Examination of Witnesses (Questions 180-197)
BARONESS VADERA,
MR MARK
LOWCOCK AND
MS SALLY
TAYLOR
10 JANUARY 2008
Q180 Mr Singh: You raise the issue
about justice; if we tell developing countries that they cannot
use carbon to give them energy—and I completely agree with
you that we cannot do that—but that cannot take us away
from the fact that renewables accounted for only 5% of the World
Bank's energy lending portfolio. So whilst I accept what you say,
what are we doing to make sure that the Bank's lending portfolio
on energy spends more and gives more and lends more on renewables?
Baroness Vadera: I think we would
agree with you that the target was too low and that the target
should be higher; so, yes, I think the answer to that is definitely
we need to push them to do that.
Mr Lowcock: In 2006 it increased
by 45%, I think, its lending on renewables—the target was
20%. From our point of view that is not such a bad baseline if
you think about the future. So they are moving and this is part
of the journey.
Ms Taylor: We are expecting them
to set a series of targets across the Clean Energy Framework,
of which one will be renewables, and we want them to really think
about the contribution they can make and to set themselves a stretching
target for that.
Q181 Mr Singh: But they can do better,
can they not?
Ms Taylor: Yes, they can do better.
Q182 Hugh Bayley: One further thought
on climate change: the driver for climate change is not emissions
but it is the stock of carbon in the atmosphere and not the flow.
Therefore, if one achieves a reduction this year or next year
it will have a greater impact on reducing climate change than
achieving that reduction in five years' or ten years' time. After
the success of the IFF[17]
for Immunisation, which was tackling a problem where again early
intervention delivers greater returns than later intervention,
is not climate change a policy area where the IFF has something
to offer? Particularly given that some of these climate funds
have been launched in are full more resources are needed for them?
I know that there is a huge mountain to climb to persuade other
countries to sign up to the concept of IFF but in relation to
immunisation it has been a great success—I believe it was
over-subscribed. Is it not worth climbing another mountain to
do something with IFF to bring forward more action earlier and
gain the benefits that would accrue from that?
Baroness Vadera: Climate change
is the classic case for frontloading. I think this has been influenced
by the success of IFFIm[18]
and the concept of the IFF. The climate change fund—I only
want to call it the climate change fund because I do not know
what it will eventually be called—actually has some of these
principles in it, or least a discussion in which we are trying
to bring in some of these principles, which is that we should
have the private sector involved and that it is actually viable
to borrow for this because it has the savings later, and what
we are attempting to do is to find ways in which this fund will
have the private sector involved. Some of the banks that we have
been talking to are interested—and that will give the leverage
principle that the IFF has. What is slightly different is who
does the borrowing and we wanted a mix of instruments because
a lot of these countries who might be involved are actually middle-income
countries who could borrow in their own name, as opposed to if
it were donors who were standing behind it. So we tried to use
the principles but adapt them to what would be a mix of instruments.
What we need to do is to find a mechanism where we are working,
using the public finance bit to subsidise, if needed, to leverage
some of the private sector. So this is a very current discussion
about the structure of this fund and how the private sector would
be involved, and there are quite a lot of minds focused on it.
I think that you will see some of these principles come through.
It may not look quite like the IFF for climate change but it will
have a lot of those leverage principles.
Q183 Sir Robert Smith: The World Bank
is also engaged in middle-income countries. It was certainly put
to us that a lot of those countries are borrowing from the World
Bank not for the money but for the expertise and knowledge and
advice that comes with it. Is that a model that you recognise
and, if so, do you think there is any scope in developing an unbundling
of the loans and advice and having a bank advice service?
Baroness Vadera: It is certainly
the case that in certain countries there is an interest in IBRD[19]
loans. In China we have seen that in the education sector they
have got involved because they want to use it as a model. I think
that we would say that we do believe that IBRD should continue
to have a role in the MICs.[20]
There are some extreme views that they should not be bothering
with the lending at all, but we do not accept that. You can see
from the volatility of the current market conditions that that
would not be the wisest thing to do. When you unbundle it, of
course, it becomes an issue of who is paying for the advice and,
interestingly, what we have found is that countries would like
the advice but they do not particularly want to pay for it. It
then becomes an issue about who is going to pay for it and the
lending actually gives you the source of income that pays for
it.
