Examination of Witnesses (Questions 140-159)
BARONESS VADERA,
MR MARK
LOWCOCK AND
MS SALLY
TAYLOR
10 JANUARY 2008
Q140 Chairman: That is helpful. I
think the Committee likes to feel that we had some influence on
this; there certainly was an awareness that we were focusing on
it and what the Secretary of State has done, I think, is adopted
a recommendation that we have not actually yet made. We regard
that as a pre-emptive strike.
Baroness Vadera: I will pass that
on to the Secretary of State!
Q141 Chairman: Going back to the
overall situation, you have just announced the IDA 15 contribution
of £2.13 billion, and again on a personal basis if I can
thank the Secretary of State for his courtesy in phoning me on
the day to tell me that was the case, which was helpful. That
is a 49% increase on IDA 14. What were the factors that determined
that level of increase, which is clearly very substantial and
we understand in dollar terms makes the UK the largest single
bilateral donor to the fund.
Baroness Vadera: Yes, it does
in dollar terms, although I should clarify something a lot of
people—particularly NGOs[5]—who
write to us talk about us being the largest shareholder, which
is obviously not at all the case. We looked at the spending settlement
that we had. We had certain factors to take account of including
what we had to do in terms of our bilateral programme. We had
certain other replenishments coming through at the same time—the
African Development Fund and the Global Fund to fight AIDS, TB
and Malaria (GFATM)—and we took a view overall in terms
of the increase for a number of reasons. The first is that we
do 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;
the IDA covers 81 countries now. 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. But I should also say
that the proportion of DFID's DEL[6]
that is going to IDA is going to stay roughly the same as it is
now. So, proportionately, it has not increased in quite—
Q142 Chairman: It is just a share of
the overall real increase in DFID's funds.
Baroness Vadera: The share of
IDA in DFID's funds has not really radically increased at all.
Q143 Chairman: I had an exchange
with the Secretary of State in the House about the contribution
that DFID is making through multinational agencies and what it
is doing bilaterally, and of course fashions come and go as to
whether we should do more bilaterally or multilaterally, or whatever.
The Secretary of State's response to me was, "Surely you
do not object to using multilateral agencies as a vehicle and
the importance of their role" to which the obvious answer
is no, of course I do not. But the question I was asking is, what
assurance can you give us that this increase is based on an objective
assessment of the best way to spend UK development money as opposed
to a convenient way of allocating rapidly increasing resources,
which your Department uniquely is currently enjoying in comparison
to other departments? You can understand the charge may be, "You
have all this extra money. How the heck are we going to spend
it? We will give a great dollop of it to the World Bank."
How do you respond to that?
Baroness Vadera: In the first
place, as I said, proportionately we have not in fact increased
it at all, but we do have a system of surveying the effectiveness
of multilateral institutions—that is on the website, we
have published that and the World Bank ranks the highest, if not
amongst the first or second highest, and that is very important
to us. We have also had an assessment of our objectives in what
we are trying to achieve and if we look through what we actually
managed to negotiate, which will be published shortly in the Deputies'
report, from the replenishment round, it very much matches with
what we are trying to do. One of the key issues is around fragile
states. We agreed and negotiated that there would be an increase
in the allocation within the IDA to fragile states; that they
will allocate more staffing resource to it, including in-country;
that they will respond by doing conflict analysis better, and
we think that is something that fits with our objectives, as the
White Paper shows, and that was very important to us. Second,
we know that Africa obviously remains a huge focus, and about
half of IDA's funding will go to Africa. But also one of the most
important things to us this time was to try and effect the change
within the Bank around what we call decentralisation, which really
significantly increases the effectiveness of the Bank and therefore
of the whole system, because increasing the effectiveness of the
Bank actually has a knock-on effect—it leverages other donors,
not only in terms of their money but also the way that they actually
behave. So we secured, for example, a commitment that they would
increase the number of staff, internationally recruited staff
that were going to be based in Africa, by 50% and that really
has a very serious impact because it has an impact of course on
conditionality and doing impact assessments and understanding
the local context and being able to speed up the disbursement,
so it has a very significant impact and it helps in harmonisation.
