Select Committee on Science and Technology Thirteenth Report

3 DFID Approach to Funding

Direct budgetary support

19. In recent years international donors have been moving away from project and programme support in favour of direct budgetary support. According to this model, donors provide funding directly to developing country governments. DFID told us that its country programmes "primarily support the developing country's own Poverty Reduction Strategy" and explained that a Poverty Reduction Strategy "allows a developing country to identify the opportunities for, and constraints on, poverty reduction in that country".[21] The Strategy is developed through consultation within the developing country and collaboration between the developing country government and the World Bank and International Monetary Fund. The Strategy outlines the country's macroeconomic, structural and social policies and programmes to promote growth and reduce poverty, and also describes the requirements for, and major sources of, financing. Donors, such as DFID, then link their aid support to achievement of the strategy. This approach has now been adopted by the majority of donors.

20. The Poverty Reduction Strategy Paper (PRSP) approach was initiated by the International Monetary Fund and World Bank in 1999, but as DFID commented, the "switch to support for a Poverty Reduction Strategy came about in part as a result of research, not least by British scholars".[22] DFID explained that this research "demonstrated that development programmes were more likely to succeed if they were owned by developing country governments and people than if donors attempt to impose their own ideas".[23] Direct budgetary support also facilitates pooling of aid from different donors, thereby reducing transaction costs and promoting co-ordination.

21. The success of the PRSP approach depends heavily on the ability of the developing country government to be a reliable partner to the donor community. DFID told us that it "adopts a comprehensive approach to assessing and managing the fiduciary risks associated with direct budgetary support […] The decision to provide direct budgetary support is made in cases where the potential development benefits are assessed as justifying the risks involved".[24] The Rt Hon Hilary Benn, Secretary of State for International Development, also made the point that a balance between direct budgetary support and programme support was still required: "Direct budget support over the last few years has ranged between 15 and 19% of our total bilateral programme. That means that over 80% is not direct budget support".[25] The President of Malawi concurred, saying that he believed that both project funding and budget support were required for the time being. We also heard in Malawi that addressing corruption was vital to enable further moves towards direct budgetary support. Doctors and nurses, for example, at Ntcheu District Hospital told us that­when they were in stock­up to half of drugs and supplies ordered from the country's Central Medical Supplies unit in Lilongwe were pilfered en route, often ending up on the black market in neighbouring Mozambique. In a letter to the Committee following the visit, Mr Benn stated that DFID Malawi had "not heard reports of pilferage of Anti-Retroviral Aids drugs" specifically.[26] This is hardly surprising as Ntcheu hospital told us it was still waiting for HIV/AIDS drugs to be distributed, months after it had been expecting them. In front of the committee, however, Mr Benn did echo views about the difficulties in moving away from project to direct budgetary support in such circumstances: "if there are concerns about corruption that is not a route down which you would want to go. We make a judgement depending on the circumstances. Tackling corruption is fundamental".[27]

22. It is expected that the proportion of aid channelled by direct budgetary support will increase in years to come. This move away from project and programme support is likely to impact on the nature of both the scientific advice that DFID requires and the scientific support it provides to developing countries. The Centre for Land Use and Water Resources Research warned that the "shift within DFID to direct budgetary support to countries […] is diminishing the donor agency's ability to provide direct technical guidance to development projects".[28] We asked DFID how the move towards direct budgetary support was impacting on its scientific and research staffing needs. For example, it might be assumed that the need for certain types of expertise would diminish if direct budgetary support became the predominant mode of assistance. We received only vague responses from DFID: Paul Spray, Head of the Central Research Department, for example, told us: "We tend now to move from discussing the particularities of projects more to discussing the broad policies". [29] DFID has not provided us with a satisfactory description of how its needs for science and technology advice are changing as a result of the increased use of direct budgetary support, or any convincing evidence that it has made a formal assessment of this. It is troubling that DFID has not considered the full ramifications of this significant policy shift. We recommend that it does so. We regard scientific and technological capability as an important part of good governance. It should therefore be a condition of budgetary support.

