Examination of Witnesses (Questions 20-39)
MR JOSEPH
EICHENBERGER
19 MARCH 2008
Q20 John Bercow: In time for the
publication of our report or, indeed, for the visit?[9]
Mr Eichenberger: Yes, I hope so.
It is a sensitive area in some respects, and this gets to one
point that the High Level Panel identified, which is: is there
a way to create a more seamless organisation? We have had this
distinction inside the organisation between the middle-income
countries, who borrow on the basis of the balance sheet and on
the basis of our own capital market borrowing at market rates
(13 of them now) and the poor countries, who borrow concessional
funding only. The question is: is there a way for us better to
use the balance sheet of the institution in order to provide an
array of instruments, particularly in those countries that may
be moving from concessional only into middle income? Ghana is
an example. Ghana has been a concessional only country for a long
time but it has floated over the last two years, I think, US $1
billion in Euro markets, or it has access to capital markets.
What should that mean for us in terms of how we use our balance
sheet prudently to support a country that is making a transition?
Frankly, in Africa it is nice to see someone going in that direction.
So part of what this balance sheet assessment is intended to help
us think through is: can we do that in a way that the shareholders
would support?
Chairman: Coincidentally, the Committee
is actually going to Ghana next week, so it might be of some interest
to follow that through.
Q21 Mr Crabb: You have already provided
some information to suggest some positive progress in terms of
tackling the under-staffing problem at the Bank. Would you still
concede that there is a problem with lack of human resources across
the Bank as a whole? Have you thought about how that might be
affecting the performance of the Bank and, in particular, the
ability of the Bank to respond in a timely way to requests for
funding?
Mr Eichenberger: I think there
is. I think it has multiple dimensions. At this time last year
the institution had close to a 25% vacancy rate. I had units under
me that had 50% vacancies at managerial levels. As at the end
of last year, that overall institutional vacancy rate had been
reduced to about 5% following, as I say, among these international
institutions the most transparent recruitment process I had ever
seen. We have succeeded in plugging the holes and I think we were
all very gratified to see the quality of the kind of applicants
that we were getting; these are some serious people. So, we have
stopped the bleeding; now the question is how well positioned
are we to do what we have said we are going to do and to do it
well? I think, if you randomly picked anybody inside the institution,
they would say that we need more people, but I also believe that
there is more that we can do within the envelope that we have.
One of the things that we have done over the last two years is
move a significant number of positions from back office support
into front-line operations, and by various measures we have now
60% of staff in front-line operations and we are moving that forward.
I mentioned earlier the ratios for our field office people. That
is all a positive thing. We have staffed up these new units, like
the new governance unit, in terms of bringing in those staff and
bringing in those skills. I think that there is more that we need
to do and we are intending to do to improve the skills mix within
the envelope, to further move people from support functions to
front-line functions, including in the field. We have had some
work done on possible options for outsourcing, which I think will
help us, basically, get some of these tasks outside of the institution,
but in the end my own personal view is that we can and we should
try to make a credible case to our board that we need a modestly
expanded administrative budget in order to do what the board want
us to do, but our view is the onus is on us. We do not believe
we can just waltz in there and say we would like to get a 10%
increase in our budget, because this is going to be very closely
scrutinised, but I think there is more that we can do.
Q22 Mr Crabb: In terms of the decentralisation
process, you mentioned earlier that you are up to about 14% of
staff in your field offices?
Mr Eichenberger: Yes.
Q23 Mr Crabb: Is that on track for
where you planned to be at this stage?
Mr Eichenberger: No, I think we
are moving too slowly. This is a point that your colleague in
Tunis, the UK Executive Director, has emphasised. There is a view
that we need more people out in the field and we need them out
in the field now. I agree with that, the President agrees with
that. I think it has been slower than we expected for a couple
of reasons, in part because the recruitment process that we are
using is really quite rigorous. We have the advertisements, we
have interviews and we have not moved quickly enough on that.
Secondly, we have focused a great deal of effort on hiring local
professionals, and there is a tremendous amount of talent out
there, and those recruitments are now beginning to be seen in
figures. So, there is a lag between what our numbers look like
today relative to the offers that we have made. People are on
their way, but we are not where we wanted to be.
