Multinational Monitor

NOV 2003
VOL 24 No. 11


Smokescreen: Fire, Forests and the Bush Administration’s "Healthy Forest" Plans for Increased Logging
by Orna Izakson

Writing Off Indonesia’s Forestry Debt: How the IMF, the Indonesian Bank Restructuring Agency and Bank Mandiri are Financing Forest Destruction
by Chris Barr and Bambang Setiono

The Politics of Parks: Indigenous Peoples Assert Their Rights Against Mining, Markets and Tourism
by Marcus Colchester

From Worst to First: Under Pressure, Boise Cascade Agrees to Stop Logging Old-Growth Forests
by Jeff Shaw


Public Lands and the Public Good: Firefighting, Outsourcing and Other Threats to Sound Public Land Management
an interview with Andy Stahl


Behind the Lines

The World Bank and Forests: Here We Go Again

The Front
Tanzania: Planning for Poverty - Ill Feelings at HealthSouth

The Lawrence Summers Memorial Award

Names In the News


The Front

Tanzania: Planning for Poverty

Tanzania took another step away from its socialist roots in 2000 when it adopted a controversial poverty reduction plan. Now, as the plan comes up for review at the end of 2003, Tanzanians are asking whether this plan is locally devised and whether it will work.

The initiative for the so-called Poverty Reduction Strategy Paper (PRSP) came from the International Monetary Fund (IMF) and World Bank, who asked Tanzania and over 45 other highly indebted countries to produce a strategy after nationwide consultations. The strategies must be approved by the IMF for countries to qualify for aid and debt relief.

Tanzania's PRSP has been praised for its poverty-reducing plans which some experts say are both achievable and will improve life for the poor. But, as in many other countries, it also has its critics.

"The formulation of the PRSP has effectively rendered the home-grown 1998 National Poverty Eradication Strategy (NPES) redundant," says Dr. Benedict Mongula, a lecturer at the Institute of Development Studies of the University of Dar es Salaam.

Critics like Dr. Mongula point to an emerging conflict between the PRSP and the NPES -- a home-grown plan to eradicate poverty by the year 2025 under a program called Development Vision 2025. The plan includes developing industries, improving access to education and boosting agriculture, the backbone of the Tanzanian economy.

Theoretically, the PRSP should work in parallel with the NPES to achieve the Vision 2025, but some observers say that in practice most funding is aimed at achieving the PRSP targets. Less ambitious than the NPES targets, these include reducing the number of people living below $1 a day from 48 percent in 2000 to 42 percent in 2003, abolishing primary school fees and increasing enrollment in primary schools from 57 percent to 70 percent by the end of 2003.

Both NPES and the Vision 2025 claim to build on Tanzania's socialist values, which date back to 1967 when the late Julius Nyerere, the country's first president, set out his radical vision to pull Tanzanians out of poverty. The so-called Arusha Declaration set out principles of collective agricultural production, equal opportunity and self-reliance. Under the Declaration, the government introduced free education, healthcare and water services.

The results flowing from Arusha -- described by well-known African historian and political analyst Ali A Mazrui as "intended to be indigenously authentic African socialism" -- transformed the country Nyerere inherited from the British. In 1961, when the British left, the country had only two engineers and 12 doctors -- and 85 percent adult illiteracy. Under Arusha, literacy rates and school attendance soared, and people's incomes and quality of life improved.

But low commodity prices on the world market, high oil prices, an overvalued exchange rate, an expensive war with Uganda to help oust the dictator Idi Amin, combined with the failure of Nyerere's policy to forcibly resettle farmers to collective villages, led the government to change its policies in the early 1980s. The economy was in bad shape: the government could no longer afford free services, debt had rocketed and foreign donors were refusing aid.

In 1982, Tanzania became one of the few African countries to attempt its own local structural adjustment program, including a move to liberalize the economy while maintaining income redistribution. When this belt-tightening measure failed to deliver, Nyerere stepped down in 1985, saying the ruling party and government had alienated themselves from the people.

The new government managed to secure a fresh IMF and World Bank loan to the tune of roughly $68 million. But the money came tied to the condition that Tanzania liberalize is trade, privatize state enterprises and open its economy -- policies that have continued under the PRSP.

Theobald Mushi, an economic consultant and former editor of the Tanzanian Financial Times, says, "since abandoning the Arusha Declaration, Tanzania has never had its own home-grown economic policies. Even the Vision 2025 and the NPES were highly influenced by experts from the UN Development Program." He adds that the formulation of the PRSP was dominated by donors and government technocrats.

Professor Joseph Semboja, executive director of the think-tank Research for Poverty Alleviation, which advises the government on poverty reduction, admits that the PRSP idea began outside Tanzania but adds, "It was quite carefully crafted to really become a local initiative -- it has local content."

