Annex B
STATEMENT TO THE DEVELOPMENT COMMITTEE BY
THE RT HON VALERIE AMOS SECRETARY OF STATE FOR INTERNATIONAL DEVELOPMENT
AND
THE RT HON GORDON BROWN MP CHANCELLOR OF
THE EXCHEQUER UNITED KINGDOM: Dubai, UAE., September 2003
It is appropriate that these Annual Meetings
should be held in the Middle East, which is currently the focus
of much of the world's attention. This is also a region where,
despite much economic and social progress over the last twenty
years, there are still significant numbers of people living in
poverty, the reduction of which is at the heart of the World Bank's
mandate.
SUPPORTING SOUND
POLICIES WITH
ADEQUATE AND
APPROPRIATE FINANCINGThe
UK has long argued that considerable additional resources will
be needed if the international community is to meet its commitment
to the Millennium Development Goals (MDGs). We therefore welcome
the work carried out by the World Bank to estimate the existing
financing gaps of individual countries, and the additional aid
flows which could be absorbed where countries are implementing
sound policies.
It is clear that there is an urgent need to
find ways of increasing available resources both in the medium
and longer-term, if we are to meet the challenge of sustainable
poverty reduction. Already the Bank estimates that a near doubling
of the additional commitments made at Monterrey could be used
immediately, some 30 billion USD annually. And as Bank staff themselves
have made clear, even this is an under-estimate of the resources
required, with substantially more likely to be needed in the short-medium
term, with a current estimate of at least 50 billion USD annually.
It is also clear that a greater share of these resources will
need to be provided in a form that is predictable and able (where
appropriate) to finance recurrent costs, in order to facilitate
the development of sound and transparent expenditure frameworks
over the medium-term.
The UK's proposal for an International Finance
Facility (IFF) seeks to make a significant contribution to these
objectives by both bridging this financing gap and providing immediate,
predictable finance in grant and concessional loan form. We will
be seeking to bring discussions about the proposal to a wider
group of countries, and we will be taking this forward in Dubai.
It is also important to ensure that these additional resources
are used in such a way as to maximise their impact. We believe
there is a valuable role to be played by the World Bank, together
with other relevant institutions, in monitoring financing shortfalls
at the country level and providing information to donors, so that
global aid allocation patterns can respond adequately to financing
needs. We need to ensure that any country seriously addressing
the MDGs does not fail due to lack of finance.
Rising levels of development finance will underline
the importance of improving aid effectiveness, a key requirement
if we are to make progress towards the MDGS. Developed countries
will need to make increased efforts to align their programmes
behind country poverty reduction strategies, and harmonise their
practices with other donors. Increased effectiveness also involves
giving developing countries committed to reform greater freedom
to use their resources efficiently. The UK has therefore untied
all development assistance, and we encourage others to join us.
Developing countries will need to implement further reform in
the governance and accountability of public institutions, and
show leadership in encouraging donors to align their programmes
with poverty reduction strategies.
We must also not lose sight of the efforts that
we have already been making to deliver on the MDGs. The UK Government
is committed to making the education Fast Track Initiative (FTI)
work. The revised framework emphasises the importance of national
education sector plans set within a wider poverty reduction strategy.
We will work with this revised FTI initiative to fill education
finance gaps, and we plan to increase spending on education to
over £1 billion over the next five years. We will provide
support bilaterally through our country programmes, as well as
multilaterally through the International Development Association
(IDA) and the European Community (EC).
We also need to scale up our efforts on health,
we look forward to the High Level Forum on Health as an opportunity
to do this—to ensure we learn lessons around health systems
reform, and to review the finance necessary to deliver a free
basic health care package. No person should be denied basic health
care because they can't afford it.
