Written evidence submitted by the TUC
1. The TUC welcomes this opportunity to put forward
its views to the IDC inquiry into the DFID Annual Report and hopes
that its views will be taken into serious consideration and reflected
in the Committee's recommendations.
2. The TUC commends the DFID for its contribution
to sustainable development, and success[194]
of its projects and looks forward to continued engagement with
it. It appreciates the importance the DFID attaches to aid effectiveness
and its significant contribution to promoting it in many international
fora including the High Level Forum held in Ghana in 2008 and
the initiatives[195]
taken by it to give effect to the cardinal principles enshrined
in the Paris Declaration on Aid Effectiveness as well as in the
Accra Agenda for Action. The current submission will comment on
the new Aid Watchdog, examine the DFID's performance on the criteria
laid down in the Paris Declaration, look at some issues overlooked
in the PDAE and make some recommendations to enhance aid effectiveness.
The submission also takes a critical look at some issues regarding
the performance of the CDC, points to the ways in which it could
improve its contribution to the reduction of poverty through the
protection and promotion of workers' rights and entitlements and
welcomes the recent announcement of the DFID's draft Structural
Reform Plan[196]
which, it is hoped, will enable the DFID to make CDC more proactive
and pro-poor.
ABOUT THE
TUC
3. The TUC is the voice of Britain at work, representing
some 59 affiliated unions with a total of 6.3 million members.
The TUC and its affiliated unions have an abiding interest in
development in that they seek to bring about sustainable improvements
in working and living conditions of workers, their families and
communities through the protection and promotion of their economic
and social rights. The TUC is part of the global trade union family
and works in partnership with trade unions in the developing world
to help deliver on its strong commitment to international development
through a variety of ways including:
- · Contributing
to the development of internationally recognized labour standards
through the International Labour Organisation and other relevant
bodies and to their enforcement throughout the world;
- · Working
in partnership with UK companies to improve labour rights in supply
chains, particularly through the Ethical Trading Initiative (ETI)[197];
and
- · Engaging
with, and lobbying, governments and international development
institutions to promote the ILO Decent Work Agenda.
This Submission draws on the TUC's core areas of
expertise in development policy and practice and in the promotion
and protection of workers' rights and entitlements and on the
experience gained though the successful implementation of a number
of development interventions. Moreover, the TUC has a strong interest
in democracy, good governance and the rule of law and is keen
on combating bribery and corruption.
ASSESSING AID
EFFECTIVENESS
4. The TUC is of the view that the assessment
of the effectiveness of aid, though necessary, is not sufficient
to capture the results of the overall development process. Aid
effectiveness focuses on how aid is used, including the planning,
management and deployment of aid that is efficient, reduces transaction
costs and is targeted towards development outcomes including poverty
reduction. While these dimensions are important, the TUC believes
that DFID should take a more holistic approach that assesses the
effectiveness of the impact of development (including Aid) overall
and that it does not merely restrict itself to outcomes from aid
delivery. Acknowledged by the Accra Agenda for Action (AAA), "development
effectiveness" must be rooted in human rights and based on
decent work[198],
gender equality and women's rights, inclusive democratic power-sharing,
and coherent national and global governance[199].
As regards decent work and development effectiveness, the entire
international community has committed to incorporating decent
work in international policies and national development strategies,
including poverty reduction strategies, as part of efforts to
achieve the internationally agreed development goals, including
the Millennium Development Goals." (ECOSOC Ministerial Declaration
of 2006)[200]
5. The TUC commends Andrew Mitchell, Secretary
of State for International Development, for recently stating[201]
that DFID must focus "ruthlessly on results and impact[202].
If the DFID wants to do this successfully, its narrow prioritisation
of "aid effectiveness" rather than "development
effectiveness' indicates policy incoherence that could lead to
the failure of this goal. Hence, the TUC urges the Select Committee
to strongly advocate that DFID should broaden and deepen its approach
to effectiveness so that it encompasses "Development Effectiveness".
AID WATCHDOG
6. The TUC welcomes the idea of an independent
Aid Watchdog accountable for reporting to Parliament's democratically
elected International Development Select Committee and appreciates
this opportunity to comment on the Watchdog at the point in which
it is being constituted rather than once it has been launched.
7. However, based on the belief that DFID should
focus on assessing "development effectiveness", the
TUC urges the Select Committee to insist that, in order for it
to be able to appropriately assess impact, the 'Aid' Watchdog's
remit be much broader than 'aid effectiveness'.
8. Similarly, based on past and current experience
at a policy level where DFID frequently fails to pay adequate
attention to other internationally agreed development goals such
as the ILO Decent Work Agenda, and the ILO Global Jobs Pact, the
TUC urges the Select Committee to insist that the Watchdog ensure
that it pays more attention to cross-cutting issues essential
for improving effectiveness.
9. We agree that the Watchdog should talk directly
to the beneficiaries of aid. In light of numerous experiences
in which the development community (including DFID) has failed
to consult with trade unions, we request that trade unions be
explicitly listed as a discrete group to consult within civil
society within the Watchdog's terms of reference for consultations
in the global north and the global south and through their international
coordinating structures.