So it met all of our objectives and that was essentially the assessment
that we made.
Q144 Chairman: That is a fair answer.
The final point on this one is that you gave us your own memorandum
in which you make a number of comments on the World Bank's performance
and the internal approach, but it has been suggested that you
have not actually shared this as widely as you might; in other
words, how you have made your assessment of the World Bank has
been done more in-house than externally. The Bretton Woods Project
said the process analysis behind your decision lacked transparency.
First of all, do you accept that there is any substance to that,
and is there any more that you could or should do to make clearer
what you were doing? You have given a fair answer, but nevertheless
in detail one wants to know what are the objective criteria and
how they are done. Your summary paper just makes statements, "They
are doing all right on this and that", but you have not said
how you came to those conclusions. Taking the fact that it is
the same proportion it is still £2.13 billion of UK taxpayers'
money; should there not be a little more public transparency of
how you arrive at that conclusion?
Baroness Vadera: I guess I would
say I was a little bit surprised by that when I read it in the
submission. We published beforehand—and in fact we are the
only donor to have done that—our effectiveness analysis
of each of the multilaterals and it is on our website. We are
quite unique in having done that, and other donors are in fact
looking at the method that we use to assess that, and that was
on the website. The World Bank and scored quite high. We made
clear our objectives beforehand around decentralisation, fragile
states, the climate change agenda as some of the top priorities
of what we wished to secure from the Bank, and that was made clear
ahead of any decision and indeed any discussions. We then had
a series of discussions over the period in the negotiations for
the replenishment and then there will be the Deputies' report
that will be published that will show what actually has been agreed
by the Bank in response to those.
Q145 Chairman: That is still to come?
Baroness Vadera: There is a draft
that is certainly available, including to the Bretton Woods Project
and others and then the final version is going to be published
shortly.
Q146 Chairman: That is something
that might be made available to the Committee before we conclude
our report?
Baroness Vadera: Absolutely, yes.[7]
Q147 Hugh Bayley: Overall, IDA 15's spend
increased by about 30% over IDA 14. You mention an increase of
staffing in Africa by 50% or so; how reassured are you that the
Bank has the capacity to effectively use a 30% increase in IDA
funding?
Baroness Vadera: The fact that
we used as one of the objective criteria that we wanted for decentralisation
and we wanted a focus on fragile states, including resources and
capacity in fragile states, has been our concern and we believe
that we would at least secure the commitment to do that, and this
will be reviewed going forward. I think that overall it would
be fair to say we believe the Bank has probably the most capacity
of any international and multilateral institution currently. For
example, when we were discussing our increase in replenishment
for the African Development Fund, which was 100%, that was one
of our key concerns and that is what we spent most of our time
negotiating with the management. So I would say that we are reasonably
comfortable that we understand their commitment to the changes
and the reforms that are needed to have that capacity and we will
be continuing to review that.
Q148 Hugh Bayley: We met quite a
number of the Vice Presidents while we were in Washington DC,
and I think it is a view shared by my colleagues that we felt
that the Vice Presidency of the Directorate in charge of Africa
was not as clear about policy and as focused as you might want.
So you are putting more resources into the field, but given that
there is a larger increase in funding, half of it is going to
go to Africa, Africa is a British development priority, are steps
being taken to strengthen the leadership on the Bank's Africa
region?
Baroness Vadera: I am sorry you
felt that about that particular individual but you will be aware
of course that subsequently a Managing Director has been appointed
for Africa, who we respect and have some considerable experience
working with, who is Ngozi Okonjo-Iweala, who was the Nigerian
Finance Minister and is very well-respected all over the world.
