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independent accounting as well as increased independent scrutiny of the United Kingdoms aid budget.
We think that that is a very good idea, but corruption robs the aid budget of so much of its full value. We need to make sure that our money is delivering, and that the 10 per cent. take all the way along the line is stopped in its tracks.
Aid donors can take four direct actions to strengthen the hand of political leaders in developing countries that need help in reducing corruption, as well as some less direct measures. First, there is a need to tighten up procurement rules, in terms of the legal framework and the rules on the use of aid. Corruption can add 20 to 100 per cent. to the cost of our aid. Obviously, it is easier to tackle the rules than the legal frameworkthe World Bank, EU and Department for International Development rules have significant loopholes or latitude.
On another tack, as has been mentioned, there are lots of ways to trace the siphoning off of funds, but efforts at identifying the beneficiaries often appear half-hearted. The World Bank and others use specialists to trace funds. We can see how much Mobutu and Marcos money has been recovered after the fact. If Governments, including Her Majestys Government, possess or can get such information about how and where money has been siphoned off, why do they not act? We must track down criminals and recover the money.
We also appear to lack the will to use international law and United Nations institutions. Many developing countries are now signatories to the UN convention that requires an anti-corruption institution. Yet many signatories barely comply with the letter or spirit of the convention in practice or in law. There is much scope for extra leverage by donors if they help such fledgling institutions become robust.
Even more problematic, much corruption in developing countries is legal. It ranges from the absence of a prohibition on Ministers owning companies that are recipients of hugely inflated contracts to permissiveness in capital markets, which enables Ministers, parliamentarians or officials to benefit directly from privatisations, bond issues and share acquisitions. That must change if we are to tackle corruption. We should be in there, helping strengthen anti-corruption measures with a review of a host of matters, from bribery to anti-competition laws; from insider trading to state governance.
We need to start from the bottom up. Donors should channel more funds through local government because that can strengthen vital local democracy. Much large-scale corruption occurs via singular central elites, and that leads to the so-called necessity of single tribes or ethnic groups grabbing control of the reins of central Government. One central target that holds all the power and wealth of a nation is a much greater danger than local government responding to local needs and demands.
Clearly, strengthening local governance and local democracy, and concentrating on the grass roots would cut corruption.
I have been able to cast only a brief glance over the weighty tome that is the Conservatives policy review, which was launched today, but it contained little mention of local government and the importance of channelling funding, especially economic development, at the level of the company, the firm and the local market. If we are serious about strengthening countries through help to help themselves, local governance and local democracy is a must to defeat corruption. Simply monitoring and watching corruption and knowing that it exists is not enough.
A couple of months ago, Results UK arranged for me to meet a woman from Kenya called Lucy. She told me that, in Kenya, money from the Global Fund to Fight AIDS, Tuberculosis and Malaria had been suspended because the Kenyan Government had failed to disburse the previous grants. It was only through grass-roots action and pressure from civil society groups such as hers that those blockages were removedthe Kenyan Government had to respond to the local demand for honesty. The Kenyan national TB programme could then continue its work.
Sadly, advising on the necessary steps to tackle corruption abroad seems a bit rich coming from us at the moment. We can tackle corruption only if we are squeaky clean in our dealings across the world. Now is not the best time for us to hold up our heads.
I want to consider an issue that hon. Members of all parties have acknowledged to be overwhelmingly important for the developing world: the threat of environmental degradation. I am upset that our amendment was not selected, but grateful that Labour and Conservative Members commended it.
Catastrophic climate change is not the only environmental problem but it is, clearly, the most urgent one, especially for poor countries, which are constrained in their ability to react to a rapidly changing climate. Climate change will hit the poorest and the most vulnerable countries in the developing world first. A recent WWF report demonstrated that, of all the millennium development goals, the goal on environmental sustainabilityMDG 7is the only one for which the overall position is getting worse rather than better.
Although the poorest people in the world have done least to cause climate change, they are the ones predicted to be worst affected. Poor people depend most directly on the services delivered by natural resources and ecosystems. They depend on them for food, fibre, water, fuel and income. The developed world, which is mostly responsible for climate change, should therefore help the developing world with adaptation. Applying the polluter pays principle, the developed world has an obligation to help poor and vulnerable countries to adapt to climate change. Therefore, we need in partnership to find additional funding for adaptation. The UK should perhaps take a lead on that, because we are one of those countries responsible for much of the pollution.