10. The TUC agrees that the DFID officials should
not be allowed to delay or amend the results of the evaluations
before they are published. We also welcome the attempt to introduce
a "traffic-light" labelling system to assist in assessing
whether British foreign aid is delivering. However, there are
a number of concerns:
- · The
"traffic light" system is simplistic and doesn't enable
the appreciation of the complexities and multiple actors involved
in the development process or the length of time it takes for
development to successfully occur.
- · Some
key development activities, particularly around advocacy, rights
and empowerment, decent work, governance and fragile states are
admittedly more difficult to assess, but are, nonetheless critical
for a holistic approach to evaluating positive and sustainable
development impacts.
- · Emphasis
needs to be placed, not only on quantitative indicators for measuring
results, but also on qualitative indicators such as content analysis
of interviews with beneficiaries of aid.
- · As
regards decent work as a development objective, the ILO Toolkit
for Mainstreaming Employment and Decent Work[203]
and the ILO's List of Decent Work Indicators[204]
are important resources from which to draw when constructing a
framework for measuring development effectiveness.
- · There
is also a concern that the narrow "aid effectiveness"
approach could easily lead to DFID officials opting for safe,
risk averse projects rather than more innovative options carrying
some degree of risk, but with the potential for greatly improved
results and impact over the longer term.
- · Another
possibility is that this narrow approach will lead to a dip in
staff morale within a department where the Administration is already
under immense pressure to make cuts in staff numbers to make efficiency
savings, despite being the only government department whose budget
is set year on year to grow.
Therefore, the TUC recommends that the Select Committee
ensure that the Watchdog has inbuilt mechanisms to safeguard DFID's
innovation, the ability to take risk and the morale of DFID's
staff.
DFID, PARIS DECLARATION
AND ACCRA
AGENDA FOR
ACTION
Conditionality vs. Ownership
11. In our view, there remains some ambiguity
as to the degree to which the DFID applies conditionality, although
it explicitly denies[205]
it in the Annual Report and in other publications. The DFID is
at pains to stress that its policy is based on three shared commitments
with partner governments; poverty reduction and meeting the MDGs;
respecting human rights and other international obligations; and
strengthening financial management and accountability and reducing
the risk of funds being misused thorough weak administration or
corruption. It provides a list of cases[206]
in which the Department has made use of its prerogatives to suspend,
interrupt, delay or change how it delivers its aid. The TUC appreciates
the DFID point of view in this regard, believes that the action
taken by it is warranted in the circumstances and is conscious
of the general lack of clarity on conditionality. However, it
is significant that the Department still uses the term conditionality[207]
rather than shared commitments in the Report in the cases it has
taken action on. The All Party Parliamentary Group on Debt, Aid
and Trade (APPGDAT), in its review of DFID, recommends that conditions
on aid be carefully reviewed[208].
"Make public all conditions linked to its aid disbursements.
It should clarify conditions on governance and political issues,
so that partner countries are clear about what would constitute
a breach of its partnership commitments. It should also continue
efforts to harmonize conditions with other donors", recommends
the DAC Peer Review of the UK.
12. The DFID does not provide much information
on the initiatives taken by it to give effect to the related concept
of country ownership, either, although it mentions it in the glossary[209].
The TUC is of the view that country ownership extends beyond government
ownership and that it should mean broad-based democratic ownership
involving parliaments and civil society[210]
including trade unions in the formulation and implementation of
national development strategies and does not subscribe to the
skepticism expressed in some quarters[211].
Predictability
13. The TUC is aware of the good standing of
the DFID in the donor community for reliability and timeliness
and above all, the predictability of its aid, although some concern
had been expressed by the APPGDAT[212]
in this regard. The DFID boasts 99% delivery in 2009[213].
The TUC notes that the DFID has signed a number of Memoranda of
Understanding (MOUs) with recipient governments detailing its
commitments over a period of five to 10 years in some instances[214].
It recognizes that MOUs and DPAs[215]go
a long way in improving the predictability of aid and that recipient
governments can rely on them when mapping out long-term national
development strategies. Nevertheless, it is just as important
to ensure that the purchasing power of UK aid is not eroded by
the depreciation of the GBP and/or inflation or deflation in the
UK. Of course, we are conscious that either or both factors could
evolve in favour of aid recipients and exchange rate uncertainties
could well be advantageous to them. In the current context[216],
however, the exchange rate factor assumes importance, as the GBP
has depreciated considerably relative to some currencies in developing
countries in the past two years. It is hoped that the issue will
be addressed by the donor community as a whole rather than by
the UK alone, for it affects all ODA commitments by all donors.
The TUC suggests that a composite currency, ideally, SDR be used
in making long-term aid commitments as well as in the compilation
of aid statistics by the DAC.
