Examination of Witnesses (Questions 1-19)
MR JESSE
GRIFFITHS, MR
SAM BICKERSTETH
AND MR
TOBY QUANTRILL
12 NOVEMBER 2008
Q1 Chairman: Good afternoon, ladies and
gentlemen. Thank you very much for coming in to help us with our
inquiry, and obviously you are coming in just before we have the
Secretary of State and you may well help to fuel, inform or extend
our questions. Perhaps you could just introduce yourselves for
the record before we start the formal session?
Mr Quantrill: My name is Toby
Quantrill. I work with WWF UK, on our international development
and government agenda, but I also co-chair the Development and
Environment group of NGOs on development.
Mr Bickersteth: Good afternoon.
My name is Sam Bickersteth and I am Head of Policy at Oxfam.
Mr Griffiths: Good afternoon.
I am Jesse Griffiths, coordinator of the Bretton Woods Project.
Q2 Chairman: Thank you. This is something
we do every year, but this year is rather different in terms of
the circumstances, and indeed even since we started the inquiry
and took evidence things have changed and moved on. Against the
background of the international financial crisis, there is obviously
a debate about the role of developing countries and what say they
may have in it. This coming Saturday, the Prime Minister is meeting
with the G20 countries, which I guess is an expansion of the G7,
but nevertheless it means that it is the big players. Perhaps
I can ask all of you whether you have concerns about the voice
of developing countries, in particular for this coming meeting
as to how on earth this meeting is going to be resolved in ways
which will ensure that the developing countries' agenda is addressed?
Obviously, if you have thoughts about that or suggestions, we
would be interested to hear them.
Mr Griffiths: Certainly, I think
you are right, we do have concerns about how developing countries
and the wider public in general will be involved in the process
of reform of the international financial architecture as it goes
forward. In fact, these are concerns shared globally by civil
society. A letter went to the heads of G20 governments last week
signed by now over 1,000 different civil society organisations
calling for a much wider process to follow this initial meeting
so that governments from around the world can be involved, including
those from the poor countries, and the public, and can have a
much more transparent and open process because obviously the kind
of reforms they agree will affect all of us.
Mr Bickersteth: I think the G20,
and Financing for Development meeting in Doha, and others coming
forward provide a fantastic opportunity to push for the core reforms
which some of us have been calling for for a while with respect
to the Bank and the IMF, and to look at the bigger picture of
financing for development. The crisis is an opportunity to re-write
the rules to make the market work for everybody. I think the concern
is that so much of the world is being excluded from this process
and the impacts are going to be felt there quite strongly. The
early talk about decoupling which might protect the poor countries
is clearly not happening and a whole range of impacts are coming
through. There are 100 million additional people going into poverty
and there are some very big impacts. This started through the
year, through the food and the energy crises earlier in the year,
and now the financial crisis is having an impact. So there is
a set of indicators and I am happy to share some of our analysis
with the Committee subsequently, but in general I think this is
an opportunity. The rules of the game are changing in itself.
We are talking about the G20, whereas it is the G8 now, so there
is a new configuration to which the international institutions
and the British aid programme needs to adapt.
Q3 Chairman: Just as a lead in to
that, presumably the G20 might argue that as an initial meeting
you cannot start with everybody, you have to kind of start working
out your agenda and they are the big players, and so on. Presumably
it is not unreasonable that they do that, provided it leads into
an engagement where they genuinely bring the developing countries
in and start to hear them? Is that a reasonable process?
Mr Quantrill: If I can answer
and step in just to say that WWF certainly signs up to a lot of
the principles you have just heard outlined. We have increasingly
come to understand the importance of flows of finance in terms
of the environmental agenda and some of the overlapping concerns
between development and the environment in that respect. On that
specific question, I think the important thing at this stage is
to make sure that in the rush to fix the system quickly we do
not undermine the long-term process which is required to actually
get some proper deeper reform in place. The system has failed
before, it has failed the environment in the past and it is only
when it starts to fail the bankers, I guess, that people rush
in and say it has to be fixed. Well, our feeling is that it has
been broken for some time and we need to see a proper fix. Now,
we understand that there is an urgent necessity for action, but
let us make sure that does not undermine what is required in the
longer term.
