Examination of Witnesses (Questions 20-39)|
TUESDAY 23 APRIL 2002
20. But to do the kind of partnership where
substantial flows of money as budget support in some way or another
are going to a country which is fulfilling its side of the partnership
should be reserved for those countries which fulfil their side
of the partnership because otherwise it will go into Mercedes
cars, sheep farms in Australia, Swiss banks and so on. Should
we try to make that distinction?
(Ms Vazquez) Stronger conditionality goes with aid
funding now and this is especially the case with the US at the
moment. I do not want to enter the debate about what is good about
conditionality and how we define good and bad performers because
it is rather academic. What I do want to say is that conditions
look good in theory when we look at good governance, rule of law,
etcetera, but the problem is when we put them into practice. Let
us say the criteria for assessing a country's performance are
not clear to usmaybe they are clear to the Committeethey
are not transparent. We do not know how governments decide to
suspend aid, on what basis they decide to suspend aid for one
country or another. The decisions are not consistent. For instance
let us think of Pakistan where the donor community decided to
suspend aid in 1999 following the coup and now everyone seems
to have resumed co-operation with this country. Co-operation was
suspended on the grounds that no democratic government was in
place and as far as I am concerned the same government is in place.
Another thing about aid conditionality is that it cannot be used
in the one-size-fits-all approach. I was talking to the Development
Co-operation Minister of Sierra Leone at Monterrey. We have post-conflict
countries where maybe not all the conditions are already in place
but they still need financial support from the donor community
so you cannot treat post-conflict countries in the same way as
you treat countries which are in the process of consolidating
democracy. There are several problems with putting aid conditionality
into practice. This should be developed and should be flexible
enough to adapt to countries' contexts.
21. Clearly the figure of 0.7 per cent trips
off the tongue but conditionality is slightly more complicated,
particularly in relation to dealing with the United States one
would imagine. When you see the chart of ODA as a percentage of
donors' GNP, right at the top are countries like Denmark, the
Netherlands which one would not imagine would be trying to put
too many onerous conditions on recipient countries and right down
at the bottom is the United States which may be a country which
would like to see a lot of conditions linked with aid. How can
you see the way forward in relation to conditionality, particularly
when one of the countries most people are trying to encourage
to increase that percentage is the United States?
(Mr German) Most of the academic studies which looked
at conditionality have concluded that it does not work. The first
thing is that people need to get real about conditions and say,
especially when in one year Tanzania had to meet 121 conditions
attached to its aid, that a plethora of conditions is ridiculous
because it simply does not work and it puts an immense burden
on countries in trying to comply with all the conditions. The
first step is to say it does not work and then to try to invest
in what does work. Linking what you asked to the question of what
makes a good donor, what makes a good donor is not making the
fragmentation even worse by everybody having their own individual
little programme. Progress that has been made in discussions within
the group of development ministers is about collaboration and
shared programming and that it is better for more countries to
get together to do joint programming rather than having to have
their own little bit, which only makes it much more difficult
for host finance ministries to track the money and then to be
accountable for how the money is being spent. If you take a consistent
approach to long-term financing and a collaborative approach with
other donors to long-term financing then that will invest in local
capacity and local accountability and that is the opposite of
imposing conditionality externally but it is much more likely
22. Is approaching the US on the basis of the
conditions they would like to attach to aid as important as discussing
the figures? The figure is what people know about, the conditions
are slightly less well known. It is probably completely unrealistic
to think that the United States are going to fund certain regimes
with certain trade arrangementsand there are certain post-conflict
countries which are most in need of aiduntil they have
a structure in place which will see that aid is effectively spent.
(Ms Ross) One thing to mention which we can share
with the Committee is that during the Monterrey conference, BOND,
with its US counterpart and its Norwegian counterpart, ran a forum
on aid. During that forum there was heated discussion between
the Minister for Economic Planning and Development from Sierra
Leone and the Head of USAID, Andrew Natsios, on this very issue.
I can send that through to the Committee and it is quite interesting.
We can report what happened but we do have a verbatim report of
that and it demonstrates how these debates are going on at ministerial
level and the difficulties there are in overcoming the US's reluctance
to approach aid in the same way. One of the key things about donors
and the key principle is that aid should go to the poorest and
at the moment only 17 per cent of US aid goes to the least developed
countries. As you know, having just done a European report, EU
aid performance is better than that, but still not great. One
of the key things which NGOs need to be doing more is publicising
to the public and making governments more accountable and making
it clear that actually aid is not going to go to the poorest and
that is one of the key reasons why you are not seeing these developments.