Alignment
14. There has been discernible progress in the
alignment of UK aid with national policies, priorities, strategies
of recipient nations since the adoption of the Paris Declaration
on Aid Effectiveness in 2000. According to the OECD[217],
63% of UK bilateral aid was programmed at country level as contribution
to the national development programmes of the partners concerned.
Although there is no explicit commitment to comply with the requirements
of the Paris Declaration in the Coalition Agreement, the pledge
to "stick to the rules laid down by the OECD"[218]
is, in our view, tantamount to acceptance by the UK Government
of the Paris Declaration and, probably, of any successor agreement
to it. While agreeing with the broad thrust of developmental priorities
identified by the Government, we should like to reiterate the
imperative need for taking into account national development policies
and priorities determined by recipient governments in consultation
with key stakeholders including trade unions. The TUC is mindful
of the UK commitments to the development of social infrastructure
and services and hopes that this approach will not stand in the
way of responding to the priorities identified by recipient governments.
According to the DFID Annual Report, 40% of UK aid to Sierra Leone
was devoted to governance while 24% and 8% went to health and
education respectively in 2009-10. Although the Government of
Sierra Leone does recognize[219]
that corruption is a serious problem, there is no indication that
it has identified governance as a priority area in its Agenda
for Change[220].
Efficiency
15. The TUC appreciates the need for improving
efficiency in the delivery of aid. However, it has serious doubts
on the need for, and desirability of, reducing staffing levels
as an appropriate and sensible way of achieving efficiencies in
development interventions and agrees with the note of caution
sounded by the OECD in this regard[221].
On the one hand, the DFID has re-affirmed its commitment to increase
aid towards achieving 0.7% of GNI by 2013. On the other, it has
already closed offices in a number of countries[222]
and is seriously considering further reductions in staffing levels.
The efficient delivery of aid hinges very much upon the knowledge,
expertise and skills of dedicated staff at all levels and assumes
even greater importance in resource-poor settings in low-income
developing countries which UK aid is increasingly concentrated
on. In addition, the DFID has increased its engagement with fragile
states where the efficient delivery of aid is indeed more resource-intensive
and challenging. In Malawi, the DFID reduced staff numbers from
over 100 to 40, by "better matching of staff to the nature
of the programme and transferring project delivery work and staff
to the Malawian Government", according to the Report by the
National Audit Office[223].
Although the NAO does not make a causal link between staff reduction
and suboptimal performance of DFID programmes in Malawi, it is
hard to rule out the possibility of correlation, especially in
the light of NAO comments[224].
While recognizing the need for continued budget support, where
appropriate and necessary, the TUC expresses its concern over
the possible use of the PRBS[225]
and other forms of budget support as a more economical way of
delivering aid in developing countries with reduced staff. The
UK is often regarded as a model of good practice[226]
by the donor community in the delivery of aid and related issues
and needs to be more cautious when striking a balance between
achieving administrative efficiency and maintaining the quality
of aid and its capability of efficient delivery.
Harmonization
16. The TUC recognizes the leading role the DFID
plays in harmonising its policies and practices with other donors
and developing joint country strategies and performance management
frameworks at country level in line with the guidelines in the
Paris Declaration. The TUC understands that the DFID plays a co-ordinating
role in the delivery of aid programmes in a number of countries
in which the UK makes the most significant contribution to the
aid effort and expects the DFID to take the lead in persuading
other donors to engage with trade unions and other important non-state
actors.
Untying Aid
17. Despite the repeated commitments by the DFID
to untying aid, the Annual Report is rather laconic in its reference
to it and says that "DFID operates no targets[227]
or quotas for business awarded to developing country suppliers."[228]
Untying aid, as the DFID itself defines it, concerns both goods
and services[229].
As the APPGDAT[230]
pointed out in 2009, the DFID still relies on UK firms for the
bulk of technical assistance provided to developing countries.
Aid focus
18. The TUC notes that the DFID is focusing its
aid on fewer countries[231]
than in the past with a view to optimizing its impact [232]and
supporting the countries concerned in their efforts to achieve
MDGs by 2015. The TUC supports the approach and is pleased that
15 out of the 22[233]
DFID priority countries are among the Least Developed Countries
recognized by the UN. It is hoped that the presence of very large
numbers of poor and vulnerable people in some low-income[234]
and lower-middle income countries[235]
will not be overlooked in the allocation of aid.
Mutual Accountability
19. The TUC notes that there is no explicit mention
of any mechanisms for mutual accountability put in place by the
DFID in collaboration with recipient governments, hopes that the
DIFD will take appropriate and adequate measures to give effect
to the commitments made to the APPGDAT in July 2009 and supports
the APPGDAT recommendation[236]
in this regard.
Raising Awareness of Need for Development Assistance
20. The TUC is concerned that the DFID seems[237]
less inclined than in the past to raise public awareness of the
need for aid and mobilise support for it and strongly believes
that there is greater need for continued efforts to consolidate
public and political support for aid in the current resource-constrained
context when ODA has come under intense scrutiny. In this regard,
while agreeing on the need to demonstrate aid effectiveness and
impact, we are doubtful about its usefulness if the public are
not informed of the rationale for aid in the first place.