Judging from the Governments past performance, as well as from my first impressions of the Conservatives report, I am not convinced that there is a real urgency
about addressing the need for action. The Make Poverty History campaign was a brilliant example of civil society action to put pressure on the G8, but I wish that equal efforts had been made on the other G8 priority of that yearclimate change. Uncontrolled climate change will undo all the good that debt forgiveness or higher aid can deliver. The hon. Member for Stone (Mr. Cash) is no longer in his place, but it is good, as he said, that the G8 agreed to a UN-sponsored process on climate change.
However, there is in fact already a process: the Kyoto protocol, which involves all the key developing countries. If President Bush had been serious about wanting to involve the US in climate talks, all he needed to do was to ratify the Kyoto protocol and join the ongoing talks about targets for the second commitment period, post 2012. Developing countries also need to accept emissions reductions. Equally, however, we cannot expect them to do that unless the industrial countries move further and faster. That principle is written into the UN framework convention on climate change, which almost every country has ratified, including the US.
International institutions also need to adapt much more urgently to the new world of an increasingly unstable climate. The World Bank still does not pay enough attention to the issue and the International Monetary Fund almost none at all. Similarly, the World Trade Organisation treats environmental issues as an unimportant sideshow. It is notable that the environmental components of the Doha agenda have been all but abandoned. We must work for universal climate-proofing of development assistance if we are to ensure that climate change is mainstreamed in development programmes and initiatives. That is going to require co-ordination among the World Bank, the IMF and the OECD group of export credit agencies, to ensure that development objectives fully support climate change mitigation.
In conclusion, development will be impaired, reduced, slowed and diminished, and we will not get value for money if we continue to refuse to liberalise trade. Our spend must be delivered effectively, which means tackling corruption, not just saying that we are tackling it. The driving imperative of development, in all its incarnations, must become inseparable from the environmental cataclysm that is climate change.
Hugh Bayley (City of York) (Lab): We are halfway between the year 2000, when the millennium development goals were set, and 2015, when the aim is for them to be implemented. This month the UN published its 2007 report on the millennium development goals, which records substantial but uneven progress. For instance, the proportion of people living in extreme povertyon less than $1 a dayhas fallen from a third of the worlds population in 1990 to less than a fifth now. If that trend continues, that goal will be met globally at least, but not in every region of the world. A great deal of the progress that has been made is down to the economic growth of one particular countrythe worlds most populous country, China. Chinas per capita income in 1979 was $210; last year it was $1,750.
China is the worlds workshop. Eighty per cent. of the worlds photocopiers are produced there, as are 60 per cent. of its mobile phones and half of all its
computers and textiles. It is a sleeping giant that has woken up. Economically, it is doing well, although it still faces major development challenges relating to halting and reversing the HIV and AIDS infection rates, to gender inequality and to access to safe water and sanitation, on which its performance is on a par with some of the poorest countries in Africa. Inequality is rising extremely fast in China. It is a more unequal country than the United States of America. These are some of the problems that the Chinese communist party congress will address this autumn, and the National Peoples CongressChinas attempt at a Parliamentwill discuss them when it is called together again in the spring of next year.
Chinas growth has profound implications for the global economy and for global development policy. By 2015, the target date for the millennium development goals, China could be a bigger economic partner for Africa than many of the OECD countries. On trade, for instance, China exported less than £1 billion worth of goods to Africa in 1995, yet by 2005, its exports to Africa were worth £11 billiona twelvefold increase in just 10 years. In the same period, UK and French exports to Africa approximately doubled in value. In 1995, Africa exported £1.26 billion worth of goods to China, which was less than a third of what it exported to the United Kingdom. In 2005, it exported £8.9 billion worth of goods to China, nearly double its exports to the UK.
The two-way trade between China and Africathe sum total of their imports and exportswas nearly £25 billion in 2006, and certainly by 2010 and possibly by next year it will reach roughly £50 billion. That is approximately the volume of EU trade with Africa. By 2015, Chinas trade with Africa will certainly dwarf the EUs trade with Africa.
It is hard to estimate the volume of Chinas aid to Africa. It is not a member of the OECDs development assistance committee, so it is difficult to compare like with like. Western donors distinguish between aidofficial development assistanceand commercial investment, but a great deal of Chinas commercial investment comes from state banks or state-subsidised companies, so it is extremely difficult to make that distinction. At Chinas summit with African leaders last year, its president, Hu Jintao, pledged to double Chinas aid to Africa, although he did not specify what that would mean in cash terms. He did, however, announce credits and preferential loans to Africa with a value of US$5 billion.