The draft PRSP was drawn up in January 2000 by a committee comprising officials from 12 ministries. That same month it was discussed in a meeting between the government, donors and civil society. According to the vice president's office, 804 people -- mostly villagers, councilors and non-governmental representatives -- then reviewed the document in workshops, before a consultative meeting with donors was held in June. Later, members of parliament discussed it in a workshop.

But there were gaps in the consultation: the plan was not brought before parliament for debate or approval, opposition parties were not included in the consultation process, and businesses, farmer and labor unions were only included at a late stage. "Employers and workers were only called in at a national workshop in August 2000, a few weeks before the paper was sent to donors for approval," says Dominico Kabyemera, chair of the Association of Tanzanian Employers.

The gaps in the PRSP consultation are one aspect of the complaints. Another is to do with the content of the plan. Many experts believe agriculture -- key to poverty reduction in Tanzania -- has been accorded low priority under the PRSP.

Ruben Masango, chair of the Mtibwa Sugarcane Growers Association, says the PRSP is missing the target because it does not encourage modern technology and provide enough resources to increase farm productivity. "Since the PRSP avails so much funds for poverty reduction, a substantive portion should have been set aside as a core capital for the agricultural bank to kick-start agriculture into a vibrant industry," he says.

The PRSP is also silent on protection of the domestic market and extending subsidies to farmers -- and it discourages the government from providing credit to the rural sector. In contrast, the NPES talks about investing in agriculture, developing agro-businesses, improving technology and increasing farm credit.

"In a country like Tanzania where more than 80 percent depend on agriculture, issues like protection of home market, subsidy for farmers and strengthening of local industry could be very critical," says Dennis Mchunguzi, executive director of Action for Relief and Development Assistance, a non-governmental organization.

But Paschal Assey, coordinator of poverty reduction in the vice president's office which oversees poverty eradication initiatives, does not see a conflict. Rather, he believes the PRSP is the right approach because it addresses fundamental weaknesses in the NPES. Unlike the NPES and Vision 2025, Assey says, the PRSP offers good poverty analysis, prioritization monitoring and excellent linkage with the budget, adding it has "developed a poverty monitoring system with indicators for assessing the effectiveness of the strategy."

Professor Semboja agrees, saying the PRSP has been drafted as a framework to stimulate quick economic growth. The PRSP is likely to bring quick and tangible results to the poor, he says. "As long as the implementation of the PRSP is closely monitored and adequately financed, the strategy is likely to bear the desired fruit."

Opinions in the villages is similarly divided.

Juma Shaaban Magubila, a farmer from Chalinze, 65 miles west of the capital Dar es Salaam, says, "It's because of the PRSP that the government has abolished primary school fees. Whether the strategy was formulated by foreigners or not, the idea that we have free education for our children is overwhelming."

But Mwakatika Isaac, a farmer from Bagamoyo, some 45 miles from Dar es Salaam, says he would rather development policies bring back socialism. "During the era of socialism we had subsidized farm inputs like fertilizers and pesticides as well as free seeds, healthcare and education from primary school to university," he says.

The fact remains that despite years of economic reforms, Tanzania is today one of the world's poorest countries with a per capita GNP of $270 in 2000, and it is highly dependent on external aid.

In 1998, the late Nyerere touched on the issue of whether a development process is nationally owned or externally imposed in an interview with the New Internationalist. Nyerere, at the time a highly respected African elder statesman, referred to a visit to Washington where he challenged World Bank officials on their performance.

"In 1988, Tanzania's per capita income was $280. Now, in 1998, it is $140," said Nyerere. "So I asked the World Bank people what went wrong. Because for the last 10 years Tanzania has been signing on the dotted line and doing everything the IMF and the World Bank wanted. Enrollment in school has plummeted to 63 percent and conditions in health and other social services have deteriorated."

"I asked them again: ëWhat went wrong?' These people just sat there looking at me. Then they asked what could they do? I told them: ëHave some humility.' Humility -- they are so arrogant!"

-- Alfred Mbogora
Panos Features/Third World Network Features
Alfred Mbogora is assistant editor with Sauti Ya
Demokrasia, a monthly newspaper on democracy,
published by the University of Dar es Salaam.

Ill Feelings at HealthSouth

There's apparently no Tyco-like video with an ice sculpture of Michelangelo's David urinating vodka.

But federal prosecutors have 14 of HealthSouth CEO Richard Scrushy's former colleagues lined up -- all willing and able to testify against him.

They need all the help they can get. Seeing the indictment coming, Scrushy took the offensive. He accepted an invitation from CBS news reporter Mike Wallace to appear on "60 Minutes" and he proclaimed his innocence. (He refused though to testify under oath before Congress.) He launched a web site to say to the world, "They did it, not me."