23. We note that science and technology rarely feature significantly in PRSPs, or DFID Country Assistance Plans.[30] This is not entirely surprising. As Simon Maxwell, Director of the Overseas Development Institute, commented, "if you go into countries and say, 'We want our aid money to be used to pursue the Millennium Development Goals', you are unlikely to get them coming back and saying, 'We regard creating international networks and centres of excellence in science and technology at the top of the list'".[31] Professor Julian Evans also told us: "It requires a sophisticated government to appreciate what research can do for development, or a sophisticated donor to promote that idea", remarking that "DFID used to have that capability" - the implication being that this is no longer the case.[32]

24. Science and technology tend to have a low priority in developing countries and ultimately if international donors do not clearly articulate the enabling role of science and technology in the achievement of the MDGs, it is hard to see how representation in PRSPs will be achieved. We saw in Malawi, for example, that donor preferences can significantly influence the content of a PRSP. The Secretary of State agreed that the process of drawing up PRSPs needs to be a "combination of push and pull" between the donor community and the developing country.[33] If DFID is not minded to "push" science and technology by illustrating the medium and longer-term benefits they can yield, it is highly likely that the understandably short-term perspectives of developing country governments will result in science and technology being overlooked. The situation is exacerbated by the fact that the guidelines for preparation of PRSPs mostly focus on very near-term horizons, and there do not appear to be specific guidance notes for incorporation of science and technology considerations into PRSPs. We are concerned that the ability of science, technology and research to contribute to progress towards the Millennium Development Goals is being hampered by the Poverty Reduction Strategy process, as currently implemented.

25. Indeed, Andrew Scott, Policy and Programmes Director, Intermediate Technology Development Group, told us that DFID had a "weakness" in "the support they give to developing country governments for them to be able to develop their own science, technology and innovation policies".[34] The Appropriate Development Panel of the Institution of Civil Engineers expressed a similar concern: "Effective poverty reduction initiatives will depend heavily on the scientific capacity both to help develop appropriate poverty strategies and to put them in place and maintain them. There would appear to be little evidence of the UK making significant steps in this direction".[35]

26. We asked DFID what formal mechanisms it used to help developing countries identify their science and technology requirements and incorporate these into their PRSPs. The response was disappointing: "Dialogue with Governments over Poverty Reduction Strategies is a top priority for relevant DFID country offices. Science and technology issues are raised as part of our discussions on each sector. Particular emphasis is given to those sectors identified as priorities in our Country Assistance Plans. Our discussions on Poverty Reduction Strategies take place in a systematic way, and involve helping with formulation of strategies, implementation, monitoring and evaluation".[36] This clearly places the onus on Country Office staff to encourage developing country governments to address science and technology in their PRSPs. The technical nature of science and technology means that developing countries may require greater advice and support on these issues than in some other areas. Unfortunately, as discussed further in paragraphs 68-70, we have reservations about the levels of expertise in science and technology within the Country Offices, and therefore about the effectiveness of this approach.

27. We conclude that DFID has given insufficient consideration to how best to help developing countries identify their requirements for scientific and technological advice and research, and how to ensure that science, technology and research are represented appropriately in developing countries' Poverty Reduction Strategy Papers. Since Country Office staff are unlikely to have the full range of technical expertise or experience required to supply effective independent advice, DFID should work together with other donors to develop specific guidance on best practice in this area.

28. Moreover, whilst we support DFID's policy of moving to a model where developing countries identify their own priorities, it is clear that national science, technology and research systems in many developing countries are too weak to enable them to contribute effectively to the PRSP process. We saw an example of this in Malawi, where the National Commission for Science and Technology received only a fraction of its official budget and was therefore totally unable to engage in high-level policy making, or to implement the policies it had developed. Senior officials from the National Commission for Science and Technology expressed their frustration at not having any ownership or overview of the research that was being carried out in Malawi, including by international donors. They also said that their lack of capacity prevented them from ensuring that donors were complying with the regulations on carrying out research in Malawi. Revealingly, the National Commission for Science and Technology placed "the general lack of integration of science and technology in national development planning processes" at the top of its list of major constraints. [37]

29. We asked DFID in oral evidence what it was specifically doing to build the capacity of science and technology systems in countries where they are almost non-existent. DFID was unable to provide a concrete example and instead provided evidence of "an indirect contribution", emphasising the need to address "the causes of repression, effective payment of salaries, economic stability".[38] We fully acknowledge the importance of creating the right economic and governance frameworks for science and technology to flourish. Nonetheless, DFID needs to encourage greater direct support to national science, technology, research and innovation systems in developing countries over the medium- to long-term, in order to be consistent with its policy of enabling developing countries to identify their own priorities. Sustainable capacity building is a slow process and investment is therefore needed now if developing countries are to have any chance of developing the necessary capabilities in science, technology and research in coming years. In view of the short-term perspective of Poverty Reduction Strategy Papers, there is a case for DFID, in collaboration with other major international donors, to develop capacity building strategies with each country. For those countries where national science, technology and research systems are so weak that capacity building will not make an impact for the foreseeable future, DFID needs to have a coherent and transparent strategy to help them identify their priorities in science, technology and research, and to ensure that these are appropriately represented in developing country Poverty Reduction Strategy Papers. The role of capacity building of national scientific institutions in developing countries is discussed further in paragraph 129, and capacity building in the UK in paragraph 197.

