AFRICAN DISSATISFACTION WITH THE COST OF SOVIET ECONOMIC AID (ER M 78-1061B)

Created: 9/19/1978

OCR scan of the original document, errors are possible

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MEMORANDUM FOR: Deputy Director of Central Intelligence

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FROM

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SUBJECT

Director, NFAC

Director of Economic Research

x African Dissatisfaction with the Cost of Soviet Economic Aid

1. Action Requested: None, for your information

only.

2. Background:. Attached is therequested on the aboveeptember. The

paper tocuses particularly on the costs tc host countrie of Soviet technical assistancetho main area of dissatisfactionand compares them with the costs of Western donor programs.

as stated

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one of several known instances of African dissatisfaction with Soviet economic and technical assistance. umber of other unhappy recipients can be cited, including Angola, Congo, Ethiopia, Mali, and Tanzania. Among the recurrent complaints: too much red tape, insufficient amount of aid, inferior quality of Soviet equipment and technical advice, and exorbitant Soviet demands for special privileges, which remind Africans.of colonialistrievance that has recently gained prominence is the excessive financial cost of Sovict-sponsoied programs.

Claims, such as those reportedly made by the Guineathat the costs of Soviet technical economic assistance are substantially higher than those of Western programs are probably justified in most cases. Because of the scarcity of firmon the costs of Soviet technical assistance, particularly in Africa, however, wo cannot substantiate tho validity of these claims across tho board, j. Salary and Living Costs

In recent yearo, Moscow has parlayed its technical assistance programrofitable adjunct of its equipment sales program in the Third World. 0 Soviet economicincluding project technicians, physicians, teachers, and

that the salaries of Soviet techniciansin contrast to the practice under Western technical assistanceare generally paid by host LDC governments, except for occasional free technical assistanco to grant aid projects and for training and medical services. Third World reimbursement rates for technicians'salarios vary widely among Third World countries,0 annually in the poorer countriesn the higher income LDCs. In addition to the salaries, the host countries must provide living accomnodations for Soviet technicians. Thus, insteadbeingSoviet technical assistance most often isechnical service rendered for some form of compensation, cften hard currency. (Guinea, for example, reimburses the USSR for technicians' salariosonth in hard currency.)

oviet technical assistance had been much lessurden to LDC host countries. At that time, most of Moscow's technical services were financed under project aid cgreements and carried the same repaymentepayments in goods overearsercent annual interest. By theoncessional deferred payments for technical assistance had become rare* Moscow increasingly domanding cash down in the form of hard curroncy or equivalent goods.

Western technical aid to tho Third World if not onlyin slzo but far more concessionary than the estern countries gave nearlyillionaid to finance the.services of anechnicians. France, with0 million6 was the largest Western donor, followed at athe Unitedillion),

and7 million). Africa received nnarly half of Western technical assistance grants6esult of France's allocation of about two-thirds of its aid funds to forraor African colonies and overseas territories. Most of the Western technical assistance ia used to pay salaries of technical personnel, which rangennually depending on tho donor countries and levels of technical expertise. Like the Soviets, the United States, and probably most other major Western donors, requires host LDCs to pay local costs such as housing and local transportation.

Although Western countries until now have provided nearly all of their technical aid as grants, they plan gradually to expand tho coot-rocovorable portions of their technical assistance programs. Wealthier LDCs, especially, will be expected to pay an incroooing share of costs, 'including aalarios. This development is not likely to cut into-the grant aid made available to needy conntrios.

Soviets Still in ucniana

Despite the many complaints expressed by host countries about

tho costs and quality of Soviet technical assistance, LDCs ore

employing greater numbers of Soviet specialists than ever,commercial contracts. ^ that

Communist project technicians aro well-trained and perform their jobs effectively, although teachers and doctors are decidedly less qualified than their Western counterparts. umber of LDCs in Africa, as elsewhere, desperately' in need,of technical expertise, from any source, continue to employ Soviot personnel because of lack of available alternative assistance and/or political reasons.

(An Annex gives several examples of the costliness of Soviet aid.)

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AFRICAi PROBLEMS WITH SOVIET ECONOMIC AID

Angola

Urban Angolans are resentful about waiting in longconsumer items while "special stores" are well stocked

6 the Soviets paid well under international market' prices for Gumean bauxite (producedoviet-aid project) and did not pay any export taxes,ubstantiol strain in Guinean-USSR relations.

Mall

t The Malian government was dissatisfied with the quality ofat Mal.f's Kalana Gold Mine, under development by

Soviet medical personnel are generally conridored to be poorly qualified and are compared unfavorably with French and Chinese doctqrs by the Malians.

Mozambique

Moscow ia demanding hard currency foronth per technician) in spite ofbalance of payments -

Nigeria

Soviet insistence onictating the terms of project construction, hiring Soviet personnel over Nigerian labor, along with the high price of Soviet equipment and raw materials, induced the Nigerians to open bidding to Western firms for the Urge Nigerian steel mill project. Soviet involvement is now limited to an ill-defined supervisory role.

Sierra Leone

Sierra Leone claimsthet Soviet fishing activities under the fisheries aid agreement coats Sierra Leoneillion annually in revenues. At tho same time, tho Soviets have not fulfilled their commitments to improve fishing ports instructli-ties, and to train local personnel

Soma Im

In tho Soviets tried to force Somalia to handle all of its foreign trade transactions through Soviet banks rather than through correspondents of the Somali national bank. Thus, net earnings from exports to non-Communist countries could be credited against Somalia's debts to the USSR. Moscow also wanted to absorb all of Somalia's exports not already covered bv current marketing agreements with other customers.

Tanzanian enterprises are reluctant to contract for machinery from the USSR because of the poor experiences of other countries in obtainina spares and after-sales service

Original document.

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