1 INTRODUCTION
1. Reform of international institutions has emerged
as a priority for the Government under Rt Hon Gordon Brown MP,
the Prime Minister. In his first Mansion House speech as Prime
Minister, and again in a speech in India on 21 January 2008, the
Prime Minister spoke of the need to renew global institutions
which had been created in and for a different era.[1]
His aims for this "new world order" were:
"To create a new International Monetary Fund
for the modern world, to create a new World Bank that can meet
the environmental challenges as well as the development challenges,
to create a new United Nations that can meet the challenges of
rebuilding where there are conflicts and where there are fragile
states in need of international assistance and support."[2]
2. The Department for International Development (DFID)
is channelling an increasing amount of its budget through multilateral
institutions. The Organisation for Economic Co-operation and Development
(OECD) said in December 2007 that the UK's overall aid figures
rose by 11.7% in 2006 "due to a substantial increase in contributions
to international organisations".[3]
These multilaterals, including the European Commission, United
Nations agencies and the World Bank, now receive over 40% of DFID's
total budget.[4] Against
a backdrop of a sharply rising DFID budget and of efficiency targets
in the civil service, the total figure for British multilateral
spending on development has risen from around £1.3 billion
a year in 2001-02 to over £2 billion a year in 2006-07 and
looks set to continue to rise. In the debate on international
development on 15 November 2007, Rt Hon Douglas Alexander MP,
the Secretary of State for International Development, said:
"The approach […] that I want DFID to take
more broadly with the […] multilateral institutions within
the international system [… is that,] given that we have
resources to deploy following the generous comprehensive spending
review settlement that we have achieved, we should try to provide
generous finance. […] However, as well as providing extra
resources, we should aim to exert more influence over the policy
choices made by institutions."[5]
Parliament and the taxpayer need to be satisfied
that DFID is indeed exerting that influence and confident that
this money is being well-spent. The UK contribution to the World
Bank in particular has doubled in the last two financial years
and looks set to continue to rise. In the summer of 2007, we decided
therefore to examine the relationship and alignment of priorities
between DFID and the World Bank.
3. The Bretton Woods Institutions—the World
Bank, the International Monetary Fund (IMF), and an institution
that would later become the World Trade Organisation—were
set up at a meeting of 43 countries in Bretton Woods, New Hampshire,
USA in July 1944. Their aims were to help rebuild shattered post-war
economies and to promote international economic cooperation.
The main purposes of the Bank in particular, as outlined in Article
One of its Articles of Agreement, are: "to assist in the
reconstruction and development of territories of members by facilitating
the investment of capital for productive purposes"; "to
promote private foreign investment"; and "to promote
the long-range balanced growth of international trade... thereby
assisting in raising the productivity, the standard of living
and conditions of labour in their territories".[6]
4. Both the World Bank itself and the context in
which it operates have changed in the decades since its foundation.
The primary focus of the Bank has moved from predominantly European
post-war economies to the developing world. This evolution means
that, in our view, the World Bank remains a highly relevant institution
and DFID is right to support it. The Bank is today the largest
development institution in the world. In many countries, it provides
the lead which is followed by other development agencies. It is
an important source of knowledge, analysis and advice on how to
tackle global issues. As such it has an impact not just directly
through the projects and programmes in which it is involved but
also more broadly through an influence it exerts over the development
system itself. Baroness Vadera, the then Parliamentary Under-Secretary
of State at DFID, said in her evidence:
"We believe the Bank is one of the most effective
ways we can spend some of our funding. In many senses it is the
glue in the system of development. It is an institution that has
the ability to do certain things that other institutions do not—heavy
lifting around health systems and education systems and working
with governments. It has a geographical spread which nobody else
can quite match. […] And the role that it plays in terms
of global public goods and all of those factors are very important.
It is considered—and we considered and evaluated it—to
be an effective organisation."[7]
5. Given its profile, the Bank comes under considerable
scrutiny from civil society, opinion formers and commentators.
Not all of their views are constructive: some organisations seem
to have an instinctively hostile attitude to the Bank which is
not always founded on evidence. In our view, such unsubstantiated
criticism of the World Bank simply damages the public perception
of development assistance more broadly. This Report will use the
range of evidence we have gathered to examine the relationship
between DFID and the World Bank, and through this to assess whether
this institution is adapted to today's challenges and capable
of achieving the development outcomes necessary if poverty is
to be eradicated.
STRUCTURE
OF THE
REPORT
6. In chapters 2-5 of this Report, we focus on the
key questions for DFID's relationship with the World Bank today
and in the short-to-medium term. These are fundamental issues
about the alignment of priorities between the two organisations,
the Bank's effectiveness and issues of reform and influence. In
chapter 6, we reflect on the Prime Minister's statement about
the need for a "new World Bank" and look ahead to what
such a Bank might look like, what its focus should be and how
some of its work might be financed.
EVIDENCE
AND ACKNOWLEDGEMENTS
7. We held three evidence sessions in this inquiry.
We took oral evidence from One World Trust, Bretton Woods Project,
European Network on Debt and Development (EURODAD), Rainforest
Foundation UK, WWF UK, Christian Aid, International Alert, ActionAid
UK, CARE International and the Department for International Development
(DFID). We received written evidence from 26 organisations and
individuals.
8. In November 2007 we visited Washington DC for
discussions with World Bank President Robert Zoellick and other
senior World Bank staff. A summary record of some of these meetings
is published as Annex 1 to this Report. We also met the Managing
Director of the International Monetary Fund (IMF), Dominique Strauss
Khan, representatives of donor and borrower country delegations
to the Bank, think-tanks, and US officials. The programme is set
out as Annex 2 to this Report.
9. We are grateful to the UK Delegation to the World
Bank/IMF and to the British Embassy in Washington for facilitating
a full and tailored programme. We would also like to express
our thanks to all those who provided us with information, formally
or informally, to assist us with this inquiry.
1 Speeches by the Prime Minister, Rt Hon Gordon Brown
MP, at the Lord Mayor's Banquet, London, 12 November 2007, and
at the Chamber of Commerce, Delhi, 21 January 2008 (pm.gov.uk) Back
2
Speech by the Prime Minister, Rt Hon Gordon Brown MP, at the Chamber
of Commerce, Delhi, 21 January 2008 (pm.gov.uk) Back
3
OECD, Final ODA Flows in 2006, December 2007, paragraph
11 (www.oecd.org) Back
4
DFID, Statistics on International Development 2002/03-2006/07,
2007, p 10 Back
5
HC Deb, 15 Nov 2007, col 876 Back
6
World Bank, IBRD Articles of Agreement: Article I Back
7
Q 141 Back
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