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Analytical Studies

Issue Objectives for the Genoa Summit Meeting 2001:

1. Strengthen commitment to increase aid for eradicating tuberculosis, malaria and HIV/AIDS.

Given the emphasis put on dealing with these diseases from an individual country's perspective at the Okinawa Summit in 2000, where Japan pledged $3 billion US over 5 years and with Italy proposing a billion dollar fund to pay for drugs this past year, there is a desire to actively work towards fulfilling this commitment. As Italy is hosting this year's Summit, it is likely that this topic will be brought to the table. G8 member countries have allocated new money for projects, research and aid over the past year, but according to the WHO and UNAIDS, the sum is still far too short to effectively carry out the programs currently in place. Kofi Annan has stated that 7-10 billion dollars a year is required to effectively combat this disease, however, actual spending in this area is in the neighbourhood of merely half a billion dollars.

As for progress, eradicating these diseases is a very public concern at the moment and individual G8 member countries will be put under the spotlight by the media to put together a co-operative solution. HIV/AIDS is obviously the disease of greatest concern as well as the one with the greatest potential for damage as it is the only one of the 3 with no cure. The latest UN General Assembly meeting in New York in late June has put AIDS back into the headlines with many of the G8 member countries supporting increases to their contributions to AIDS. It is likely that they will announce these new increases in spending at the Summit. Further progress in AIDS research and widespread distribution of medication will hinge upon a successful agreement among governments and pharmaceutical companies, the latter being those who carry out the bulk of R&D and have stated that they will cease to do so if their patent rights are not respected in the race to treat and cure AIDS.

2. Strengthen resolve to work with pharmaceutical companies to provide essential life-saving medication to those who need it most.

Since the Okinawa Summit, there have been enormous developments on the drug scene with particular reference to anti-retroviral drugs used to treat HIV/AIDS patients. Pharmaceutical companies have come under fire for pricing these treatments too high so that the millions of infected in Africa cannot hope to afford them. In addition, there is the continuing concern over patent rights on the pharmaceutical companies part, that should they provide these drugs to poorer countries, generic versions of these expensive drugs would be produced and used, effectively robbing them of the opportunity to recover huge costs incurred during the R&D of the drug. Indeed, some countries such as South Africa and Kenya, have passed certain laws or are in the process of doing so, which allow the production and sale of generic drugs under national law, with potentially huge losses to those companies producing drugs still protected by patents. G8 members committed themselves to working with pharmaceutical companies among other actors to help relieve the strain that tuberculosis, malaria and HIV/AIDS can pose on development of the poorest countries at Okinawa. They must now try and find a way in which all those concerned may benefit.

Although there have been a round of price reductions in certain essential drugs as well as an offer by one company to provide its drug for free to all African nations, there is much more that needs to be done to fight these epidemics. Although individual countries may raise funds to pay for these drugs, the surest way to achieve widespread success is to have an agreement with pharmaceutical companies that would allow for an abundant supply of these drugs even to those unable to afford them. G8 member countries are home to many of these companies and will probably discuss their options in Genoa after a very eventful year.

3. To launch the Enhanced HIPC Initiative to deliver faster, broader and deeper debt relief, releasing funds for investment in national poverty reduction strategies.

The recent attention on poverty and AIDS will set the stage for further discussion on the HIPC(Heavily Indebted Poor Country) initiative. The proximity of the special U.N. summit on AIDS has highlighted the urgency to lighten the debt of the poorest countries. None of the heads of state of the G8 countries attended the AIDS summit so the G8 will be a timely opportunity to for these leaders to personally address the relationship between debt and the proliferation of AIDS. 31 of the 41 HIPC are in Africa and so are seventy percent of the 35 million people affected by HIV. Servicing foreign debts diverts public funds away from health and education, making the nation more susceptible to the disease epidemics. The dismal forecasts of economic and social instability of this continent will have alarming consequences for the G8.

The Pressure

There have been calls to improve the HIPC initiative from numerous civil society organisations and even from some of the G8 governments themselves. This political will could translate into more funds and a shorter timeframe being adopted in Genoa. Many claim that debt reduction takes too long and is given with too many conditions while not going far enough. The Jubilee 2000 campaign has received wide publicity in most of the G8 nations and has become a political force, not the least because of its many celebrity endorsements. Jubilee will be one of the civil society groups that will have some official status during the summit.

In the United States a congressional report in June condemned the HIPC initiative for taking too long and not doing enough. There has been an increasing degree of bipartisan support to speed up the process. ``Forgiving the debt would free significant resources to fight poverty and disease in Africa,'' said Rep. Bernard Sanders (I-Vt.) at a hearing of the House Financial Services subcommittee on Africa. Sanders cited Zambia, which he said spent $89 million on debt service and $76 million on healthcare last year.

The Criticisms

World Bank's HIPC(Heavily Indebted Poor Countries) initiative is administered only to a limited number of countries and only after those countries show a significant amount of internal reform. This slows the deliverance of relief and further impoverishes the governments. To date, 23 of the 41 HIPCs have qualified for assistance estimated to reach more than US$34 billion by 2015. The World Bank's 'conditions' for debt relief are criticised not only because it delays the process, but also because of the instability it can engender. Some of the conditions include the privatisation of national assets, trade liberalisation and 'market-based pricing'. The sale of national assets is vulnerable to under the table deals while trade liberalisation opens the door to market speculation to the extent that Indonesia has seen. While Market-based pricing( the removal of food, oil, etc.) does decrease the government's expenses, it can also cause food riots.

Some are simply sceptical that the HIPC initiative can meet its modest targets. The real per capita GNP growth rates necessary to achieve the IMF's target in 15 years is 6%. Few indebted countries are close to that level of growth.

Many African leaders, including Prime Minister Meles Zenawi of Ethiopia, have been publicly pleading for more fundamental help to their economies. They want western markets to lower their barriers to trade for African exports. While it is unlikely that this plea will be heeded in Genoa, they do set the context for significant discontent that western leaders are responding to, both from protestors and from HIPCs.

The most poignant challenge for the G8 countries, however, is to make good on their Kyoto commitment to "promote more responsible lending and borrowing practices". Otherwise, the HIPC initiative will only be temporary solution.

Document prepared by Serena Yoon and Jacob Young, University of Toronto G8 Research Group, June 2001.

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