Select Committee on Public Accounts Minutes of Evidence


Supplementary memorandum submitted by the Department for International Development

Question 30:  To what extent is DFID involved in research on renewable energy?

  1.  DFID currently funds 12 knowledge and research projects in energy with a total value of £2.34 million, and a further 7 with a total value of £1.17 million have been approved for funding in this years round, contracts for which are being finalised. They are summarised in the table below. Full details may be found on the website .

  2.  In addition to our own bilateral support, DFID also supports research into renewable energy at the multilateral level through our contributions to the Global Environment Facility (GEF). This was set up to help developing countries to meet the additional cost of addressing global environmental objectives. Projects under the GEF are implemented by the World Bank, United Nations Development Programme and United Nations Environment Programme. Since 1991 the UK has committed £215 million to the GEF. The UK has pledged to support a 50 per cent increase to the fund and is committed to encouraging other countries to do the same.

ThemeTitle Description
The development and promotion of renewable energy sources, especially for rural communities

Micro solar lanterns: developing and marketing (June 1997 to May 2002) To review recent experience of solar lanterns, and to develop, produce and market an affordable, reliable solar lantern in Africa to meet the needs of large numbers of poor, rural people for better quality and cheaper lighting.
Benefits from improved rice husk combustion efficiency (September 2000 to September 2003)

Improved efficiency of rice husk combustion in rice processing, with particular focus on small rural mills in Bangladesh, to enable use of saved husk for provision of animal feed, fuel for poor people and value-added by-products of rice husk ash.
Fuel substitution-poverty impacts on biomass fuel suppliers (June 2001 to November 2002) To determine all poverty impacts on traditional household fuel suppliers arising from fuel substitution of biomes by more modern fuels, informing policy makers of the full cost benefit, livelihood and poverty impacts of fuel substitution.
Disseminating approaches to sustainable livelihoods (November 2000 to March 2002) To develop, disseminate and build local capacity in participatory, multi-stakeholder workshops—and other practical methods—for exploring in-country priorities and partnerships in Energy for Sustainable Urban and Rural Livelihoods.

ThemeTitle Description
The development and promotion of renewable energy sources, especially for rural communities Uptake and commercial sustainability of watermill-based energy services (April 2002 to April 2004) To enable a self-sustaining watermill upgrade industry to become established in the Indian Himalayas
Modern energy: impacts on micro enterprises (Inception Phase) To demonstrate the link between the provision of modern energy services and the emergence of sustainable micro-enterprises.
Energy and the EnvironmentClean Development Mechanism (CDM) pilot project to stimulate market for family-hydro for low-income households (March 2003 to April 2004) To build the capacity of institutions in Vietnam and the Philippines to develop Clean Development Mechanism projects for family-hydropower.

Question 76:  How does the total EU agricultural subsidy compare with the total value of EU aid?

  1.  According to the latest Organisation for Economic Cooperation and Development (OECD) estimates, the EU provided

97.9 billion[7] of support to agriculture in 2000 (provisional figure). In 1999,

107.5 billion was provided. In 2000, EU Members provided total net ODA of

27.4 billion. Therefore, EU agricultural support in 2000 costs about four times as much as official development assistance.

  2.  The Government fully acknowledges the barrier EU trade restrictions present to developing countries economic growth. While many developing countries have preferential access to the EU market, the highest tariffs continue to fall on historically sensitive products of interest to developing countries, particularly agricultural goods, textiles and clothing. According to a 1999 EC estimate[8], total developing country gains from a 50 per cent cut in tariffs, by both developed and developing countries, would be in the order of $150 billion. This is around three times what developing countries currently receive in aid.

Question 78:  DFID analysis of the impact of GM foods on world poverty?

  1.  In 1999 DFID provided £34,750 of funds to a research project by Professor Timothy Swanson of University College London into the implications of terminator seeds for developing countries. Terminator seeds are genetically modified to make them sterile and thus denying farmers the possibility of saving the seeds of one crop and using them as planting material for the next crop.

  2.  Prof Swanson's main findings, published in The Economics of Managing Biotechnologies (2002), are:

    —  Terminator technologies are not likely to be widely available commercially for about 5-10 years (from December 1999), and will predominately be used in developed countries rather than developing countries.

    —  Developing countries and farmers which invest in and are early adopters of GM and terminator technology are likely to benefit. Slow adopters or countries with little biotechnology capacity are likely to be bypassed or negatively affected through increased competition.

    —  The widespread use of expensive terminator seeds in developed countries is likely to lead to a slower diffusion of new technology to developing countries particularly the least developed. This could increase food insecurity particularly in the least developed countries.

  3.  GM technologies have the potential to provide significant benefits for poor people and the environment if applied safely and responsibly to the crops on which the poor rely. In response to demand from developing countries, DFID is currently funding research into affordable GM technologies. Such research aims to adapt GM technologies to local ecologies, agricultural systems and socio-economic circumstances with the aim of benefiting poor farmers. DFID is working to ensure that developing countries are able to make informed choices about whether to adopt GM technologies, and to manage their safe development and use. We also recognise that GM technologies are one of a number of tools that could help the world meet the predicted increase in demand for food in developing countries.

  4.  DFID's does not, and will not, fund activities that involve the development, testing, or use of breeding material which uses terminator technology, until and unless such technology has been shown and agreed to be appropriate and beneficial for the developing countries concerned.