Transparency
21. The TUC praises the DFID for developing and
making public its new project database and believes that this
will help to ensure that our own work is better informed by DFID's
and that, where synergy exists, we can seek policy and/or programme
coherence.
Trade Unions and Development
22. The TUC welcomes DFID's continued engagement
with the UN Development Cooperation Forum, the OECD-DAC and the
Working Party on Aid Effectiveness, and it appreciates its role
in moving the agenda forward though evidence-based research and
discussion papers. However, despite representation of the International
Trade Union Confederation (ITUC) and the Trade Union Advisory
Council (TUAC) on the Working Party and DAC working groups, and
the contribution of trade unions to employment-centred development
activities through the ILO decent work agenda and the ILO Global
Jobs Pact, their role is frequently ignored. It takes a lot of
time and effort for the ITUC and TUAC to successfully argue for
their inclusion as valuable partners. Therefore, the TUC would
suggest that the DFID improve its policy coherence, in keeping
with internationally agreed development goals, and consultative
methodologies such as those of the ILO and OECD which recognize
and envisage a role for trade unions.
23. The TUC wishes to commend DFID as a main
sponsor of the BetterAid and Open Forum CSO platforms. This enables
an independent CSO channel to act on aid effectiveness. However,
this support is limited because it goes to the umbrella organisations
and does not necessarily allow the individual international networks,
such as the International Trade Union Confederation[238],
to improve their own effectiveness in coordinating their membership
to input effectively into this agenda. This is a serious threat
to the possible outcomes of the overall exercise. Whilst recognising
that this is not a problem limited to DFID - all CSO donor governments
are doing the same - the TUC urges the Select Committee to encourage
DFID to break the mould and take a lead by ensuring that also
core civil society networks are supported in their efforts to
improve their own effectiveness and capacity to provide input
into this process.
24. The TUC welcomes DFID's attempts to streamline
its procedures. However, the TUC would urge the Select Committee
to note that core components of civil society, particularly those
that are membership-led and democratically accountable, such as
trade unions are not set up for receiving development aid. Trade
union budgets are funded by membership subscriptions, and their
members rightly require that their unions spend their subscriptions
for representing them at work. Nevertheless, there are vast other
areas that trade unions play an important part in, such as recruiting
and representing vulnerable workers (too poor to pay a subscription)
and holding their governments to account. Being a trade unionist
also requires different skill sets to development NGO's who are
able to employ funding professionals. Therefore, we urge DFID
to do more to invest in the building of capacity of civil society,
especially in the global south, so that all development actors
can successfully access DFID funding streams on a more equal footing.
25. As a new DFID Partnership Programme Arrangement
recipient, the TUC applauds the trust and support DFID has offered.
We are delighted that this support is enabling us to currently
work on 19 programmes with trade union partners in 23 countries
across the global south. The TUC would urge the Select Committee
to note the breadth and depth of its work and to encourage DFID,
particularly its decentralised offices overseas, to recognise
and engage more frequently with free, fair, democratic membership-
led trade unions across the developing world.
DFID and UN Agencies
26. The TUC commends the DFID for funding of
the UN agencies and its introduction of performance frameworks.
However, there appears to be a major omission in the report relating
to DFID's relations with the UN International Labour Organisation.
Whilst the DWP is responsible for the UK's core payment to the
ILO, the DFID has had a longstanding record of making additional
voluntary contributions to ILO work. This funding has been provided
both through a series of Partnership Framework Agreements (PFAs)
and through support from country offices for specific projects.
When both sources are combined the UK is clearly seen as one of
the largest providers of additional support to the ILO.
27. The DFID commissioned an independent evaluation
of the last DFID - ILO PFA 2006-2009 which concluded that considerable
progress had been made by the ILO on meeting reform targets set
by DIFD and that based on PFA performance and 'common interests
in international development' DFID should strongly consider continuity
of funding. It has also been noted that the ILO has been playing
a leading role in the 'One UN' process at country level, in particular
through DFID-supported work on the integration of Decent Work
Country Programmes into UN Development Assistance Frameworks and
national Poverty Reduction Strategies.
28. The TUC welcomes DFID's desire to link its
funding to improvements in the ILO's effectiveness both in relation
to the delivery of in-country programmes and in institutional
reforms of the ILO itself. However, we note with regret that the
DFID appears to have failed to meet its own commitments to provide
predictable funding. The period in which funds from the last PFA
could be spent was extended for a short time into 2010 to allow
key projects to continue and a commitment was given to review
the PFA's impact within a tight time frame so as to enable decisions
to be taken on future funding. Despite the ILO providing detailed
evaluations of where DFID resources have been used and their impact
together with an independent evaluation report commissioned by
the DFID, the ILO has now been waiting for over nine months since
the end of the last PFA. Despite requests from the ILO for limited
bridging funding, supported by TUC interventions which DFID officials
appeared to support, no such funding has been received and the
whole issue is now subsumed into the wider DFID Multilateral Aid
Review. The consequences of this should not be underestimated.