Q24 Mr Crabb: Aside from recruitment
issues, what would be some of the other challenges associated
with getting these field offices up and running and performing
to a high standard?
Mr Eichenberger: One, which I
think we have dealt with, is meaningful delegation of authority.
This has been a highly centralised institution for the last decade.
A generation of managers has grown up in this institution with
a highly centralised frame of mind. We need to move authority
out to the field. We are doing that. We have a new delegation
of authority matrix. Secondly, we need significantly to improve
and to invest in basic communication between the field and headquarters.
Africa is a tough place to do some things that we just take for
granted, like having a video conference, for example, and we need
to increase that. Communication alone will not fix everything,
but it will fix a lot of things. So, those are a couple of near-term
priorities.
Q25 Chairman: Do you have a vigorous
in-house training programme, and you if do, do you have to bring
people to Tunis to do it?
Mr Eichenberger: We have an internal
house training programme. I do not think it is vigorous enough.
It is an area of priority going forward. It is an area we are
budgeting more money to. We regularly bring our field office colleagues
to Tunis for training—that is on an on-going basis—but
I think it needs more work in terms of procurement, procedures,
et cetera. The bank is a complex place; we have a lot of new staff;
we need to invest in them.
Q26 Ann McKechin: Mr Eichenberger,
you have mentioned several times how infrastructure is now a priority
for the Bank. I wonder you if could give us some specific information
about what you are planning to do over the next three years and
also if you could perhaps indicate what assessment the Bank has
made of the impact of climate change in terms of how you are going
to invest in infrastructure and what the priorities need to be?
Mr Eichenberger: On the specific
numbers for infrastructure, I think that is something I need to
get back to you on. As a proportion of our work, it has increased
substantially. There are definitional issues. A water project
in a rural village: is that infrastructure or is that agriculture?
Perhaps that is something we can pursue in Tunis and get you more
detail. On the climate change issue, we have recently brought
to the board a framework for investment in clean energy. Our approach
to climate change has a couple of dimensions. The first is greater
investment in clean energy and, perhaps most importantly, ensuring
that the power sector energy investments that we are doing explicitly
integrate a climate and carbon and environmental dimension. We
think we have the tools in place to do that. That is one piece.
Secondly, to ensure that all of what we are doing builds in adaptation
to the climate change challenge, whether it is water operations
or power operations or whatever. The third basic piece is, there
is a considerable emerging demand in Africa for the Bank to be
engaged in issues around what you might call natural resource
management but, in particular, water resources management and
forestry management. We have a significant initiative now underway
in the Congo Basin—the UK, I believe, is giving serious
consideration to support for this—around managing those
forest and water resources. I do not believe that the institution
is ever going to be an intellectual leader in the climate change
debate and, in fact, I would argue that is probably not where
we should be. There are a lot of players in the game; we have
very good integration with the World Bank and with others on this
issue; so we see our role going forward as increased emphasis
in the design element of our basic business, increasingly looking
for opportunities to bring a new approach to things like natural
resource management, risk mitigation, and the like, and effective
partnerships with others who have expertise in the resources that
we can leverage on.
Q27 Ann McKechin: You mentioned forestry
in the DRC[10]
which has had some degree of controversy attached to it, particularly
around areas of corruption, and certainly the Bank has been commended
for trying to set good standards in this regard. I wondered whether
you think this is an area where the Extractive Industries Initiative
would be helpful, to extend it to something like forestry, or
in what way you think the Bank helps to establish good practice
in places like the DRC in terms of how it actually manages this
very crucial asset?
Mr Eichenberger: From my perspective,
it seems to me that, aside from its specific details, the EITI
has had a very prominent role in affecting the way people think
about the issue and in changing the way the institutions themselves
perceive their own obligations. From my perspective it is almost
less important whether it is just about oil or diamonds because
the whole approach is that there is a compelling need for greater
transparency and accountability around these resources. That is
the large picture and we are leveraging off that. For us EITI
is a principle, and it allows us to have a conversation that we
probably would not have had 10 years ago. Whether there is value
in formally extending it, there may be, but from our perspective,
we have a basis on which to move even as it exists now.