ENHANCING VOICE
AND PARTICIPATION
OF DEVELOPING
AND TRANSITION
COUNTRIES
Another key element of improving the governance
and accountability of public institutions is enhancing the voice
and participation of developing and transition countries in the
International Financial Institutions (IFI) themselves. The UK
has been a strong supporter of the "voice" agenda in
the Bretton Woods Institutions (BWI), and looks forward to a full
discussion of the issues in Dubai. We believe that enhancing voice
will require continued effort on a range of issues, and welcome
the recognition from both other shareholders and the institutions
themselves that further work in this area is necessary. While
progress has been made on some aspects of this agenda, it is essential
that this is sustained in order for us to fulfil our Monterrey
commitments.
We commend the significant steps that have already
been taken to strengthen developing country Executive Directors'
offices. To ensure such progress on capacity building continues,
we would like to see final agreement on the establishment of an
Analytical Trust Fund to support the provision of independent
research and policy advice to African Executive Directors in the
Bank and the Fund. The UK, together with Sweden and the Netherlands,
has already circulated a joint approach paper setting out our
views on how this advisory research facility should be structured
and governed. We hope to see further financial commitment to the
Trust Fund at the Development Committee meeting.
But capacity-building is only one element in
the process of change. To ensure that Voice is mainstreamed within
the work of the IFIs, we need to ensure that there is a firm commitment
to achieve progress on the more challenging institutional and
structural issues, as well as to continued improvement in participatory
processes on the ground at country level. Changes to enhance transparency,
increase decentralisation and increase the diversity of staff
could have a positive impact on the voice of developing countries
in the institutions, and must continue. We would welcome a short
report from management on actions they are taking in both the
Bank and Fund to move these issues forward from a voice perspective.
We would also like to see commitment from staff to strengthening
borrower participation in the IDA 13 Mid Term Review and the IDA14
replenishment negotiations. In the context of these negotiations,
we would support the discussion of a staff paper setting out a
range of options for ensuring full take-up of IDA shares by developing
countries.
The UK supports further discussion of possible
structural change at the Executive Board level. The UK believes
that the creation of a 25th seat for Sub-Saharan Africa on the
Boards on both the IMF and World Bank would be an important step
to increase the effectiveness and efficiency of the representation
of African countries, and should be seriously considered. We would
also support an increase in the Basic Vote as part of any future
revision of the Articles of Agreement of these institutions.
PROGRESS REPORT
ON TRADE
The failure to reach agreement at the World
Trade Organisation (WTO) Ministerial Conference in Cancun was
extremely disappointing and a blow for the Doha Development Agenda.
We have lost an opportunity to move ahead on an important pillar
of the development agenda, which will bring higher global economic
growth and progress towards the MDGs, and we share the frustration
of developing countries. It is important to look for ways to get
the talks back on track and we hope that developed and developing
countries will share our determination to continue working until
we have achieved a world trade system which really delivers for
developing countries. The multilateral system remains the best
vehicle for securing the benefits of trade for all and we must
not be pushed off course.
As negotiations move forward, the need for trade-related
technical assistance and capacity-building in developing countries
can only increase. We therefore welcome the expansion in both
depth and scope of the World Bank's trade programme over the past
few years. In particular, significant international efforts have
been made to ensure that trade-related capacity-building activities
support national development programmes. This is a crucial step
in helping developing and transition countries exploit new trading
opportunities, and should remain a priority for the Bank and other
development partners in the future.
It is also widely acknowledged that the weakest
and most vulnerable countries may also need support in adjusting
to trade liberalisation measures. We strongly support the recent
joint initiative by the Bank and the IMF to help countries cope
with potential negative impacts of reform, such as preference
erosion and loss of tariff revenues. This must also be built on
poverty and social impact analysis, in order to address these
aspects of reform design. It will be important to ensure that
the details of this initiative are worked out in close partnership
with the WTO, the United Nations Development Programme (UNDP),
the United Nations Conference on Trade and Development (UNCTAD)
and bilateral donors to ensure that a common approach is adopted.