It has affected the ILO's ability to deliver on key areas including;
work on the elimination of forced and child labour in India and
the development of the Coop Africa Project. In fact in regard
to the latter project a firm commitment was given in April to
provide additional funding, but as far as we are aware, the funds
have not been released to the ILO.
29. The TUC must also register our surprise that
the DFID - ILO relationship has been omitted from the DFID report
on its key UN funding relationships. We would also take this opportunity
to renew our request that the DFID provide an overall figure for
financial support for the ILO, including both money provided for
projects by country offices and other DIFD sources in addition
to the PFA arrangements.
30. Looking to the future we are hopeful that
the MAR will conclude that DFID funding for the ILO should be
continued and increased and that it results in effective outcomes.
In addition, we would like to see the provision of dedicated funding
for capacity building work to ensure the engagement of social
partners (employers and workers organisations) in the preparation
and delivery of Decent Work Country Programmes and other ILO technical
cooperation work at country level. We would also like to see a
more coherent approach across DFID policy and programme work (including
both UK and country offices) to the Decent Work Agenda, widely
recognised as a vital element in achieving the MDGs and delivering
wider sustainable development.
The CDC Investment Code and Labour Standards
31. CDC, DFID's wholly owned Development Finance
Institution (DFI), has the potential to drive significant pro-poor
private sector growth in the developing world. Yet CDC is a laggard
among DFIs in alleviating poverty, particularly in the four critical
areas of international standards, monitoring and impact, development
effectiveness and civil society engagement
32. To ensure that companies using CDC funds
respect fundamental labour, social and environmental standards,
CDC requires them to abide by its newly revised Investment Code
(the "Code"). However the Code is not in compliance
with core international standards, and, despite its claims to
the contrary[239],
falls well short of the World Bank's International Finance Corporation's
(IFC) "Performance Standard" - widely adopted by other
DFIs[240]
and recognised to be a leading standard. The Code has three main
problems in this regard.
33. Firstly, unlike IFC's labour rights provisions
set out in its "Performance Standard 2" (PS 2), the
Code does not include key provisions around fair retrenchment
processes, grievance mechanisms, supply chains, human resources
policies, requirements to provide written terms and conditions
of employment and the requirement that the code covers all workers
engaged by the company, not just "employees".[241]
This last point is critically important because company operations
can involve many "non-employees" - from contract or
agency workers to workers in an outsourced part of the company's
operation. These are typically the most vulnerable and poorest
workers in sectors that CDC invests in including construction,
manufacturing and agriculture. This leads to worrying outcomes:
for example, under the current Code, a company would be free to
discriminate against e.g. migrant agency workers, or home workers
engaged on a piece rate system.
34. Secondly, the Code's language on labour rights
is much weaker and on several occasions distorts the meaning of
the core conventions of the International Labour Organisation
(ILO) it is claiming to reference. For example the Code states
that business in which CDC capital is invested will: "allow
consultative work-place structures and associations which provide
employees with an opportunity to present their views to management".[242]
This language is a watered down definition of freedom of association
typically used in company codes of conduct for operations in countries
where independent trade unions are banned such as China. As such,
it falls well short of the definition of freedom of association
and the right to collective bargaining in ILO Convention 87.[243]
Other provisions in the code also fall short of international
standards for example, on preventing discrimination.
35. Thirdly, while PS2 requires companies to
adhere to core labour standards, the Code only aims to, "encourage
the businesses in which CDC's capital is invested to work over
time towards full compliance with the International Labour Organisation
(ILO) Fundamental Conventions". There is no requirement that
such encouragement results in any positive change, nor any time
frame or benchmarking to ensure progress towards full compliance.
Read literally, there would be nothing to stop CDC investing in
a company employing child labour, where that company claimed that
it would eventually deal with the issue at an unspecified time
in the future.
36. CDC should revise its Investment Code by:
- · Ensuring
that it is fully consistent with internationally recognised labour,
social and environmental standards by consulting the relevant
UN agencies or treaty bodies, especially the ILO;
- · consulting
with trade unions and other civil society organisations to draw
on their expertise; and
- · Ensuring
that the revised Code is consistent with, and ideally better than,
the IFC Performance Standards - widely recognised to be good practice
in the field.
Monitoring and Demonstrating "Development
Impact"
37. CDC is mandated to contribute towards DFID's
mission of alleviating poverty. After reviewing CDC's published
material, the TUC shares the conclusion of the Public Accounts
Committee of the House of Commons: "there is limited evidence
of CDC's effects on poverty reduction."[244]
This is for the simple reason that CDC does not target or measure
poverty in its projects.
38. In its 2009 Development Review it reports
that companies it invests in employ some 733,000 people.[245]
Have these jobs been created because of CDC's investment? Has
this employment helped these people leave poverty? Or were they
already well off? The TUC is concerned that many of the sectors
that CDC invests in may not be reaching the poor or creating jobs.
Further, if CDC investments are reaching the poor, there is no
data showing that workers are earning wages good enough to lift
them and their families out of poverty.