Chairman: Certainly there was an irony
when we met with the IMF this time last year, when they pointed
out they were losing $400 million a year because there were not
enough financial problems in the world! So be careful what you
wish for, I guess is the outline of that. I am going to bring
in John Battle now just to pursue that.
Q4 John Battle: Quite often when
there is financial pressure it is the poor who are hit hardest
and poor counties which will be the worst affected. Someone made
a remark that millions more face death by famine and hunger as
a result of increased food prices. What is your assessment of
the impact of this financial crisis on developing countries to
date? How realistic is it and is there any real assessment being
made of the impact on poor countries and poor people?
Mr Bickersteth: If I can pick
up on that point, our recent analysis shows that the additional
cost of grain for developing countries, given the average 80%
increase in grain prices over the last year is $324 billion over
the previous year. As we know, aid is about $105 billion, so three
times more than aid it has cost just for grain to be supplied
to the poor countries, so that sort of headline statistic speaks
for itself. Many of the poorest countries have been hit very,
very hard and I think there is a real danger now, as we move from
food and energy crises to the rather noisier, headline-grabbing
financial crisis, that we forget there is a food crisis. There
was a food crisis and there is now a greater food crisis. 850
million people were hungry a year ago and the statistic is now
nearly a billion, so it has increased, but there is a problem
with chronic hunger anyway.
Q5 John Battle: Could you identify
where they are by country? Not necessarily at this moment in time,
but is it just a generic number and an average statistic, or could
you say there are so many millions in Malawi, so many millions
in Ethiopia?
Mr Bickersteth: Yes, we can. The
FAO[1]
and the World Bank have identified and we in our own analysis
looked at 53 of the most heavily affected countries and calculated
that $14.5 billion in additional resources were necessary to mitigate
the short and the immediate term effects. The key thing is that
there was hunger and the solutions need to be short-term and longer-term.
We have seen strong leadership by the Bank in the international
community and it set up a $1.2 billion fund, some of which has
been dispersed, $300 million or so of that, and $500 million has
been committed. So there has been some good progress and the British
Government itself has responded, but that is still seriously inadequate.
World food prices have dropped, yes, but they are still about
50% higher than they were two years ago, so the problem was there
and the problem persists. There is plenty of evidence of children
not getting to school, high levels of malnutrition and a generation
which will be lost as a consequence.
Q6 Chairman: Without in any way detracting
from that, there are one or two countries which have gained. John
Battle mentioned Malawi and my understanding is that Malawi has
actually been a food exporting country this year. Not traditionally,
but it has managed it. So presumably within the overall picture
of it being much worse for most people, there are some countries
and some poor people who are actually better off?
Mr Bickersteth: We expressed these
increased prices as a double-edged issue. There are opportunities
to gain and Malawi has benefited from that. The exporters, Rwanda,
Uganda, have the potential to gain, but at the same time it affects
consumers and we have seen this in riots in cities in a number
of countries.
John Battle: Just to extend, if I may,
that point and the need to be aware of different situations, could
I also ask whether sometimes when a hunger crisis is on the horizon
and the money rushes to the World Food Programme and they are
organising the logistics to get the food to feed the people and
serve them in queues. Has any thought been given to the fact that
the price of basic foodstuffs also affects the price of seeds
for next year and the price of imports in terms of fertilizers
and the rest of it? So if there is a hike in the food price, the
ability to sow the seed for next year becomes even more difficult
and so as well as addressing the immediate food needs, what about
the medium term harvest needs to ensure there is a harvest next
year?
Chairman: You are slightly straying and
I am going to come back to you, but can I bring Marsha in on that
because he has got some food-related questions?
