Supplementary memorandum submitted by
the Department for International Development, in response to further
questions from the Committee
1. Does the UK Government support the
establishment of a Multistakeholder Review of private sector participation
in water and sanitation?
DFID has been invited and will participate in
the scoping study for the Multi-stakeholder Review of Private
Sector Participation.
The private sector, at local, national and international
level, has an important role to play in the delivery of water
and sanitation services, although there has been some recent controversy
around international private sector participation in water and
sanitation.
DFID is working to encourage partnership between
national and local government, civil society and the private sector
through initiatives such as Business Partners for Development,
to identify common ground between government, industry, community
leaders, trade unions and non-governmental organisations in the
development of appropriate mechanisms for improving access of
the poor to water supply and sanitation.
2. What is the UK Government doing to
ensure that countries such as Niger and Honduras, which have good
donor-approved education plans but which have missed out on the
Education For All Fast Track Initiative, are not denied the financial
support which they need to make improvements to their education
system?
The UK Government is committed to making the
Fast Track Initiative work. Although UK support for education
will continue to be provided through our country programmes rather
than through a separate FTI contribution, we will continue to
support the FTI to accelerate progress towards the education MDGs,
particularly now that the priority of the country-led sector development
process has been accepted. DFID will continue to focus on its
priority countries for its bilateral commitment. Support for poverty
elimination and Education For All goals in other countries will
be provided through our contribution to multilateral funds.
The UK is attending an FTI Partners' Meeting
in Oslo on 21-22 November. Discussion there will focus on ways
to provide financial support to donor orphan countries such as
Niger and Honduras. One such proposal is the establishment of
an FTI Catalytic Fund. This is currently supported by four FTI
donors (The Netherlands, Norway, Italy and Belgium). The objective
of the fund is to ensure that all countries have the possibility
to begin scaling up progress towards Universal Primary Completion,
by providing transitional funding for FTI-endorsed countries which
do not have a strong donor presence. Although the operating rules
of the Fund are still being finalised, the Fund is intended to
"crowd in", rather than crowd out, other donor support,
by providing bridge financing for a finite number of years. However,
outcomes of the Oslo meeting will not be fully established until
mid-December.
3. What is the likely impact of the Basle
II Capital Accords on developing countries' access to finance,
and might they be revised so as not to unduly discourage lending
to developing countries?
The Basel Accord is a non-binding agreement
between G-10 bank supervisors and central banks that formulates
broad supervisory standards and guidance for internationally active
banks. The FSA and the Bank of England represent the UK in Basel.
Discussions on the design of a New Accord are continuing and the
finalisation of Basel II is expected no later than mid-year 2004.
The new Basel Accord will be implemented in Europe through a new
Capital Adequacy Directive, CAD3.
The overall impact of Basel II on lending to
developing countries will depend on a large number of factors,
including how banks respond to the New Accord. However, it is
not clear at this stage that the proposals will damage the provision
of finance to developing countries in aggregate. The proposals
will improve on the current regime by aligning regulatory capital
charges more closely to risk which should provide a better basis
for sustainable lending. They will also remove the current bias
towards short-term lending to developing countries, and towards
lending to lower credit rated OECD sovereigns rather than to higher
rated sovereigns outside the OECD.
November 2003
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