Select Committee on International Development Third Special Report


The United Nations Conference on Financing for Development: From preparations to outcomes

Recommendation 1: "We welcome the improved coordination between the various international organisations and feel that such efforts are crucial if there is to be policy coherence as regards international development. The appropriate response to greater coordination between the International Financial Institutions and the more democratic United Nations is to strengthen the voice of developing countries in all fora, rather than to decry such coordination (paragraph 8)"

6.  Improved co-ordination between the UN and the Bretton Woods Institutions (BWIs) was an important factor in the success of the Financing for Development process. We hope that the UN and BWIs will work together equally successfully in the follow up to Monterrey, particularly through the annual ECOSOC/BWI High Level Dialogue. We are working with the UN to ensure that UN development activities at country level support the Poverty Reduction Strategy approach and that, where they exist, Poverty Reduction Strategy Papers (PRSPs) are the primary mechanism for all donor support to developing country governments.

7.  Increased country-level ownership and participation should be matched by enabling developing countries to play a more effective role in the governance and policy-making of the IFIs. We have urgently encouraged the World Bank and IMF to identify new, innovative ways to do this, prioritising countries in sub-Saharan Africa in particular. We are developing and supporting a number of initiatives in this area. These include capacity-building to enhance countries' ability to engage in policy debate at both country and institutional levels, encouraging streamlined conditionality and greater transparency in IMF and World Bank programmes and supporting developing country leadership in drawing up work plans for the IMF's new Africa Regional Technical Assistance Centres.

Recommendation 2: "We commend the Government on its active role during the Financing for Development process, and trust that it will endeavour to inject international discussions and actions to meet the Millennium Development Goals (MDGs) with a sense of urgency (paragraph 11)"

8.  Recent international conferences - the Millennium Summit, Doha, Financing for Development and the World Summit on Sustainable Development- have together established a global agenda for poverty reduction. Delivering this agenda will require action from developing countries, donors and multilateral organisations, including the BWIs and DAC, but we do not see a need for more big conferences. The need now is to implement the commitments we have made, not to revisit them. We are supporting the UN's work in monitoring countries' progress towards the MDGs, linking together campaigns in support of the MDGs and the Secretary General's annual reports on global progress, which should help inject a sense of urgency into national and international efforts to achieve the MDGs.

Recommendation 3: "We share some of the disappointment which critics of the conference have voiced, but are keen to maintain the momentum gained at Monterrey rather than dwell on what might have been (paragraph 13)"

Recommendation 4: "We warmly welcome the aid increases announced by the EU and the USA. But, the success of the summit must ultimately be assessed in terms of its contribution to meeting the MDG targets. As such, it is too early to judge the summit's success. Thus far, little has been achieved and nothing has been implemented. If the Monterrey Summit is to be seen as a turning point rather than a talking shop, the international community must implement quickly the agreements reached, and use them as a starting point for a concerted international effort to eliminate poverty (paragraph 15)"

9.  The significance of the Monterrey Consensus is precisely that it is a consensus, which for the first time sets out the terms of a possible global partnership for poverty reduction and which was endorsed by all the UN's Member States. It would be unrealistic to expect that some of the more ambitious proposals promoted by NGOs, or advanced in the Zedillo Report as a contribution to the intergovernmental debate, would command the same degree of consensus. We share the view of the Committee that it is vital that we maintain the momentum gained at Monterrey rather than dwell on what might have been. Disappointment will be justified only if the international community - donors, developing countries, international organisations and civil society together - fails to implement the important commitments contained in the Monterrey Consensus.

Resource flows: The big picture

Recommendation 5: "Financing for development must be considered in the round; the focus should not be solely on aid. Non-aid flows of resources are crucial for developing countries' prospects of meeting the MDG targets (paragraph 25)"

10.  The bulk of resource flows to developing countries now comes from non-aid sources. In recognition of this, the Monterrey Consensus sets out developing countries' commitment to put in place an enabling environment to attract and make the best use of international private flows - as well as domestic resources and official development assistance. Donors can help by providing capacity support to build the right regulatory and legislative enabling environment and necessary institutions.