Q184 Sir Robert Smith: And there is also
a view put that the borrower gets the sense that the advice of
the Bank and its thought process is going to be that much greater
because it has a loan to protect.
Baroness Vadera: Absolutely, although
being lender of last resort.
Q185 Sir Robert Smith: It is, yes.
Baroness Vadera: Yes, it certainly
changes the nature of the relationship when there is funding involved.
Q186 Sir Robert Smith: One think-tank
put it to us when we were in Washington that the UK was maybe
not as involved as it could be in the relationship with middle-income
countries. The point was put to us that whilst obviously the country
may be better-off if it comes to tackling poverty a lot of the
poverty is still in middle-income countries, so the Bank's engagement
with those countries is still quite important. There was a concern
that maybe the UK was not fully engaged with that work at the
Bank.
Baroness Vadera: I think it would
be fair to say that DFID's primary focus—at least in our
own operations—is obviously very much in low-income countries,
we have gone for a 90/10 split in our programmes. We have a depth
of expertise and experience and operations in low-income countries
that makes us a more natural partner in those countries with the
World Bank and we do not have huge operations in certain parts
of the world, in Latin America, for example, that would make us
a natural partner, and that might give us some disadvantages.
But I think in countries like India and China, in certain specific
countries that we think will be very central and important and
where we do have some presence, I think we do have an involvement.
For example, in India, whilst it is, I suppose, a middle-income
country there are huge depths of poverty and inequality. We work
very closely with the Bank on the ground and we do go into the
joint programmes in fact and sit at the table together because
there are not many donors in India, other than us and the Asian
Development Bank—and they are, I gather, the main donors.
In China we have worked with them again and talked to them and
we have been influential in getting some of the poverty issues
and gender issues and other issues mainstreamed, so we can do
some of that. I think at the board level and at the policy level
again we have a voice at the board, but I think again we are disadvantaged
by the fact that we do not have the spread, so cannot bring the
individual experiences.
Q187 Sir Robert Smith: You do not
have the external expertise. But it does not mean that you do
not think the Bank should, where it can get that expertise from
another country, be engaged?
Baroness Vadera: We very much
understand and accept and focus in our intervention, and others,
on the issues of poverty in middle-income countries where the
issue does not become about financing it becomes about inequality
and poverty, and that is very much our focus here.
Q188 Chairman: I think it is fair
to say that Members of the Committee have been a little exercised,
firstly on the disengagement, for example, from Latin America;
and secondly, not in terms of money but in terms of advice and
support, on the disengagement from some middle-income countries
where DFID policies might even help demonstrate to the governments
of those countries how they might alleviate poverty in ways that
would be politically acceptable. Is there any suggestion that
the staffing constraints are a factor here because clearly the
10% is not a problem in many cases because it is not a requirement
for substantial amounts of money; it is the value of having DFID
expertise with some programming obviously because you have to
have at least a pilot or demonstration projects. Do you sense
that DFID is constrained because of staffing from, for example,
having an engagement in a country like Brazil?
Baroness Vadera: For me it is
very much an issue of are we going to be everything? Are we going
to be the World Bank? Are we going to be everywhere and do everything?
Some people do not consider us sufficiently focused as it is,
involved in the numbers of countries that we are. Really our knowledge
base and our expertise is very focused and we are leaders in,
I believe, Africa, in fragile states, in certain types of countries
that have certain specific problems and our engagement in middle-income
countries is very much around that agenda. I think it would not
be as simple and straightforward as saying that it is the staffing
numbers; it is the fact that we would not consider ourselves leaders
in the field of understanding the issues that face a very different
country like Brazil from Uganda or Ghana or Mozambique.
Mr Lowcock: If we were to run
the thought experiment that if we had more staff where would we
allocate them to, I am sure we would allocate them—on my
advice anyway, Ministers would need to decide—to exactly
the list the Minister has just given, for reasons of comparative
advantage, impact. A lot of countries we work in are not over-supported
by the international system at the moment.