Q28 Jim Sheridan: Still on the question
of infrastructure, I wonder if you could perhaps explain to the
committee the decision-making process for what limited resources
you have in terms of major project build versus smaller project
build in order to get to the people who need it most, who are
the poor communities in Africa? For instance, what factors are
taken into account in terms of medical care? Do we build a big
hospital in a city that is not accessible for people in the rural
areas, or do we build 10 smaller medical centres in rural communities
and how are they staffed and resourced? Basically, what we need
to know is how that decision is reached.
Mr Eichenberger: That is a core
question. I think, in general, it is reached through a combination
of the best professional assessments from people in the Bank and
in other institutions like the World Bank as well as the government's
own priorities. Sometimes there is tension between the two in
the judgment about should we build a gold-plated facility here
versus reaching the real needs out there. It is tough. Frankly,
it seems to me that is one of the issues that has played a role
in what we see as a disappointing lack of impact in some of our
health sector operations to date. There is a lot of evaluation
work going on in health operations and education operations. Has
the focus on primary care or education at the rural level really
yielded what it anticipated? I think it is fair to say there has
been some disappointment with that. There are issues around if
you build it, they will come. Well, may be, but will they find
books there? Will they find a teacher that shows up for work?
There is a whole set of questions around that. As a general proposition,
this is part of our strategic selectivity, we do not see that
kind of investment as core work for us in the future. We will
continue to be engaged in improving, for example, the delivery
of health systems, but we are less likely to be in the business
of building rural health clinics, in part because there are others
doing it and others are doing it better. Where we see an interface
is, for example, getting clean water into a school, getting clean
water to a health clinic that has been built and may have no access
to clean water. That is a basic. It is not a very sexy infrastructure
investment, but from our perspective it is something we can do
well and it directly enables a contribution to Millennium Development
Goals through this channel; so this is kind of the approach we
are taking.
Q29 Jim Sheridan: Are there any tangible
examples? I mean the Infrastructure Consortium for Africa, as
it is called. Are there any tangible examples in the short period
of time that you have been there, any major achievements that
you would like to identify or, indeed, anything we can do to improve
it?
Mr Eichenberger: Overall on infrastructure?
Q30 Jim Sheridan: Yes.
Mr Eichenberger: I think there
are. Just related to your first question, we also have, also with
the UK Government support, a Rural Water Supply and Sanitation
Initiative that is getting at some of the issues that you mention.
I think we could put together a more systematic list of Infrastructure
Consortium for Africa work. It has produced a lot of collaboration
around some high priority infrastructure projects that have wider
regional benefits along the lines of the regional operations work
that I was talking about earlier. I do not have specifics offhand,
but I am more than happy to get them to you if that would be helpful.
Q31 Chairman: You have already answered
a number of our questions on private sector development. This
Committee did a report a couple of years ago, which was a valuable
but disappointing report in the sense that we all agreed and everybody
told us that private sector development was the key to the future
but nobody had much of a clue as to how you were going to unlock
it.[11]
You have given us some encouraging indicators that there is more
scope for it and maybe the climate is moving in the right direction.
The Centre for Global Development produced a series of targets
for you in terms of where you should go and where you should not
go. Can I pick up one point? Within the context of that report
what we were told on more than one occasion was that one of the
keys to the success of private sector development in Africa would
be the empowerment of women, and specifically the Centre for Global
Development suggested that gender strategies were something that
the Bank should be doing. I happen to notice that of your 18 directors
one was a woman but she finished her term at the end of last year.
I know you do not control who the directors are and who is appointed,
but is it not the case that successful private sector development
in Africa does require more empowerment of women, and, if that
is the case, should not the Bank have a gender strategy, and,
indeed, does it have an internal gender strategy?