11.  However, we should remember that in very poor countries aid is an important part of the budget. In all countries, aid is the only form of development finance which can be focused on poverty reduction, and therefore has a proportionally greater impact on the achievement of the MDGs than other forms of finance.

Recommendation 6: "If developing countries are to escape poverty they must take responsibility for their own development. Developing countries will need to establish policy environments, and local banking and financial systems, to both retain and mobilise domestic resources, and to attract and retain international resources (paragraph 20)"

12.  We agree that developing countries must take responsibility for their own development and that the establishment of appropriate policy environments to attract and retain domestic and international resources is critical. A sound and competitive financial system is a prerequisite for mobilising both domestic and foreign savings and the removal of capital controls should be carefully sequenced with measures to strengthen financial supervision and regulation. However, developing countries need help in achieving this, including technical assistance and capacity building support. DFID is providing such assistance in a variety of ways including through the multi-donor FIRST initiative to help countries strengthen their financial systems. We are also helping to build a facilitative environment at the regional and international levels - by supporting the work of key multilaterals in areas such as the analysis of investment climate issues and the benefits of FDI (by the World Bank Group, UNCTAD and OECD), by supporting the post-Doha process aimed at the negotiation of multilateral agreements in the WTO on investment and competition, and by supporting the development of regional competition policies.

Recommendation 7: "Developing countries must show that they are taking strong measures to tackle corruption and money laundering so that countries' resources benefit all the people rather than corrupt elites. Developed countries must rigorously enforce their own anti-corruption laws and insist that financial transactions by firms with developing countries are open and transparent (paragraph 21)"

13.  The Government agrees that corruption and money laundering are serious obstacles to development in many developing countries. The International Development Committee's 2000-2001 report on corruption provided a comprehensive review of the issues and of DFID's activities in this area and suggested avenues for future initiatives. Since that report, DFID has continued its work helping countries strengthen legal, financial, administrative and political institutions in countries committed to tackling corruption.

14.  In addition, the Government recognises that developed countries have responsibilities too and has made strong progress tackling the 'supply side' of corruption. The Anti-Terrorism, Crime and Security Act (2001) put beyond doubt that UK anti-corruption legislation applies to the bribery of foreign officials and extended jurisdiction on a nationality basis so that any UK national can be prosecuted in a UK court, even if the act of bribery takes place wholly overseas. The Proceeds of Crime Act, which received Royal Assent in July 2002, brings together pre-existing provisions into a simplified, single offence of money laundering, covering all crimes. It tightens the disclosure rules to be observed by UK financial institutions, enables assets to be frozen more quickly and speeds up and broadens developing country access to UK Mutual Legal Assistance.

15.  Stemming the international flow of laundered funds and tackling corruption in developing countries are complex and long-term tasks. DFID stands ready to assist governments for the long haul and recognises that local solutions are essential. Commitment from the highest political levels is important. The nature of DFID's relations with developing country governments will depend among other things on their commitment to tackling corruption.

Recommendation 8: "The current situation in which Northern governments advocate trade liberalisation whilst themselves engaging in agricultural protectionism is a disgrace, and puts at risk not only the Doha trade round, but also the MDGs. The developed countries must act now to eliminate agricultural subsidies and to enable developing countries to sell their products in Northern markets. We urge the Government to do its utmost to bring such changes about. We will be monitoring progress very closely (paragraph 26)"

16.  We fully agree with the committee's conclusion that more could and should be done to open up Northern markets to goods from developing countries. While the EU already provides a market for over 50% of Least Developed Country exports, the EU needs to be opened up further to imports of agricultural goods from developing countries, and the CAP reformed so as to cut over-production and further align EU with world prices. That was one of our prime motivations in supporting the "Everything But Arms" initiative in February 2001, in pushing for more a liberal GSP regime last December and for a forward leaning mandate for the forthcoming negotiations on Economic Partnership Agreements between the EU and the ACP Countries. It is also a point which shapes our approach to the CAP mid-term reviews, as Margaret Beckett made clear on 15 July in the Agriculture Council's preliminary public debate of the proposals.