Q189 Chairman: So it is a comparative
advantage point?
Baroness Vadera: I think so, yes.
Q190 Chairman: One of the slight
frustrations we have in dealing with the World Bank is that we
very often have to ask you to explain on the record what the World
Bank is doing because the World Bank will not do it. Both institutionally
and practically they do not want to give evidence on the record
in public; they say that is because it would be political. And
sometimes they say that because there are 200 countries in the
world that they cannot give evidence everywhere, but that is not
an argument for not doing it, that is an argument for how you
control it. Do you feel that this is something that ought to change
because there is a real dilemma that the Bank takes our taxpayers'
money and other countries' taxpayers' money and it is a major
player in the field and yet in a formal way its officials are
not accountable in the way that you are. Do you think that is
damaging to the Bank and do you think that they should change
that policy, and is it something that the British government would
encourage them to do?
Baroness Vadera: We would certainly
encourage them to be more open and transparent and we focus quite
significantly on all of their issues around disclosure and providing
information and explanations for what they do. This is with absolutely
no disrespect to this Committee, which is incredibly well-informed,
as it happens, and you do have the ability to really understand
what is happening, but I think the thing that would worry me the
most about Parliaments would be the Parliaments in developing
countries where the Bank is very powerful as an agent of change
in many cases and the ability of those parliamentarians to be
able to ensure that they understand and talk to the Bank, and
I think that is also an issue in addition to the one that you
raise. So I guess one of our focuses has been on ensuring that
they do talk to parliamentarians in developing countries. Mr Bayley
is more knowledgeable about this than I. We do encourage the country
offices in particular to ensure that they are open and clear and
give information and have access and I think that that is another
angle to consider in this. In particular, if you do not have the
sorts of facilities and knowledge base that the IDC[21]
has in that situation, I think that us helping those countries
in creating the capacity of those countries to work with the Bank
would be a very important thing.
Q191 Chairman: I suppose you could divide
it into two halves—although I would not want to suggest
that one half should have preference over the other. We, after
all, are a shareholder country and we are now the biggest donors
to IDA. There is a really serious issue that therefore to some
extent this Committee and this Parliament looks to the World Bank
and says, "To some extent you are a client of the UK Parliament
and yet you are not accountable to us directly, only through our
own government." At the other end of the scale, whilst I
take your point—and I will ask Hugh Bayley to come in on
that—that developing countries may not have that degree
of capacity and sophistication, that is a kind of a chicken and
egg argument, is it not? If you are not going to give them the
opportunity, how are they going to learn, and indeed how is the
Bank going to respond if it is not put in that situation?
Baroness Vadera: I agree with
that. I think it would be helpful to see the Bank more clearly
accountable. There is sometimes sensitivity, it has to be said,
in those countries by the governments—the administration
governments as opposed to Parliament.
Q192 Chairman: That is another legitimate
issue.
Baroness Vadera: It is quite complex
and I think that in one sense I agree with you that the Bank feels,
"We do not want to get involved in this sensitive area about
where the accountability lines go in a country". So they
have taken this uniform view, which possibly does create a deficit,
as you say.
Q193 Hugh Bayley: It is an obvious
point that you should not characterise all parliamentarians in
developing countries in the same way—there are some very,
very capable parliamentarians who have spent years in government
and then become very effective agents for change as back-benchers
in their Parliaments. I have seen that in Kenya, I have seen that
in Malawi, I have seen that in a number of countries. They would
be in a position, I think, to give a strong and helpful steer
and advice to the Bank country office, but there is not a process
by which the Bank formally engages with them; it is not accountable
to them, that is clear, it is accountable to you, to the Directors
of the Bank. In March last year at the last PNoWB conference in
Cape Town I chaired a meeting when the President answered questions
and after a bit of pressing Paul Wolfowitz as it was then undertook
to get his Vice President to write a paper about how this relationship
of reporting from country offices to a Parliament of that country
could take place without implying a relationship of control by
the Parliament. I was really quite taken aback when we went to
see President Zoellick that the very first thing he raised with
us, without prompting from us, was the role that PNoWB could have
in enabling this to happen.
