third option: a proposal put forward by the aid agencies to create bilateral counterpart funds locally (see accompanying text).

At the end of 2009 the last of these 12 counterpart funds was closed. The external final evaluation attested that all the funds had performed well in reaching the target groups. It showed no evidence of mismanagement or misappropriation. Compared with other development assistance programmes, the funds operated with the highest degree of cost efficiency: over 90 per cent of the resources went into projects. Admittedly, most of the funds had to learn the hard way in the beginning and it took longer than expected for them to identify the fields and projects in which to invest. Yet that patience has paid off.

Target group-oriented and flexible

What do the experiences with the debt reduction programme show? First, that the funds make it possible to establish a direct link between debt cancellation and poverty reduction. The funds proved to be effective instruments for channelling considerable additional amounts on a targeted basis: the fund in Egypt alone financed grassroots projects worth 100 million francs.
A second insight is that funds are not all the same. None of the 12 debt reduction funds resembled any other. Development funds are adjustable channels of funding that create scope for customised solutions and innovative projects.

Lastly, the funds are ideal for including civil society forces in formulating, deciding and implementing projects and programmes. As such, not only do they ensure that the monies reach the right places, but they also promote the much-vaunted «multi-stakeholder dialogue» on a small scale.
Bruno Stöckli, Alliance Sud Expertise

Article published in: Alliance Sud News No. 64, Summer 2010

Flexible and locally oriented:
Counterpart funds in practice

In the mid-1990s Switzerland negotiated the conditions for bilateral debt relief with 12 governments in the South (debts under the export risk guarantee scheme). Switzerland offered to renounce its claims completely. In exchange, the governments in the South were to pay a portion of the debts as a «counterpart» into a bilateral fund that was to finance poverty reduction projects. This counterpart share was higher for «richer» developing countries than for poorer ones (Egypt, 60 per cent of claims, Zambia, 8 per cent). Altogether, the 12 counterpart funds allocated almost 300 million francs for poverty reduction.
The way the money was distributed was decided locally and in accordance with the conditions prevailing in the country. Local NGOs were involved in the decision-making process, including, from the Swiss side, the Debt-for-Development Unit of Alliance Sud, a division funded by the Confederation. The outcome was 12 funds with vastly different funding instruments. Senegal and Côte d'Ivoire opted for micro-credits and the promotion of small businesses; in Egypt the funds went to environment-friendly infrastructure projects in marginal areas, whilst Latin American funds supported social projects.
A body consisting of representatives from both countries was responsible for seeing to it that the funds were used as intended. A technical committee was charged with examining, selecting and steering the projects, and as a rule consisted of local representatives from NGOs, the private sector and the line ministries concerned. The inclusion of civil society has paid off. In Senegal for example, the counterpart fund is now a foundation in which NGOs, private sector and government are represented – unprecedented for this West African country – and which thus also functions as a platform for dialogue.

Bruno Stöckli, Alliance Sud Expertise

Article published in: Alliance Sud News No. 64, Summer 2010