39. While DFID has given CDC investment targets
for countries and regions, it does not have targets for reaching
the poor and reducing poverty. As a first step, CDC could adopt
indicators on actual jobs created and wage levels, and set specific
targets for investment.
40. CDC investments should also be having a measurable
impact in other areas of development covered in the Code. CDC's
recently published 2009 Development Review attempts to respond
to this criticism, but the data it presents is wholly inadequate.
A series of evaluations of the CDC funds were carried out, concluding
that some funds "had social issues" and some had "reported
social improvements".[246]
It also gives each fund a global grade on its ESG (Environmental
Social Governance) performance on a scale of "excellent",
down to "unsatisfactory".[247]
41. Is child labour an issue? Are workers actually
being paid their wages? In what sectors are investments lifting
the most people out of poverty? Unfortunately CDC's reporting
says almost nothing about the developmental impact of its work.[248]
Other private sector initiatives with a development or "social"
component would grade performance on an issue-by-issue basis establishing
baselines to measure each issue, setting benchmarks to strive
towards, and then supporting the company to come up with a plan
of action to drive continuous improvement. The data produced by
this can then be used to analyse trends, and evaluate how interventions
can be better tailored to tackle difficult issues. This is basic
good practice on aid effectiveness, and practice that DFID is
a world leader on. In the absence of such a system, the impact
of CDC investment is unlikely to be any different from ordinary
private sector activity in developing countries.[249]
42. CDC should:
- · Establish
specific targets for reducing poverty
- · Work
with DFID, the ILO (and other relevant UN agencies) and other
key stakeholder to develop clear development indicators and benchmarks/targets.
On employment and labour issues, CDC should adopt "Decent
Work" indicators measuring employment creation, social protection,
labour standards and social dialogue.
Setting up Systems to Drive Decent Work
and Development
43. More than developing a good set of development
indicators, CDC needs to follow the lead of other DFIs and organisations
in running programmes with companies and make real strides in
reducing poverty and providing decent work. For example, a company
member of the ETI has recently been able to show that over the
past three years it has turned around 60 "non-complying"
factories in Morocco to ensure that they now all pay at least
the minimum wage, and adhere to national health and safety standards.
It achieved this with far fewer resources, and greater supply
chain challenges than CDC. Furthermore, it has done this as a
for-profit outfit, not as an organisation using public funds with
the purported aim of alleviating poverty.
44. Other DFIs are making similar progress in
this area. The IFC-ILO Better Work Programme is working with multinational
enterprises, local suppliers, trade unions and national governments
to improve livelihoods of workers in manufacturing supply chains.
In Cambodia, for example, the programme has given decent work
and wages to female workers, who have been able to save and send
funds back to their rural communities enabling them to cope with
rice shortages. This is a cost effective programme, well targeted
and measured.
45. Both of these examples represent emerging
best practice in private sector development and labour standards
management. They are moving away from a "compliance"
approach - widely recognised to be a flawed "tick box"
exercise - to putting a strong emphasis on developing systems
to enable and ensure sustainable improvements in labour standards
and productivity. This includes working with companies to develop
professional systems of human resource management, and working
with local unions to build functioning systems of industrial relations
- to enable workers to monitor and improve their own conditions
and production processes through mature dialogue with management.
46. To move to this model CDC needs to invest
in local resources in priority investing countries to help build
relationships, design the programmes, deliver the training and
monitor progress. CDC is moving to assist fund managers "through
a comprehensive training programme backed up by the new Toolkit".[250]
However, commercial fund managers are unlikely to have the right
skill sets to perform the tasks outlined above (eg could a fund
manager design a programme to identify and address caste discrimination?).
Instead, CDC should consider engaging local specialist staff in
priority investing countries to work with companies to develop
and carrying out time-bound, target-driven improvement plans,
possibly in partnership with other DFIs and development actors.
The TUC would be happy to work with CDC in running a series of
pilots in this regard.
47. These steps could help to link CDC directly
with the companies it invests in and thereby drive developmental
change. This would overcome the problem of its private equity
model: namely that CDC's indirect investments make it too "detached"
from the actual companies using its funds. These measures should
be thoroughly and independently evaluated to determine whether
CDC's private equity model can be made developmentally effective,
or whether CDC should instead shift to a model of direct investment.
48. CDC should:
- · Draw
on best practice in private sector development initiatives by
running programmes in priority investing countries with companies
to drive sustainable improvements in labour standards and productivity;
and
- · Evaluate
how effective such programmes are in making a private equity investment
model developmentally effective.
Civil Society Engagement
49. CDC has very limited engagement with civil
society. Contrary to good practice among DFIs, the CDC has no
formal consultative processes or governance positions for trade
unions or other representative civil society organisations. For
example, the IFC and the European Bank for Reconstruction and
Development (EBRD) have been able to achieve best practice in
developing and applying labour standards to their investments
through drawing on the expertise and experience of the Global
Union Federations and the International Trade Union Confederation
(ITUC) through formal consultative structures.[251]
Further, DFIs such as the Netherland's FMO and Germany's DEG include
trade union representation on their boards.
