Examination of Witnesses (Questions 160-179)
BARONESS VADERA,
MR MARK
LOWCOCK AND
MS SALLY
TAYLOR
10 JANUARY 2008
Q160 John Battle: If I may suggest
that maybe in this century we start to look at Africa as a collection
of countries rather than one big unit.
Baroness Vadera: Absolutely. I
did suggest that it was not necessary for all of the African countries
to be in the same constituencies. In fact we were having that
discussion this morning that they do not all have to be just between
the two African EDs and that some of their conditions might be
more suitable to others. I think that people are slightly watching
as well amongst the members; they are watching to see how the
Fund quota voice discussion is completed, which is anticipated
in the spring. I think there is another issue which is quite important,
which is that particularly the African members are much more interested
in voice in terms of what they experience on the ground. Their
primary interest is not in the more general stuff in Washington;
their interest is how they are going to access the finance, what
are the terms of it and what the conditionality around it is.
I think that part of the voice needs to be strengthened and that,
for them when you talk to them, is one of the big things that
they want out of the voice discussion.
Q161 Sir Robert Smith: When they
met us they did also wonder—and I do not know what your
thinking is—whether they should have a third member of the
board for the sub-Saharan African constitution.
Baroness Vadera: It would be fair
to say that there is also the view that the board, which is now
24, is possibly a little bit unwieldy. I certainly get the sense
that the current President has that view. So in the context of
restructuring that I do not know where the third ED would be.
I think the principle that we are very clear about is that the
proportion for low-income countries, in particular Africa, needs
to increase. Whether that is two and the rest of them reduced
or whether that is three is a slightly separate issue.
Q162 Sir Robert Smith: One of the
other things put to us was maybe going down the road of double
majority voting where the dominated board has to get the majority
and also the other members or by population also has to get a
majority. Have you any thoughts as to whether that is a workable
solution?
Baroness Vadera: In a formulaic
way it would certainly be one way of increasing, whichever way
you cut it, the voting rights of the poorer countries. I am not
entirely sure that it would be effective because you could quite
easily see a situation of gridlock in one sense. I do not believe
that there is a huge emphasis from the African EDs or from some
of the low-income members for this. Actually what they are interested
in is being effective at the board and I am not sure that having
that voting structure would actually make them more effective
and might conceivably make them less effective.
Q163 Sir Robert Smith: What sort
of dialogue is DFID having with the borrower countries as to their
priorities for improving their voice?
Baroness Vadera: We have a dialogue
at the ED level and we obviously talk to them at the country level.
In particular when Trevor Manuel was the Chair of the Development
Committee we had quite an intense dialogue because he led some
of these discussions. I think that we have possibly too much,
waited for them to show some sense of what they want because it
is not always clear what they actually want. So we would anticipate
some feedback from them and perhaps we should be more proactive.
Mr Lowcock: Can I give an example
of what the Minister has just said? I have been in Africa this
week and I spent some time with the Finance Minister in the country
concerned and, as always, we ask him, "What are the big issues
for you?" Actually he said exactly what the Minister said—it
is about the way that the institution interacts with us at the
country level; can they be faster, can they be more decentralised,
please; can they be more responsive to us? That is why we have
focused on those issues.
Q164 Sir Robert Smith: We had an
alternative view from a US official that development banks that
do have boards with borrower country voting majorities are, in
his words "dysfunctional". His explanation was that
if you are a borrower you are unlikely—because you might
want to borrow in the future—to vote against someone else
borrowing. I wondered should the World Bank avoid that route.
Do you share that view, although maybe not that rhetoric?
Baroness Vadera: It seems to me
that the whole thing is a rather caricatured debate if it is put
in those terms. At the end of it what is very clear is that they
need to have greater voice; they need to be more effective and
at country level they need to have a greater say and that, to
me, would be the most important thing.
Q165 Chairman: Just as a clarification
of that, the official in question said that you would not get
one country turning down an application from another country on
the grounds that it would be its turn next. But the UK Director,
I think of the Inter-American Development Bank, said that actually
it was the US Treasury that was dysfunctional and it would not
engage effectively with the Bank, and in the case of that bank
the borrowers actually were also the majority shareholders. So
I think that was the context in which it was being said. Obviously
the concern, nevertheless, is the huge imbalance between the shareholders
who distribute money and the borrowers who clearly are, the purpose,
as John Battle says, which the Bank exists for, but they really
do need to have a bigger voice and it is a question of how that
is achieved.
