Select Committee on International Development Appendices to the Minutes of Evidence


Memorandum submitted by the Natural Resources Institute


  1. Following the first White Paper (1997), this Second White Paper' s commitment of the UK Government to a more rational, consensual and transparent approach to development, poverty elimination and sustainability must be welcomed.

  2. Our comments which follow focus on some aspects of the White Paper on which the Natural Resources Institute feels especially competent to comment.

  3. As recognised by the White Paper, globalisation represents both an opportunity and a threat for the world's poor: in the former case, the poor having access to the benefits of growth in the form of all that goes into improved well-being; in the latter case, patterns of growth further marginalising the poor, exacerbated by the economic imperialism of trans-national corporations and cultural imperialism of the wealthy nations.

  4. Since global development is a process in which there is a multitude of institutions, from local to global in the private and public sectors, none of which individually directs or controls that process, there is no scope for a complacent presumption in favour of impacts promoting equitable and sustainable development. The White Paper itself makes no such presumption.

  5. However the White Paper does make a rather disturbing statement (para 36): "The reality is that all profound economic and social change produces winners and losers". If any pattern of globalisation is to be regarded as within that context, including patterns which do not further marginalise but benefit the poor, do we not have a major problem?

  6. Of course, we can accept, indeed look for, some losers, in terms of the corrupt, dishonest and clearly exploitative, categories reflecting particular patterns of power and governance, locally, nationally and internationally. Beyond such losers, one of the challenges is to seek approaches to global and local development, governance and "development awareness"—ie social and corporate responsibility—amongst the privileged, whereby aspirations for ever-increasing material wealth, command over resources and consumption are tempered. In that sense, those (households, societies, countries) which may be "losers" materially, at least in a relative rather than necessarily absolute sense, do not perceive themselves as losers in an overall sense.


Making Markets Work for the Poor

  7. For the last 15 years "making markets work for the poor" is exactly what many development assistance organisations have been trying, but generally failing, to achieve. At one time or another, micro-finance, enterprise development support, market information and other interventions have been tried as discrete remedies to rural poverty. Failure to meet rural income growth objectives has often persuaded donors and developing country governments to abandon one discrete approach in favour of another. Without a more coherent approach to "making markets work for the poor", the failures of the past will merely recur. Encouragingly, more coherence in approach is now in evidence.

  8. In the case of national agricultural markets in the South, comprehensive approaches are much more likely to succeed than discrete approaches because they encourage policy and budgetary consensus among developing country governments and donors. Just as importantly, the best agricultural sector approaches recognise that market and marketing inefficiencies (for which poor farmers and poor consumers ultimately pay) require a multi-dimensional approach, in which financial, informational, infrastructural, legal and cultural constraints are tackled simultaneously and with reference to each other.

  9. Institutional failure is at the heart of national marketing inefficiency in developing countries. In this context, the key institutions are:

    —  the law (contract law in particular), its enforcement and impartiality;

    —  government policy-formulating organisations (and importantly, their links with implementing organisations);

    —  government policy-implementing organisations (and, to emphasise the point, their links with policy makers);

    —  private sector associations (trade associations and their links with the finance sector and all levels of government);

    —  the formal lending sector;

    —  organisations charged with the provision and maintenance of marketing infrastructure (including the basic means of distributing information);

    —  informal institutions (for example, money lenders, cultural and religious trading partnerships, and-often corrupt-traffic police and some other local officials).

  10. The inability of market and marketing projects to deliver improvements in poor people's incomes is usually attributable to failures within and between the institutions listed above. The solution therefore lies not in directly treating the symptoms of inefficiency (high transport costs, market inaccessibility, high borrowing costs, inefficiently small scale operations and so on) but in strengthening the institutions that support the long term viability of donor, public and private investments. How this should be done is not straightforward. While there are some generally applicable principles and approaches, eg as in the 1999 World Bank publication "Assessing Aid: What Works, What Doesn't and Why", these need to be applied and adapted to country-specific situations.

  11. Many of the comments above also apply to export marketing in developing countries. The major difference is the involvement of large international financiers and buyers, who continue to force the pace of change to the extent that export marketing chains are generally much more efficient than their domestic counterparts. Access to markets in the North and developing countries' negotiating capacity at the international level are clearly major issues. The White Paper's recognition of these problems and its commitment to their resolution ("creating a fairer international trading system and reforming the WTO", paras 226-240) is encouraging.