Recommendation 9: "We remain supportive of the Heavily Indebted Poor Countries (HIPC) process, but recognise that there are serious problems which require addressing, particularly as regards the speed of the process, the linking of debt relief to development needs, and the likelihood of countries exiting HIPC with sustainable debt burdens. The HIPC process must also be flexible enough to cope with the diversity of circumstances which developing countries face, including those which are emerging from conflict (paragraph 33)"

17.   The Government shares the Committee's concerns about the speed of the HIPC process. However, it should be noted that though only six countries have reached Completion Point and had the totality of their debt to the UK irrevocably cancelled, a total of 26 countries have reached Decision Point and have received relief on $62 billion of debt, out of a possible total of $100 billion.

18.  The UK recognises the need for sufficient flexibility in the HIPC process to cope with a diversity of circumstances, including the global economic slowdown and the fall in commodity prices. To that end the Government has advocated topping-up at Completion Point to ensure that no country exits the HIPC initiative with an unsustainable burden of debt. At the G7 summits in Halifax and Kananaskis the UK helped secure agreement from the G7 to play their part in providing up to US$1 billion to fund the financing shortfall in the HIPC initiative, including the need for additional topping-up.

19.  Out of 11 countries yet to reach Decision Point eight are affected by conflict, making their progress in the HIPC initiative more difficult. To help ensure that the HIPC process is flexible enough to help countries emerging from conflict, the UK has pushed for improved lending terms for these countries from the International Financial Institutions. The shareholders of the IMF and World Bank agreed at their spring 2001 meetings to set up post-conflict assistance account to offer financing on concessional terms, and the UK has pledged 2.5m to this fund over three years. In addition, the UK operates a unilateral "Hold-in-Trust" policy for those countries yet to secure debt relief because of civil wars, external conflict or the absence of a poverty reduction programme, under which debt payments are held in trust until they can be returned to fund poverty reduction.

Recommendation 10: "Debt relief must provide additional real resources, and must never be provided at the expense of other official development assistance (ODA) flows (paragraph 36)

20.  The Government supports the principle that debt relief should provide additional real resources and should not be provided at the expense of other official development assistance. In preparing the budget for the Department for International Development in the 2002 Spending Review the Government carefully considered the financing needs of the Enhanced HIPC initiative and ensured that sufficient additional resources were provided for both debt relief and other official development assistance. The UK welcomes the decision by the G7 to fund their share of the financing shortfall in the Enhanced HIPC Initiative, recognizing that this could be up to US $1 billion, and we stand ready to pledge our contribution.

Recommendation 11: "There are various flows of financial resources, any of which might be tapped by developing countries, but only aid can be truly focussed on poverty reduction. We are glad that DFID, the Treasury and the Government are so supportive of aid, and encourage them to continue to push the case for aid in both domestic and international fora (paragraph 38)"

21.  The Government welcomes the Committee's endorsement of the case for aid and will continue to argue this case strongly both in the UK and internationally.

Innovative sources of finance for development

Recommendation 12: "We share with many advocates of currency transactions taxes (CTTs) the view that exchange rate volatility contributes to poverty and hinders development, and we wish to see more financial resources available for development. Many taxes - taxes on smoking, motoring, pollution - have two apparently contradictory purposes. This is not a significant criticism of CTTs, but the question remains as to whether a CTT is the best way, either of reducing speculation or of raising revenue. If we are to be persuaded fully, further investigation into issues of feasibility and practicality will be needed (paragraph 46)"

22.  The Government broadly agrees with the Committee's assessment of the proposal for a Currency Transaction Tax and would also welcome further study by the academic community and others. On the economics of Currency Transaction Taxes, while the Government agrees that economic instability contributes to poverty and hinders development, it is also important to recognise that exchange rate movements can help to mitigate economic instability as well as, in some circumstances, contribute to it. The international community's strategy for preventing and resolving financial crises needs to focus on a broad range of approaches, including the role of codes and standards and of IMF surveillance, effective financial and corporate regulation, sound macroeconomic policy frameworks and an international financial architecture better able to resolve crises when they do occur, including through temporary capital controls and debt restructuring where necessary.

