APPENDIX 10
Memorandum submitted by the Natural Resources
Institute
GENERAL COMMENT
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.
WE NOW
TURN TO
SPECIFIC ASPECTS
OF THE
WHITE PAPER
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.
TACKLING GLOBAL
ENVIRONMENTAL PROBLEMS
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.
SPECIFIC RECOMMENDATIONS
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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