Q7 Mr Singh: What has happened with
the food crisis is that it has brought agriculture into sharp
focus once again, and I know that in your submission you mention
the issue of agriculture and small farmers and the need for a
new strategy, and ActionAid has said that the World Bank has helped
to create a global food system which works against the interests
of the poor. What specific changes would you like to see in the
World Bank's approach to food security?
Mr Bickersteth: What we saw was
the World Bank and the IMF leading in the dismantling of the institutions
in poor countries which delivered services to smallholder farmers
through the eighties and nineties. Now, the Bank and DFID itself
have admitted that they made a mistake because that was a form
of security, an insurance, which those communities and individuals
had which was taken away. So you have the absurdity of a country
like Mozambique having 450 agricultural extension agencies, 450
people, that is one for every 30,000 farmers, to deliver knowledge
about improved farming techniques. As you know, I travelled with
some of you when I worked for DFID there a few years ago. You
can see the opportunities for agriculture. They are not able to
deliver those opportunities. So money needs to go to agricultural
extension. The private sector response which was anticipated in
the dismantling of inefficient public bodies did not happen because
markets do not operate well in these environments. So I think
one thing we would say is, more access to information. DFID has
responded very positively in a massive increase in its support
for agricultural research, but we would say that that is not enough
and is not sufficient. There are other aspects towards making
that research accessible to people. The other issue is the example
which the Chairman raised of Malawi, whose parliament took the
opportunity to provide subsidies for seeds and fertilizer for
its farmers. The third area where we would expect to see more
support would be around grain marketing. The provision of a minimum
floor price has proved very useful and where it has been taken
away in countries like Ethiopia that has had a devastating impact
on the volatility of prices and the volatility of production,
which has thrown the country from surplus to famine from one year
to the next. That is just an example of the kinds of areas. This
is all about the state taking a more central role and we have
yet to see the Bank and other donors really substantially recognise
there is a shift for funds to be used in the delivery of an effective
state. There is still that liberalisation/privatisation model
which is still coming through in some of the economic conditionalities.
Q8 Chairman: It is right, is it not,
that the biggest obstacle to getting a trade deal is the protectionist
farm policies in Europe and the United States, whilst the agencies
which Europe and the United States have created have been busy
destroying the protection of the farm sector in the developing
countries?
Mr Bickersteth: Yes, and history
has shown that the success of agricultural development in our
own country was based upon investment in agricultural research
and expansion going back to Rothamsted in the 1850s.
Q9 Mr Singh: I just want to ask about
the International Assessment of Agricultural Knowledge, Science
and Technology for Development report (IAASTD). I understand from
the briefings I have had, that the World Bank tried to put pressure
on them to be more in line with the World Bank's strategy, but
in fact the report came out with a different strategy. In what
way does this report differ from the World Bank strategy on food?
Mr Griffiths: I think that is
an important point. There are two points to raise first. There
is the World Bank's development report on agriculture from last
year, which is not the same as a strategy and as I understand
it the last time the Bank produced a strategy on agriculture was
some five years ago. So there is not really, I guess, a current
strategy. So we can only infer it probably from the way the Bank
behaves, but I think the UK Government supports the IAASTD and
it differs from the Bank's existing practice, if you like, in
a number of different ways. It supports, as Sam said, much more
state involvement in agriculture. It talks about the use of traditional
knowledge and the importance of policy flexibility so that governments
can respond within their national context to ensure food security
for their countries. It criticises heavily the push to agricultural
trade liberalisation without allowing for that national response.
So I think in most key areas, it is very different from the way
the Bank has certainly behaved in the past, and I guess the question
for DFID now is how are they going to push the Bank to respond
to that assessment and to DFID's own support of that assessment
to change the way it behaves.
Q10 Mr Singh: I get from the last
part of your response, that despite what has happened with the
food crisis, despite this report, the World Bank still is not
listening and not responding by changing its strategy?
Mr Griffiths: The Bank has done
a number of different things, including this $1.2 billion of existing
resource devoted to responding to the food crisis, but I think
in terms of the policies it pushes on the ground and the way its
projects are implemented, we do not have the evidence yet to say
that it has changed a great deal and in effect there is a vacuum
on its policy level, I would say.