She not only has a track record of reform, as we have seen in
Nigeria under very difficult circumstances, but also I think because
she used to work at the Bank she has a very clear understanding
of the Bank's systems and what needs to change. What we are particularly
pleased with is that she understands some of the weaknesses of
the Bank, having been on the other side of the fence, in particular
around the issue of decentralisation and having Bank staff on
the ground, around harmonisation, around conditionality—these
are some of the areas on which she is very focused, in fact. I
talk to her quite regularly. She has asked, for example, for DFID
to share with her our way of incentivising of staff in terms of
decentralisation because she has got to the heart of the issue
really quickly, which is, "I understand what we need to do
but the point is my incentivising staff to actually want to be
in Africa and how do you do that? I would like to see how DFID
does that because DFID does that better." So we have written
a paper for her, which I have just sent to her today. So we are
quite comfortable with that. I would also say about Obi[8]
that she does have strengths and I think working with Ngozi, who
she knows quite well, they would make a good team because she
has certain different types of strengths that may not have come
through in the discussion of the policy and strategy.
Mr Lowcock: Could I just add on
the resourcing side that the Bank is increasing the share of the
overall resources it has, which is going to Africa, and for us
that is an important thing that is happening, including, above
all, overseas.
Q149 Hugh Bayley: Given that the
UK will be the largest contributor to IDA 15 do you think that
that means our leadership role within the board changes and, if
so, in what way?
Baroness Vadera: I think many
would say that we possibly play that leadership role as it stands
now. I think these things are qualitative assessments and are
quite difficult. I certainly have a sense from my experience of
travelling in-country that we have a very close relationship with
the Bank on the ground and they consider us as a kind of primary
partner. I certainly have a sense from talking to people in Washington—and
I understand that you yourself saw President Zoellick and he talked
about the kind of leadership role that we play and in the board
I am aware, from my other historic experience, that we are considered
to play a leadership role. So I am not sure that the formality
of moving to becoming the largest contributor will have a radical
difference. I can understand the importance of the symbolism of
it but I am not entirely sure how it will change, given that we
already have quite a significant position.
Q150 Chairman: It was stated to us
more than once that "money talks" in the World Bank.
Baroness Vadera: I think they
were lobbying, possibly!
Q151 Hugh Bayley: Finally, what can
you tell us about the commitments made by other donor countries
to IDA?
Baroness Vadera: The one that
has the most impact is obviously the United States and that was
a 30% increase, which I guess given it is the largest country
in the world it is perhaps okay, certainly compared to the previous
replenishment round. We have a table, which I am very happy to
send you if you have not already seen it, which shows an increase
from France, which is about 34%.[9]
We have a couple of new donors, which is very interesting; we
have China and Egypt. We have Spain making a very significant
increase. So there are some quite interesting changes. The Germans,
given their budgetary situation, about 21%, Japan at 31%; so I
would say that they have tried to keep apace, certainly.
Q152 Mr Singh: You have touched on the
issue of the World Bank being an effective multilateral development
institution, and the Secretary of State said it is "the most
effective multilateral development institution".[10]
What hard evidence is there to support that assertion? What do
you mean by "effective"? Is it an effective, efficient
bureaucracy; is it effective in terms of outcomes; is it cost-effective?
Will you share with us why you value the World Bank so much because
in context the civil society criticises it quite severely sometimes
in terms of outcomes on the ground?
Baroness Vadera: I should possibly
take the point about civil society first. We should try and differentiate
between disagreement about policy and effectiveness. Sometimes
they are the same thing and sometimes they are not the same thing
and a lot of civil society disagree with certain elements of Bank
policy. I was talking about effectiveness in terms of the survey
which is on our website and we have four specific things that
we measure, that we measure across the piece; I think that doing
it comparatively is much more important than actually doing it
on its own. The first thing it talks about is the effectiveness
of achieving results, where it does rank the highest; then we
talk about the partnership approach where there is some room for
improvement, which is possibly the one with which the NGOs have
the most issues. Then we talk about its strategy and its overall
approach. So we have a different matrix of measures and we measure
each of them. The Bank overall scores highly, which is why the
Secretary of State made the comment about it being the most effective.