Mr Eichenberger: Absolutely. The
gender piece of the African development poverty challenge is huge,
it has been under-emphasised for far too long and it is something
that our institution needs to do much more. I think we recognise
that. We do have a gender strategy in place now. We have provided
an implementation report and update on it to the so-called ADF[12]
Deputies in the context of this replenishment negotiation. I think
it was quite a candid report in the sense that it identified some
areas where we were moving ahead reasonably well and some other
areas where, frankly, we were not doing enough. I think in part
this gets to the issue which Mr Crabb raised, which is around
our internal skills mix. We have gender specialists whose purpose
is in part to ensure, for example, that that water project or
that road project explicitly builds in the inevitably important
gender dimensions so we know where the benefits are flowing, and
we have too few of these provisions, but the President is absolutely
committed to deepening our work on this. We have indicated to
our Deputies that we will provide another more systematic report
on where we are going on this issue, and my expectation is that
it will show improvement but it will also say that there is much
more to do.
Chairman: Because of the constraint of
the time, we will not pursue the question now, but I think we
will be interested when we are in Tunis to get some idea partly
on that but also on how you are pursuing or using the Bank's resources
to unlock private sector development in what is an improved climate.
As I say, we produced a report two years ago and, frankly, I think
we were frustrated at the end that there was not enough being
directed to unlock it, so perhaps we can leave that as something
we will explore in more detail in Tunis. I will bring in John
Battle.
Q32 John Battle: Just two questions
on, I think the word was, congruence or convergence, really the
agendas of the Bank. You have two arms, as I understand it: the
Development Bank and the Fund, and the High Level Panel report
proposed merging them so that if you did not have access to one,
or it was over-subscribed, the other was accessible. How is that
going?
Mr Eichenberger: That is perhaps
one of the bolder recommendations of the High Level Panel.
Q33 John Battle: Bolder means unachievable,
does it not?
Mr Eichenberger: No, just challenging,
and there will be different views on that. There are issues around
the One Bank agenda that are both technical but also operational.
What we have now is, in a way, two balance sheets, as you know.
It is vitally important for our institution, we believe, to keep
the Triple-A rating for its so-called hard window lending. A little
more than 10 years ago, the African Development Bank lost the
Triple-A rating and it has taken 10 years to claw it back, so
that is vitally important. This explains a little bit why the
Bank was slow to get into private sector actually, to protect
that. It seems to me the issue is more around the points we talked
about earlier, which is can we pull some of the strength out of
the hard balance sheet and apply it to the soft window? Are there,
for example, public/private partnerships that we can be doing
more of in the poorest countries, and we are seeing that using
hard window instruments in supporting investment in poorer countries?
This issue of how do we merge the two balance sheets, we will
get a lively discussion—I know it is an issue that we will
talk about in our annual meeting—our shareholders have widely
different views on this and we will just have to see how we move.
Q34 John Battle: Another, you might
say, bold agenda this morning, the mechanics of the organisation
really, and that is the constituencies that make up the board.
I was intrigued, looking at the structure of the board, that China
is in with Spain, Kuwait, Korea; the UK is in with Germany, the
Netherlands, Portugal; India is in with Finland and Denmark; Burkina
Faso, Gabon, Senegal, Mali, Niger, Benin, Cape Verde and Chad,
the poorer countries, are in a group of nine, and America is on
its own in a group. Is there any strategic reason? Is it on population,
is it on contribution and are they fixed forever, those groupings?
They are all given percentages which are often weighted. How is
it arrived at? Why are some countries in a group of nine and America
on its own?
Mr Eichenberger: I think there
is a long historical legacy to that going back, as far as I know,
to the initial creation of the Bretton Woods institutions in the
post-war era where at the World Bank, for example, an executive
board was created where a subset of countries were single country
constituencies—the US, the UK, France, the usual suspects—so
to some extent the structure of boards in the regional organisations
is in part a legacy of what has happened in the Bretton Woods
institutions earlier on. You asked if this is immutable. It is
not immutable. New countries come in, they find a constituency,
sometimes countries move from one constituency to another. The
US issue is—I am probably not well positioned to comment
on that. It is an historical issue. It is probably an issue that
needs to be addressed in the Bretton Woods institutions before
it is addressed in regional institutions.
