House of Commons - Public Accounts

Select Committee on Public Accounts First Report

2 THE DESIGN OF DFID COUNTRY PROGRAMMES

PROVIDING ASSISTANCE THROUGH DEVELOPING COUNTRY GOVERNMENTS

13. DFID is increasing aid through direct funding to national budgets of developing country governments. In 2005-06 25% of DFID's bilateral funding was spent in this way.[30] Historically, most developing country governments gave preference to manufacturing and urban sectors through policies such as keeping food prices down which exacerbated rural poverty. The rural poor have been less effective in demanding their share of government funds so they have tended to miss out on development benefits. This position has started to change, partly because of worries about social unrest.[31] In Vietnam, for example, concern about security in remote rural areas has been one reason for a strong host country government effort to tackle rural poverty.[32]

14. Only half of DFID country teams using budget support reported that they were satisfied with government expenditure in rural areas or its broad geographical focus.[33] Progress was more difficult where governments first need to change their policies or systems. In Uganda, for example, government budget allocations had not clearly favoured the poor.[34] Since 1999 DFID had encouraged the Ugandan government to increase its allocations to poorer districts, but in 2005-06 expenditure per head still varied by as much as 100% between districts with similar poverty levels.[35] Progress had been slow because of the Ugandan government's decision not to reduce any district allocations.[36]

15. To combat rural poverty DFID needs to monitor government expenditure and poverty reduction in rural areas or districts. But developing countries have few targets which are disaggregated and monitored at district level.[37] In Mozambique DFID is implementing a new public financial management system to help it track where funds are being spent and will use this improved information to inform a new monitoring framework with more disaggregated targets.[38]

16. DFID will provide aid directly to government only where that government has a poverty reduction plan.[39] But although DFID has encouraged some governments to allocate resources more equitably it does not attach firm conditions about where the money is to be spent nor is it consistent in advocating equitable funding to rural areas or particular regions.[40] In Mozambique, there are stark differences in poverty levels between the North and South of the country, with northern areas being more remote and highly rural. Donors there raised concerns about whether government allocations to districts are equitable during routine sector level working groups comprising donors and government officials. For example, the working group on education raised concerns that gender disparities in educational outcomes varied by province. But no working group has made equitable budget allocations to rural areas or districts its top priority. Nor is it clear how the government has acted on these concerns or what happens if no progress is made. In 2006 donors noted that the Mozambique government was still not basing budget allocations to districts on specific criteria, though they had raised this concern the previous year.[41] And the current performance assessment framework agreed between donors and the Mozambique government does not have an indicator to measure improved allocations to poorer or rural districts.[42]

17. In such cases DFID is relying on donor working groups to raise important issues with the developing nation government. These groups are important to help harmonise donor views and communicate them to the developing nation government. But they do not remove the need for DFID to use its considerable influence to follow up issues of particular concern and to relate UK assistance to progress in those areas.

18. DFID is an influential donor but still has a relatively small effect on local attitudes.[43] The Ugandan government has improved the allocation system only after years of lobbying by DFID and other donors. Where developing country governments are not concentrating on helping the poorest or where they lack the capacity to act efficiently, direct intervention through projects is an important way of delivering development benefits. For example, in the Democratic Republic of the Congo charities directly fund small sustainable projects in rural areas.[44]

OTHER TYPES OF BILATERAL ASSISTANCE

19. DFID spends approximately 60% of its bilateral assistance on projects and programmes, and one of the highest priority areas for DFID action has been improving the governance and accountability arrangements in developing countries. DFID country teams have a strong emphasis on good governance in central government ministries, but are less engaged in governance or service delivery at lower levels of government.[45] In some countries such as Ethiopia and Rwanda, which have high growth rates, it has still proved hard to reach the poorest.[46] Here DFID is developing social protection programmes which are similar to social security payments to target resources directly to the poorest.[47]

20. Overall DFID is employing fewer people in productive sectors, despite the existing UK expertise on sectors such as fishing and private enterprise which can assist the rural poor.[48] But projects directly related to enterprise can yield important results. For example, microfinance projects can allow the rural poor to access credit, which helps to reduce their vulnerability to external factors such as poor harvests. But microfinance receives only 1% of DFID's total expenditure. In total DFID has spent over £165 million to support microfinance and financial sector projects since 1997 and more than 20 million people have benefited from microfinance initiatives supported by DFID within the last five years, including many in rural areas.[49]

21. DFID has previously said that civil society organisations are often better than state providers at reaching the poorest.[50] But it has increased its support directly to state governments and decreased the percentage of its funding for civil society organisations. DFID expects developing country governments to decide which service providers, including civil society organisations, to engage with. But this approach relies on developing country governments identifying the relative efficiency of different service providers and on their willingness to use civil society organisations to deliver services when the same organisations may also be challenging government policy.[51]

SUPPORTING RESEARCH AND INNOVATION

22. DFID has produced a great deal of research but it is not well disseminated and its use has been patchy. Even its own country teams were not content with the dissemination of UK-funded research findings to themselves or to the poor.[52] DFID had to commission a separate £37.5 million project to encourage better use of existing research which it had funded as part of the £190 million Renewable Natural Resources Research Strategy.[53] DFID's Strategy for Research on Sustainable Agriculture aims to develop the capacity of research organisation in developing countries, for example on crop science research.[54] DFID has worked with science and agriculture departments of universities in Bangalore and Hyderabad to help rural groups in India.[55]

23. Innovative use of information technology can help the rural poor, particularly in getting research and knowledge to rural communities. For example, Nokia has been innovative in Africa and India in increasing crop yields in rural areas using mobile phone technology to provide advice to farmers.[56] DFID has funded a research project in Ghana on use of GPS and Google to provide enhanced mapping of rural areas, and facilitating analysis of, for example, village growth, crop patterns and environmental factors.[57] DFID recognises the high potential impact of information technology for development, as demonstrated on projects such as the Financial Deepening Challenge Fund where DFID assisted a mobile phone company to set up banking services.[58]

30 C&AG's Report, para 2.9 Back

31 Qq 5, 32 Back

32 Q 87 Back

33 Q 163 Back

34 Q 29, C&AG's Report, Figure 7 Back

35 Qq 148-151 Back

36 Ev 25 Back

37 C&AG's Report, para 2.19 Back

38 Q 31 Back

39 Qq 88-89 Back

40 Qq 23, 31, 87-90 Back

41 Joint Review 2006; Aide-Mémoire; April 13, 2006; Ev 26-27 Back