Examination of Witnesses (Questions 20-39)
22 JUNE 2004
MR SUMA
CHAKRABARTI, MR
MASOOD AHMED,
MR MARK
LOWCOCK AND
DR NICOLA
BREWER CMG
Q20 Chairman: Before we move on to ask
Quentin to ask questions about multilateral aid and then Tony
to ask questions about the WTO, just two quick questions about
not just budget support, but general support. If we go back to
Sierra Leone, "The Memorandum of Understanding contains commitments
by Sierra Leone to reforms—in return for UK support. These
include action on corruption, reform of central and local government,
public expenditure management, media reforms, effective regulation
of the diamond industry, security sector reform, sound macro-economic
management and the development of a poverty reduction strategy."
When one goes to Freetown there are two people there, there is
President Kabbah and Vice President Solomon Berewa, and that is
it. Most government ministers are commuting between London and
Freetown and the level of management at the top level of the civil
service is tiny. I have two thoughts on that: one, could we not
be doing more to help the lower policy-makers, the people who
write the policies, work up the policies. In your department when
you need someone to work up a policy you have huge numbers to
fast track it through. Secondly—and you may tell me you
already do this—when we go out there, there are a lot of
general advisers and then specialist advisers. You and DFID must
still have what we used to call G7s or Principals. To what extent
do they get seconded in their career to the private offices or
to ministries overseas to see it from that end of the capacity
challenges of how you can actually implement, if you are Vice
President of Sierra Leone, actually doing some of this stuff from
that end. I have two questions really, what more can we do to
encourage and build the capacity of receiving countries for policy
formation and, secondly, what more can we do to ensure that your
people actually have an understanding of the policy difficulties
of receiving countries?
Mr Chakrabarti: I fundamentally
agree with you, I think we need to do more of this, not just DFID
but departments generally need to provide more support for policy
formulation in countries. That is what I was trying to get at
in answer to the earlier question from Mr Robathan. We used, of
course, to do a lot of that in the past. If you go back to the
Sixties and Seventies, many of us began our careers actually—I
did in Botswana with the Botswana Government.
Mr Robathan: A great success.
Mr Chakrabarti: Not due to me
though, more due to the Botswana contingent. In the last 20 years,
however, that all went away because of the feeling that those
people were not necessarily driven by the incentives and the objectives
of the governments they were working for, they were more driven
by the donors. If we were to go back down that route in Malawi
or Sierra Leone, we would have to devise a scheme with the relevant
countries that they were much more in the driving seat and these
people were not working for the donors. That is the thing we need
to focus on. In terms of how many of our people, the youngsters
coming through, have that sort of experience, ODI fellowships
clearly help to do that and there are several other secondment
schemes. Mark?
Mr Lowcock: I think you are exactly
right and I am just going to give two examples of people who are
now quite senior in the Department who have done exactly that.
One of our directors for information came to us originally from
the Treasury and spent two years working for the South African
Ministry of Finance, doing exactly what you are talking about.
One impact of that was to make him much more effective in working
for us because he had a much better insight. The other example
is in Uganda where somebody who is now the deputy director for
us for Asia spent four or five years working with the Permanent
Secretary as a behind the scenes adviser. The key thing about
that is that he was not visible to anybody, he was behind the
scenes, he was talking just to the Ugandan government, working
just for them, and therefore he was dealing with the problems
Suma was talking about, who are my loyalties to? We need to do
more of that, both because it is good for them and because it
is good for the countries which are having support.
Mr Chakrabarti: Can I just follow
up on that to try and draw the two points together? What I would
like to do in, say, a case like Malawi when we next provide budget
support is think about whether some of that budget support should
be reserved, essentially, for technical capacity building of this
sort, where the Malawians would be quality controlling the people
they get, the people who would be working for them, they would
be paying their salaries and not us, but they could pay it out
of the budget support we give them. That is something that donors
are still grappling with.
Q21 Mr Colman: Can I say that I thought
that the report was a bit light in terms of the emphasis on the
importance of looking at trade and investment—we have pages
90 to 92 and we have paragraph 1.7 but it is a bit light given,
if you like, the tremendous view which I support, that was made
in terms of world poverty making globalisation work for the poor
in terms of the White Paper when we set out on this road. Perhaps
you could restate how you see the way forward, because I saw in
Cancún where I was sent as part of the UK delegation, nominated
by this Committee, a situation where still many of the developing
countries who were full members of the WTO were getting their
briefings very often from NGOs who were very anti the views expressed
by DFID and, might I say, even the reports of this Committee.
