Written evidence submitted by the UK Aid Network (UKAN)

 

About UKAN

The UK Aid Network (UKAN) is a network of UK NGOs who work together to advocate for more and better aid, from the UK in particular. We also work with colleagues across Europe, and internationally, to influence the aid system more widely. Members include ActionAid UK, Oxfam GB, CAFOD, WaterAid, BOND and World Vision UK.

 

UKAN welcomes this evidence session and the IDC's efforts to maintain scrutiny over the UK's response to this critical international process.

 

1. General reflections on FfD and Doha

 

1.1 The 2002 Monterrey Consensus on Financing for Development (FfD) aimed to herald a new era of global cooperation in mobilising resources to support development and a new international effort to put FfD at the centre of the global agenda.

1.2 In bringing together Heads of State and Government in Monterrey, it was recognised that a new effort to mobilise sufficient development resources to meet the MDGs required the highest level of political commitment.

1.3 Such a high level of political commitment is arguably now more important than ever, given the significant challenges the global financial and economic crisis is likely to pose for fragile and vulnerable economies across the developing world.

1.4 However, just 6 years later and with poor countries already suffering from a food, fuel and climate crisis, developed country governments have let FfD slip down the international agenda and are shirking many of their commitments laid out in the Monterrey Consensus. Although developed countries have taken important forward steps on debt relief, they have failed to take sufficient action on trade, reform of the international financial architecture and in delivering the increased aid they have promised.

1.5 Only 2 of the 44 heads of state (which included 29 from Africa) that attended Doha were from the EU (Bulgaria and France) and only one other was from the OECD (South Korea). Such weak high level representation by developed country governments is likely to have sent a signal to others participants about their ambitions for Doha and to have limited the potential for Doha to achieve an ambitious outcome.

1.6 The final outcome document from Doha, at best merely re-affirmed the Monterrey Consensus and failed dismally to build upon it and create a much-needed bold and ambitious new plan to mobilise additional development resources to support developing countries to cope with these challenging times.

1.7 Although, importantly, it was agreed in Doha that the UN should host a meeting on the impact of the economic and financial crisis on development, this meeting will not explore possible wider reforms to the global financial system, which are currently being discussed by the G20. This displays a clear unwillingness of the developed and emerging economies to discuss these issues in a fully representative forum such as the UN where developing countries could have more of a say on these issues.

 

 

2. Progress towards the UN 0.7% target

 

2.1 The majority of developed countries are failing to deliver 0.7% of their national income as aid - the UN agreed target. Currently only five countries have reached this target. Many countries are also way off-track from meeting other international aid commitments, like the G8 Gleneagles agreement to deliver an additional annual $50 billion by 2010. This time last year, even before the effects of the global financial and economic crisis began to be felt, the OECD was warning that donor's forward spending plans would leave them around $34 billion short in 2010 of their Gleneagles commitment (OECD 2007).

2.2 Now, as the effects of the global financial and economic crisis become more apparent and public expenditures in developed countries is subject to cuts, concern is mounting that developed countries are abandoning their aid commitments. This appears to happening already; for example, in Italy, the parliament has recently agreed a 56% cut in the amount of ODA that goes through the Ministry of Foreign Affairs for 2009; and in France, ODA levels are stagnating - rather than increasing as required to meet their aid commitments.

2.3 It is also important to note that with GDP levels falling across the developed world aid to GNI ratios will be worth less in absolute terms than if current growth rates had continued. CAFOD estimates that the fall in UK growth during the recession will result in UK aid being over £5 billion less in current prices over the period 2009-2014 than it would have been if recent growth rates had continued.[1] These circumstances raise the importance of the UK and other donors being ambitious with aid increases.

2.4 Doha was a key opportunity for developed country governments to strengthen their resolve to deliver aid more rapidly and to take practical steps to make this happen. Such practical steps could have included commitments to set annual targets for increasing spending in the coming years to meet the 0.7% target by 2015 at the latest and to integrate the required spending levels to meet these targets into their annual budgets.

2.5 However, the Outcome Document (OD) outlining what was agreed by governments at Doha failed to come close to what was required to introduce new urgency to efforts to meet international aid commitments.

2.6 Far from committing developed countries to meet their 0.7% targets in the coming years the OD merely "urged" (FfD 2008) developed countries that have not yet met their 0.7% commitments to take additional concrete steps towards meeting this target. In addition, the OD only references the commitment made by the G8 to increase annual aid to Africa by $25 billion between 2004 and 2010 and not the overall target of increasing aid by $50 billion over the same period (FfD 2008).