Baroness Vadera: I completely
agree that they do. We do not share, I have to tell you, the view
of some of the members that we have to wait for the IMF committee
discussions, which we understand from the Managing Director of
the IMF that he would very much like to conclude by the spring
meetings. Nevertheless, there is not enough consensus to move
us forward. We think there will be an opportunity and we will
push hard for there to be an opportunity from spring onwards to
look at this issue. Again, I think you could find yourself gridlocked
in quite a long discussion if it comes down to shareholdings and
voting rights, and so we think that probably a two-phase approach
where there will be some early wins for the African communities
in terms of their capacity, their effectiveness on the board and
some of the reallocations might actually be a good way to go.
But, again, we think that this needs to be led by them and we
are slightly loath to impose that. But we could not agree more
about the fact that this really needs to be handled quickly.
Q166 Ann McKechin: I want to turn
to the issue of Trust Funds because I think on current trends
the UK is contributing almost as much to Trust Funds as it is
to the IDA. Could you outline from DFID's point of view what you
consider the benefits of the Trust Funds are; and what are the
views of the other major donors about Trust Funds because it certainly
struck me that the Global Fund to fight Aids, TB and Malaria,
has a great deal of support from the USA but the Trust Fund for
Afghanistan is one which they have largely bypassed. I am just
trying to find out about the internal political dimension within
the World Bank's view about how Trust Funds are emerging and what
their importance is?
Baroness Vadera: I do not think
Trust Funds are a very homogenous group. We are a contributor
to Trust funds and about a third of our contributions to Trust
Funds are in fact to five global aid institutions: the Global
Fund, the Fast Track Initiative, the immunisation facility for
GAVI,[14]
GEF[15]
and Debt Relief Trust Fund. So we have those five in that Trust
Fund pot, which I think people view slightly differently. We then
have about a third going to country Trust Funds, where we think
that they can be a very effective pooling mechanism. So in one
sense there is a Trust Fund which is about policy and there is
also a Trust Fund where actually sometimes the Bank is just being
the financial agent, being a bank and a disbursement agent as
well. So you have to take them slightly differently. We have found
them an effective mechanism for a number of reasons; one of them
is around pooling and harmonisation and reducing the burden for
countries. Certainly in Ethiopia where we have a Trust Fund that
works very effectively; in Afghanistan I can imagine it would
be a lot more difficult if everybody was off doing their own thing.
So we do think that it has some real merit here. IDA is the largest
disperser of concessional lending and you do need to focus areas
because it is a very big beast, so actually being able to use
a Trust Fund in order to focus on certain areas. We are in discussions,
for example, as I am sure you are aware, about climate change
and having something around that, which I think is very important.
So we do have a view that there is effectiveness, but they certainly
do need some reform and there has been some reform. So they started
to reject Trust Funds where countries set up Trust Funds so that
their nationals can be hired to do certain tasks. That kind of
thing has been stopped, and there might be others like that. I
think that the US, which you mentioned in particular, is, as you
say, a huge supporter of GFATM and of Debt Relief, so I think
again it is important for them as well. A lot of the Europeans
are interested in Trust Funds because they are interested in harmonisation.
Q167 Sir Robert Smith: One of the suggestions
has been put to us is that there are so many Trust Funds partly
because it is a way of working around the rules of the Bank and
that it maybe takes the incentive away from actually reforming
the Bank's own internal operation. Do you think that it is a distraction
from channelling money directly through the Bank and reforming
the way the Bank operates?
Baroness Vadera: As I said, when
you think about a third going into the big five and then a third
going in-country, I do not have a sense that DFID misuses it.
Mr Lowcock: I think there is one
category, if I may say so, for which there is a potential concern,
which is to do with the administrative budget. We think, for example,
that the World Bank should have much greater expertise on gender
and social issues and that it would actually be a priority for
the $2 billion a year worth of administrative budget. At the same
time it is true that there is a Trust Fund which helps build their
capacity on gender issues and we view that as a way to help them
get to where they need to get to in the medium term. So that is
a particular category that we do look at with a great deal of
scrutiny because of the risk of Trust Funds on staffing creating
a silo, when what you really need is a mainstreaming across the
whole of the system.