Short-term aid versus long-term capacity building

30. Investment in science, technology and research requires long-term commitment. Donors, such as DFID, are faced with competing demands for funding of humanitarian relief in emergency situations that require short-term (but often substantial) aid provision, medium-term actions to meet the MDGs, and longer-term development of the knowledge, infrastructure and capacity required to prevent emergencies occurring in the future. When asked how DFID determined the balance between these choices, the Secretary of State indicated that the funding was effectively allocated on a case by case basis.[39] The Government CSA also observed that "there is currently no clear UK Government approach to S&T capacity building so no alignment with donor agencies/multilaterals, and […] no consensus on the appropriate balance between capacity building and short-term aid provision".[40]

31. Although the demands for short-term aid are unpredictable and liable to fluctuate, it is important that DFID has a clear policy for deciding what proportion of the aid budget should be allocated to longer-term development. In light of the move towards direct budgetary support and the decentralised nature of much of DFID's funding, as well as the need to be able to respond to crises, it would not be practicable to define the distribution precisely; flexibility is essential. Nonetheless, we urge DFID to develop clear guidelines to inform decisions on the balance between short-, medium- and long-term aid provision, as well as clear country-specific policies with respect to this balance.

Interpretation of the Millennium Development Goals

32. DFID's development agenda is shaped by the MDGs. The London School of Hygiene and Tropical Medicine was not alone in remarking that although it "strongly supports […] the focus on achieving the Millennium Development Goals", there is a need to remember that "the process of attaining them in a sustainable way requires a longer term perspective than is sometimes acknowledged".[41] Professor David Taylor, Centre for Tropical Veterinary Medicine, told us that the "quick-fix and short term vision" of development agencies was "undermining and distorting the contribution science can make towards development".[42] Moreover, Professor David Molyneux from the Liverpool School of Tropical Medicine also stated in a recent article that the focus of health policy makers on HIV/AIDS, tuberculosis and malaria as a result of the MDGs was detracting attention and resources from other infectious diseases, such as leprosy and river blindness, which are responsible for "deleterious effects on the social and economic wellbeing of the poorest quintile of populations".[43]

33. In addition, Dr Andrew Cotton, Director of DFID's Resource Centre in Water, Sanitation and Environmental Health (WELL), noted that although the UK Government "was a prime mover behind one of the great achievements at the World Summit on Sustainable Development in Johannesburg 2002, namely adopting a global target for improving access to sanitation", the fact that neither water nor sanitation are headline MDGs means that "there needs to be a strong advocacy effort for the contribution the sector makes - and, by implication, the role of technology".[44] The Environmental Audit Select Committee has addressed the targets that emerged from the World Summit on Sustainable Development in detail in its Report: World Summit on Sustainable Development 2002—from Rhetoric to Reality.[45] Dr Cotton additionally remarked on the "detectable reduction in the emphasis placed by DFID on the role of technology and engineering as a means to support pro-poor development".[46] The Appropriate Development Panel of the Institute of Civil Engineers shared this concern and told us that during the workshops for the Applied Technologies to Improve Livelihoods that DFID organised in preparation for the new Research Strategy, it had been "warned off the word 'infrastructure' - as though […] you do not need to do any more about that".[47]

34. In addition, whilst the headline goal for primary education is laudable, expansion of secondary and tertiary education systems is essential, for example to safeguard the supply of teachers. Furthermore, the British Council recently published a survey of young people's perceptions in Malawi, Zambia and Zimbabwe which showed that 42.6% of young people said that what they most wanted to achieve in their lives within the next five years was "to pursue further education".[48] Since developing countries tend to base their PRSPs on the targets enshrined in the MDGs, the absence of headline goals for science, technology and further or higher education may reduce the emphasis placed on these issues by developing countries.

