STATEMENT TO THE DEVELOPMENT COMMITTEE
BY THE RT HON VALERIE AMOS
ANNEX B
SECRETARY OF STATE FOR INTERNATIONAL DEVELOPMENT
AND THE RT HON GORDON BROWN MP CHANCELLOR OF THE EXCHEQUER
UNITED KINGDOM
DUBAI, U.A.E., 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
Financing
The 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 £1bn 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 twenty 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 $6bn 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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