Do you see a situation where, frankly, DFID should be much more
proactive in putting money into funds, not appointing I suggest
the consultants, that should be done by the countries themselves,
but who could perhaps provide a more balanced range of advice
than perhaps some countries who had been given theirs by the NGOs
who, frankly, were rejoicing in the breakdown of negotiations,
and you felt in a sense that they were not necessarily feeling
in any sense that globalisation could work for the poor. What
lessons are we learning from Cancún that DFID should be
more proactive in providing the resources for developing country
members of the WTO to fight their corner—and they are now,
thank God—but to do it if you like on the basis of knowledge,
not on the basis of the almost overriding views of UK-based NGOs?
Mr Chakrabarti: I will let Masood
give you a detailed answer; I think you are spot on myself. I
do think we need to build up the capacity of developing countries
to analyse this issue to work out their own positions for themselves
and give them voice, if you like, in these negotiations in a way
that is not happening at the moment, and the voice of many NGOs
in receiving countries is much stronger than the voice of the
poor countries involved. We have put quite a bit of money into
capacity building ourselves and the full fruits of that have not
yet come through in some of these countries, and it may be the
case that we need more of it really. Masood, do you want to come
back on some of this?
Mr Ahmed: If I can just amplify
a bit what Suma said, my concerns at Cancún were that there
was a good dimension to that and a negative one. The good dimension
was that developing countries were much more vocal and organised
in putting forward their perspective, and I think there was actually
almost a step change in the way they participated compared to
Doha, so in that sense that was a good outcome, and part of that
was due to the fact that they felt more confident by getting this
analysis or the support that they were getting from a whole range
of people but mostly NGOs. The bad dimension is the one you have
outlined which is that it is not clear that the analysis and advice
they were getting was balanced and indeed in their own best interest,
because some of the advice was essentially saying walk away from
the thing rather than try to get a deal that works.
Mr Colman: That is right.
Mr Ahmed: In yesterday's FT
you might have read—and other papers carried it—about
a recent study which has just come out and in a sense also says
it is better to walk away than to try and agree a deal. I think
there are always going to be people who will have had such a high
demand for the kind of agreement that they think is acceptable,
and whose views about the benefits of liberalisation are so nuanced
or negative, that they will be advising much more often that it
is better to walk away than to conclude. What I think we do need
to do much more now is to provide developing countries with access
to a much broader range of views, but in a way that they drive
the agenda. That is something that, as Suma says, we have stepped
up on, the funding for capacity building, and it is one of the
three areas of priority that we are attaching importance to.
Q22 Mr Colman: If the Chair will allow
me two supplementaries, one is the General Agreement on Trade
Services (GATS). We are inundated by the World Development Movement,
a very good organisation, but in terms of saying that GATS is
an appalling way forward for developing countries to see the delivery
of a range of services, and I notice in your water and sanitation
section you do not mention GATS at all. You will know that Baroness
Symons has rebutted a number of the things that have been put
forward by the World Development Movement; there you have an example
of a situation where developing countries have two very different
views put to them. You have not addressed this in your report;
what advice do you have for us as a Committee in terms of dealing
with the myths and the facts of the General Agreement on Trade
and Services and do you believe on balance that you would in fact
be supporting developing countries to use, in some circumstances,
the General Agreement on Trade and Services—particularly
water and sanitation?
Mr Ahmed: I think our advice to
them would be that it is a useful balance for them to be moving
towards organisation of services, but we need to make sure that
in the discussions the services that are of interest to developing
countries ought to feature in that debate. What I will say is
that the second part of the priorities that we have set out is
to try and pull together and disseminate more accurately some
more evidence which can serve as a basis for the next round of
negotiations. We have commissioned a fair amount of work which
will try and pull together some of this evidence, and we will
try putting it out in different ways. We also for the first time
in December last year brought together quite a large number of
people to have a trade and poverty conference here in London,
which brought together the multilaterals, developing countries
and a number of analysts. What was interesting for me there was
that in some ways a number of the developing country people who
were there were searching for ways forward, but a number of the
so-called heirs apparent who were outside the framework were much
more interested in still dissecting the past. A lot of developing
country representatives, at least at that conference, were quite
keen to say we have had this problem, we recognise it is a failure
for all, but we now want to move forward and identify which are
the red lines from our point of view that we do not want to cross,
but where are the other areas where we can make constructive gains—
Q23 Mr Colman: Is GATS a red line, as
the World Development Movement thinks it is?
Mr Ahmed: I do not think that
it is for many, because I do not think many developing country
people have focused enough on it, so part of it is lack of understanding.