Recommendation 13: "In our view it is imperative that generating the political will to finance development remains the central focus, and that the choice of methods by which to collect funds remains a secondary consideration (paragraph 46)"

23.  The Government agrees with the committee. We are fully committed to working for and achieving significant increases in aid internationally, and recognise that this ultimately depends on the political will of individual donor nations. We also strongly believe that arguments for increases in aid should not depend upon the case for new taxes. The Government has demonstrated the UK's commitment to financing development by the decision in the 2002 CSR to increase the UK's aid budget to 0.4% of GNI by 2006 and by playing a leading part in securing the EU's pre-Monterrey commitment to increasing EU aid. We will continue to provide strong political leadership on this issue. At the same time, we recognise the scale of the global resources that will be needed to achieve the MDGs and will consider with an open mind innovative proposals to increase development financing. To raise investment in developing countries by a total of $50 billion a year to 2015 would require a step change in aid flows from the developed world. One option is an International Development Financing Facility to build on the work of the World Bank, the IMF and the regional development banks as outlined in the Chancellor's speeches in New York and Washington at the end of 2001, and detailed in his evidence to the Select Committee.

Recommendation 14: "We are supportive of the Government's position on special drawing rights (SDRs). If the fourth amendment were ratified it would provide a welcome one-off increase in global liquidity, and might provide some resources for development. We encourage the Government to continue to press this case (paragraph 51)"

24.  The Government welcomes the Committee's support for the implementation of the 4th Amendment to the IMF's Articles of Agreement, which would provide a one-off increase in global liquidity, while at the same time addressing inequities in the current allocation of SDRs. The Government also agrees that a general allocation of SDRs may have a role to play in directing resources to meet liquidity needs in poorer countries - although it notes the need to do so in a manner consistent with the Articles of the IMF.

Recommendation 15: "We recognise the problems associated with proposals to use SDRs to finance development, but consider that there might be a limited role for SDRs, perhaps as part of an International Development Trust Fund (paragraph 51)"

25.  The UK believes that the proposals to use SDRs to finance development are worthy of consideration, including the possibility of SDRs fulfilling a role in the Chancellor's proposals for an International Development Financing Facility. However, the Government recognises that any decision on the allocation of SDRs needs to be fully consistent with the IMF's Articles of Agreement.

Recommendation 16: "There is a funding gap which can only be filled by substantial North-South resource transfers. Such resource transfers will only be possible if sympathetic Northern governments show real political leadership, both in persuading other countries, and in securing domestic public support for the necessary resource transfers (paragraph 55)"

26.  The Financing for Development conference provided welcome evidence of the willingness of many donor Governments to begin to provide much needed additional resources for development. The UK played a key role in achieving this outcome - particularly by helping to secure the EU commitment to increase average official development assistance to 0.39% of GNI by 2006. The UK Government will continue to provide political leadership on this issue. Public support for development assistance is vital and DFID will continue its work on building informed awareness of development issues in the UK. We are also sharing our experience in building development awareness with other donors.

Official development assistance: Volumes

Recommendation 17: "If the MDG targets are to be met, there must be a massive increase in aid flows to developing countries. Making aid more effective is crucial too, but there is universal agreement that aid volumes will have to increase substantially (paragraph 56)"

27.  The Government agrees with the Committee's comments. As well as arguing the case for aid internationally and improving our aid effectiveness, the Government has, in the outcome of SR2002, demonstrated its continued commitment to deliver substantial increases in UK development assistance, in order to help meet the Millennium Development Goals. The Government will continue to work to secure further international increases in aid flows. No developing country genuinely committed to poverty reduction, good governance and economic reform should be denied the chance to achieve the Millennium Development Goals through lack of finance.

Recommendation 18: "As far as the UK is concerned, recent years have seen welcome increases in aid contributions, from US$3.2 billion in 1997 to US$4.5 billion in 2000, raising the UK's contribution from 0.26 to 0.32 percent of Gross National Income (GNI), and bringing the UK level with France in these terms. In the recent spending review, the Chancellor announces that UK aid will rise to 0.4 percent of GNI by 2006. This increase, whilst leaving the UK well short of its 0.7 percent commitment, will lift it well above the current OECD/DAC average of 0.22 percent, enable it to meet and exceed the EU target of 0.39 percent by 2006, and reinforce the UK's position as the most generous G7 donor in ODA/GNI terms (paragraph 59)"