Q168 Sir Robert Smith: That is something
to watch out for. Obviously in Afghanistan there is quite a strong
case because of the strength of governance of the Trust Fund;
but is there a danger that it is too easy a model and that countries
do not get ownership? Budget support is very much a DFID priority
but do you think that the World Bank maybe channels stuff through
Trust Funds too readily at a national level?
Baroness Vadera: I do not believe
that there has been a situation where it has been used as an alternative
to budget support. I would be quite surprised. In the case of
Ethiopia, as you know, we stopped budget support for specific
reasons; that was a decision that was made, it was agreed to collectively
and then we put the funding into a Trust Fund for direct programming
and to the social protection programme. So that would not be something
that we did by accident, that was a positive decision to do that.
I would be surprised if it was being used as a substitute for
something like budget support.
Q169 Sir Robert Smith: Finally, with
900 funds, how does that work with donor harmonisation?
Baroness Vadera: We certainly
monitor and look through the Trust Funds to which we contribute
directly—the spending teams in DFID who work on this do
that. I agree that if you end up with six Trust Funds in one country
you have slightly defeated the purpose of having the Trust Fund.
In-country it tends to be a little less like that.
Q170 Mr Singh: We are given the impression
here that DFID is really championing the issue of governance reform
of the World Bank and we would like to think that DFID is the
champion of governance reform. However, when we were in Washington
there was a think-tank there that told us that the UK has been
strangely silent on governance reform at the World Bank. How has
that perception got around?
Baroness Vadera: What do you mean
by governance?
Q171 Mr Singh: The Bank President,
the voting shares of borrowing countries, the voice of the donor
countries, transparency.
Baroness Vadera: I am sorry if
that impression has been created and we will certainly have to
change that if that is the case. I think it would be unfair to
say that that was an accurate reflection of the reality. We have
been, as I was explaining, perhaps a little more silent on the
issue around a reform of the voting and more structural reforms
because we believed that we wanted to get the developing countries
themselves to have a clearer view of what they wanted and to respond
to them rather than to impose our view, although I would say that
some of our fellow donors on the board would not agree that we
have been that silent on the subject. So I think that might be
one of the reasons. Certainly we have been extremely clear and
vocal, for example on the issue of the election of the President
that we wanted to see an open and transparent process. The circumstances
of the selection of the current President were a little bit different
and speed was of the essence, so perhaps that was not the best
time. So it might be that giving that perception. But I am quite
surprised by it and I do not think it is an accurate reflection.
Q172 Mr Singh: Could that perception
have arisen because of this contrast between the UK and Australia,
Canada and Brazil, who we were told have much stronger voices
and are more open about the need for reform?
Baroness Vadera: All the countries
you name are countries that we speak to and have been talking
to quite regularly and we have quite a lot of common dialogue
with. Again, I am not sure that that would be accurate that we
have been less vocal than they have been. We certainly were involved
in the process of the selection of the President the last time;
everybody was consulted. We had conversations, we wrote; we contacted,
for example, the US Treasury Secretary to ask directly and to
ensure that there was consultation. So we were very clear about
those issues.
Q173 Mr Singh: I accept that you
have dialogue with these countries. Would it be too strong to
say that you are coordinating with these countries to achieve
reform in the governance of the World Bank?
Baroness Vadera: We think that
the most important set of countries are the developing countries
rather than the countries that you name, so I would say that for
me it would be more important what they wanted and what they thought
they wanted out of the process, and therefore we would like to
be more responsive to them. I would suggest that they would be
a more important group because at the end of it they are the ones
without the voice, without sufficient voice.
Q174 Chairman: Is there not an issue
of leadership, given that the structure is the way it is, that
people, NGOs claiming to speak on behalf of the borrowing countries
or those borrowing countries themselves are looking to a country
like the UK to take a lead, given very politically and very bluntly
that the UK approach to development is radically different to
the US approach to development, and a very big signal about the
character of the World Bank would be given the day that a non-US
President is appointed by merit, and I think that is an important
part of it. So I wonder whether it is the British government style.
Nobody denies that DFID says these things all the time, but when
you are in Washington the impression is that you get on with the
day-to-day business and do not actually stand up and say that
this is a real issue. People are looking to say that perhaps,
even though it may ruffle a few feathers, that maybe sometimes
DFID should be doing that, even on a day-to-day engagements.