Q35 John Battle: I am not so much
worried about fingering America—put it that way—it
is the African groupings. If I could put the question in a slightly
more positive way, in a sense a speculative way. Why could not
the groupings reflect some of the tentative attempts at regional
development in Africa? The East Africa trade organisations—there
have been some regional attempts in the past—I would have
thought they may have made useful blocks for you. What would be
the relationship with the NEPAD[13]
initiative? Could that help reformulate the structure to make
it, I am not saying more democratic for the sake of it, but so
that people can get access to the funds on a more equitable basis?
I think, rightly, both the Commission for Africa and, indeed,
the High Level Panel report said that the African Development
Bank should be the top vehicle for development in Africa, for
investment in Africa. That is the bold challenge, is it not, really?
How do you get people to group around that is what I am really
looking at? Do you need to alter the structure to do that to tie
in with the approach?
Mr Eichenberger: There may be
structural dimensions to it. There are a couple of aspects of
the Bank that are, I think, directly responsive to some of the
concerns you raised. First, the basic structure is African countries
have 60% of the voting power in the institution and the non-regionals
have 40%, so it is very much an African owned institution, and
I think that is clear. Secondly, in terms of the board of directors
of the organisation, it is an 18 member board, of which 12 are
African board members and only six are non-regional board members.
I sit on the board all the time. There is a very powerful, effective
African voice in the board on any issue at any given time. There
are clearly improvements that could be made. I think, ultimately,
this is not an issue necessarily for management, it is for the
governors of the Bank. I think there is a view now that the board
is functioning relatively well. We are putting on the table, for
your interest, a paper next week around the basic governance structure
of the Fund, the concessional window, that will be an opportunity
to have precisely this discussion around voice and vote.
John Battle: That is helpful. Thank you
very much.
Q36 Chairman: That is useful. As
you can see, members are peeling away, as the House is due to
sit in a few minutes. You have answered one question to a substantial
degree, so I have only got a small additional one. We did a Sanitation
and Water report last year and on the back of that DFID is increasing
its commitment on sanitation and water in Africa, but I wondered
if you were able to give us any indication of how DFID's engagement
with the Bank on sanitation and water has had a positive impact.
14 In other words, is DFID's engagement with the Bank a valuable
component of improving the delivery of sanitation and water?
Mr Eichenberger: I think the answer
to that is, yes, and I would say a couple of things. First, the
Bank was given a lead role, a secretariat role, in something called
the African Water Facility. I think there was a general view that
the institution had moved too slowly to actually begin implementing
more work on the ground; similarly with this Rural Water Supply
Initiative. DFID was very outspoken on dissatisfaction with the
pace of that, as were other member countries, but DFID also went
ahead and provided some very well targeted technical assistance
in order to help the Bank to deliver more of that stuff. I think
we have substantially increased our activities in those areas.
Q37 Chairman: Was that brought-in
technical assistance or technical assistance from DFID personnel?
Mr Eichenberger: It is a technical
assistance fund.
Q38 Chairman: To enable you to buy
in technical assistance?
Mr Eichenberger: Yes.
Q39 Chairman: Thank you very much.
We are obviously looking forward to our visit, when we will have
an opportunity to explore this in more depth. I hope from your
point of view that in fact this engagement has helped you to get
some idea of the sort of questions that are of concern to us.
I would just repeat what I said at the beginning. What we are
interested in is ensuring that the partnership between DFID and
the Bank is properly evaluated, properly assessed and, ultimately,
delivers practical and concrete results on the ground. It is as
simple as that in principle, but obviously getting from A to B
is another matter. Could I thank you and say that those of us
on the Committee who will be visiting the Bank's headquarters
look forward to seeing you again and your colleagues and exploring
this in some more depth and, ultimately, producing a report which
we hope will be of help both to DFID and to the Bank on their
future way to go.
Mr Eichenberger: Thank you very
much. I appreciate the opportunity.
14 International Development Committee, Sixth
Report of Session 2006-7, Sanitation and Water, HC 126
9 The Committee visited the African Development Bank
headquarters in Tunis from 2-3 April 2008 Back
10
Democratic Republic of Congo Back
11
International Development Committee, Fourth Report of Session
2005-06, Private Sector Development, HC 921 Back
12
Africa Development Fund Back
13
New Partnership for Africa's Development Back
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