Chairman: To put it on the record the
PNoWB is the Parliamentary Network of the World Bank.
Q194 Hugh Bayley: There are two things
I would like to ask you to commit to. One, to ensure that the
Vice President for External Affairs, who I think has this brief,
does this work and brings to the board proposals for how a relationship
with Parliaments in developing countries could work. Secondly,
following our visit, I went under my own steam with my Parliamentary-Network-of-the-World-Bank
hat on to take Caroline Sergeant to meet Betty McCollum, Congresswoman,
who is now the Chair of the PNoWB board. I think that Caroline
is keen to see the Bank seconding somebody to PNoWB to try and
work through with PNoWB how its role could be developed. Are those
two things that have been reported back to you and are they things
that you would welcome, encourage and support?
Baroness Vadera: First of all
I just want to stress that I do completely agree about the capability
of parliamentarians. Sometimes with the capacity and their resources
there is a slight difference.
Q195 Hugh Bayley: Exactly.
Baroness Vadera: On your two questions,
yes, I will commit to raising with the Bank that the Vice President
does do the paper that was committed. We did get a read-out of
your meeting with President Zoellick and Caroline Sergeant has
told us about the meeting with Betty McCollum.
Q196 Hugh Bayley: Good.
Baroness Vadera: I think what
we would very much like is for PNoWB to bring forward its strategy;
that would for us be the best process that would break through
this. I guess what I would say is that I will commit to going
back and thinking through how we might assist in PNoWB bringing
forward the strategy. What we cannot do is substitute for that
or be the strategy or in any sense create it because it really
has to come from PNoWB and parliamentarians directly. But we will
go back and Sally will speak to Caroline whether there is any
way in which we can assist PNoWB in bringing forward its strategy.
It needs to decide for itself what its strategies are and how
it is going to be active and what its role and remit is.
Q197 Chairman: Obviously we will
produce our report in the next few weeks and the flavour of some
of it I think is clearly indicated by the questions we have been
asking. I think it would be fair to put on the record that during
the time we were in Washington we were very well received by the
Bank; they facilitated meetings; many people met us and exchanged
with us fairly frank views. But I think there were occasions—and
there are also occasions when it is nice to have those private
meetings because you get more out of people in some ways—when
it would have been nice to feel that some of that could have been
on public record. In the case of President Zoellick, interestingly
enough, the diary allocated 30 minutes to the meeting which I
think actually lasted an hour and 20 minutes or something like
that, and he obviously just carried on as suited his determination
to engage with us. So that is not the point at issue, we had a
good meeting and we had a good session. But I think there are
concerns, and it is really in the Bank's interests too that it
is subject to criticism. I think there is a comment that is relevant
to the NGOs in some cases that legitimate, constructive criticism
of the Bank, its policies, its delivery, particularly when it
is backed up by facts is useful and valid and certainly helpful
for this Committee; but gratuitous criticism of the Bank actually
damages public support for aid and development and that obviously
is not something that this Committee wishes to encourage. I think
as a Committee we found the exercise interesting; the timing was
probably fortuitously appropriate. Ironically we had also engaged
quite well with Paul Wolfowitz in the past and President Zoellick
has indicated that he would be willing to meet this Committee
as and when he is visiting London or coming through London, which
I hope will happen. So we have a good relationship; but there
are shortcomings, I think, in the way that operates in public.
Can I thank you and your team for coming in and giving evidence
and say that we appreciate that a recommendation we had not yet
made but were about to has already been adopted, so we like to
think we have had some chemistry on that. And we hope that when
our report is published it will be seen to be a constructive and
useful one that might help both DFID and the World Bank improve
their engagement.
Baroness Vadera: I am sure it
will; thank you very much indeed.
17 International Finance Facility Back
18
International Finance Facility for Immunisation Back
19
International Bank for Reconstruction and Development Back
20
Middle-income Countries Back
21
International Development Committee Back
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