50. Other UK bodies dealing with the private
sector and international development (among other things), such
as the UK National Contact Point (NCP) to the OECD Guidelines
have benefitted from having social partners (TUC, CBI and NGO
representatives) sit on its oversight body. These external members
have greatly aided in improving accountability and oversight of
performance, building consensus on strategic direction and bringing
in a wide range of expertise. Among the 42 NCPs globally, the
UK is now recognised as a world leader.
51. CDC needs to conduct public consultations.
Aside from ensuring that CDC is accountable and consultative,
consultation is simply common sense: CDC's Investment Code would
have greatly benefitted from external feedback and advice, particularly
from the ILO, had it consulted.
52. CDC claims in its Freedom of Information
statement that it, "discloses aggregate summary results of
its evaluation work and produces development impact reports annually".[252]
Yet as discussed early, this information says very little about
actual development impact. Instead CDC should disclose all information
relevant to assessing development impact including but not limited
to its impact assessments and evaluations of funds. If such documents
were publicly available, some of the concerns raised in this submission
might have been addressed.
53. Surprisingly, unlike other DFIs such as the
IFC or the Asian Development Bank, CDC had no complaints mechanism
for workers or communities potentially affected by CDC investments
to seek redress. Such mechanisms can help identify and resolve
problems at an early stage, rather than cause them to escalate.
This is a huge reputational risk for the organisation and poor
development practice.
54. Trade unions most probably represent workers
engaged by the companies that CDC invests in. However, it is not
at all clear that these unions have been consulted, as part of
any impact assessment or in any ongoing monitoring and evaluation.
55. Accordingly CDC should:
- · include
trade unions and other civil society partners on its Board. As
a first step CDC should develop formal consultative structures
with trade unions and representative civil society organisations;
- · hold
public consultation processes in developing policy and strategy;
- · Disclose
all information relevant to assessing development impact including
but not limited to impact assessments and the evaluations of funds;
- · Establish
a complaints mechanism allowing parties to file complaints to
address potential breaches of the standards and secure appropriate
remedies; and
- · For
all proposed investments, conduct impact assessments that consult
with potentially affected parties and civil society organisations,
and include binding recommendations for avoiding or mitigating
negative impacts.
194 "Overall the success rate of DFID projects
and programmes was 72.8% in 2009-10", Annual Report 2009,
p73 Back
195
Chapters 4 and 5 detail initiatives taken to enhance aid effectiveness. Back
196
Department for International Development, Draft Structural Reform
Plan, 27 July 2010, page 8, available at http://www.dfid.gov.uk/Documents/DFID_SRP.pdf Back
197
The Ethical Trading Initiative is a leading multi-stakeholder
body of companies, trade unions and NGOs, working collaboratively
to improve working conditions in global supply chains. For more
information see www.ethicaltrade.org Back
198
Decent work is understood by the ILO as having four pillars: productive
and freely chosen work; social protection; social dialogue and
labour standards. See: http://www.ilo.org/global/About_the_ILO/Mainpillars/WhatisDecentWork/lang--en/index.htm
Back
199
The Accra Agenda for Action. Paragraphs 3 and 13. Available
at: http://siteresources.worldbank.org/ACCRAEXT/Resources/4700790-1217425866038/AAA-4-SEPTEMBER-FINAL-16h00.pdf Back
200
http://www.ilocarib.org.tt/cef/initiatives/declaration-Ministerial%20Declaration%20of%20the%20High-level%20Segment%20of%20ECOSOC%20(text%20as%20adopted)%20.pdf
Back
202 201 Andrew Mitchell soothes charities' fears over planned
DfID cuts, The Independent, 25.8.2010 http://www.guardian.co.uk/business/2010/aug/25/andrew-mitchell-spending-cuts-aid-agencies
Back
Back
203
http://www.ilo.org/public/english/bureau/pardev/download/toolkit_en.pdf Back
204
http://www.ilo.org/wcmsp5/groups/public/---dgreports/---integration/documents/meetingdocument/wcms_115402.pdf Back
205
Annual Report p114 Back
206
See Table 5, op cit. Back
207
Op cit p74 Back
208
Carefully review the conditions placed on its aid, whilst also
ensuring it is 'proactively transparent' in making all conditions
attached to its aid public, in line with its 2005 commitment.