There is the second issue, which is do we then agree with what
its objectives are, what it is trying to do, and this is effectiveness
in terms of what it does, and we felt and assessed that it achieves
for us—it is the institution that is most effective for
us in achieving what we want it to achieve, which is to be this
glue in the system to leverage other donors, to leverage other
behaviours, to make changes. It is the most transformative thing
that we could do. We could spend the money ourselves and the value
we would get would be affected because I believe that DFID is
the most effective institution multilaterally or bilaterally,
but what we need to do is to leverage others in and that is something
that we can do very effectively with the Bank. So I guess we would
take the view that those are the two assessments. There are criticisms—and
I know that you have had them in your hearings—around partnership,
country ownership, conditionality and gender—and there are
various things. Frankly we are not funding the Bank as being absolutely
where it needs to be—in fact, what we have spent all of
our time doing is trying to focus on its reform and its improvement,
but that should not detract from the fact that we think that this
is the best way we can spend that money.
Q153 Mr Singh: Do you look at all
at the failures of the World Bank in terms of its programmes and
if DFID does look at those failures how do you feed the lessons
into the World Bank?
Baroness Vadera: I sometimes feel
that we spend more time looking at its failures than we do at
its successes. Obviously the Bank has its own systems for looking
at its reforms and failures, and there are systems and the Independent
Evaluation Group looks at policy areas, central areas or picks
certain things to look at. We then look at the findings of that
and we really do make quite a strong push at the board level and
at the shareholder level in terms of changes and reform. There
are things that it investigates in terms of outside complaints,
so there is an inspection panel. You will be familiar with the
one about the Congo Forest, which we have been looking at. We
are very much pushing that the lessons are learnt because, as
you know, we are very interested in the Congo Forest in terms
of both development and climate change and the centrality in the
whole continent, and we need to ensure that those lessons are
learnt, so we push on that. Then working on the ground I think
DFID is in quite a unique position in certain countries, particularly
in Africa—we work very closely with them. I was in Rwanda,
Nigeria and Uganda and we have a joint country programme of assessments
that are taken and that is an opportunity again to ensure the
lessons that are learnt and to ensure that things are corrected
and in place. One of the things that we managed to do in Vietnam
recently was to ensure the mainstreaming of gender in the PRSP,[11]
where, as you are aware, the Bank has admitted it has had some
historic failures.
Q154 Ann McKechin: The DFID policy is
clearly based around the Millennium Development Goal targets and,
following on from Marsha Singh's question, perhaps I could give
you two examples of criticisms about the way the Bank operates
and how that conflicts with our own Government's priorities. One
is structural in the fact that it is a bank, it is not an aid
agency like DFID, and it still operates, even on a soft loan basis,
on a commercial basis—it expects loans to be repaid. So
to what extent is that a barrier in terms of trying to put across
our own policies? The second one, which I am sure you will not
be surprised about is its commitment over a long number of years
to neo-liberal type policies, the issues of privatisation and
free trade. I think perhaps rather than just seeing the generality,
one example, I am sure you have seen from Paul Collier's book,
The Bottom Billion ... the question of landlocked countries
and small island states, whether a general economic policy of
free trade is really the one which is appropriate for them, and
again how this could possibly conflict with their own targets?
Baroness Vadera: I think this
is the structural question about if the bank is a bank, which
is a very interesting one. Of course, if you took the concessional
element of IDA it is not quite a bank really because the grant
element is so significant—the overwhelming majority in fact.
There is a view which I think I can certainly see in practice,
that if it is a bank in a funny way it does give more ownership
to the country, in that the country has a say, it has decided,
it has obligations and it is a part of the discussion. Having
said that, we would say that perhaps sometimes the Bank ought
to behave like a bank a bit more, which would mean it was more
responsive to its clients. You would not expect a bank client
always to be treated in the way in which we have seen examples,
so I would not want to defend the Bank's behaviour in every situation.
