The World Bank - International Development Committee Contents

Examination of Witnesses (Questions 75-130)

Jesse Griffiths, Peter Young, Ed Hedger

30 November 2010

Chair: Good morning, and welcome. I see you have just introduced yourselves to each other, which is fine, but, for the record, perhaps you could also introduce yourselves to the Committee.

Jesse Griffiths: I'm Jesse Griffiths, from the Bretton Woods Project.

Ed Hedger: Ed Hedger from the Overseas Development Institute.

Peter Young: Peter Young from Adam Smith International.

Q75 Chair: Thank you for coming along. We are, as you know, just completing a report into the World Bank and the UK's engagement with it. Obviously the UK is a major contributor to the IDA of the World Bank. It has often been said that the World Bank is very good on analysis but not always excellent on delivery. We clearly, as a country, under both the previous Government and the present Government, have taken the view that the World Bank delivers a lot of our objectives, so that in the current financial year, 37% of the programme is going through multilaterals, and obviously the World Bank is a major recipient; not the biggest, but the second biggest. First of all, do you think that is right? If so, do you think the percentage should be higher or lower? May I say that you don't all have to answer every question, unless you feel you have a particular comment to make? I have a suspicion, Peter, that this might be one you would want to get started on.

Peter Young: Thank you very much. I agree with what you said earlier, which is that the Bank is very good on analysis, and has a lot of very capable people working there, and it's our great pleasure to interact with them often, but the implementation could be considerably improved. The central point of the evidence that we submitted is that the overall approach that is taken by the Bank of lending money to developing countries and for the developing countries themselves then to handle the procurement and administration is a critical reason, in many cases, for that poor implementation. This is because fundamentally, in many of these countries, the capable mid­level staff in the civil services that we have, which handle such procurement and administration effectively, just don't exist or are very much thinner on the ground. You have all sorts of problems that arise from that, including substantial delays in the organisation and the start of activities, and a lot of problems in the actual implementation due to faulty administration and difficulties in changing what is required in the light of circumstances. It's notable that whereas the Bank is strong in evaluation in the form of post­evaluation—evaluation of things once they've stopped—it isn't strong on evaluation during the course of activities, which is the most valuable type of evaluation, because then you can see what's going on, and what you should change in the light of circumstances. Because of the way things are structured, you have Bank supervision of ongoing activities, as opposed to monitoring and evaluation in the sense it would be done, say, in a DFID project. Broadly speaking, we think that development expenditure is spent much more effectively by DFID itself directly than through the World Bank or many of the other multilateral agencies. There should be a focus on trying to get to grips with these implementation problems as a priority. Perhaps, in the interim, more should be spent directly by DFID and less through multilaterals like the Bank.

Q76 Chair: Before I invite the others to come in, I'm going to make a comment and ask another question. The Minister of State last week made the point, just picking up on your last point, that DFID did not have the same footprint as the World Bank. Indeed, in many cases, we could only work through the World Bank in countries in which we didn't have an operation, or similarly with the United Nations, where security factors made it difficult. You've made a clear statement that, comparing like with like, I suppose, you think DFID does it better than the World Bank, but clearly DFID cannot be everywhere. That's the comment. Perhaps I'll ask the others to comment on what has been said, but the question would be: what is the comparative advantage of the World Bank compared with other multilaterals and compared with DFID doing it itself? We've heard what the disadvantages are, but does the Bank have any particular advantages?

Ed Hedger: I'll comment on that. From an ODI perspective we wouldn't have a strong position on what the precise allocation should be under IDA16. However, speaking to the question of the performance of the World Bank, first of all, it is worth disaggregating the World Bank into its constituent parts, and particularly the focus of ODI has been on IDA, the concessional lending arm. It's interesting to look at what some of the evidence on the performance is. There are various indices out there, consistently scoring quite highly, which is worth noting. Work by Bill Easterly ranks it very highly first in a comparative sample, Knack et al did some work and ranked it second, and the most recent analysis by CDG and Brookings puts it in the top 10 on the four categories that it mentions. That's not to say that it's perfect, but by various measures we have, it is worth noting that its performance is assessed quite positively.