2.7 What was agreed in terms of aid increase timetables and budgeting was even less committal. The OD stated merely "we strongly encourage" (FfD 2008) all donors to establish rolling indicative timetables to meet aid targets in accordance with their budget processes. This statement fails to communicate sufficient urgency, is not time-bound, does not require multi-annual timetables to be introduced (as was stated in earlier drafts of the OD) and does not give clear guidance about what actions need to be taken by donors.

2.8 The OD's response to the need to increase aid levels failed to reflect the urgent political effort that is required to get developed countries firmly back on track towards meeting their aid commitments, especially in the context of the current global economic and financial crisis.

2.9 It does have to be recognised that the UK and other EU member states have been progressive voices on aid volumes and the EU commitment to collectively reach the 0.7% target by 2015 was repeated in the OD. However, it is disappointing that the UK and other EU member states were not able to exert sufficient pressure amongst other donors to ensure a more ambitious outcome from Doha on aid; and the UK and many EU member states have so far failed to commit to multi-annual aid targets that take them to the 0.7% target.

 

3. The financial crisis and aid

 

3.1 The global financial and economic crisis is causing hardship for people all around the world and posing some significant questions for governments, especially about public spending and other economic policies.

3.2 There is therefore rightly much concern that the crisis will lead to falls in aid levels as developed country governments reduce and / or reprioritise their spending. Such trends were seen following the early 1990s global recession, which led to aid levels failing by 25% between 1993 and 1998 and not returning to their 1992 levels until 2003.

3.3 Such an outcome cannot be allowed to happen in response to the current financial crisis. Not only would such a response result in us neglecting the world's poor when they need support the most, but it would also be a violation of the international commitments made by developed countries.

3.4 Whilst recognising that the financial crisis is causing hardship to many in the developed world, developing countries, who have been facing a range of new economic challenges in recent years are likely to be the least well equipped to respond to this crisis. This heightens the need to deliver aid more rapidly than at present, never mind maintain its current level.

3.5 The poor and marginalised in developing countries, who commonly spend 50%-80% of their limited income on food (UNCTAD 2008), have been hit hard by the more than doubling of prices of staple food crops such as maize, rice and wheat over the last 2 years. This is a challenge that the World Bank has warned may reverse the gains achieved in poverty reduction achieved since 2000 (World Bank 2008) and has left the world's poor already more vulnerable to economic shocks.

3.6 The present financial crisis now poses additional challenges for the poorest countries, including from reduced resource inflows and slower growth that puts public spending and livelihoods under further strain.

3.7 Recent research (ODI 2008) suggests that foreign direct investment to developing countries is expected to fall by 25% or $150 billion by 2009; and remittances to developing countries may fall by $40 billion over the same period.

3.8 In addition, the slow-down in economic growth in the developing world over the period 2008-2010 is predicted to result in a $414 billion less being generated in these economies compared to current growth rates (ActionAid 2008). This will leave developing country governments struggling to maintain the level of public spending that are critical to providing basic services such as health, sanitation and education; and is predicted to lead to the number of people earning less than $2 a day increasing by 100 million in the coming years (ActionAid 2008).

3.9 Such outcomes obviously pose critical challenges to efforts to achieve the MDGs by 2015 and many of the MDGs will most likely be missed if urgent and radical action is not taken.

3.10 One obvious contribution that developed countries can make to bolstering developing country efforts to withstand the financial crisis, is to increase their aid levels to help fill the growing resource gap faced by developing countries.

3.11 Such a response should go hand in hand with developing country taking action to tackle a range of problems around domestic resource mobilisation, including: the operation of tax havens; transparency in the banking system; capital flight; and making further progress in dealing with the substantial debt burden still negatively impacting developing countries.

3.12 The response to the financial crisis in the UK and internationally shows that with the required political will substantial resources can be made available for urgent needs to be met. The £37 billion provided to British banks by the government in October 2008 in order to keep them afloat, is equivalent to more than 7 times the amount given by the UK government in aid in 2007/8 (£5 billion). Only a small proportion of those funds (around £5 billion) would be required to immediately meet the UK's 0.7% target.

3.13 Increasing aid levels now is not only vital to maintaining efforts to tackle poverty and meet the MDGs, it is also makes sense in terms of protecting recent aid investments and the future impact of aid.

3.14 A slowdown in resource flows to developing countries may result in degradation of human and physical capacity invested in through recent aid programs. This could easily occur if skilled labour is forced to move outside of developing regions in order to find sufficiently rewarding opportunities and vital maintenance of physical infrastructure is not resourced. Such impacts may require even larger increases in aid in the future to achieve the MDGs.