Recommendation 19: "We recommend that the Government follow the example of Belgium and Ireland in setting a date - a date which is sufficiently in advance of the 2015 MDG's deadline - for reaching 0.7 percent, and a timetable for hitting that target (paragraph 62)

28.  The Government welcomes the Committees support for the Chancellor's announcement that UK ODA will rise to 0.4 per cent of GNP by 2006 and for the commitment made by EU member states. The Chancellor has reaffirmed the Government's commitment to the 0.7 per cent target, and the outcome of the Spending Review represents a major step towards that goal. Commitments to the allocation of public expenditure beyond 2005-06 are a matter for future Spending Reviews.

Official development assistance: Effectiveness

Recommendation 20: "The estimated poverty-reduction productivity of ODA nearly tripled during the 1990s (paragraph 63)."

29.  We believe the evidence of increasing aid effectiveness is compelling and expect ongoing improvements in aid effectiveness to increase the poverty-reduction productivity of ODA still further. Research indicates that the targeting of aid on poor countries is an important factor in determining the poverty reduction productivity of aid. One area where we see particular scope for improvement in this respect is EC aid. In 2000 the EC spent less than 40% of its aid in the poorest countries: we are pushing the EU to increase this to 70% by 2006.

Recommendation 21: "We believe strongly that there need not be a tension between aid volume and aid effectiveness, and that improvements in aid effectiveness are essential if increases in aid volume are to be generated. As such, we are firmly of the view that donors and recipients of aid must work together to improve the effectiveness of aid (paragraph 64)."

30.  The Government agrees with the Committee's comments. We should be working towards a virtuous cycle in which increases in aid effectiveness increase public support for greater volumes of aid, which then have an ever-greater impact on poverty reduction. Donors and recipients should work together to ensure that donor support is untied and harmonised in support of country owned poverty reduction strategies and channelled through direct budget support wherever possible.

The good recipient

Recommendation 22: "Developing countries - their governments, but also civil society, business and the media - have the primary responsibility for ensuring that aid is used effectively. The ineffective use of aid or the diversion of aid into the pockets of elites pushes the poor deeper into poverty and robs them of the assistance provided to them (paragraph 65)."

31.  The Government agrees that aid effectiveness is an issue for all involved in the development process. Donors and partner governments have a responsibility to apply best practice in making the most effective use of all resources for poverty reduction. Civil society in developing countries can play an important part in holding governments to account for progress towards the MDGs.

Recommendation 23: "The pre-requisite for poverty reduction and the effective use of aid is the commitment of the recipient government to poverty reduction (paragraph 66)"

32.  The Government agrees that the commitment of the recipient government to poverty reduction is vital to making rapid, sustainable progress towards poverty reduction and maximising the impact of development assistance.

The good donor

Recommendation 24: "We recommend that DFID considers adopting a target for its aid allocation to basic social services, encourages its fellow DAC members to increase their allocations inline with the 20/20 Initiative, and, continues to encourage the recipients of its aid to prioritise spending on universal access to basic social services (paragraph 67)"

33.  Helping partner governments ensure access to basic services for all is a high priority and essential for achieving the Millennium Development Goals. This will require increased social sector expenditure in developing countries. DFID will work with partner governments in the context of their strategies for poverty reduction to help them deliver better services for poor people. However, we do not believe that input targets, such as the 20/20 initiative are appropriate. Too often in the past these have led to poor quality, donor-driven projects in order to meet the target. We believe strongly that it is better to remain focused on helping our partners deliver development outcomes, and to be flexible in providing the most appropriate type of support needed to achieve this.

Recommendation 25: "We applaud the Government's actions in untying UK aid, and encourage the Government to continue its efforts to persuade its more recalcitrant European partners to untie their aid too (paragraph 69)"

34.  The Government fully supports the Committee's recommendation. Our priorities are to ensure the effective application of the OECD DAC agreement reached last year on untying financial aid to the Least Developed Countries, to urge the EC to take action against recalcitrant Member States that that are not applying the EU Procurement Directive to their aid programmes, and to press for a wider untying agenda, both within the EU and internationally. It remains our firm belief that aid must be untied to maximise its impact and we will therefore continue to press the case for all forms of aid to be untied to all developing countries.