Speaking to the question of the comparative advantage versus a bilateral agency in the form of DFID, there are certainly things that the World Bank does and that the World Bank is invested in doing on behalf of other bilateral funders that are worth noting. These include its engagement with global public goods, which does require that footprint across multiple countries, which DFID doesn't have, and its capability at country level to harmonise and to engage a large number of actors. It can form a bridgehead, with all the questions about how effectively it performs that, and take advantage of the economies of scale across a very large number of countries, which bilaterals can't. As you mentioned, there is also the depth and the richness of its expertise. From my perspective, those would be points worth considering, which would need to be set against a series of concerns, of course, about how effective it is in delivering its mandate.

Q77 Chair: Obviously Bretton Woods has some strong views about how the World Bank should reform. The British Government have concurred with some of them, not all of them, and have argued that they've had some success in helping to shape the Bank's responsiveness, particularly in­country delivery, which was one point of concern. Do you agree with DFID's assessment of that? Do you think they have made progress in getting the Bank to be better focused? What more do you think needs to be done, and is it good value for the UK taxpayer compared with what else it might do with that development funding?

Jesse Griffiths: Before I come back to those specific points, just to put a little bit of context into the decision that the UK Government will be making on IDA, as you know, last time, IDA15, the UK was the largest contributor to IDA, overtaking even the USA, even though the US is a much—

Chair: That was partly to do with the exchange rate at the time.

Jesse Griffiths: Exactly. But I think when we are talking about the IDA16 replenishment, for the UK to maintain the same dollar contribution would mean an increase of around 30% in its pound sterling contribution. For me that frames this question of to what extent the UK should be supporting IDA16, because I think the central question is not so much the issues of effectiveness, though they are incredibly important. It's also about what the role of the World Bank should be, as you rightly highlighted, and the position it plays in the development architecture. When the UK comes to make that decision, if it were to increase, for example, its dollar contribution, it would be seen as a massive boost, a vote of confidence in the Bank, which I don't think the Bank should be getting at this time.

I think there are a number of areas of concern that we've highlighted in our paper, but first of all, and critically important to everything the Bank does, is the issue of governance and ownership. As you know, and as previous reports of past Committees have said, the ownership is central to the development of developing countries, and I think whilst the Bank scores quite highly on some aspects of effectiveness, it's ownership where there's a real issue; for example, in terms of the continuing use of conditionality. While that has reduced, it's still problematic. As people have mentioned, procurement and other procedures sometimes make it more complicated in countries. I think there are real issues about the way the Bank interacts, and the governance issue, for me, is central. 60% of the Bank's shares are still held by high­income countries. It's interesting to read in DFID's submission that they used the Bank's inaccurate figures, which say that the figure is about 53%. That's only if you classify countries such as Saudi Arabia as developing countries, which the Bank itself doesn't do except when it comes to measuring governance.

Q78 Chair: Obviously it is on the record. That's interesting. I take that point. Presumably there's a published record of the actual shareholdings, so it is possible to get the—

Jesse Griffiths: It is, and we've produced a detailed briefing that looks at it. If you look at the high­income countries versus the middle­income countries versus the low­income countries, the high­income countries have 60% of the vote, even after the last round of reforms. There are inaccuracies in the way that has been reported by the Bank.

Q79 Chair: Have you given us that briefing?

Jesse Griffiths: I believe so, but I can certainly send it again.

Chair: We have a briefing from you, but I don't particularly recall that detail.

Jesse Griffiths: It's mentioned in there, but there's a much more detailed one where we break it down by different categories of country. There's an issue there, and there's also an issue of transparency about that.

There are also concerns in some key areas that are essential for the Millennium Development Goals, such as health, where the Bank has been heavily criticised by the Independent Evaluation Group. They found that only 27% of projects in sub­Saharan Africa were deemed to have had satisfactory outcomes in the health portfolio. On gender, which is another issue that the Government have been rightly emphasising as central to development, the Bank tried to improve, so it had a gender action plan about five years ago. But even now only 27% of economic sector work, which is essentially important both from a gender perspective and also in terms of what the Bank does, is regarded as gender­informed.

There are quite a lot of concerns about how the Bank behaves and about the Bank's effectiveness, which are slightly broader than just asking questions of: "If I spend £1 here, will it be the most effective use of that £1?" but which strike to the heart of the development debate, and how countries can develop. To my mind, that is the question. When you are asking questions about the Bank, it's about the Bank's central role in developing countries.