Last year, China committed $8.1 billion of assistance to Angola, Nigeria and Mozambique. To put that in context, last year the World Bank committed some $2.3 billion in new loans to Africa, which is considerably less than the sum committed by China. Chinese aid is often criticised for being tied aid. It involves not only money spent in Chinese companies but includes Chinese labour that goes to Africa to deliver many of its construction projects. Chinas aid is often linked to its gaining access to natural resources, although, looking back over the years, one cannot say that UK aid or western aid in general has always avoided commercial advantages. Chinese aid is often made conditional on political goalsthe One China policy, for instance. The declaration from the China-Africa
summit at the end of last year committed all the African leaders present to supporting that policy as part of the deal.
China has an Africa policy, but Africa does not have a China policy... the danger is that China will politely rip off Africa just as the west did.
However, most African political leaders support what China is doing in Africaand it is not just those of Sudan, Angola or other states who are in receipt of a lot of Chinese aid because of the raw materials they supply to Chinas economy. President Festus Mogae of Botswanaa country that most of us would regard as a model of African development and a success storysays:
The Chinese treat us as equals, the west treats us as subjects.
The Commission for Africa identified that western donors had neglected infrastructure. China has identified that, too, but it is moving a great deal faster than we are to provide infrastructure support to African countries. The Sierra Leonean ambassador to China, Sahr Johnny, said:
If a G8 country had wanted to rebuild the stadium, for example, wed still be holding meetings. The Chinese just come and do it.
I believe that Chinas priorities for Africa are different from ours, but that it is genuinely committed to Africas development. China would gain a great deal from working more closely with western donors. We are not in a position to dictate terms to China, but I would like to see DFID building a closer working relationship with the Chinese and inviting China to become an observer at OECD development assistance committee meetings.
A great deal of World Bank aid still goes to China. As the International Development Committee learned last week, a major loan package to help China to green its energy sector is being negotiated. I warmly welcome that, as China needs that kind of support. Since China has such enormous foreign exchange reserves, I do not think that the World Bank should be a net donor to China. We should invite the country, in view of the size of its foreign exchange reserves, to make a contribution to the next International Development Association replenishment equivalent to the size of the loans it receives from the World Bank and to become a donor, along with other World Bank nations.
With only nine seconds to go, I must quickly say that we should seek to plug the gaps that Chinese aid does not touch, such as on governance and supporting the capacity of Parliaments in Africa to hold the
Mr. Peter Lilley (Hitchin and Harpenden) (Con):
It is a pleasure to follow the hon. Member for City of York (Hugh Bayley), who made a significant speech on
an extremely important subject. The issues that he raised are addressed in the report; indeed, he may well find matters of great interest to him there. I am thinking of a paper written by a brilliant young man of Chinese origin, who makes three succinct points. First, we should never miss the opportunity to engage with China on governance issues. Secondly, we should recognise that China will double its aid, so wethe G8should keep our promises to double our aid. Thirdly, we and our partners should redouble our efforts and co-operate in pursuing governance issues to ensure that they are not undermined by other new donors coming on the scene.
I am indebted to my right hon. Friend the Member for West Dorset (Mr. Letwin) both for securing the debate and for his masterly exegesis of a lengthy report. In delivering that, he has rather relieved me of the obligation that I had intended to fulfil of spelling out what it contains in its 453 pages. Therefore, perhaps I could address matters from a different angle from that which I intended.
I came to the subject of development many decades ago when, as my mother put it, I had a proper job and I was a development economist working on aid and development programmes in Africa and Asia. At that stage, had someone asked me whether I would still be interested in those subjects and whether we would still be facing so many of the same problems todaysome of the countries that I have revisited face even worse levels of poverty than they did thenI would not have believed them. I thought that by now poverty would be history.
The situation was brought home to me clearly by someone who put it in stark terms. The aid effort began perhaps in 1948 with Harry Truman. Since then, $1 trillion has been spent on aid. Why is not poverty history? One reason is that that sum, although apparently large, is actually not so large spread over half a century and over billions of people. It is a handful of dollars for each poor person each year. Small wonder then that it has not cured the problem. There is every reason for us to increase aid, which I think the House is committed to do. My party, I am happy to see, is committed and has reaffirmed its intention to meet the 0.7 per cent. of GNI target by 2013, or earlier if possible.
Another reason is that, for much of that period, aid was given largely for reasons other than the alleviation of poverty. The cold war meant that aid was used to buy allegiance rather than to end poverty. Tied aid meant that money was given to subsidise donors domestic industries, rather than to relieve poverty. Once one reaches that conclusion, that is a good reason to put much more emphasis on the effectiveness of aid, and that is what we do in the report to a considerable degree.
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