  12. We note that the White Paper asserts (para 222) that, for most countries in Africa (a region of particular priority from a poverty reduction perspective) and Latin America "the best prospects over the next few decades are in natural resource-based products". We also note (paras 223-225) the recognition of "supply-side issues" which constrain the realising of these prospects, and the recognition of the need for help, including technical expertise, in modernising and developing agriculture. The proportion of DFID financial assistance going to agriculture has been held steady during the last decade, at around 10%. DFID could more fully distil the lessons of experience from its assistance to this sector, and share these with its partners.

  13. We note also the recognition (para 223) that primary-exporting countries need help to design effective ways of managing the risks of fluctuations in world commodity prices. The White Paper does not expand upon this, but there is real world experience in a number of approaches on which we have made a preliminary review, as a basis for developing and eventually replicating some practical approaches.

  14. These include:

    —  development of farmers' marketing organisations;
    —  the use of futures and options markets;
    —  domestic and regional commodity exchanges;
    —  warehouse receipt financing systems;
    —  price fixing formulas;
    —  improving quality control, storage and handling;
    —  contract farming and outgrower schemes;
    —  improved infrastructural and policy environment;
    —  diversification;
    —  improved provision of market information;
    —  greater in-country processing before export;
    —  fair trading.

  15. The White Paper could have been more explicit in recognising that there is real experience with a range of approaches to price risk management, on which we can all draw.

Encouraging pro-poor research

  16. The nature of UK public sector-sponsored research has changed over the years in line with the perception of the needs of developing countries. Thus, with the International Development Targets to the fore, current UK Government-funded research activities combine cutting edge scientific innovation with a detailed knowledge of the social and economic environment of the poor people who are the beneficiaries.

  17. In agriculture, as for health, the greatest investment in research is by the private sector but there are generally insufficient commercial incentives for the private sector to invest research effort in the so-called "orphan crops" millet, cassava, plantains etc, and in the farming systems on which many poor people depend. Research on environmental and sustainability issues is also unattractive to the private sector.

  18. The explanation (para 137 of the White Paper) that privately-funded research in agriculture is limited "because most enterprises are too small to do research" appears to be very much a secondary factor (if at all). Clearly, there are large companies in biotechnology and the agro-chemicals industries. It is the lack of commercial incentives, not the lack of large research companies, which limits the benefits to poor farmers of privately-funded research.

  19. The White Paper (paras 138-141) refers to "innovative partnerships between public agencies, foundations and private sector companies to develop and test new international public goods", but this is expressed in the context only of human health research and not agricultural research. Developing public goods in agriculture, eg new crop varieties which are more drought tolerant, may be more challenging than in health, because of the greater diversity in product requirement. Thus, a number of crop varieties are likely to be needed for the varied agro-ecological situations found in Africa, while only one or a very few HIV/AIDS vaccines are needed. However, there may still be considerable scope for public funding of private research in, for example genetic modification to incorporate a gene for drought tolerance in a crop variety which can then be released to public sector national research organisations in developing countries, for use in their own plant breeding programmes using traditional methods.

  20. We believe that DFID should be explicit and forward in applying to agriculture the public-private partnerships approach on which it is explicit in the health sector.

  21. It remains the case, however, that the White Paper correctly identifies the continuing under funding of pro-poor global public goods research of this nature. Although the Consultative Group on International Agricultural Research (CGIAR) is an important element in addressing these needs, there is a danger that this organisation is viewed in isolation. It is in fact a vital part of a global agricultural research for development system that depends for its success on complementary activities in a range of other organisations both in developed and developing countries. We believe that there are significant gains to be made by fostering the improved partnerships that will help this system operate more effectively. This will require continued recognition of the importance of developmental research in UK organisations as well as long term support to organisations in the South. There is some concern that, in rightly supporting research and capacity-building in developing countries, DFID may inadvertently, through its patterns of research funding, weaken the ability of the UK agricultural research base to partner and strengthen research in the South. Additionally, the UK Research Councils consider that their mandate is to commission research for the UK's interest only. This trend is also to be seen in the European Commission where, with the development of the concept of the "European Research Area", the Directorate General for Research has signalled its intention from 2002 to abolish a budget line which was specifically designed to facilitate partnerships between developing and developed country research institutions.

  22. It should not be forgotten that UK and indeed Europe as a whole, has a long and distinguished history of research aimed solely at the needs of developing countries. In the case of agricultural research, the work of the Natural Resources Institute goes back over 100 years and the UK can be rightfully proud of the national contribution to the improvements in the livelihoods of poor people in developing countries.


