DFID Annual Report 2008 - International Development Committee Contents


Supplementary memorandum submitted by the Department for International Development

23 September 2008

DFID ANNUAL REPORT 2008—EVIDENCE SESSION (15 JULY) FOLLOW UP

  Thank you, and your colleagues for holding our recent oral evidence session on DFID's Annual Report 2008. I and my colleagues, Sue Owen and Mark Lowcock, welcomed the opportunity to explain the work of the Department in more detail and to answer the questions of the committee. We find this exchange valuable and constructive.

  During oral evidence in response to questions, we said we would provide a note of:

    (a) the funding of civil society projects in Latin America; and

    (b) DFID's involvement with the Comprehensive Africa Agricultural Development programme.

  This is attached as Annex A and B to this letter. We also said that we would let you have a note on how we derive our estimate of the number of people DFID helps lift out of poverty from a model. This is attached as Annex C.

  Many thanks and kind regards.

Minouche Shafik

Annex A

NOTE TO QUESTION 83 INTERNATIONAL DEVELOPMENT COMMITTEE HEARING DFID ANNUAL REPORT 2008 TUESDAY 15 JULY 2008

NOTE ON DFID FUNDING TO CIVIL SOCIETY IN LATIN AMERICA

  1.  To better address persistent poverty in Latin America, DFID is increasing its financial support to the region and changing the way it is provided. One of the changes is an increase to our support to Civil Society Organisations (CSOs). CSOs are at the frontline of tackling the social exclusion and inequality responsible for persistent poverty in Latin America, and therefore channelling more support through them will help address these important issues.

  2.  DFID funding for UK CSOs working in Latin America will increase from £7 million to £13 million per year by 2010-11. Based on a competitive process, 12 of our existing Programme Partnership Agreement (PPA) partners have been selected to receive the additional funds as from 2008-09. The successful partners are:

    —  ActionAid;

    —  CAFOD;

    —  CARE;

    —  Christian Aid;

    —  HelpAge;

    —  HIV and AIDS Alliance;

    —  Oxfam;

    —  Plan;

    —  Progression;

    —  Save the Children;

    —  World Vision; and

    —  WWF.

  3.  The selection criteria were based on the following thematic priorities for work in the region:

    —  supporting and promoting accountable public sector and political systems that are responsive to poor people and their needs;

    —  increasing access to markets and economic opportunities for poor people;

    —  tackling gender inequality and social exclusion;

    —  addressing HIV and AIDS;

    —  climate change mitigation and adaptation; and

    —  promoting the exchange of experience and lesson learning from Latin America.

  4.  Our PPA partners work though national and local partners in Latin America and engage in processes that will strengthen government accountability such as participatory budgeting. For example ActionAid in Brazil has engaged in participatory budgeting in the region of Recife, and promotes the experience by sharing lessons with other countries, including African countries.

  5.  We are currently developing a joint action plan with our PPA partners who work in Latin America in order to strengthen our mutual learning by establishing mechanisms for collaboration.

  6.  Though we will be closing our offices in the Andes and Central America, which will no longer be needed to deliver our new regional programme, we will maintain a programme of £4 million per year in Nicaragua as it becomes a middle income country. We will switch the funding for the government to providing support through alternative channels, including other donors and civil society.

  7.  DFID's Civil Society Challenge Fund (GSCF) also provides support for UK CSOs working in partnership with local civil society in Latin America. Currently 15 CSOs receive funding from the CSCF to promote women's rights and children's rights, and to tackle social exclusion amongst other important issues. These projects have a duration of three to five years and entail a total commitment of over £5 million.

  8.  Through its Governance and Transparency Fund, DFID is supporting a number of international civil society organisations based in or working in Latin America—the Wildlife Conservation Society in Guatemala (£1.33 million over five years), Associacion Benefica PRISMA in Peru (£4.56 million over five years), and Global Witness in a number of countries including Honduras (£3.75 million over four years). A successful Transparency International bid included Euros 50,000 a year for five years for the core work of Etica y Transparencia—this represents almost 60% of Etica's annual budget.

DFID

September 2008

Annex B

NOTE TO QUESTION 66 INTERNATIONAL DEVELOPMENT COMMITTEE HEARING DFID ANNUAL REPORT 2008 TUESDAY 15 JULY 2008

NOTE ON COMPREHENSIVE AFRICA AGRICULTURAL DEVELOPMENT PROGRAMME (CAADP)

  1.  CAADP is the Africa Union/New Partnership for Africa's Development (NEPAD) programme for accelerating progress towards MDG1 (on income poverty and hunger) in Africa, agreed by African leaders in 2003. The Commission for Africa recommended that donors should back CAADP. This was reflected in the Gleneagles communiqué. The UK's leadership on CAADP led to the EU's Advancing Agriculture Africa Strategy of 2007 aligning with CAADP.

  2.  Through CAADP, African governments are committed to raising agricultural productivity by at least 6% per year. African governments have agreed (Maputo Declaration) to increase public investment in agriculture to a minimum of 10% of their national budgets—substantially more than the 4 to 5% average they commit today. Mali, Madagascar, Namibia, Niger, Chad and Ethiopia have met or surpassed the 10% goal. Governments including Zambia, Malawi, Kenya and Rwanda have boosted their agriculture budgets significantly.