Recommendation 26: "Ideally, and subject to an assessment of the risks involved and the requirement of accountability, aid is best provided through direct budget support (paragraph 70)"

35.  The Government welcomes the Committee's support for the appropriate provision of development assistance as direct budget support. In suitable conditions, direct budget support is preferable to other forms of aid in several ways: it ensures that funds flow through the central budget increasing transparency, government ownership and accountability for the funds provided; it increases pressure for improvements to central government planning and financial management systems; and it supports effective prioritisation by partner governments.

Recommendation 27: "The choice of aid instruments - as well as the allocation of aid and the selections of development interventions in general - must take account of country specifics rather than follow a preset formula (paragraph 70)"

36.  The Government fully agrees with the Committee's comments

Aid as investment

Recommendation 28: "Aid should be conceptualised as investment. However, careful attention does need to be paid: first, to the allocation criteria which drive aid/investment decisions; second, to the implications for countries which are seen as offering low rates of return; and, third, to the nature of the conditions which investors might attach to aid flows (paragraph 71)

37.  We agree that aid should be understood as investment. The focus must move from providing short-term aid to compensate for the effects of poverty to an approach where aid is a long term investment in tackling the causes of poverty by promoting growth, participation in the world economy. We agree that careful attention needs to be paid to ensure that allocation criteria - which drive aid/investment decisions do not lead to the adoption of simplistic or formulaic models of investment and expected return.

Recommendation 29: "It would be helpful if DFID made explicit its underlying model of the ways in which aid is effective and its aid allocation criteria, and encouraged other donors to do the same. Such transparency is fundamental to any notion of a shared and jointly-owned development partnership, and would provide developing countries with the information necessary to - if they so wish - improve their performance in terms of the criteria (paragraph 75)".

38.  DFID has provided a great deal of information about its views on the ways in which aid is effective. In the two White Papers on International Development (1997 White Paper, chapter 2; 2000 White Paper, chapter 7) annual Departmental Reports (2002 Departmental Report, pages 14-21) and occasional publications such as the joint DFID-HM Treasury paper on the Case for Aid to the Poorest Countries.

40.  We fully agree with the Committee that it is essential that our partner countries have the information needed to improve their performance. Some Country Strategy Papers include 'base case and high case' scenarios and set out the factors which will determine which scenario is followed. The Memorandum of Understanding (MOU) with the Government of Rwanda is a further example of how DFID is increasing transparency about our expectations of our partner governments and our contribution to poverty reduction. We are considering further such MOUs with other partner governments.

Recommendation 30: "Aid resources must not be squandered in countries which lack the commitment to development and poverty reduction. In addition, aid must not be used to prop up governments that are not furthering the interests of their people. This must not mean that we forget such countries, or, more specifically, the millions of poor people who live in such countries. Rather, the nature of donor engagement with such countries - countries which the World Bank labels Low-Income Countries Under Stress or LICUS - ought to be different (paragraph 76)"

41.  We agree strongly. DFID is working actively with other Government Departments, the World Bank and other governments to develop more coherent approaches to poverty reduction in countries whose governments do not fully share our commitment. DFID's own programme portfolio contains a range of strategies for working in a diversity of circumstances. At one end of the range are countries whose governments are fully committed to poverty reduction and where UK aid is delivered in support of nationally owned poverty reduction strategies and as far as possible delivered through the Government's own systems. At the other end are countries whose government is not an effective or trustworthy partner and where essential assistance to poor people must be delivered through non-governmental channels.