Money is not going on basic health and education and a great deal
of US aid is now tied and goes to US corporations and US technical
(Ms Randel) The US is a very odd donor,
particularly on the conditionality side. Congress has a huge influence
on very small amounts of money. There are reports literally this
thick of congressional approvals for project, by project, by project
within things like the child survival programme. In some ways
that is very good because you have a lot of political input. In
other ways it is very fragmented and an official within a developing
country will be responsible for ensuring that this little pot
of £10,000 or small amounts of money go to a particular thing.
US aid is very programmed, so there is an issue there. On the
question of whether you should focus on volume or conditionality,
there is this huge issue about volume because of a misperception
in the States about the burden they share. Because they spendequal
with Japan more or lessa very large amount of money on
aid compared with what other donors spend, the perception is that
they are bearing the large burden, because a quarter of humanitarian
assistance is funded by the US at least and so on and so on. There
is a big information job about both how much money the US is spending
as part of the international effort and also what a tiny percentage
it is of the federal budget. It is something like 0.3 per cent
of public expenditure in the states, compared with 0.6 per cent
for the OECD as a whole. Public perception is that it is very,
very high spending. There is a big job to do on volume.
(Ms Ross) For the US, the extra annual
spending of $11 billion required to meet the 0.7 per cent target
represents around a quarter of the increase in military spending
scheduled for 2003 and announced after 11 September, and a seventh
of the tax cuts for the period 2002-14. Education is needed at
that level and we are working to try to create international coalitions
of NGOs working on these issues to pressure donors to give more
aid to the poorest, do more donor harmonisation, untie aid alongside
progressive governments such as the Utstein group and the UK Government
which have been quite progressive on these issues.
23. You say it is an educational job for the
United States. I find that slightly strange since you have also
said that they produce one quarter of the world's development
assistance. That is quite a lot.
(Ms Randel) Humanitarian assistance, emergency assistance.
For emergencies, the US funds about one quarter of the global
effort, but about one fifth of the global aid effort.
24. As a Briton, I am not going to preach to
the United States, never mind the 0.7 per cent.
(Ms Randel) It is the burden sharing point.
25. I understand the point but I think we should
be slightly wary about telling the United States' taxpayers how
to spend their money, although I do take the point. That is not
what I want to talk about. Since you are saying there should be
greater co-operation, of course I entirely agree, it is very sensible
that there should be greater co-operation. Would you therefore
like to see more done through UN agencies in general? Yes or no?
That is the way that a lot of British Government money is now
being spent. We have committed more through UN agencies and multilateral
rather than through bilateral aid.
(Ms Randel) It depends on the UN agency. For instance,
if you want to improve public health, then investing more in UNICEF
would be a very, very sensible thing to do.
26. Is it not the case that the UN charges 13
per cent administration costs?
(Ms Randel) If you look at the administration costs
for bilateral donors, you will find that they are at least that
(Ms Vazquez) Bilateral aid is tied.
27. British bilateral aid is not tied.
(Ms Vazquez) No, that is the only exception.
28. Do you not think 13 per cent is quite a
lot to charge on administration? I think it is an awful lot of
money to charge for disbursement. It is quite an issue with a
lot of NGOs that I know.
(Ms Randel) It is a difficult question because what
people include in administration is very different between donors,
so it is very hard to compare. The number of officials you have
delivering however many billion dollars' worth of aid is another
mechanism people use to compare between UN agencies and bilateral
donors. I certainly would not want to be in the position of claiming
that UN agencies are necessarily more efficient than some bilateral
donors at least.
29. Regarding the untying of aid, the UK Government,
working closely with NGOs such as yourselves, have been at the
forefront of moves to untie aid and we all agree that this is
a good way forward. It is a measure which the OECD's Development
Assistance Committee estimates would release an extra $5 billion
of aid resources. What is the status of discussions with our EU
partners about them untying their aid?
(Ms Ross) Work on EU aid is continuing and work on
bilateral aid is continuing on aid untying. A paper is going to
be put together on aid untying. What happens to that paper ...?
The discussions are ongoing and the UK Government are at the forefront
of pushing those discussions but several governments are hostile
to aid untying and slowed down the process of discussions around
(Ms Vazquez) Denmark and Germany. As you know, Action
Aid presented a legal complaint to the European Commission on
this very issue, saying that bilateral aid tied programmes were
in contravention of EC law on internal market rules. The aid procurement
markets cannot be closed, so therefore you cannot discriminate.