  3.  The CAADP initiative contains a set of principles and targets to (i) guide country strategies, (ii) enable regional peer learning and review, and (iii) facilitate greater alignment of development partners. Under the CAADP framework, African governments have established four continent-wide priorities for investment and action in agriculture, forestry and fisheries:

    (i) extending the area under sustainable land management and reliable water control systems;

    (ii) improving rural infrastructure and trade-related capacities for market access;

  (iii) Increasing food supply reducing hunger and improving responses to food emergency crises; and

    (iv) improving agriculture research, technology dissemination and adoption.

  4.  DFID supports CAADP because it is Africa led, 70% of the poorest in Africa are engaged in the agriculture sector, and it provides an important mechanism for alignment and harmonisation among donors. Though there is much more to do, CAADP has had significant impact both in individual countries and across the continent. African governments are beginning to invest more in agriculture and the donors are beginning to respond more effectively. CAADP provides the framework that enabled an African led response to recent high food prices and food insecurity situation.

  5.  DfID's financial support to CAADP is done through a number of channels. Several country programmes provide support that address CAADP's objectives on agricultural growth and addressing hunger. In addition, DFID has provided an initial £5 million to regional and pan-African institutions (NEPAD, regional economic communities) to enable them to leverage better and higher levels of investment from African governments. Our leadership here will likely draw other partners—the EC, USAID, Japan, Netherlands, SIDA, France and Germany—into a second phase of support through a multi-donor trust fund, hosted by the World Bank. DFID's five year £400 million pound research funding for African agriculture is aligned to CAADP's mandate.

  Achievements to date include:

    —  Increased Investments by some African countries. Mali, Madagascar, Namibia, Niger, Chad and Ethiopia have met or surpassed the 10% goal for national budget allocation that Africa leaders set for themselves in 2003. Governments including Zambia, Malawi, Kenya and Rwanda have boosted their agriculture budgets significantly.

    —  A framework for delivery of Paris principles. Donor coordination has improved. Our initial investment of £5 million to help the CAADP accelerate has leveraged the establishment of a multi-donor trust fund (managed by WB) with initial contributions of around $80 million. CAADP has provided the framework for joint donor trust funds for African research organisations (through which some of DFID's research funding will be channelled). It is an African led agenda that the G8 and others (including TICAD) align behind.

DFID

September 2008

Annex C

NOTE TO QUESTION 77 INTERNATIONAL DEVELOPMENT COMMITTEE HEARING DFID ANNUAL REPORT 2008 TUESDAY 15 JULY 2008

THE CALCULATION THAT "DFID ESTIMATES THAT IT HELPS TO LIFT AT LEAST THREE MILLION PEOPLE PERMANENTLY OUT OF POVERTY EVERY YEAR"

  1.  DFID estimates the number of people our aid helps to lift out of poverty using a model based on a methodology developed by Collier and Dollar which explored the link between aid, economic growth and poverty reduction in over a hundred developing countries using data from the 1970s to 1990s. Their research suggests that donors can affect growth through their allocation of aid, and that growth in turn will typically lead to poverty reduction in low-income countries. It further suggests that if donors wish to use their aid to maximise the reduction in poverty, aid should be allocated to countries that have large amounts of poverty and good policy.

  2.  DFID uses estimates of the effect that aid has on growth (and therefore poverty reduction) drawn from Collier and Dollars research to estimate the total number of people DFID helps lift out of poverty, given our allocation of aid across countries.

  3.  The statistic that DFID helps lift an estimated three million people out of poverty every year was generated in 2006, by using the approach set out above. It was based on aid allocations that were, at the time, our estimated bilateral and multilateral allocations for 2007-08. The model suggested that DFID's allocations in this year would help to lift 3.45 million people out of poverty. This was rounded down to three million for simplification and to help ensure that our estimate remained conservative.

  4.  Table 1 below provides an example of how the calculation of the impact of DFID's aid is made in an individual country. It shows that the average efficiency of aid in a particular country is 500 which implies that, for each million pounds of aid spent, on average 500 people will be lifted out of poverty. As DFID spends £150 million in this country, the total number of people that we estimate we would lift out of poverty is 75,000.

Table 1: Example of estimating the poverty impact of aid in a particular country
Average Efficiency of Aid Bilateral Allocation (£m) Multilateral Allocation (£m)Total Allocation (£m) Estimated number of people lifted out of poverty
50010050 150750,000


  5.  We used this methodology to estimate DFID's aggregate impact in all countries in which we deliver aid, but we do not use the country breakdown of the estimate to infer any estimate of impact in any individual countries. This is because estimates are subject to statistical margins of error. Also the model is based on an assumption that other influences on growth rates (except aid) remain constant. While this is a common assumption in economic analysis, and a necessary assumption to allow estimation of the impact of aid on growth, it does mean that individual country estimates will not always be borne out.

  6.  To illustrate this more clearly, the results of this methodology could be compared with a medical trial that says; "1,000 people given a new treatment lived on average 5.2 years longer". If we repeat this with another group (or at another time) we do not expect to get exactly 5.2 again; if circumstances change (eg patients start smoking) the result may change; and it is certainly not true that all patients live exactly 5.2 years longer. This last point in particular makes clear the difficulty with looking at each country (patient) separately.

  7.  While this methodology is a reasonable way of estimating the impact of DFID's aid on poverty reduction, we recognise that is it imperfect. We will continue to invest time and energy into developing alternative measures of our impact.





 
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