Baroness Vadera: I have not actually
known DFID to worry about ruffling feathers in Washington. We
made a very clear statement at the time. The Secretary of State
at the time and the Prime Minister (the Chancellor at the time)
have all made statements and they certainly were not curtailed;
those statements were not worrying about the reaction because
we thought it was critical and important that there was an open
process. I do understand and I do agree it is important and that
it is a good signal to send; we, as you know, in fact managed
to effect some changes in the IMF process that were a very positive
step forward.
Q175 John Battle: The switch to this
Gender Action Plan somewhere in the Bank—the new Gender
Action Plan, I wonder what you expect of that plan? Will the Bank
take it seriously or will it just be a little bit of gesture politics,
do you think?
Baroness Vadera: I think it had
better take it seriously! I think it will take it seriously and
indeed it was one of our asks and I believe one of our wins during
the replenishment discussion. They themselves, to be fair to them,
have acknowledged that they had weaknesses in gender. Gender,
as we all know, is a notoriously difficult issue to mainstream
but it does need to be mainstreamed; it does not work if it is
something on the side. We have pushed quite hard. We have an undertaking
from them on this and it will be a part of the mid-term review
of the IDA replenishment as well. They have an advisory council
on gender, which Mark sits on, so perhaps he would like to comment
on this as well. The Gender Action Plan is going in particular
to focus on what the Bank believes is its comparative advantage,
which is around economic empowerment of women. So it has worked
on those issues and we have seen it already. We have mentioned
Vietnam before, but part of the change involved a change of legislation
to equalise the age of retirement for women, for example. In Liberia
they have started working with the Nike Foundation with adolescent
girls; so there is already a move happening. I think in addition
to the economic empowerment piece, which I think will happen because
it now has this Gender Action Plan, it has this advisory council
looking at it, I think it is very important that we continue to
work and push for the mainstreaming of gender in the social policies
around economic empowerment.
Q176 John Battle: I think I would
be disappointed if it became MDG[16]
9, a gender action plan, and the reason is that I have learnt
probably this year from our work on maternal mortality, the inquiry
we have done there, I am absolutely convinced now that development
is about empowering and creating space for women, because the
one MDG miles and miles behind all the others is maternal health;
and why? Because it is women and it is complicated in the eyes
of many men, and it cuts across all the others. I am almost tempted
to say that the next Make Poverty History campaign should be women
only actually, saying, "This is our agenda, and we are outside."
So on all eight of the MDGs it is women, women, women who pay
the highest price, and I wonder whether that could be mainstreamed
through the men in the Bank. Do you think it could happen?
Baroness Vadera: I would like
to give you an honest answer, which is I am not sure. Would I
like to see it happen? Yes. I am just smiling because it is something
I bang the table on reasonably regularly myself. I think it is
very critical. We do know that in fact this could be one of the
ways to solve it—it is the cause of poverty, the symptom
of poverty, women's rights and empowerment issues. So I do think
that it is absolutely central and we would really like to see
it happen and we have put it very high on our list of priorities
for the Bank in terms of a formal action.
Q177 John Battle: In terms of that,
if you sharpen that up, if the vision is that women are encouraged
to be seen now to be leading and championing the campaign for
development and men get out of the way, please, because you are
in the way, then can you give me some indications of the kinds
of changes, incentives, processes, the kind of staging posts that
the Bank will need to put in place to drive that agenda through?
Because the men—including me—will make noises as we
quietly and slowly waken up to the issue but in fact there will
not be those decisive change points built into the policy structures
to make a difference in anywhere near time.
Baroness Vadera: I think that
you are right. I am going to ask Mark to comment on this because
he does sit on the Gender Advisory Council. I am more heartened
than I have been because there is a group of women—in fact
there is a group of African women in the Bank who I think could
be a very powerful voice. There is Ngozi, there is Obi who we
have already spoken about; there is also Joy Phumaphi who—I
do not know if any of you met her—has been working on some
of the social sectors and she understands these issues. So I do
think that there is a chance for the Bank to show leadership because
there are now women leaders inside the Bank who can do this. Mark?
Mr Lowcock: We completely agree,
Mr Battle, with what you have said and the one thing we have pushed
hardest as the members of the advisory council is to ask the new
President himself to take a personal lead, so that it is clear
across the whole of the incentive system of the organisation that
thinking about the impact of any Bank issue be it of policy or
credit on women and doing that analysis is absolutely integral.
We have had an assurance, I think, that Mr Zoellick will take
a high level meeting on that topic and set out his vision at the
spring meetings and we will be working with him towards that end
and follow with him very closely the progress he makes.