It is not a red line so much as a blurred line for them; I do
not think they have yet fully figured out which side of the analysis
to come out on, so it is a good reason to put out more evidence
and analysis in that area.
Mr Chakrabarti: And a good reason
also as many would see it to have capacity building, so to do
that analysis as well. One other point on this, I do think we
ought to look for supporting PRSPs to take account of trade much
more than they have in the past. If you ask me, there has been
a bit too much about the donor aid relationship with those countries
and not enough about the wider policy environment.
Q24 Mr Colman: Can I then as my second
supplementary ask you about what has happened to the TRIPS (Trade
Related Intellectual Property Rights) agreement of 30 August last
year, as it seems to have vanished into the undergrowth? We clearly
could simply put down a whole series of questions saying when
is the legislation coming forward? You are sitting in front of
us, what on earth is happening? We are nearly up to the first
anniversary, the world is waiting and the pharmaceutical companies
tell me, "Well, you know, this is stuck somewhere in the
parliamentary logjam." Can you assure us that it is going
to be fished out and will be before us before we break and we
get to the anniversary date? It seems extraordinary that this
was celebrated, yet the UK Parliament has not done a thing.
Mr Ahmed: My understanding of
it is that the log jam that exists is actually not here but in
Brussels, because we are waiting for the EC to issue Community-wide
regulations, after which we can issue secondary legislation in
the UK to implement it. We are quite advanced in the preparation
of the secondary legislation to ensure that as soon as the Community-wide
legislation is issued we can bring it forward without delay. We
are now pushing quite hard, making exactly the point you have
just made, in Brussels, that it is a bit embarrassing that a year
after—
Mr Colman: Ten months on already.
Mr Ahmed: We do not yet have the
Community-wide legislation. Canada at least has that—
Mr Colman: No, they have withdrawn it.
Mr Ahmed: You are better informed
than I am then; I thought the Canadians already had that in place.
We basically want to be in a position that as soon as the Community-wide
legislation is there we are the first to put forward our secondary
legislation, but we have to keep pushing in Brussels.
Q25 Mr Davies: Thank you. I wonder if
I could ask you about Iraq, which is obviously the greatest variance
in your expenditure and budgetary tables at page 170 and 171.
I think at the Donors' Conference last November we promised some
£540 million if I recall.
Mr Chakrabarti: Yes.
Q26 Mr Davies: The bulk of which is under
your budget and some of it FCO and MoD. My first question is can
you tell us just how you reach that figure and, secondly, how
you split it up with the FCO and the MoD?
Mr Chakrabarti: The overall total
figure is in a sense derived from the UN and World Bank calculations
on what the financing gap for Iraq was going to be over the next
few years, and then various donors indicated what they were going
to provide, with the UK, US and Japan obviously trying to galvanise
other donors to provide quite a bit. In a sense the sum was partly
to gain leverage with other donors, to call them in to do more
than they were planning to do, being absolutely frank about it.
Q27 Mr Davies: But it was all top-down.
Mr Chakrabarti: It was very much
top-down but it was of course related to the best analysis that
people could do, given the situation in Iraq, of what the needs
would be in Iraq over the next few years. So there is a sort of
financing gap of the traditional sort we would see. Then as to
how it is split up, trying to remember exactly, it is £544
million over three years from April 03 to March 06; most of that
is from DFID, as you know, I think it is £30 million from
the Global Conflict Pool, £30 million from MoD's Quick Impact
Projects, about £60 million from the FCO and the rest from
DFID.
Q28 Mr Davies: What I am interested in
is how you actually came to that position. Did you sit down with
officials from the other departments and did you decide that some
of those tasks more naturally fell under their budgets?
Mr Chakrabarti: Yes.
Q29 Mr Davies: Just take us through that
process.
Mr Chakrabarti: Essentially we
were already embarked on some spending under different sub-heads
before last October and this is a figure that goes back to the
previous March, the beginning of the financial year. MoD already
had a budget, for example, for Quick Impact Projects, which they
have started spending on already, so that budget was just scored
as part of this, the FCO was doing work, for example, around communications
and issues like that, setting up a TV channel and things like
that in Iraq. That was also scored because that was already on-going,
so the bulk of the new expenditure if you like is DFID, but some
of the old expenditure, because we were going back to the previous
April, was scored as well to get to the figure of £544 million.
Q30 Mr Davies: What were the main items
of expenditure? It is not really broken down; you have got a page
in here in section 4 (page 82) but it does not really tell us
an enormous amount. The International Reconstruction Fund for
Iraq, that is a large one, what sort of things does that do? To
the UN consolidated appeal, £72 million, that is a large
amount. The other reconstruction work £59 million. What sort
of things does that include?