It is not only bad from the developmental point of view but also
from the economic point of view and it is in violation of EU legislation.
That legal complaint has been ongoing for two years and the Commission
has not made much progress because the Commission relies on information
from Member States about their own procurement systems and they
have not been very willing to give that information. This is where
we face a blockage. We need evidence against Member States' tied
31. Regarding British aid, which is the only
thing in which we really have interest, if any, Clare Short is
very keen that private money and inward investment will generate
a much greater poverty reduction than straight aid money. I think
we would agree with that; I certainly would. I think we would
all agree that untying aid is in principle a very good thing.
The complaint I have heard from British companies is that if they
cannot get a contract from the UK Government, from DFID, consultants
or whatever it might be, and they cannot get them from our EU
partners because they are tied and only giving them to national
companies, or largely, you then end up with a situation where
the British overseas investment is drying up because they are
not getting any contracts. What do you think the solution to that
(Ms Vazquez) Development assistance should not be
used as a form of subsidising home companies. There are other
instruments within a government to promote export: you have export
credits, you have ministries of trade, etcetera. What we have
to work on now is challenging first of all our European colleagues
to untie and then the rest of the world, the Japanese and the
Americans. Seventy per cent of US aid is tied and the Japanese
are no better than the Americans. We should concentrate first
on untying European bilateral aid and then other donors' aid.
32. To confirm what has been said, the four
countries which have a percentage above 0.7 per cent, that is
Denmark, the Netherlands, Sweden and Norway, all are tied aid
and it is in fact support for their business community. One shake
of the head and one nod. What is the answer? All of these are
really to support home industries in those four countries.
(Ms Ross) I am not clear on all of the governments
(Ms Vazquez) Yes, they do. They all have different
proportions of tied aid. Sweden's proportion of tied aid is smaller
than Denmark. Denmark is the country which ties most in that group.
You are right they all have tied aid.
33. It would be helpful if Development Initiatives,
as a research body, could provide this information as a breakdown
of ODA as a percentage of DAC donors which would help in our thoughts
I know at the prepcom and at the conference one of the things
put forward by the Interparliamentary Union, which represents
all the parliaments of the world who choose to belong to itI
regret to say that the United States still has not rejoined but
they were representedwas that all aid flows to developing
countries, the use of those aid flows or the approvals of those
aid flows, would have to go through a vote of those parliaments
and that there should be ongoing scrutiny on a six-monthly basis
of how that aid was being used. Was this something which was discussed
in Monterrey and if it was not discussed do you think it should
have been? Is this something you would approve which is to have
scrutiny, accountability? At the moment there is no requirement
for IMF, World Bank or any aid flows to be discussed, approved
in any way by any developing country's parliament. Do you agree
this is a good way forward?
(Ms Randel) Yes; absolutely.
(Ms Ross) Yes. As donor countries are
constantly preaching good governance and good governance is important
to improve the effectiveness of aid, I would have thought that
accountability to parliaments on governance of aid flows would
be something donor governments should be supporting.
34. Was it discussed in Monterrey?
(Ms Ross) No.
(Ms Vazquez) No.
35. That was the first conference where the
IPU had observer status and I regret to say that it was at exactly
the same time as the IPU Marrakesh conference, so a number of
the people who could have been at Monterrey were in fact at the
Marrakesh annual meeting. My second question is about this business
of dialogue and partnership. You were saying civil society and
business interests were present through the whole process. All
the information which has been given to us by Development Initiatives
is about government ODA. Was there any discussion about the quantum
of private sector development assistance untied or of, let us
say, the money raised by NGOs? We are about to come to Christian
Aid week. A lot of us assumed that quite large sums of money are
raised in this country which are disbursed as development assistance.
Were there any discussions about what the quantums were around
this? How much is being raised that could go alongside development
assistance as partnership on a global basis, on a country basis?
If this was not raised, it would be very interesting for Development
Initiatives to seek to collect this sort of information. A very
interesting discussion at the moment in this country is about
the Health Service and people look at what is going through government
and what is going through the private sector and you have a total
sum. I just wondered whether similar figures were available for
what private individuals are donating in the United States as
opposed to what the government is contributing and similarly in
this country and other countries around the world. Is there in
fact a much larger amount of development assistance going out
into developing countries which none of us really knows about
or has not been tracked?
(Ms Randel) The last bit is the most correct bit.