John Battle: Can I ask about IMF loans,
because in response to the financial pressure the IMF has responded
by saying it will give loans to, I think, 15 countries. In one
of our previous sessions it struck me that we have spent a lot
of time campaigning on the HIPC[2]
initiative to reduce debts and now we are back giving them loans
again in the worst circumstances. I just wondered whether the
levels of conditionality attached to those loans are appropriate
or could even set back the Millennium Development Goals by reducing
public sector involvement in education and health and could be
completely counter-productive. What is your view of those IMF
loans?
Chairman: Can you hold that question,
because otherwise we will not have time to listen to all the answers,
because we have to go and vote.
The Committee suspended from 2.33 pm to 2.45
pm for a division in the House.
Q11 Chairman: I have heard there
may well be another division, but I do not know whether you are
able to come back to Mr Battle?
Mr Griffiths: I think it is an
excellent question. It is certainly something we are extremely
worried about because we do know the bad impacts of IMF conditionality
in the past and the early indications from the new wave of lending
to stricken countries, to countries like Iceland, Belarus and
Ukraine is that the same kinds of conditions appear to be attached.
We do not know exactly what they are because that is not publicly
available, but for example Iceland got a large IMF loan and then
had to raise interest rates by 6%. We understand that one of the
conditions for the Belarus assistance is the privatisation of
some banks. So at the same time as the rest of the world is going
in the opposite direction, the IMF still seems to be stuck in
its traditional role and it is something we are really concerned
about. It is something which speaks also to the broader reform
which is necessary as we go forward, which we discussed first
at this G20 meeting, which is are these institutions really fit
for purpose in the twenty-first century? We do not think the policy
responses the IMF appears to be pushing are the right ones, but
also the IMF was not able to play a strong role in preventing
the crisis in the first place, which I think speaks to its governance
more than anything else. 60% of the votes for the IMF are held
by the richest countries, so inevitably the IMF feels it is off
limits to play a surveillance role of those countries' economies.
Mr Bickersteth: If I could just
add a point, I think many African states are somewhat amazed by
what has happened, because what has happened in the past when
there has been a crisis in Africa is that those states have been
encouraged to privatise. When we have seen a crisis in OECD[3]
countries we have nationalised.
Mr Quantrill: Since I am here
to talk about climate change, I would like to actually pose a
question to you, to pose to the Government as to why our Government
thinks it is remotely appropriate to increase the debt burden
of poor countries in the process of apparently helping them to
cope with climate change and the World Bank being part of that
process through the climate investment funds.
Q12 John Battle: If I may say in
response to Jesse Griffiths's comments, maybe it is inappropriate
for governments which run the IMF to impose conditions on poor
countries that they are now not imposing on themselves but are
doing exactly the opposite. It obviously will not work, they have
decided, and their own terms and conditions are something different,
are they not? If I could just press you a little. I was under
the impression, though, that there were 15 low income developing
countries which the IMF has agreed to augment its support to and
they did say there would be less conditionality in the type of
facility they were lending than previously. Have you explored
that at all? Are you aware of that? In other words, it is suggested
slightly that they may be softening the hard line approach. Have
you picked that up?
Mr Griffiths: This is the rhetoric.
I think the actuality we are not entirely sure about. The UK Government's
position is very clear: there should be no economic policy conditionality
attached to lending. So it does not matter if there is less economic
policy conditionality. There should not be any.
Mr Bickersteth: Having sort of
set out the impacts that are being felt now, and remittances of
course will fall drastically so all those sources of income are
drying up, the head of OECD has asked for a pledge by rich countries
to sustain their aid commitments. Will the UK Government agree
to that pledge is the first question, and there is a political
opportunity for the UK to sustain its leadership—this is
well expressed by the Prime Minister's speech on Monday night—keeping
and sustaining development assistance at this time, but going
beyond that could the leadership and vision be demonstrated by
bringing some of the commitments forward, which the UK has got
in terms of raising its aid levels towards the 0.7% target in
2013?