3.15 There is an overwhelming case for the UK government and other developed countries to increase their delivery of aid in the coming years in response to the financial crisis. Developing countries need these resources now more than ever; developed countries are capable of delivering the required resources; increasing aid levels makes economic sense; and perhaps most importantly, the MDGs and other international commitments will not be met if aid levels are not increased soon.

4. Aid effectiveness more vital than ever

 

4.1 With the financial crisis putting aid spending under increased scrutiny, the importance of improving aid effectiveness and meeting related international standards and commitments is becoming increasingly important. Now more than ever, the aid community needs to display full and unwavering commitment to making aid work better.

4.2 It was therefore welcome that the OD of Doha put an emphasis on donors taking a range of actions to improve the effectiveness of their aid, and it referred to the Paris Declaration and Accra Agenda (AAA) for Action as key process through which donor progress is being sought.

4.3 The AAA reinforces many of the commitments made in the Paris Declaration, but also outlines a number of immediate actions to be taken by donors (as well as partner countries), including efforts to:

§ Provide partner countries with full and timely information on annual commitments and actual disbursements

§ Provide partner countries with regular and timely information on their rolling budget allocations for the following 3-5 years

§ Make public all conditions linked to the disbursement of aid

4.4 The challenge now for donors such as the UK is to implement their commitments in the Paris Declaration and the AAA. As a first step it is therefore vital that the UK put in place a process for implementing its commitments and ensuring that the required change is taken across the organisation. This is no simple task and it requires significant commitment across DFID and immediate action to push the aid effectiveness agenda forward.

 

5. Where does FfD go next?

 

5.1 The Monterrey Consensus was a significant document, as it expressed a strong collective voice and vision from both developed and developing countries to put FfD at the centre of the international agenda. It was hoped that a new era of long-term partnership in mobilising development resources to meet the MDGs had begun and that developed countries were committed to making sure this process delivered on its vision.

5.2 However, just 6 years later, the negotiations at and the OD from Doha illustrated that developed countries are reluctant (in the case of the EU) and in some cases, resistant (in the case of the US) to give the FfD process a central role in generating international commitment to mobilise additional resources for development.

5.3 Not only were very few developed countries represented by their Heads of State in Doha (see section 1.5) but there was significant opposition to there being a continued effort to monitor and follow up on the commitments of the FfD process.

5.4 In the end the OD of Doha simply included an agreement "to consider the need to hold a follow-up FfD conference by 2013". This is far from a glowing endorsement of the critical role of this process in efforts to mobilise development resources and the importance of monitoring and reviewing progress.

5.5 If sufficient development resources are to be mobilised to achieve the MDGs it is vital that the FfD process remains at the core of the international agenda and progress in implementing the commitments laid out in the Monterrey Consensus are closely monitored, reviewed and pursued.

 

 

Questions for the hearing

 

· Will the UK government be taking steps to put in place a legally binding annual timetable to meet its 0.7% target?

· Will the UK government be using the opportunity of the High Level UN meeting on the financial crisis and development to get donors to make more urgent and binding commitments on aid?

· What steps will the UK government be taking to implement without delay the commitments on aid effectiveness that it made at the Accra High Level Forum.

· Will the UK government agree to giving the "Financing for Development" process increased political commitment in the future, so this important agenda stays a priority for the international community?

 

 

Bibliography

 

ActionAid, 2008. "Car crash economics: what G20 leaders must do to stop the financial crisis becoming a poverty catastrophe", ActionAid Briefing, November 2008

 

FfD, 2008. "Doha Declaration on Financing for Development: outcome document of the Follow-up International Conference on Financing for Development to Review the Implementation of the Monterrey Consensus", paragraph 42, UN Financing for Development Office, 09/12/08

 

ODI, 2008. "The global financial crisis and developing countries", Background Note, Overseas Development Institute, October 2008

 

OECD, 2007. "Aid Targets Slipping Out of Reach", OECD Development Assistance Committee, November 2007

 

UNCTAD, 2008. "Addressing the global food crisis", UNCTAD, 2008, p3

 

World Bank, 2008. "Implications of Higher Global Food Prices for Poverty in Low-Income Countries", Policy Research Working Paper, World Bank, April 2008

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[1] This calculation is based on the assumption of constant GDP growth of 2.5% without the recession; and a fall in GDP of 1.3% in 2009, followed by resumption of 2.5% growth p.a. for 2010-2014 in the recession scenario; with an inflation rate of 3% and steady scaling up rate of the ODA:GNI ratio over the period 2007 to 2014 to 0.7%. This data will be presented in a forthcoming CAFOD briefing note.