The UN-backed effort to fight AIDS, tuberculosis and malaria is in trouble. But that's not necessarily a bad thing.
Recently it came to light that the Geneva-based Global Fund to Fight AIDS, TB and Malaria reported that at least $34 million in grants--used to procure drugs and other commodities for the world's poor--had been stolen, along with some of the commodities themselves.
Last month, Germany joined Sweden in demanding an investigation of the waste and fraud; Germany has suspended financial transfers of more than $250 million until it is completed.
In the U.S., the House Appropriations Committee last week proposed cutting $450 million in grants to the fund in its 2011 budget. If the U.S. withholds funding, the fund will probably have to halt many grant payments, leading to major disruptions in the delivery of life-saving medicines to tens of thousands of people.
That's unfortunate. But tolerating corruption is arguably worse.
It is bad enough that donor aid is stolen; worse is the corruption that feeds off it, causing damage long after a particular grant is dispensed and forgotten.
My team's research indicates that perhaps a quarter of malaria medicines donated by aid agencies, primarily the Global Fund, are stolen from the public sector and diverted. That could be up to 30 million treatments a year. Once criminal gangs start making money from trading pharmaceuticals, some will turn to trading in fake pharmaceuticals--perpetuating not only corruption, but suffering as well.
To its credit, most of the information we have is due to the transparent systems at the Global Fund. The $34 million in misappropriated grants was exposed by the fund's own investigations.
But while the fund deserves praise for its transparency, it has simply tried to do too much in too many places--trying to run grants in 145 countries, many known to be highly corrupt. And it allowed its mission to creep along the way. The fund was sold to the American people as an agency that would primarily provide commodities (drugs, condoms, mosquito nets, etc.) to poor nations. The assumption was that it would provide these commodities to countries where they could be delivered by the health systems.
But in dozens of countries, the fund has had to ask U.N. agencies to actually assist in the delivery of the commodities; the fund has even had to help fill out the forms to get the grants in the first place.
As a result, the Global Fund has spent far more money than was ever planned on technical assistance and capacity-building in countries. Its practices have overlapped with agencies supposedly more competent in these areas, notably the World Bank and the UN Development Program (UNDP).
So the current crisis gives Congress the chance to push the Global Fund back to its core mission. The reality is the fund isn't equipped to carry out proper capacity-building; for it to even try only encourages corruption.
While the Appropriations Committee's threat to cut $450 million could drive the fund back to its core mission in an attempt to decrease corruption, Congress must not be lazy and short-sighted in trying to cut costs.
Attacking the Global Fund because it has been transparent ensures that other agencies--like the UNDP--will never release audit reports. Why would they, if transparency is punished? UNDP won't release its own audits to the Global Fund, even though the fund gives it $1.1 billion to operate 63 grants in 27 countries.
It would be very simple to just shoot down the Global Fund. But to do so would set back transparency a decade or more.
Yes, the fund must be thoroughly investigated, but we mustn't fool ourselves into believing that any other multilateral agency is doing a better job with the aid dollars it receives from U.S. taxpayers.Roger Bate is the Legatum Fellow in Global Prosperity at AEI.