IMPLEMENTATION REPORT
OF POLICIES,
ACTIONS AND
OUTCOMES NEEDED
TO ACHIEVE
THE MILLENNIUM
DEVELOPMENT GOALS
The policies and actions needed to achieve the
MDGs are clear, and are plainly set out in our commitments at
Monterrey. However, as we have seen, moving forward in many of
these areas can be difficult and slow. We therefore welcome the
work underway to develop a formal framework for assessing progress
in implementing our commitments. It will be important to ensure
that this framework addresses all aspects of our collective contribution.
In particular, we must ensure that assessments of aid quality—particularly
progress on Poverty Reduction Strategy Paper (PRSP) alignment
and donor harmonisation and coordination—are included in
this monitoring process for donors and the International Financial
Institutions alike.
Monitoring alone is, of course, insufficient
to deliver results, and it is therefore essential that the first
Global Development Review contains clear operational recommendations
for ministerial action. The framework should also serve to reinforce
accountability against Monterrey commitments, and must therefore
be widely owned. We welcome the close collaboration with other
development partners which has already taken place, and trust
that this will continue. It is also essential that assessments
of developing country policies are embedded in country owned processes,
and we therefore welcome the Bank's recognition of the importance
of using PRSPs and PRSP annual reports in making these assessments.
PROGRESS ON
THE IMPLEMENTATION
OF POVERTY
REDUCTION STRATEGY
PAPERS (PRSPS)
We welcome the recognition that country-ownership
of PRSPs is central to their effective implementation. Considerable
progress has been made in the last year, with the completion of
a further 14 PRSPs, bringing the total number to 32. Moving forward,
the annual reports on PRSP implementation will be a key element
in embedding the PRSP in national policy making processes, and
it is crucial that governments remain in full control of the process.
The IMF and the World Bank have important roles
to play in strengthening the PRSP process. Recent commitment from
the IMF to improve the alignment of its programmes with country-led
processes is encouraging, as is the Bank's willingness to participate
in multi-donor initiatives. A challenge in rolling forward PRSPs
will be to improve policy analysis of growth and shocks, and distributional
analysis of macroeconomic policies. More generally, there needs
to be more open dialogue with stakeholders on macroeconomic policy,
with governments taking the lead. Given the weak macroeconomic
capacity in many countries, some facilitation of this process
will be required, and the Fund will need to play a supportive
role, helping governments explore options and trade-offs.
We welcome the IMF and the World Bank's public
commitment to systematically assessing the poverty and social
impact of key reforms. Rapid progress in the Bank's roll out of
Poverty and Social Impact Analysis (PSIA) in 40 low-income countries
has been encouraging over the last year, and the Fund is beginning
to reflect the poverty and social impacts of proposed reforms
in its policy advice. However, it will need to do more to commission
and use PSIA within its areas of competence.
PROGRESS ON
THE HEAVILY
INDEBTED POOR
COUNTRIES (HIPC) DEBT
INITIATIVE
We welcome the progress that has been achieved
with the Heavily Indebted Poor Country Initiative (HIPC). However,
progress in countries reaching their Decision and Completion Points
has not been as fast as expected. We thank staff for their analysis
of the reasons for this, and hope that this will lead to debate
on how to speed up implementation.
Due to the global slowdown and the reduction
in primary commodity prices, there is an increasing risk that
countries will not be exiting the HIPC Initiative with sustainable
levels of debt, and that those countries that have already reached
Completion Point may see their debt return to an unsustainable
level. For this reason, it is important for the UK that agreement
is reached on the methodology for calculating debt relief at Completion
Point. We need to ensure that the additional voluntary relief
provided by some bilateral creditors is truly additional to any
`topping up' of debt relief. In this way, we will be ensuring
that relief benefits the poor countries for which it is intended
and does not merely subsidise other creditors. Now that we have
the Staff report on this issue, we hope that agreement can be
reached on this point.
We also welcome the progress that has been made
over the past year in encouraging more creditor countries—including
Bulgaria, India, Korea and Libya—to participate in the HIPC
Initiative. However, it is vital that we press forward to secure
the participation of all creditors in the HIPC Initiative, and
we look to the World Bank and IMF staff to continue their efforts
at moral suasion on creditors.