Q13 Mr Crabb: Just picking up on
Jesse Griffiths's point a few moments ago about whether these
institutions are fit for purpose in the twenty-first century,
there is obviously a lot of interest around the reform of governance
and, thinking about the World Bank, the decision to move to a
merit-based process for selecting the head of the World Bank,
I think would be welcomed by many people. But what further progress
do you want to see on the specifics of the selection process itself
and also the reform of voting shares on the board?
Mr Griffiths: We saw at the Annual
Meeting some fairly minor changes to governance of the World Bank
but the promise that the process will go on for long enough hopefully
for those to be deeper. On presidential selection, it is good
that there is a commitment to an open process, merit-based, which
any country can nominate, but of course that is what the case
was, you might argue, for the IMF's selection of Dominique Strauss-Kahn[4]
and we saw that the Europeans forced through their candidate.
So we will not know, I guess, until next time whether the same
will apply for the Bank because it is obviously not a written
convention that the Americans get to choose the head. In terms
of going forward, what we and over 100 other civil society organisations
from around the world backed prior to the Annual Meetings was
the G24 developing country governments' call for parity of voting
as a principle, which should underpin the Bank and the Fund. I
guess this is particularly important for an institution like the
Bank, which should be about development in the poorest countries,
that those countries should at least have an equal say in how
the institution is run. We have not heard from the Government
whether they support this as a principle. The message we have
got back from them and other European governments is that it will
be very difficult in practice, and I guess our argument is that
if we are going to have this process of governance reform going
forward, you have got enough time to work out what the practice
is but what really matters is the principle. Should a development
institution be equally run by the poor borrowers and the rich
lenders? We argue that it should.
Q14 Mr Crabb: So the question of an additional
board seat for Africa, for example, you would not regard that
as a sufficient response to concerns around developing country
representation on the board?
Mr Griffiths: It is an improvement,
no doubt, but I think there is a missed opportunity there because
what they did was they added an extra seat, from 24 to 25, and
they did not do anything, for example, about the fact that Europe
still has eight seats on the board, which gives it a disproportionate
power, we would argue. So I think we are looking for much more
fundamental reform going forward, and if you look at the proposals
for voting share reallocation which they made at the Annual Meetings
and which they will take forward going forward, our estimates
are that this will only shift between 1 and 3% on each of the
different parts of the World Bank. So even in the best case scenario
of IDA,[5]
if developing countries are allowed to take up their full subscriptions
they will get to 48%. That is the best case scenario. In the case
of the IFC,[6]
for example, they will still be in the low forties, late thirties,
so a long way away from this concept of parity.
Mr Bickersteth: I have not got
anything to add on that.
Q15 Mr Crabb: Just finally in terms
of improving transparency of the way the World Bank makes its
decisions from the point of view of developing countries, as parliamentarians
here we obviously support a greater role for national parliaments
in scrutinising the World Bank's decision-making. What other steps
could or should be taken to improve transparency from the point
of view of developing countries?
Mr Griffiths: I think there is
a fantastic opportunity coming up, which we hope the UK Government
will push the Bank on, and that is that there should be a review
of the Bank's disclosure policy next year. Now, what we and many
other civil society organisations have argued—and there
is something called the Global Transparency Initiative, which
is a coalition of civil society organisations—is that the
Bank and other international financial institutions should move
towards a policy of presumed automatic disclosure of information,
so that instead of saying, "These are the documents you're
allowed to see and these are the processes you're allowed to witness,"
everything should be assumed to be open and transparent with a
list of exceptions which are carefully monitored. It is that change
in attitude to one of presumed secrecy towards one of presumed
transparency that we will really push as this process goes forward.