Questions 164 and 165:  How much of the lost EU budget is attributable to international development?

  1.  The European Commission does not produce an annual consolidated report with figures for levels of detected fraud. Nevertheless, the financial year 2000, the latest for which audited reports are available, revealed little evidence of fraudulent or irregular behaviour in the budgets related to international development (the External Actions budget and the European Development Fund).

  2.  Detailed findings are set out below. They illustrate the scale of the problem to some extent: against an average total budget spend on international development of 6 billion annually, levels of possible fraud total about 15 million of which the UK share is about 2 million.

  3.  The European Court of Auditors (ECA) focused their audit in 2000 on the Tacis programme (former Soviet Union States and Mongolia). The Court picked up on internal procedural weaknesses but found no evidence of financial irregularities as a result of its audit. The Court's report on the activities of the European Development Fund pointed to the continuing investigation or irregularities surrounded expenditure within the Africa, Caribbean & Pacific (ACP) Group Secretariat based in Brussels, and the misappropriation of some 6 million in Senegal uncovered by an audit in 1995. The ECA studied the close of audits in progress at the end of 1999. The study covered six financial audits concerning approximately 40 million which had found evidence of ineligible expenditure amounting to almost 36 per cent of the expenditure audited by the auditors engaged by the Commission. Recovery orders had not yet being issued. The report identifies Tanzania and Central African Republic as two of the countries involved.

Question 166:  The Committee asked for a note on the mechanics of the UK's contribution to the EC development programmes and an indication of the levels of funding.

  1.  The UK and other member states finance EC development assistance in two distinct ways:

    —  Budgetary contributions.

    —  Voluntary contributions to the European Development Fund (EDF).

Budgetary contributions

  2.  The EC's external programmes are, with the exception of those for African, Caribbean and Pacific states, funded from the EC budget. Each member state's share is based on a formula that takes account of GDP and customs receipts. The UK's current share is approximately 19 per cent[9]. With a few exceptions for particular programmes, DFID is responsible for the UK's contributions to the external relations and pre-accession chapters of the budget. In 2001-02 this is forecast to accounts for £670 million of DFID's budget, up from £636 million in 2000-01, and an estimated £517 million in 1999-2000. Each year the Treasury withholds the UK's estimated budgetary contribution to the EC on international development from DFID's vote. Adjustments are made in following years when the final outturn is known.

Voluntary contributions to the EDF

  3.  The EDF was established as the financial instrument for the series of agreements signed between the EC and African, Caribbean and Pacific states (the Lome« Conventions and, since June 2000, the Cotonou Agreement). It is a voluntary fund which all member states contribute to and which is managed by the Commission. The EDF is replenished every five years. The size of the replenishment and each member state's share are negotiated afresh on each occasion. For the past two replenishments, the UK share has been 12.7 per cent. The estimated UK share of EDF expenditure in 2001-02 is £91 million, down from £121 million in 2000-01 and £213 million in 1999-2000.

Questions 166-170:  The Committee wanted further information on why donors were unable to agree a set of common indicators for measuring good governance.

  1.  There is no internationally agreed definition of governance. Most development agencies have formulated their own definitions. These differences reflect various governance traditions and differences in language. In the case of the multilateral development banks, for example, their mandates influence their definitions. So the World Bank's mandate limits its governance operations to the economic sphere. Our view is that good governance extends to every sector and is key to creating the economic conditions and services necessary for poverty reduction.

  2.  In March 2000 a joint Development Forum comprising representatives from the OECD Development Assistance Committee (DAC), World Bank, IMF and UN, attempted to identify a set of governance indicators that the international community could use to measure progress towards the improved governance of developing countries. These negotiations were initiated by the DAC in recognition of the importance of governance in development and the absence of any internationally agreed targets. In particular, the International Development Targets (now superseded by the Millennium Development Goals) did not cover governance.

  3.  The DAC identified certain necessary characteristics for governance indicators if they were to be useful and secure international acceptance. The following key points were agreed:

    —  The indicators had to measure change over time and therefore had to be replicable and quantifiable.

    —  It was also recognised that the international community could only afford to adopt a relatively small number of indicators so that the collection of data and measurement of progress in all countries was both practical and economical.

    —  The DAC agreed that indicators should be truly representative of what they measured. For example, the measurement of whether a country holds periodic elections is replicable, quantifiable and economical, but on its own it is not an adequate measure of the quality of democracy.

  4.  The majority view at the March 2000 meeting was that the statistical data then available did not match these requirements and that the international community should not accept second-best indicators in such an important and sensitive area. As a result, the DAC failed to agree on good governance indicators.

  5.  Since then, DFID has invested in further work on so-called `second generation indicators' that match up to the requirements identified in the DAC. This work is being taken forward in the World Bank. In the light of this, the DAC Working Group on Governance will later this year revisit the questions of governance assessments and indicators to review the prospects of agreeing governance indicators.

Suma Chakrabarti

Permanent Secretary

Department for International Development

May 2002

7   As measures by the Producer Support Estimate (PSE), which measures support from consumers and taxpayers to farmers, including government subsidies and price support. Back

8   Nigel Nagarajan, Millennium Round: An Economic Appraisal, EC Economic Papers, Nov 1999. Back

9   The abatement to UK budget contributions to take account of our relatively lower receipts from the CAP does not apply to the external relations part of the budget. Back

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