You asked about what are the comparative advantages. One of the key roles the Bank does play is that it has a huge role in overall policy discourse and shaping the way we all think about development. I would suggest that it's played that role in a highly problematic way in the past, although there have been some improvements and I welcome President Zoellick's recent speech on the matter. My main concern in this whole inquiry is to highlight that the Bank's role is broader than just delivering particular programmes on the ground. It is, I would argue, the most important actor in development in many countries, and also in the global development discourse.

Q80 Hugh Bayley: We've read your evidence, and we'll come back with specific questions on health, gender, the IEG, education and each of those specific criticisms that you make, so you don't need to refer to them on each occasion. My question is this: DFID is, as a result of the Spending Review, committed to halving its administration costs. That means a lot of DFID staff are going to be laid off, and the ability of DFID to expand its bilateral programme whilst managing it effectively is severely constrained. That means that more money will go to the multilaterals. Overall the aid budget is going to increase by 50% over the period of the next three years. That is a massive increase; perhaps a doubling of the multilateral spend. If you say they shouldn't spend it through the World Bank, and we know they're likely to spend less rather than more through Europe, where on earth is this money going to be spent if you don't use the Bank as a vehicle?

Jesse Griffiths: Our position is that they shouldn't increase their dollar contribution.

Q81 Hugh Bayley: You've said that, but where is a doubling of multilateral aid going to be spent if the Bank doesn't pick up a share of that?

Jesse Griffiths: To maintain a dollar contribution will be a 30% increase in the sterling contribution, so that is already quite a significant increase.

Q82 Hugh Bayley: But we're talking about a 100% increase. You're saying, "Avoid the Bank," because you have criticisms, which we're going to discuss in detail in the next hour or so. Malcolm asked you about what was the comparative advantage of the Bank. You said it had severe comparative disadvantages, so what are the comparative advantages of the alternative multilaterals? Where would you advise the Secretary of State, if he were sitting here, to put his money? If not through the Bank, where, in terms of multilaterals? Which multilaterals work better than the Bank?

Jesse Griffiths: The UK Government, as you know, are conducting a Multilateral Aid Review, and in any review like that you will find that for different issues, different multilaterals perform better. You mentioned, for example, the Global Fund: a lot of NGOs support that as a tool for improving health expenditure, and I think in many countries DFID's own bilateral programmes perform very well.

Q83 Hugh Bayley: But if it is halving its admin costs, it would be a misuse of aid to put more money bilaterally, wouldn't it? It would be poorly managed.

Jesse Griffiths: There are two issues. Should it be halving its admin costs, or not?

Q84 Hugh Bayley: Well, it is. It was told to, and it has committed to, so it's not dreaming that something different is going to happen. That is what the Spending Review has agreed to do. What I'm saying to you is this: most of us in the development community are very pleased that the Government's committed to meeting the 0.7% target. It means a huge increase in British taxpayers' money that will go to development. If you were to limit the contribution to IDA in the way that you're suggesting, I think it's highly unlikely that that 0.7% would be reached. Would that be preferable, to miss 0.7% but constrain what the Bank does, or to use the Bank as a vehicle for delivery to ensure that we meet the 0.7%. If you had the choice between those two, which way would you jump?

Jesse Griffiths: I don't think it is a choice. There are plenty of vehicles for spending aid money. The approach DFID adopt in many countries is to think: "On the ground in that country, what's the best way to spend the money?" As you rightly highlighted, a large proportion of DFID expenditure goes through multilaterals, but a significant chunk of that goes through multilateral expenditure in­country. It is not the IDA replenishments we're talking about, or the large increases to the Global Fund and others, but in­country, deciding which institutions operate best in this or that country, and how do we fund those? I don't see any problem with making a decision at that level. However, I'm a bit concerned about some of the assumptions that lie behind some of the questions; that, for example, it's more important to defend the line that we should be reducing administration costs than asking, in each country, "What is the most effective way to spend that money?" In some countries, particularly fragile states, it may mean you have to have higher administration costs. I take your point that that is the Government's position, but it doesn't mean I would necessarily support that.