35. DFID did not accept the validity of these concerns, telling us that the MDGs "focus the world's attention on some really important things that we need to do"[49] and "have also opened up the door to science and technology […] We are talking 2015, we are talking about problems for which there is no immediate solution and therefore research is required".[50] We are pleased to hear DFID acknowledge the importance of science, technology and research for achievement of the Millennium Development Goals, but we are not convinced that these words have been translated into policy or practice. We remain concerned that technology-intensive areas such as infrastructure, energy, water and sanitation are at risk of being neglected by DFID and other donors due to their omission from the headline Millennium Development Goals. The specific nature of the Goals, whilst bringing focus to the international development effort, may also detract resources and attention from approaches such as capacity building, if interpreted too literally.

Multilateral funding routes

36. Approximately half of DFID's resources are spent through multilateral agencies. The most significant amounts involved comprise the UK's share of the European Commission development budget and contributions to the World Bank, Regional Development Banks and UN Agencies.[51] The recent National Audit Office (NAO) report on DFID's funding for HIV/AIDS suggested that DFID needs to pay greater attention to evaluating how the work of multilateral organisations that receive DFID funding aligns with DFID's objectives: "DFID provides significant sums to multilateral development institutions […] HIV/AIDS has such a bearing on the Millennium Development Goals that it should feature in any strategy relating to those multilateral development institutions which have a clear interest in responding to the epidemic. However, eight out of the fourteen DFID Strategy Papers for such institutions did not mention HIV/AIDS".[52]

37. We followed this issue up with DFID and were told by the Secretary of State that DFID was "trying to move towards having a better system for judging the effectiveness of different bodies. So if one looks at the different UN agencies we are in the process now of developing a matrix of trying to judge who is doing a good job, who is doing a less good job and for us to adjust our funding accordingly. It is a perfectly rational, sensible thing to do".[53] We fully agree with the Secretary of State that rigorous evaluation of the effectiveness of funding channelled through different multilateral agencies is "a perfectly rational, sensible thing to do", and are therefore surprised that DFID is only now beginning to adopt such an approach. We accept that conditional support may sometimes be necessary in order to raise standards in poorly-performing organisations, but DFID needs to be open about its reasons for provision of aid in these cases.

38. The DFID Departmental Report 2004 states that in 2003-04 "the UK's share of the European Commission's development and pre-accession programmes is expected to total some £970 million. This is about 25% of DFID's budget".[54] Yet Mr Benn said of EU development funding: "as I think everybody knows, it has not been terribly effective in the past".[55] The Secretary of State additionally told us that there was "a process of reform taking place that the UK has played a very strong part in pushing, and we have seen some improvement. There is further improvement yet to be made".[56] During our visit to Malawi we also heard that EU development programmes in Southern Africa were of variable quality.

39. The International Development Select Committee stated in its Report on DFID in 2003 that the "EU's record in terms of the share of aid reserved for poor countries remains substantially worse than that of individual member states" and warned that in view of the enlargement of the EU, "DFID will need to find ways of ensuring that the accession of the 'ten' does not reinforce the tendency for the EU to focus on the 'near abroad'".[57] The Report also criticised DFID for not providing "a succinct assessment of how the EU external assistance meets the UK's development objectives" in the 2003 Departmental Report.[58] It is not acceptable that 25% of DFID's funds have been potentially allocated to development programmes that are widely perceived to have been of dubious effectiveness. DFID has responsibility for ensuring that the multilateral routes through which UK aid is channelled represent good value for money for UK taxpayers. DFID's past failure to monitor its multilateral investments has been a hindrance to ensuring that this expenditure makes an effective contribution to meeting DFID's objectives.

Public-private partnerships

40. The draft Research Strategy stated that DFID has been a pioneer of public-private partnerships (PPPs) and was looking to take forward, or develop, PPPs in agriculture and health.[59] However, the Appropriate Development Panel of the Institution of Civil Engineers (ADP) was sceptical of the utility of PPP arrangements for meeting international development objectives, suggesting that companies used them "to avert criticism/attention from less commendable actions".[60]

41. By contrast, the International Livestock Research Institute (ILRI), based in Nairobi, told us that DFID had taken "a bold step in supporting ILRI and partners to apply a very novel genomics approach to develop the ECF [East Coast Fever] vaccine" and said that the fact that DFID had required "detailed feasibility studies which involved the private sector before approving the grant" ensured that once proof of concept had been achieved, the "probability of uptake by the private sector" was "high".[61] The Centre for Tropical Veterinary Medicine (CTVM) also expressed support for DFID's approach to PPPs for livestock vaccines: "DFID have responded positively to the technical and financial problems such research presents and intend to assist in establishing a public-private partnership specifically to develop vaccines against common livestock diseases of the tropics".[62] Professor Maudlin from the CTVM explained to us that his enthusiasm for the PPP stemmed "from the fact that it should provide a boost to the funding".[63]