Baroness Vadera: I certainly got
the impression when he was in India—and it happened to coincide
with my visit to India—that he was much seized of this because
of course gender issues are a huge problem in terms of India.
It is not just the amount of money; it is really about their rights.
So I do think he is seized of it. But we have been here before
so I would like to continue to push rather to say, "We think
we have this and it is going to happen."
Q178 Hugh Bayley: Robert Zoellick
admitted to us that there was a tension between the Bank's role
as a development agency tackling poverty and its emerging role
tackling climate change, which we see most obviously in relation
to energy projects, but you also see, I guess, potentially between
carbon economic growth and international responsibilities and
climate change. How do you think those tensions can be resolved
and what role can DFID play in enabling the Bank to resolve those
tensions?
Baroness Vadera: In one sense
tension exists because nobody has quite found the Holy Grail of
low-carbon growth. We are much seized of this; it was, as you
know, one of our big issues and the Secretary of State has talked
about it a lot, the Prime Minister has talked about it a lot.
We are currently in discussions with other donors as well as with
the Bank about the role it should play—it is going to do
a paper that is going to come to the Board. We are also in discussions
with it about something that I think could be really very major,
which is the creation of, I am sorry to say, a Trust Fund around
climate change. As you know, we have committed money for an international
window of the Environmental Transformation Fund, which is £800
million and we think that it would be a very good idea to work
with the Bank and through the Bank because it would leverage other
donors. Other donors have now actually started to come to the
same views—the US is very interested and the Japanese are
very interested; the Danes are very interested and are going to
hold a meeting at the end of the month to talk about the European
contribution to this. So the idea is to take the Clean Energy
Investment Framework which has created the analytical framework
but does not have any financing behind it and to create this climate
change fund facility—I do not know what it is going to be
called—which would focus on issues around adaptation and
forestry as well as energy and low carbon energy growth. Once
it has that funding behind it I think it will be a way to resolve
what President Zoellick sees as some of these tensions. In terms
of tensions I also notice that you have had some evidence to suggest
that somehow the Bank should not be funding any form of fossil
energy for developing countries, which I think is not the most
just way of conducting ourselves because, quite frankly, it is
their choice; they will have their obligations under the international
treaties and we cannot deny them this right. In certain countries,
for example in Malawi, the market has been coal but 80% of people
are without electricity; are we going to turn around to them and
say, "You cannot have this," or "By the way, we
can but you cannot"? It is not the most just way of conducting
this. So I think that we are attempting to use the investment
framework and underneath it have this fund which will, I think,
be a very powerful instrument and a very exciting instrument in
fact.
Q179 Hugh Bayley: You might characterise
some of the environmental bodies who have presented evidence to
us as taking a hard-line position that the Bank should not do
energy, but I think that there is a more powerful argument that
they are making that the Bank's speciality is development and
reducing global poverty and that it should concentrate on what
it is best at and some other body or bodies should concentrate
on maybe bringing the world back to a low carbon economy. I was
talking to Myles Wickstead this morning about something completely
different and he mentioned the debate within the government in
the run-up to Gleneagles about whether we should have a single
agenda item of Africa and climate change or whether there should
be two policies. I understand why there were two policies, because
you wanted to make it clear to high emitters that this is a policy
for them—it is not just a policy in relation to the African
policy, I understand that. But if you follow that through you
might say that it should be the Bank's responsibility to concentrate
on development and some other body's responsibility to concentrate
on climate change. So why is the Bank being seen as a deliverer
of the world's response to climate change. Why should the Bank
have this remit?
Baroness Vadera: I have to say
that I was certainly there when we were discussing whether we
should have more than two things at Gleneagles. As far as I am
concerned development is about the environment. I really cannot
see any way that they are not about the same thing. If you look
at the impact that climate change is having on Africa, if you
look at the impact of the model of development that countries
will follow, including developing countries, on climate change
they are so inextricably linked I do not see how they are separate.
At the end of it we need a bank, we need a financing institution;
because it is a global problem we need a financing institution
that has a global reach; and we need a financing institution that
does development. As far as I am concerned it is a slam dunk to
me that that is what we are looking for. It is one thing to have
Gleneagles, which is about creating commitments, creating momentum,
separating out the two issues, which is the perception issue,
but we have to operationalise this and there is only way to do
that and that is to do it together.
14 Global Fund for Vaccines and Medicines Back
15
Global Environment Facility Back
16
Millennium Development Goal Back
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