Q16 Chairman: Just on that point,
do you accept there is a kind of tension that you shift the balance
too far, that even in terms of the taxpayers, who are putting
the money in, they would feel that if you actually gave all this
money to the World Bank and effectively the recipients decided
how to spend it as a majority there is a danger that people will
lose confidence in its accountability? I totally accept all your
points about transparency, but do you accept there is a kind of
balance which needs to be struck between those who are providing
the money—and I mean the public not the governments—and
those who are receiving it, who should obviously have a much more
significant say in how it is dispersed?
Mr Griffiths: Obviously that is
true, but I think the best guarantor to ensure that money is effectively
spent is that the people who are most affected get an opportunity
to hold the institutions accountable, and it is that kind of accountability
downwards to the poor people in the poorest countries who are
affected by the Bank's decisions and projects, that we would like
to see massively increased.
Q17 Hugh Bayley: Say "Done that"
if you have already answered this point. How do you think the
Bank ought to relate to parliaments in countries where it has
loan programmes? What role should the national parliaments of
those countries have in scrutinising the Bank's programmes in
the country, and in what other ways should the Bank make its decision-making
procedures more accountable to people in those countries?
Mr Bickersteth: You have raised
some of this already, I think, relating to transparency, but putting
the Poverty Reduction Strategy Papers through the parliamentary
process or the equivalent is clearly a way to improve the transparency.
We have moved from them being written in Washington, which the
first generation was, and the second generation in countries,
but I think we need to move to embedding that in an accountable
place through the parliamentary and civil society scrutiny.
Q18 Chairman: Toby Quantrill, you
were talking about climate change and the specific points which
have been raised by you and others about the role of the World
Bank in terms of funding fossil fuels. Do you actually take the
view that they should be pulling out of supporting fossil fuels
altogether?
Mr Quantrill: Our position is
that long-term that is probably the right way to go, that public-backed
finance should not be used in that way. But what we are really
looking for are steps in that direction in terms of clear accounting
of the carbon footprint initially, a clear indication of how the
World Bank Group wants to move towards promoting a low carbon
pathway, which is entirely necessary now, I think that is becoming
clearer and clearer, for developing countries and to show us how
they are doing that. Now, that does not necessarily mean entirely
pulling out of fossil fuel finance per se initially, but we want
to see indications of how we are actually going to be supporting
a low carbon development pathway. But ultimately, yes, I think
the Extractive Industries Review in 2003 actually put forward
a recommendation that the World Bank should be pulling out of
fossil fuel funding. The UK Government did not, as I understand,
support the recommendations of that and they were not implemented,
and we would be interested really to know exactly why that approach
to fuel was not adopted.
Q19 Chairman: But if you look at
some of the problematic developments there have been, particularly
say in Africa—and you may know more than I do about how
they engage—is there not a role for the World Bank to actually
try and ensure that fossil fuels are developed in a way which
more appropriately meets the needs of the people in that country.
And if the Bank or similar institutions are not engaged then they
are more at the mercy of either multi-nationals driving more purely
commercial concerns or other nationals from outside Africa who
have again their own national interests at heart? In other words,
could the Bank not have a role—if you take Ghana as an example—to
enable or help Ghana to develop its oil and gas reserves in ways
which boost its own budget, its own employment and its own engagement,
and if they were not there is it not more likely that it would
be done, as it has been elsewhere, in ways which are detrimental
to people?
Mr Quantrill: I think that is
an argument which we have heard and it is an argument which I
do not think really holds up because ultimately I would say it
is a question of prioritisation. World Bank finance is there to
promote a development process. There is, as you say, plenty of
private finance available to push fossil fuel exploitation and
there are questions about how we bring private finance towards
better environmental standards, but ultimately any fossil fuel
based processes has to be limited in the long-term. What is really
important is that the money of the World Bank Group and the public
finance is used to promote pro-poor development and low carbon
development. So I think it is a question of prioritisation.
1 UN Food and Agriculture Organisation Back
2
Heavily Indebted Poor Country Back
3
Organisation for Economic Co-operation and Development Back
4
Managing Director of the IMF Back
5
The International Development Association-the development arm
of the World Bank Back
6
International Finance Corporation, part of the World Bank Group Back
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