I think that there are situations that we can see where the fact
that it is a bank and there is a loan and it has to be repaid
has actually hindered the ability of the country to access that
finance; we have seen sometimes a certain reluctance to have loans
for health systems, for example. So it does occur; there is certainly
that level of conflict that occurs. I think for me, given the
level of concessionality in the loan, which would be about 65-70%[12],
that actually the issue is, is the Bank sufficiently responsive
to the fact that this is a loan and therefore the other side of
the party needs to sign up and have some say in it? In terms of
the commitment to the liberal policies, I think there has been
a change; I think we collectively—not just DFID—including
the whole voice that Britain has, the NGO movement, has had a
significant impact on this, and the way I saw it was that the
turning point was very much around the PRSPs. They were not perfectly
implemented and they are still not perfectly implemented, I am
sorry to say, but they were the turning point and the turning
point was about giving ownership back to the country, and consulting
wider stakeholders. That is the kind of huge victory that I sometimes
feel that NGOs do not stand up and claim sufficiently because
it is, in fact, in many senses their victory. The issue around
privatisation, conditionality, there is a long history around
this; there have been changes and we have been looking at this
area quite seriously, as you know. You have heard evidence on
this; you have spoken to the previous Secretary of State about
it. We think that there is now a shift and there has been a reduction
in the number of conditionalities, but also specifically they
have said that they would not have conditionality around sensitive
policy areas and sensitive privatisations, and we have seen that
commitment come through in the second review of conditionality.
I think a lot of this is about how it is done and implemented.
I think their principles and their policy is actually now not
that different from that of DFID. The issue is how do they actually
implement this on the ground and I think that a lot of that is
about who is in the country and therefore we went back to the
heart of it and that is why we focused so much on the issue of
decentralisation.
Q155 Ann McKechin: You mentioned the
PRSP process where they say they have had to actually engage in
consultation on the ground. What appears to me as absent is a
similar review process after a decision has been put in place
where the World Bank, as well as doing their own internal evaluation,
is also actively consulting with people again on the ground to
see what their reaction has been and what lessons should be drawn
from it collectively together. It seems to me that it has made
it atone point in the chain but there is not the follow-up further
down the line.
Baroness Vadera: The assessment
after the event?
Q156 Ann McKechin: Yes.
Baroness Vadera: We were having
this discussion the other day. There is an assessment but the
interesting thing is that it does not, for example, get back to
the board to say, "This is the assessment and this is what
we found." There is a more technical process in the peer
review mechanism for the lessons learnt. Asked, do they do that—yes
they do, at the management level. But what I find is interesting
and I think is correct in what you were saying is that the impetus
is on getting the programme right, getting it designed and getting
the money dispersed rather than coming back and saying, "Yes,
we did it and, guess what, we only had 60% success." It is
not something that the board tends to discuss very often. I think
I would have to agree with that lack of figures. Overall I do
think that there has been a shift and I do think that the appropriateness
of policy at the design stage, particularly for example in understanding
the issues around trade for landlocked countries or island states,
is something that has been looked at, and of course a lot of trade
policies are not in fact implemented through the Bank but through
other means.
Q157 John Battle: To follow on from
that and the point that you make about the assessment at the board
level, what encourages me about the World Bank is that it is not
just any old bank, such as a JP Morgan Chase, for example; it
is different, and not just in its methodology of working and decentralisation
but in its aims and purpose, because built into it is tackling
poverty. One of the tools for tackling poverty would be the Poverty
and Social Impact Assessments (PSIAs) and what I would be concerned
about is the lack of rigorous, systematic use of Impact Assessments
by the Bank. In 2005 in the DFID policy paper attention was drawn
to the need for that systematic use, but why is there no reference
then to Impact Assessments in DFID's latest UK and the World
Bank report?[13]
There is no reference to the Impact Assessment. Can we push that
a lot harder as a useful tool?
Baroness Vadera: I do not think
I can answer the question why there is no reference to it.
Mr Lowcock: I can tell you there
will be in the next one!
Q158 John Battle: I think that is
the answer I am looking for! But you see it as a useful tool?
