Big Businesses Benefit from COVID-19 Relief Funds – Global Issues


The bulk of the COVID-19 relief money will go to large companies. The people most likely to be affected by the pandemic in the Global South have been excluded, such as small businesses, marginalized communities, women and the poor. Credit: Diony Matos / IPS
  • Written by Ed Holt (Bratislava)
  • Inter Press service

a Report by Financial Transparency Coalition (FTC) The civil society group showed that the vast majority of COVID-19 recovery funds in nine developing countries have gone to large firms rather than welfare, small firms, or those operating in the informal economy.

“The way in which relief from COVID-19 has been implemented has exacerbated marginalization, poverty and inequality, including income, gender and other forms of inequality, in some countries,” Matti Cohonen, director of the Federal Trade Commission, told IPS. “.

“The bulk of this relief money goes to the big companies, but the people who are likely to be hardest hit by the epidemic in the southern world, such as small businesses, marginalized communities, women and the poor,” he said.

In what the group says was the first major analysis of public rescue funds spent in developing countries during the pandemic, members of the Federal Trade Commission have considered their use in Kenya, South Africa, Sierra Leone, Bangladesh, Nepal, Honduras, Guatemala, El Salvador and India. .

It found that in eight countries, an average of 63 percent of state aid related to the epidemic went to large companies, while only a quarter of it was spent on social protection schemes. Only 2% went to informal sector workers – although the informal sector often makes up a large portion of the overall economies of many poor countries. Meanwhile, much of what was allocated to small and medium-sized businesses has never reached it and has been diverted elsewhere, she claims.

India has been examined separately for the change in the government’s definition of small business during the pandemic.

However, the Federal Trade Commission believes that the overall corporate stimulus is likely to be greater due to an expected revenue shortfall from tax cuts, especially in Bangladesh and India, or the cost of tax amnesty programs, as in Bangladesh and Honduras.

Civil society groups working in some of the countries cited in the Federal Trade Commission (FTC) report say the results were not entirely unexpected, but stressed the extent to which governments seem to be neglecting the poor and marginalized groups during the pandemic.

Speaking of the finding that 92 percent of Kenya’s rescue money has gone to large companies, Chennai Mukumba said of Africa Tax Justice Network An advocacy group told IPS: “This was not surprising because the private sector has a lot of leverage to influence policy. But it was surprising that only the people who needed it were reached – the vulnerable and marginalized, especially those working in the informal sector.

In many poor countries, the informal economic sector makes up a large part of the overall economy as millions of people often depend on informal work to earn a living. In Bangladesh, for example, cash workers make up 85 percent of the country’s workforce. The figure is similar in Kenya.

COVID-19 restrictions, including lockdowns and travel bans, have had a major impact on such business as people are no longer able to travel for work or sell goods in markets or outside their neighborhoods. This has had a major impact on some families.

“Among vulnerable populations, people have already seen their quality of life deteriorating due to movement restrictions. The narrative that we hear from people on the ground working with these communities is that there is an acceptance that governments need to impose restrictions to stop the spread of COVID-19, but that must be the case. These restrictions will be accompanied by relief measures, and these relief measures, Mukumba said.

The FTC study focused on where the COVID-19 bailout money went, but it did not go into detail about the exact reasons for spending it the way it was, nor did it look at individual payments to companies or other entities.

But Kohonen and Mukumba told IPS that there are a number of reasons resources do not go to social protection services, including private sector pressure and insufficient government capacity to identify vulnerable populations.

The report also raised a warning about the lack of transparency around the disbursement of recovery funds.

He cites how the World Bank in Kenya, for example, provided $ 50 million in immediate funding to support the country’s emergency response – money now unaccounted for.

Whatever the reasons for allocating the funds, Cohonen said, the fact that little social protection remains a serious problem must be corrected.

He explained that “more funding should have been allocated to social protection and a lot to go to major companies that do not need such a large proportion of relief funding.”

Even in some states where an ostensibly relatively large portion of relief funding is spent on social protection, the most vulnerable members of society still lose.

Ricardo Barrientos, of the State Department, explains the situation in Guatemala, where just over half of the funding for COVID-19 relief has been directed to social protection measures. Central American Institute for Financial Studies (ICEFI) The one who worked on the report told IPS: “Although the government’s response is primarily devoted to social protection, it was too little, too late, and critically insufficient to have a tangible impact for most Guatemalans.”

As a percentage of GDP, it was 3.07 percent – of the countries surveyed only Honduras and Sierra Leone the figure was lower – and while most of this money was earmarked for the Emergency Cash Transfer Program, it was concentrated in cities and urban areas. Areas, and it has failed to reach the people who desperately need it, particularly indigenous Mayans who live in poverty and in appalling conditions in rural areas.

“While more than 70 percent of families live in the informal sector, which accounts for around 24 percent of GDP, relief funds were ridiculously small for this important portion of Guatemala’s economically active population. Many Guatemalans found themselves in A tragic situation where they have to go out and try to sell something, or die of starvation. He said, “ I would rather die from COVID-19 than starvation. ”

The FTC is currently preparing reports on the use of rescue operations for COVID-19 in other countries, including more developing countries as well as developed countries in Europe and elsewhere.

However, it is possible, say members of the Federal Trade Commission, that in developing countries at least, it is likely that a similarly large proportion of the money has gone to the large corporations.

“In Sierra Leone, we saw most of the relief money going to companies and we expect it to be a similar story in other countries in Africa that we are still looking forward to,” Mukumba said.

The FTC has presented its report to governments and major COVID-19 bailout donors such as the World Bank and the International Monetary Fund. He has yet to receive any direct response.

It also called on governments and international financial institutions to adopt a series of measures to address what it calls “a serious imbalance in the current relief funds from the emerging corona virus.”

These include applying a minimum corporate tax rate of at least 25 percent, raising taxes on the wealthy, corporations and those with high incomes, creating public-benefit property records, to see who benefits from recovery spending, profits made during the pandemic, and introducing greater accountability. To provide transparency about the conditions accompanying and payments made with COVID-19 recovery funds, including World Bank funds.

© Inter Press Service (2021) – All rights reservedOriginal source: Inter Press Service


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