42. The main advantage of PPPs is the access that they provide to additional resources. At present, only 10% of the $50-60 billion global budget for health research is spent on the diseases that affect 90% of the world's population and the "big five" agricultural research multinationals spend between them more than twenty times the entire Consultative Group on International Agricultural Research budget on post-genomic agricultural research.[64] Much of the scientific research conducted, particularly in areas such as drug and vaccine development, is extremely costly, with the pharmaceutical industry spending, on average, $800 million for every new drug registered.[65] It is simply unrealistic to expect individual donors, or even consortia of aid agencies, to fund such efforts single-handedly. PPPs provide a means of sharing costs with the private sector, as well as the opportunity to leverage the scientific and management expertise within that sector. PPPs can also help to co-ordinate the research being undertaken by different partners. It is, of course, vital to give careful consideration to the appropriateness of private sector involvement in each individual case, with the arguments for privatisation of services in developing countries, for instance, being less clear-cut than for the use of PPPs for drug or vaccine development. In addition, strategies must be in place to ensure the sustainable delivery of benefits to the developing country partners since it may not be realistic to expect the private sector to commit the long-term investment required for sustainable development.

43. DFID has played a leading role in leveraging private sector research, providing funding for the International AIDS Vaccine Initiative and the Global Alliance for Vaccines and Immunisation. DFID is also the biggest bilateral source of funds for the Medicines for Malaria Venture and the African Agricultural Technology Foundation. We support DFID's increasing emphasis on the role that public-private partnerships can play in facilitating research for development where costs would otherwise be prohibitively high, or there would be no incentive for private sector involvement, and where the benefits are clear for the developing country partners. The roles of the private sector and PPPs at the local level are discussed further in paragraphs 137-141.

21   Ev 100, para 37 Back

22   Ev 100, para 38 Back

23   Ev 100, para 38 Back

24   Ev 311 Back

25   Q 523 Back

26   Letter from Mr Benn [not printed] Back

27   Q 523 Back

28   Ev 326, para 1.3 Back

29   Q22 Back

30   Country Assistance Plans are plans for DFID's bilateral programmes laying out how DFID will contribute to achievement of the MDGs in that country, based on the country's PRSP. Back

31   Q 70 Back

32   Ev 255 Back

33   Q 521 Back

34   Q 92 Back

35   Ev 144 Back

36   Ev 371 Back

37   Memorandum from National Commission for Science and Technology in Malawi [not printed] Back

38   Q 580 Back

39   Q 524 Back

40   Ev 392 Back

41   Ev 135 Back

42   Ev 241, para 10 Back

43   David Molyneux, "'Neglected' diseases but unrecognised successes - challenges and opportunities for infectious disease control", The Lancet, Vol 364, 13 July 2004, pp 380-383 Back

44   Ev 329-330 Back

45   Environmental Audit Committee, Twelfth Report of Session 2002-03, World Summit on Sustainable Development 2002-From Rhetoric to Reality, HC 98-I Back

46   Ev 330 Back

47   Q 397 Back

48   British Council, Young People's Perception Survey: a summary of findings in Malawi, Zambia and Zimbabwe, 2004 Back

49   Q 529 [Mr Benn] Back

50   Q 529 [Mr Bass] Back

51   DFID Departmental Report 2004, para 7.36 Back

52   Report by the Comptroller and Auditor General, Department for International Development: Responding to HIV/AIDS, 18 June 2004, HC 664 2003-2004 Back

53   Q 593 Back

54   DFID Departmental Report 2004, para 7.38 Back

55   Q 593 Back

56   Q 593 Back

57   International Development Committee, Eighth Report of Session 2002-03, Department for International Development: Departmental Report 2003, HC 825 Back

58   Ibid Back

59   DFID, DFID Research Funding Framework 2005-07, May 2004, Pg 11-12 Back

60   Ev 144 Back

61   Ev 222 Back

62   Ev 336 Back

63   Q 484 Back

64   Sarah Holden and Taylor Brown, DFID, Research Strategy: Leveraging Private Sector Research, 2003 Back

65   Ibid Back

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