  23. All concerned recognise the complexity of this aspect of globalisation, which "cross-cuts" the development process and which is fundamental to the sustainability of that process and its outcomes. The White Paper illustrates this complexity. The following comments pick out some under-addressed aspects.

  24. The introductory paragraph to this section of the White Paper (257) recognises that "existing patterns of production and consumption are placing enormous strains on the global eco-system, and rapid population growth is adding to these pressures". It goes on to say that globalisation, well-managed, can help address these challenges by promoting greater development, (increasing the resources and information available for improved environmental management, and by helping to spread cleaner technology). While, to some extent, the following paragraphs develop that approach, we do feel that they under-state the difficulties and contradictions.

  25. As we commented in our introductory remarks, there are a myriad of institutions within the development process; therefore, the concept of "well-managed globalisation" overlays the goals and activities of this myriad (public and private, global and local), without, needless to say, any single "controlling" or "managing" institution. [The chapter correctly proceeds to focus (briefly) on working with the private sector and on international co-operation].

  26. Global society's current activities are degrading the environment. In developed countries, "development" generally is regarded by society as "more of the same"-more consumption goods, more choice, more wealth etc. The White Paper (paras 24 and 261) acknowledges that consumption patterns in developed countries are the major source of global environmental degradation. Unless value systems can be influenced, it is hard to see how the UK, and developed countries more widely, can meet our own responsibilities. This needs to start with school and civic education, and especially in the most powerful and resource-consuming countries, notably the USA. While the UK Government must continue to strive to the maximum for effective follow-through on the Kyoto protocols, there may be parallel scope for a lower key sharing of approaches across OECD countries to school and civic education in development and the environment.

  27. While the White Paper clearly states the need for institutional and regulatory frameworks and the polluter pays principle in developing countries (paras 266-267), it is not clear that this same emphasis is applied to the UK itself. Concerning sound environmental, or indeed other, practices, the long-established culture in the UK is generally based principally on self-regulation. While there is some overlay of public accountability in the actions of private companies, we suggest that the balance needs to be seriously reviewed, along with the incentive and penalty structure.

  28. The increased international trade in goods, which is of course a major aspect of globalisation, brings benefits to consumers in importing countries (greater choice of goods at lower cost) and industries in exporting countries—exploiting the comparative advantage of each. Open economies, open trading systems and increased trade are generally seen as "a good thing". Certainly, those developing countries which can access international markets achieve more rapid development and thereby more success in reducing poverty. Yet international trade itself carries a cost to the environment, especially movement of goods (and people) by air, with its effects on global warming and atmospheric pollution. The White Paper omits any reference to this issue. The continued growth in international traffic, especially by air, which is so much a part of our globalising society, should be recognised as an important element in concerns on sustainable patterns of development.

  29. Here also, there is no easy answer, but the trade-offs between, on the one hand, ever-increasing international trade and associated development (in North and South) and on the other hand the impact on sustainability needs to be addressed. The approach to pursue may be to ensure that the true cost, including the long term cost to the environment, is reflected in the private cost paid in the international freight industry. If analysis were to show that this cost would inhibit development and poverty reduction in the developing world, extra effort and resources would then be needed in facilitating cross-border and regional trade, which in any event is very important for some developing countries.


DFID should:

    (a)  Place emphasis on strengthening institutions that are key to the viability of donor, public and private instruments in marketing in developing countries (paras 9-10).

    (b)  More fully distil the lessons of experience from its assistance to agriculture, and share these with its partners (para 12).

    (c)  Make full use of experience to date in approaches to price risk management (paras 13-15).

    (d)  Apply to agriculture the public-private partnerships approach which it is explicitly promoting in the health sector (paras 19-20).

    (e)  Promote partnerships in agricultural research, between Southern and UK research institutions and the CGIAR, and reflect this in its resource allocation decisions (para 21).

    (f)  Put further effort into school and civic education in international development, the environment and sustainability, and seek to link this across OECD countries, including the USA (paragraph 26).

    (g)  In relation to environmental impacts, review and redress the balance in the UK, such that there is more effective weight placed on regulation, public accountability and the polluter pays principle, and less reliance on self-regulation (para 27).

    (h)  Recognise, analyse and address the impact on environmental sustainability of increased international flows of goods and people, especially by air, and be prepared to give greater assistance to the development of regional trade among developing countries (paras 28-29).

Natural Resources Institute

January 2001

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