Recommendation 31: "Donors have a right and a responsibility to ensure that aid is used effectively, that recipient countries are committed to poverty reduction, and that appropriate policies are in place. However, we recognise that the external imposition of conditions can undermine local ownership and accountability. Conditionality, in some form, is sure to continue, but it needs to be practised flexibly so that countries are treated on a case-by-case basis, rather than in a one-size-fits-all manner, and so that local ownership and accountability are not undermined (paragraph 79)"

42.  The Government agrees with the Committee's comments. Ensuring that conditionality does not undermine ownership and accountability of developing country governments to their people is an important, ongoing challenge for donor governments. We are moving towards a development model in which PRSPs - designed by countries to address their own priorities within the framework of the Millennium Development Goals - are used to slim down conditionalities, by replacing the hundreds of different donor imposed requirements with the goals that developing countries themselves have agreed. We are encouraged by the progress the IMF has made so far in streamlining its conditionality attached to its financial assistance, and will continue to work with the IMF and the Bank to take this work further, including to ensure that conditionality are closely linked to and consistent with PRSPs. It is for donors to assist countries in implementing their poverty reduction strategies, designed to address country priorities within the overall framework of the MDGs.

Development partnerships and burden-sharing

Recommendation 32: "Attaining the MDG targets will require a change in the relationship between donors and recipients, and the construction of development partnerships which allow for sufficient ownership at the local level, including in the production and implementation of Poverty Rducution Strategy Papers (paragraph 81)".

43.  The Government agrees with the Committee's comments. The most successful development partnerships are led by a committed partner government driving progress towards poverty reduction, with donors providing support. Poverty Reduction Strategy Papers are an important part of changing and strengthening development partnerships.

Recommendation 33: "Partnerships are not a panacea for international development, but they do offer a way forward. The Committee is keen to play its role in the construction of a global partnership for development. Indeed we believe that parliaments and parliamentarians - in the developed world, the developing world, and in collaboration with each other - have important roles to play in helping to ensure that development partners live up to their promises, and that global partnerships are translated into national and local legislation and local action. We urge DFID, along with networks such as the Commonwealth Parliamentary Association, the Inter-Parliamentary Union, and the Parliamentary Network on the World Bank to help build the capacity of developing countries' parliaments to play their role in scrutinising decision-making and spending on their side of the emerging global development partnership (paragraph 92)"

44.  We agree on the importance of parliaments in providing a voice for all their people including the poor and disadvantaged and for their role in holding governments to account. We advocate a larger role for them in the development and scrutiny of PRSPs. We welcome the Committee's support for this work and urge them to continue their efforts to support development through their own contacts with parliamentarians around the world.

Recommendation 34: "Persuading the USA to engage seriously with international development issues, to support rather than undermine an emerging multilateralism, and to share the burden of financing development, remains a challenge (paragraph 94)"

45.  The Government agrees that it is important to encourage the USA to participate as fully as possible in the global effort to reduce poverty. The Government welcomes the interest shown by members of the Committee in engaging directly with politicians in Washington, and recognises the potential value of such dialogue in increasing awareness of international development issues in US political circles.

Recommendation 35: "We recognise the importance of engaging with the USA, as regards the Millennium Challenge Accounts, and in relation to its development-related activities in general (paragraph 99)"

Recommendation 36: "DFID should seek to influence the establishment of the USA's Millennium Challenge Accounts to ensure that they are informed by up to date development thinking, focused on poverty reduction, and do not neglect poor and poorly-governed countries, for instance in sub-Saharan Africa (paragraph 99)".

46.  We welcome the creation of the Millennium Challenge Account, and the US intention that it should contribute as effectively as possible to poverty reduction. We welcome US commitment that development assistance should be carefully targeted and have a demonstrable impact on poverty reduction; and we hope that the MCA will be managed in line with emerging best practice on aid effectiveness. We welcome the commitment shown by the US Administration to consult widely on the management of the MCA.

47.  Since the Monterrey Conference, the Government has deepened its engagement with the US Administration on aid effectiveness issues, including through discussions between DFID's Permanent Secretary and the senior officials in Washington tasked with establishing the MCA. DFID and USAID are planning a UK-US conference in London in October, which will address a wide range of aid policy and management issues and include a dialogue between the Secretary of State for International Development and the Administrator of USAID.


Recommendation 37: "The case for aid is powerful. It is our strong belief that the Government could and should make the case for aid and international development even more strongly than it currently does, in international fora, to our EU partners, and to the electorate (paragraph 102)

48.  The Government agrees with the Committee that the case for aid is powerful. We will continue to make this case as strongly as we can in the UK, the EU and globally.

Secretary of State for International Development

16 September 2002


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