Q85 Mr McCann: Good morning, gentlemen. My question is about how the interests of the poorest developing countries can be best served within the World Bank Group. In particular, there's a proposal where the presidency of the World Bank would alternate between developed countries and developing countries. I just wondered, is that just a fig leaf, or do you think that would be valuable?

Peter Young: The more important things relate to the actual operations of the Bank and reforms in the way that those are carried out. In our evidence, we tried to give you a view from the trenches on what it's like to interact with the Bank and work with the Bank on a practical basis. We pointed to a lot of flaws in the procurement administration and the implementation of activity, which I think are a lot worse in the fragile states than in other places. Talking, after this very kind invitation to give evidence, to some former Bank staff who are working with us, they said that the real problem is to do with the HR issues within the Bank, and how people are managed and motivated, and the matrix structures that mean that people are reporting to five different people, and so forth. If a developed country person was to sort that out, then great; if a developing country person was to sort that out, then great. I think it is addressing the fundamental issues that is the important thing, as opposed to who sits at the top, and to address those fundamental issues within the Bank means difficult reform programmes. All those people who work for the Bank often have strong interests in preserving things the way they are, because they are comfortable with that and changing things would make things difficult for them. It is a question of who would be tough enough to push through those reforms.

Q86 Mr McCann: If they were pushing through those reforms, if it really is structure, I take it that the other ideas that people have had, for example in terms of developing countries having the same voting strength as donor countries, is that, again, not dealing with the issue, because of the structural issues you've referred to?

Peter Young: I would generally tend to think so. I think that who has however many voting shares is probably neither here nor there in the scheme of things. One maybe ought to look more at how donors are interacting with the Bank. Let's look at these multi­donor trust funds, for example, many of which are extremely inefficient.

Chair: We're coming on to those.

Peter Young: We're coming on to those. I won't talk about them now.

Ed Hedger: Maybe I could just comment on the way past on this question of in­country impact. We did some work looking at the recipients' stakeholder perceptions, particularly among members of the Executive, parliamentarian and business leaders, about how they would rank multilateral donors comparatively. One of the questions we posed was the nature of the governance structures of the multilateral organisation, and to what extent that had a bearing. At first cut, it appears to have some influence, to the extent that African countries would have some preference for the African Development Bank, because they feel there is a perception of greater representation in that, so there is a factor. That said, the much stronger factors that emerged from a number of African countries, with key Government officials, were on things like a sense of commitment to development through the nature of the instruments used and the behaviours displayed, and some of the more mechanical details of aid, and an alignment with policy that is Government­led, and getting behind those sorts of questions. I think it was registered as important, but not the most dominant of those priorities.

Jesse Griffiths: I think your question is absolutely bang right. It is naïve to suggest that who selects the president and who sits on the board doesn't matter that much. Of course it matters enormously, and it particularly matters in the Bank because of the gentlemen's agreement that means the US always selects the president of the Bank. Although the G20 and the Bank's board have made commitments to phase this out and have a merit­based process, it is still very uncertain whether that will happen next time a president is selected, because of opposition within the US. It affects the selection of the president, and the Bank is a very president­dominated institution. The amount of oversight by shareholders is much lower than you would expect. For example we had a strategy from the Bank this year, the first strategy we've ever had overall from the Bank, and that only came about because shareholders demanded it as part of the IDA16 process. The strategy, if you read it, is not really a strategy; it's more a summary of what the Bank is doing.

The president matters enormously. For example, my characterisation of this particular president's agenda is that he has an expansionist agenda for the Bank. He wants to see the Bank engaged in all the different aspects of development, and you can argue whether that's a good idea or not, but a different president would have a completely different attitude. I think it is vitally important who selects the president, and I think it does poison developing countries' relationships with the Bank that it is seen to be dominated by Western institutions. I think you are right: some reform is needed, and certainly a merit­based selection process that is open to anybody, as the G20 have promised. The issue of voting shares, as you say, is vitally important, and the G20 did agree to move to equality of voting between developed and developing countries over time. To my mind that would create the kind of institution we would like to see: a cooperative based on sharing of governance between the borrowers and the lenders, if you like.