None of us really knows about it. The estimates range from something
like six billion to something like $18 billion which is rather
a large range of total voluntary flows from developed countries
to developing countries. We did do a paper for the White Paper
on Globalisation on voluntary flows which I have brought with
me, for which the Charities Aid Foundation showed the total UK
development NGO income for 1998 at just over £1 billion.
We are talking about significant sums of money, especially as
it will probably be going to the poorest countries and to basic
36. Was this data collection discussed at Monterrey,
given the partnership approach?
(Ms Vazquez) Not as far as I know. The US administration
repeated on several occasions that although the US official assistance
may not be that large, a huge amount is coming from US foundations
and charities which had to be taken into account. I have the figures
but not with me.
Mr Colman: Could that be provided to
It is interesting as a scoping exercise: where we are now, where
we wish to go and how this relates to the 2015 target achievement
country by country, both how much is raised in the donor country
and how much is disbursed in the country which is the recipient.
ODA may in fact be a minor amount. I do not know. Clearly it is
the view of this Committee that it should be increased, but it
is worth having an overview as to what is actually going on.
37. The importance of private sector flows should
be factored more prominently by the lobby generally into the equation.
All of you made some very interesting responses to my earlier
questions. Judith made the point that amongst the responsibilities
of donors should be to change policy in areas other than development
assistance, such as trade and agriculture subsidies. That also
must be a pre-condition. Without change to the terms of trade
again development goals will not be reached. It is quite right
for people to make proposals, whether it is the World Bank or
NGOs or parliaments, to turn Doha into a development round, to
reform agriculture in poor countries. I wonder whether it would
be sensible to seek to supplement the progress such as it was
at Monterrey by setting goals or targets for the volume of imports
to developed countries from the poorest countries. If you could
get developed countries to sign up and say yes, we must have a
tripling over a decade, or whatever it is, of imports of agricultural
products, then you would be required to do things in terms of
tariff and non-tariff barriers. However, if you simply demand
change, which we should continue to do on tariff and non-tariff
barriers, certain things will happen, but people will not be under
any obligation. There is a commitment in principle to 0.7 per
cent so you have been able to nudge people up over the years,
at least use that as an argument, so there is a commitment to
volumes of trade. Would that be a useful thing to set? Do you
think that would be a useful goal and lead to policy change?
(Ms Randel) I do not know, but I do remember reading
the US statement that that was one of the things that the Minister
reported on, the volume of imports into the US from developing
countries as part of their development effort.
38. Could you find that document?
(Ms Randel) I have it right here.
(Ms Vazquez) It is a question of indicators: how do
you measure development? Just by the volume of developing countries'
imports? It is a good measure but we also have to think of human
39. Forgive me, whether they are good or bad,
we have the Millennium Development Goals which are human development
indicators. What I am trying to think of, in the same way that
we have 0.7 per cent as a goal to strive for in terms of north/south
financial flows from aid ... You asked the right question. Is
the volume or cash value of trade a good indicator? I do not know.
Brighter people than I need to try to work out what is the right
thing. The question is: should an indicator of that kind be used
to try to promote accelerated policy change on the terms of trade?
(Ms Ross) BOND does not advocate or campaign on trade,
but trade campaigners would probably say that there was no shortage
of banner headlines for how you could improve terms of trade:
zero tariffs. The point is that the political will is not there
to do it. With any proposal you might come up against the same
problem, which is also the same on 0.7 per cent, which is that
you can have your banner headlines, but there has to be the will
(Mr German) In principle anything which encourages
engagement with developing countries, including trade, is very
welcome. However, you have to remember that most private finance
which is invested in developing countries is not targeted on poverty
reduction. It may be welcome, it may contribute to growth, but
if you look at the people who are chronically poor, then they
are the people who most need the aid which is the only international
resource which can be specifically targeted on poverty and the
goals. On the question of promoting broader engagement, I did
want to mention the UK Council for International Co-operation,
which we put in our note. If you do have something like a UK Council,
then it could promote every kind of engagement with developing
countries, be it through aid, be it through exchange visits, be
it through investment. That is very important. Our discussions
with people from the private sector show that a lot of them are
extremely well disposed towards development, both for business
purposes and for humanitarian purposes, anti-poverty purposes.
14 Not printed. Copy placed in the Library. Back
Ev 30. See also supplementary memorandum from ActionAid/Bond,
Ev 35. Back
OECD Development Co-operation Report, 2001, Table 13. Back