The UK government must similarly challenge the use of intrusive
conditions by multilateral organizations", A Parliamentary
inquiry into aid effectiveness, A Report of the All Parliamentary
Group on Debt, Aid and Trade, 2009, p28
Back
209
Annual Report, p116 Back
210
"As such, aid needs to be administered by recipient countries
with participation from all
stakeholder groups, particularly parliaments
and civil society", The Report of the APPGDAT, 2008, p25
Back
211
See for instance, Aid Effectiveness after Accra: How to reform
the Paris Agenda, Briefing Paper 39, ODI, July 2008 Back
212
The Report of the APPGDAT, P.22 Back
213
£674.4 million out of £680.7 million, op cit p71 Back
214
DFID signed a ten-year MOU with Ethiopia in 2003. Back
215
Development Partnership Agreements In 2006, the DFID signed a
10 year DPA with Afghanistan. Back
216
The exchange rate between GBP and NGN (Nigerian Naira) fluctuated
between 202.94NGN and 263.99NGN with an average rate of 236.53NGN
in the period 1st Jan 09-31st Dec 09. Back
217
Aid volumes, channels and allocation, OECD, Peer Review, UK, July
2010 Back
218
The Coalition: our programme for government, para 18, p22, 2010 Back
219
President Earnest Bai Koroma of Sierra Leone, Speech to Chatham
House, 29 Jan 2008, p5 Back
220
Agriculture and Food Security, Infrastructure and transportation,
Energy and Water Resources and Human Development have been identified
as priority areas by the SL Government. Back
221
Maintaining capacity and protecting DFID's key strengths, op cit
Back
222
Since 2002, it has closed offices or programmes in 36 countries,
OECD, Peer Review, 2010. Back
223 Aid
to Malawi, Report by the Comptroller and Auditor-General, National
Audit Office, HC964, 30 Oct 2010 Back
224
Progress has, nevertheless, been slower than planned: only 61%
of the targets DFID
Malawi set for June 2008 were achieved
on time, and a further 14% within the subsequent year. And measures
themselves need to be more robust, unambiguous and relevant: few
directly address value for money in project implementation",
op cit p5.
Back
225
PRBS represented 27% of total DFID aid programmes in 2009, Table
5, DFID Annual Report 2009. Back
226
OECD Press Release on the Report on the UK Development Assistance,
9 July 2010 Back
227
"Donors will promote the use of local and regional procurement
by ensuring that procedures are transparent and allow local and
regional firms to compete", para 18c, AAA Back
228
Annual Report 2009, 4.1(i) Back
229
Op cit, 4.2 Back
230
Report of the APPGDAT, p17 Back
231
The Annual Report lists 22 priority countries. P21 Back
232
"We will reduce costly fragmentation of aid", AAA, para
17 Back
233
Ghana, India, Pakistan, Kenya, Nigeria, Vietnam and Zimbabwe are
Non-LDCs. Back
234
17% of the population in Pakistan was below 1USD a day in 2002,
Overview, Pakistan, World Bank, 2010. This amounts to at least
17 million or more than twice the population of Zambia. Back
235
23% of the population was below the national poverty line
in Sri Lanka in 2002-08. Back
236
Report of the APPGDAT, 2008, p28 Back
237
"There is broad public and political support for development
assistance. However, public awareness of development aid is weak,
public support for more official development assistance (ODA)
is declining, and public and political concerns over the effectiveness
of financial aid are increasing", Ensuring External and Domestic
Accountability, OECD Peer Review, UK, July 2010 Back
238
The International Trade Union Confederation has 312 affiliated
members in 156 countries and territories, with a total membership
of 176 million workers, 30 million of them in the Commonwealth
Back
239
See: http://www.cdcgroup.com/key-facts.aspx Back
240
See Ergon Associates (2010), Decent work and development finance,
page 21, available at: http://www.decentwork.org.uk/wp-content/uploads/DWLS-and-Development-Finance_final.pdf
Back
241
The current draft revision of IFC PS2 also includes other critical
areas of working condition such as reasonable hours of work and
overtime - one of the most widespread problems in supply chains
in developing countries. See: http://www.ifc.org/ifcext/policyreview.nsf/Content/PerformanceStandard2 Back
242
CDC Investment Code provision 2.b.i Back
243
For more information on Convention 87, see: http://www.ilo.org/declaration/principles/freedomofassociation/lang--en/index.htm Back
244
House of Commons Public Accounts Committee (30 March 2009) "Investing
for Development: the Department for International Development's
oversight of CDC Group plc", page 6 Back
245
CDC group plc (2010), Development Review 2009, page 1,
available at: http://online.hemscottir.com/ir/cdc/dr_2009/ar.jsp Back
246
Ibid page 19 Back
247
Ibid page 24 Back
248
CDC's Development Review 2009 does have a series of "good
news" case studies, but these are not a substitute for demonstrable
development impact across its portfolio. Back
249
The Code does commit CDC and the companies it invests in to "work
over time to apply relevant international best practice standards,
with appropriate targets and timetables for achieving them"
(Code 1. Principles), yet there is no information available on
such targets and timetables, or results this might have achieved.
Back
250
CDC (2010) Ibid page 19. At the time of writing the toolkit was
not a publicly available. Back
251
The Global Union Federations are global trade union bodies representing
national unions covering a particular sector. For example the
Building and Woodworkers International (BWI) represents construction
unions globally. The ITUC is the global body representing national
trade union centres such as the TUC. Back
252 See:
http://www.cdcgroup.com/uploads/finalfoiapublicationschemenovember2009.pdf,
page 3 Back
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