Scrushy's aggressive defensive posture, the mistrial of banker Frank Quattrone, combined with the gathering storm over the Enron Task Force and its failure to bring Kenneth Lay and Jeffrey Skilling to justice, puts tremendous pressure on the federal prosecutors in the HealthSouth case.

At an early November new conference at the Justice Department, federal prosecutors put their best case forward -- an 85-count indictment charging Scrushy with a wide-ranging scheme to defraud investors, the public and the U.S. government about HealthSouth's financial condition.

Scrushy, 51, of Birmingham, Alabama, surrendered at FBI Headquarters in Birmingham. He pled not guilty and was released on a $10 million bond. A federal judge in Birmingham ordered him to wear an electronic ankle bracelet.

The indictment charges Scrushy with conspiracy, mail, wire and securities fraud, false statements, false certifications and money laundering. The indictment also seeks forfeiture of more than $278.7 million in property which Scrushy derived from proceeds of the alleged offenses, including several residences, boats, aircraft and luxury automobiles.

"Instead of telling the public the truth, Richard Scrushy and his accomplices lied -- they cooked HealthSouth's books and Scrushy personally vouched for false financial statements with the SEC to cover up their scheme," says Assistant Attorney General Christopher Wray.

HealthSouth Corporation, founded in 1984, was the largest U.S. provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, with approximately 1,800 locations in all 50 states, Puerto Rico, the United Kingdom, Australia and Canada.

Scrushy served as chair of the board of directors from 1984 through early 2003, and as chief executive officer of the company during that time, except for periods in late 2002 and early 2003. He personally participated in the preparation of financial statements and other financial documents.

Scrushy and other HealthSouth executives received salaries, bonuses, stock options and other benefits that were tied, directly or indirectly, to the company's financial performance.

From 1996 through 2002, Scrushy received approximately $267 million in compensation from HealthSouth, including $7.5 million in base salary, more than $53 million in bonuses, and stock options valued at more than $206 million when exercised.

The indictment alleges that Scrushy caused HealthSouth to falsify financial statements, making the company appear more successful than it actually was.

The indictment alleges that between 1996 and 2003, internal reports by HealthSouth's corporate accounting staff showed that the company routinely failed to produce sufficient net income to meet the expectations of Wall Street securities analysts, the market and its own internal budgets -- a failure that Scrushy and others referred to as "not making the numbers."

Scrushy and others devised a scheme to inflate HealthSouth's earnings by making false and fraudulent entries in HealthSouth's books and records, and to cover up the accounting fraud with false financial filings and statements.

The indictment alleges that the scheme added approximately $2.7 billion in fictitious income to HealthSouth's books and records during the course of the conspiracy.

Federal officials allege that Scrushy and his accomplices would meet to discuss HealthSouth's actual financial performance and the need to falsify those internal results before they were publicly reported.

On instruction from Scrushy's accomplices, the indictment alleges, corporate accounting staff falsified the company's books and records. The fraud allegedly included false entries in income statement and balance sheet accounts, including property, plant and equipment accounts, cash accounts and accounts receivable, among others. According to the indictment, the co-conspirators referred to those methods as "filling the hole" or "filling the gap."

The indictment also alleges that Scrushy sought to control his co-conspirators, HealthSouth employees and the company's Board of Directors by, among other things, threats, intimidation, electronic and telephonic surveillance, and reading their e-mails.

To further control others at HealthSouth, Scrushy allegedly obtained large compensation packages for co-conspirators and offered them other incentives to keep them from discussing the fraudulent scheme, including, at one point in early 2003, an offer to take care of a co-conspirator's family if the co-conspirator would take the blame for HealthSouth's financial overstatements.

-- Russell Mokhiber


The November 2003 Lawrence Summers Memorial Award* goes to South Carolina Democratic Party Chairman Joe Erwin.

Erwin says he plans to seek corporate sponsorships to help raise $500,000 to hold the state party's February primary, which the state party has to pay for.

"Some statewide corporation may want their company identified with democracy," Erwin, a Greenville, South Carolina, marketing executive, told the Charlotte Observer. "You do what you have to do as long as you do it legally and with integrity."

"It somewhat changes the nature of politics," acknowledged Erwin, "but boy, isn't it consistent with the way things are changing?"

Source: Jennifer Talhelm, "Ads on ballots to pay for S.C. primary? Sponsor logos on ballots not out of the question," Charlotte Observer, October 3, 2003.

*In a 1991 internal memorandum, then-World Bank economist Lawrence Summers argued for the transfer of waste and dirty industries from industrialized to developing countries. "Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs (lesser developed countries)?" wrote Summers, who went on to serve as Treasury Secretary during the Clinton administration. "I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. ... I've always thought that underpopulated countries in Africa are vastly under polluted; their air quality is vastly inefficiently low [sic] compared to Los Angeles or Mexico City." Summers later said the memo was meant to be ironic.



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