Mr Chakrabarti: The box on the
next page actually gives you some examples, but we probably ought
to attribute some of those things to each of these channels if
you like. The International Reconstruction Fund for Iraq is a
trust fund, essentially, which the World Bank and the UN manage,
and it helps to finance the Iraqi budget as a whole. So it finances
a wide set of outcomes, it is budget support essentially as we
understand it elsewhere. So we have made an allocation of £70
million to that trust fund which will be allocated by the bank,
the fund and the Iraqis to a variety of poverty-relieving programmes
in Iraq.
Q31 Mr Davies: I read the table on the
other side as achievements of the Iraqi administration, or achievements
of the Coalition plus the Iraqi administration. Things like getting
the oil flowing and the Central Bank of Iraq are nothing to do
with DFID—as far as I know you were not involved with getting
the oil flowing and so you are not taking credit for that, those
are the figures in this other table.
Mr Chakrabarti: Yes. Some of our
staff have obviously been involved in some of the discussions
there, but we are not taking credit for all those. There are things
here also in this table which DFID would take credit for, for
example the Essential Infrastructure Project—the third bullet
point down in Box 4f—that would not have happened without
DFID.
Q32 Mr Davies: This conversation has
revealed a possible confusion which could be in the mind of a
reader of this annual report, because if in fact what you are
saying is that if you want to understand Box 4e you have to do
that by looking at Box 4f which supplies examples of what Box
4e has been spent on, then I think you are going to have to relate
it to it directly because, as you have already pointed out, there
are some things in Box 4f that do not relate to Box 4e at all.
In fact, it is quite an ambiguous report because there are no
explicit connections made and some people might draw an implicit
connection which, as you say, would be right in certain cases
but not in others, so there is an excellent chance for misunderstanding.
Mr Chakrabarti: I am sure we could
do better with the presentation of things that DFID is directly
providing and things that DFID is providing collectively, if we
go back to the beginning of the conversation. In a number of these
things, DFID has been involved—for example, the power sector
reconstruction in the centre of Baghdad. Andy Bearpark, who is
DFID's secondment into the CPA, has been fundamental to bringing
that about.
Q33 Mr Davies: What about the police,
for example? There are now more than 45,000 Iraqi police, do you
contribute to that?
Mr Chakrabarti: We have been involved
but so have many other countries; again, I would not take full
credit for just that, I think a number of countries have been
involved in police training, but the UK has been one of the organisations.
Q34 Mr Davies: It really raises two points.
One is that insofar as you have not been involved in a substantial
amount of that achievement, why use this annual report to list
a lot of achievements in the administration of Iraq, which is
not strictly relevant? The second thing is that insofar as you
have been involved, that is spending on security and it is not
spending on poverty reduction or anything to do with the DFID
budget, is it, it is to do with other issues?
Mr Chakrabarti: I accept the first
point, I think it is perfectly fair to say that this box describes
a whole series of achievements, some of which DFID has been directly
involved in and some of which it has not. But I think that where
it has been directly involved and spending the DFID budget, clearly
that has passed the test of the International Development Act
and therefore has to be spent on things that are trying to alleviate
poverty, such as the example I gave you, the Essential Infrastructure
Project, trying to get these public utilities up and running.
Clearly that is having an impact in Iraq.
Q35 Mr Davies: I suppose you can say
that. I suppose you could stretch it to say that the Central Bank
of Iraq now being independent and a new set of bank notes to replace
the former Iraqi currency is something to do with reducing poverty,
but I find it more difficult to relate your remit under the Act
to the strengthening of the Iraqi police, and I was slightly concerned
that you were creating a precedent there for spending DFID money
in other projects, for instance on improving the policing in a
country, which certainly is a very, very wide interpretation indeed
of poverty reduction or achieving the Millennium Development Goals.
Mr Chakrabarti: We could have
a discussion about policing. I think policing generally, in certain
situations, is fairly fundamental to poverty reduction. The poor
tend to suffer most from insecurity and having a decent police
force, being defined in terms of good standards and not being
arbitrary in meting out justice and so on, is quite fundamental
to many poor countries. So I would not draw the line quite where
you have drawn it.