In the longer-term, the key challenge is how
to ensure continued debt sustainability while enabling countries
to finance their poverty reduction strategies, in order to achieve
the MDGs. It is not acceptable that countries that have demonstrated
a strong commitment to sound economic management and poverty reduction,
should be denied access to concessional finance. Many HIPCs will
remain vulnerable to exogenous shocks for the foreseeable future.
The solution must lie in a new forward-looking,
country-specific approach to assessing genuine debt sustainability,
and in a more flexible approach to selecting financing instruments
in order to ensure that appropriate financing can be made available,
consistent with debt sustainability. It is essential that this
financing is additional to existing commitments. The UK has proposed
the IFF as a mechanism to deliver additional resources up to 2015,
which could provide further aid and debt relief. We hope that
discussion will give a clear direction to this debate, so that
solutions can be identified by the time of the 2004 Spring Meetings.
WORLD BANK
GROUP INFRASTRUCTURE
IMPLEMENTATION ACTION
PLAN
The UK believes that well-planned infrastructure
projects are an important element of effective development policies.
We therefore commend the realistic proposals outlined in the World
Bank's Infrastructure Action Plan. Moving forward, it will be
important to ensure that the Bank's drive to increase expenditure
on infrastructure services is achieved without recourse to indiscriminate
project lending. In particular, we would like to see as much emphasis
on the maintenance and management of existing and new infrastructure
as is awarded to the installation of new capacity. We must also
make certain that institutional support, including capacity-building,
is completely integrated into investment programmes.
More generally, future IFI lending for infrastructure
must be structured and priced with a view to avoiding the crowding
out of private funding, where this is a credible alternative.
It will also be essential to ensure the long term financial sustainability
of infrastructure services, whether this is to be paid for by
taxes or end-users, or a combination of both. This will depend
in part on recipient countries accepting increasing accountability
for their investment choices.
THE MIDDLE
EAST
There has been much economic and social progress
in the Middle East region over the last 20 years. But there are
still significant numbers of people living in poverty, and there
is a risk that further progress will be hindered or even reversed
by continuing conflict in the region. There is risk too from governments
not continuing to take forward the economic social and political
reforms needed to ensure growth, the creation of jobs, more equitable
distribution of wealth, and access to services for a still rapidly
growing population. Failure to address these issues effectively
will result in failing states, and have implications far beyond
the region.
The region is not short of development finance,
receiving around $6 billion a year, and many countries receive
more aid per capita than those in sub-Saharan Africa. However,
the effectiveness of aid to the Middle East and North Africa is
often compromised, and its effectiveness reduced, by the competing
aims of donors. A more joined up approach of donor activity would
ensure more effective use of aid. With regards to trade, the performance
of non-oil exports has lagged behind other regions of the world.
Rich countries therefore need to move faster to remove tariff
barriers. At the same time countries in the region need to reduce
the high tariffs which impede trade, and discourage inward investment.
IRAQ
The UK very much welcomes the role that the
Bank is playing in the international effort to provide support,
through its work on the social and economic needs assessments,
and on the establishment of a Trust Fund as a channel for donor
support for the future development of Iraq and the welfare of
its people. We look forward to considering these assessments in
the Madrid conference next month, alongside our partners in the
international community. The assessments should provide a sound
basis for an international effort to help the country get back
on its feet again after decades of conflict. We encourage the
Bank to make its own direct contribution to Iraq's development
through technical assistance, and through lending as soon as conditions
make that appropriate. We, for our part, are working hard to help
create the conditions for the restoration of national sovereignty
to Iraq as quickly as is practicable. In conclusion, there can
be no doubt that the agenda for action outlined above is ambitious.
If, as we hope, it is here in Dubai that Ministers make a clear
commitment to providing the resources to reduce world poverty,
then these 2003 Annual Meetings will have been truly memorable.
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