Baroness Vadera: I absolutely
see it as a useful tool. There is something interesting going
on in the PSIAs, which we started because—and we were party
to starting it because we did not think that there was enough
done on the subject. We are now finding that it is being done
but it is being mainstreamed, which I guess is what was the ultimate
objective, but it is not clear and transparent that this is a
PSIA and it has been mainstreamed. So there is a huge stream of
work that is going on to ensure a more systematic consideration
in the design at the right stage and that this is happening. I
do think there is some evidence that it is happening. I think
what we would like to see as the next stage—and we did push
this, it was a part of the discussions around the replenishment
and will be in the DFID report as well—what I think is an
interesting step to take is ensuring that the PSIAs are done not
just by the Bank but they are done by the country, so that they
are involved, and there is capacity in the country to make an
assessment of the impact of the Bank's policy. We found, for example,
I think in Tanzania that the country was more involved and there
were research organisations and I think that makes a radical difference
because they do understand the context better. So we are pushing
the whole PSIA very hard, but we are particularly pushing for
local capacity-building and are actually funding local capacity-building
to do PSIAs.
Q159 John Battle: We make a contribution
as well to the African delegates to the Bank. I am really concerned
about the voice of the developing world now and how that emerges
in the Bank. I think DFID makes a contribution to what is called
the Analytical Trust Fund. Perhaps you could say a bit more about
that, but I am rather more interested in knowing what other ideas
DFID is pushing, encouraging, to ensure that delegations from
the south are effective; that they are well-informed and they
carry some weight in Washington and are not just either tick boxed
or patted on the head.
Baroness Vadera: I have to be
honest and express some disappointment about the Analytical Trust
Fund, which I do not think is necessarily a reflection on the
intentions or the people involved. It has done some stuff, for
example it has looked at the financial sector policies and it
has looked at the whole issue of how the IMF quota voice situation
is occurring and gave that research to the African board members.
I think it has two problems. The first is that in one sense you
cannot outsource, being the client, and the client is the ED and
the ED needs to be in an effective enough position to be asking
the right question of using the Trust Fund that is available for
the research. Secondly, the consortium that provides that support
is very research focused, whereas what the two African EDs face
is they have to turn up every day and they have to be prepared
for quite a wide-ranging discussion about all of the policy papers
and all of the decision papers that are in front of them. I think
that that is where we really need to focus. Our view is that there
are some things that are easier wins than others. If you start
to talk about changes in the shareholding and in the voting structures
there is, as you are well aware, very little consensus amongst
the members; but I think that there might be other things that
could be done, including the reallocation of the countries within
the board members to make them stronger, and have more capacity
and alternates; but things need to be changed on that and we will
be pushing for this discussion going forward in the spring.
5 Non-governmental organisations Back
6
Departmental Expenditure Limit Back
7
The Final Report is expected to be made public the day after
it is discussed by the World Bank Executive Board-that discussion
is scheduled for 28th February. A draft report was placed on the
World Bank website on 6 November for comment by Civil Society
Organisations. Back
8
Obiageli Ezekwesili, World Bank Vice-President for Africa Back
9
The table is contained in the IDA Deputies Final Report which
is expected to be made public the day after it is discussed by
the World Bank Executive Board-the final discussion is scheduled
for 28 February Back
10
"UK to give record level of support to fight global poverty",
Department for International Development press release, 14 December
2007 Back
11
Poverty Reduction Strategy Paper Back
12
IDA provides aid to client countries with different levels of
conditionality. Most IDA funds are provided either as a standard
IDA loan (known as an IDA crdit) or grant. A standard IDA credit
is provided with a 40 year maturity, with a 10 year grace period
and a service charge of 0.75%. As a result the grant element of
a standard IDA credit is about 65-70%. In addition IDA provides
grants to some countries based on their debt levels (approximately
20% of IDA in FY06 was provided in the form of grants and the
rest as credits). Back
13
Department for International Development, The UK and the World
Bank 2006/2007, IFID 04, November 2007 Back
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