Q36 Mr Davies: I am not drawing it, Mr
Chakrabarti, I am just here as the voice of the public asking
questions. This has been a fascinating dialogue because it is
quite clear that poverty reduction has a vastly more elastic meaning
than I think most of our constituents imagine, so I am not making
any normative comment on what you have told me at all, I am simply
establishing the very interesting revelation that has emerged
this afternoon. Can I go to the other side for a moment, getting
away from the spending side if you like to the income side, so
looking to see how you raise this money for the reconstruction
of Iraq, because there has been a substantial increase, as the
Government made clear at the time, within the existing DFID budget
and therefore it follows that there will be other budgets which
will be cut correspondingly, and I think this has been mainly
in Latin America, Peru, Honduras, China, middle-income countries.
That is right, is it?
Mr Chakrabarti: That is right.
Q37 Mr Davies: So what has happened is
that we have diverted the sources of aid from projects very directly
related to alleviating poverty in Honduras, for example, where
I think we were backing up Oxfam, so very directly related to
poverty reduction, and putting it into Iraq where it was spent,
among other things, on supervising the Central Bank and improving
the policing. That is again a shift along the spectrum away from
a purist, poverty reduction agenda, is it not, by quite a dramatic
amount?
Mr Chakrabarti: I really do not
think so. There are two questions there, let me try and take them
in turn. One is why did the Government choose to reallocate money
from other middle-income country projects to Iraq? The Government
decided Iraq was a very high priority for it, both in development
and reconstruction terms as well as in other fiscal terms. It
has a target of spending 10% of its bilateral funds in middle-income
countries; that target is not just plucked out of thin air, it
is based on evidence, research evidence which shows aid is most
effective in low-income countries. So when it decided that Iraq
was going to be a development programme it had to finance it out
of that 10%. It could have made another choice, it could have
said we will renege on our 90-10 Public Service Agreement target
(for which we are accountable to Parliament) and take it out of
low-income countries. That would have flown in the face of evidence
that aid in low-income countries actually has a higher return,
and so it decided to make the choice it did, but it obviously
was not an easy choice for the Government to reduce aid in many
of those countries in Latin America, China and elsewhere. That
is why it made those choices and it has had impacts, difficult
impacts, which we can discuss if you wish. I do not think this
concept of poverty reduction has suddenly been changed by Iraq.
Many of the things that we are doing, whether in Iraq or elsewhere,
would in our view fall perfectly well under the ambit of poverty
reduction. To get public utilities up and running, to even get
a central bank up and running, is fairly fundamental to getting
most economies up and running, economies which hopefully will
get a good economic policy which will help the poor, whether it
is in Iraq or Uganda.
Q38 Mr Davies: In Peru, for example,
you were committed to funding small projects through Oxfam Peru,
a grassroots organisation in rural Andean parts. Those are very
poor areas in the Andes, are they not? There are pockets of extreme
poverty in middle-income countries, rather like you have spent
a lot of money on addressing pockets of extreme poverty in India
which is a highly successful middle-income country. So you took
money away from that to put it into Iraq, which is certainly a
middle-income country, potentially a rich country, and where there
was an immediate political imperative to make sure that the post-conflict
period was as short as possible and that the reconstruction was
as successful as possible. I think the importance of this conversation
is this, there are some people who might imagine, reading perhaps
rather superficially the 1998 Act and hearing some of the political
rhetoric of the last few years about overseas aid, that your budget
is now entirely autonomously directed to poverty alleviation,
poverty reduction, and that is all; it cannot be diverted for
political reasons at all into something that is not purely poverty
reduction, and so you make an objective assessment of where there
is poverty and how your budget can best be spent on alleviating
that poverty. There are obviously arbitrages to be made in different
countries, projects that call for Direct Budget Support or otherwise,
but there is only one criterion. Then you find that because there
is a political crisis and a major political imperative—I
happen to support the Government on Iraq, I am not causing trouble
for the Government on Iraq, I supported the military action last
year and I am still happy to say that I did. I totally understand
the political imperative and indeed share it, we have to make
a success of military actions wherever they are and we have to
raise money. The Government decided it was not going to make a
further appropriation and therefore you were told "Find some
money elsewhere and divert it in double-quick time to Iraq."
You did what you were told and I am sure in a very efficient fashion;
nevertheless, that is not a pure poverty reduction agenda, it
is not purely an autonomous ministry whose job is simply to spend
some money which the taxpayer has given you for poverty alleviation
purposes, it is a budget which can, where necessary, be diverted
for higher political criteria elsewhere.
Mr Chakrabarti: I can only say
that I think that would not stand up. If you look at the reasons
why we have put money into Iraq and what we are putting it into,
I would be perfectly happy to continue defending it as—
Q39 Mr Davies: But you would not have
decided it yourself, Mr Chakrabarti, you have told me this was
a top-down decision.
Mr Chakrabarti: Absolutely.
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