There is a deeper institutional issue, which I've alluded to and I'm sure DFID actually shares this view, in that overall the Bank shareholders don't have enough influence over the way the Bank operates. I mentioned the issue of there not really being a strategy. They meet through an executive board of delegated civil servants that meets at least twice a week and approves almost every project. The board operates much more like a part of the Bank than an oversight body, because every project is approved by the board, so they have a stake in every single one of those. There are ongoing reforms, or suggestions for reform; Zedillo, the ex­President of Mexico, led a high­level panel on governance reform, which suggested some of the reforms you mentioned in terms of parity, merit­based selection, but also having a much stronger oversight of the Bank staff through executive board and also through increased transparency and accountability to citizens and parliaments.

Q87 Mr McCann: One final question, and hopefully it's a yes/no: should donors withhold assistance from recipients who break undertakings?

Peter Young: I generally think there should be a relatively tough line on this. If we don't take a tough line, then people don't pay attention to these sorts of agreements. Conditionality has had a bit of a bad name. If a country is absolutely wasting money on something or other, it's perfectly okay to make a condition that it sorts that out before one lends it more money or gives it more money and it hasn't addressed the first problem. I think "yes" is the answer to your question.

Ed Hedger: I'd say provided it's proportionate, and provided it's relevant. Those are two questions that have not always been applied. Clearly there is evidence of conditionality having effects and securing traction on reforms. When there is a sense of a lack of ability to achieve those conditions, or some factors beyond the control of the Government to achieve them, is one point that's relevant, and second is the timing; the point at which funds are withheld. One of the objectives of course is around predictability. Conditionality applied at short notice can fundamentally undermine that, and that takes you into questions about whether conditionality is a prior condition or an ex post condition. It's a complex set of arguments rather than a simplistic one of withholding or not withholding aid.

Jesse Griffiths: If I could emphasise that last point, predictability of aid is crucially important for developing countries. It matters, exactly as you said, how you make these disbursements and on what conditions you might withhold the disbursements. The IMF estimates that aid is several times less predictable than tax revenue for Governments in developing countries, for example. That's a real problem. The issue about withholding disbursements should only be done under very clear conditions that are agreed in advance, and over a timeframe that allows the developing country to adjust. Suddenly cutting off aid is possibly one of the most damaging things any donor could do; you could probably even argue it could do more damage than the aid did good in the first place.

Ed Hedger: There is evidence on this, about the borrowing costs upon Governments of recourse to private markets in order to compensate that. It links in with the harmonisation agenda as well, where donors act in concert, which is a good thing for all sorts of reasons in terms of transaction costs upon Government and themselves, but equally the impact of multi­donor withholding needs to be treated sensitively to those sorts of issues.

Q88 Chris White: Good morning. How optimistic are you about the economies of low­income countries over the coming year?

Ed Hedger: It's not an area that I was going to give substantial evidence on. I can say a few words about the role of the crisis response window, perhaps, in that context. I think that the evidence from ODI, with which we can certainly provide you, is that they were to some extent protected through their weak integration with international financial systems, so the direct transmission was limited, but there's a risk of second-round effects. They seem to have fared quite well. In the context of the World Bank conversation, there seems to be some encouraging progress around inclusion or ongoing inclusion of a crisis response window, and I know that's something the UK Government has pushed quite hard for. One of the big weaknesses during the crisis was that much of the money was locked in the trust funds, and therefore the ability to act fast and responsibly is weakened. That would seem to be something to continue pushing for, and a good emerging development, which could be supportive of those countries if they become vulnerable.

Q89 Chris White: If these fragile economies were to deteriorate, what sort of support and assistance would multinational organisations be able to provide?

Ed Hedger: Through these trust fund windows? It is still in negotiation as part of the IDA16 negotiations, but, as I understand it, if a number of countries' GDP were to decline by 3% or greater, or there were to be some sort of systematic decline, then the idea is there would be a more immediate response. This is partly to do with the earmarking of funds, where a lot of the funds to IDA have been earmarked to trust funds. This has been one of the significant criticisms, from our perspective, of the way the World Bank operates, and its inability to respond quickly. This would be a softer earmark associated that could move faster.

Peter Young: I think, to answer your question, that with low­income countries it is often very specific factors that are peculiar to the country concerned, which are more important than the overall economic climate. For example, take south Sudan. What's going to happen with the referendum and the separation from the north? Take Pakistan: unless its fundamental governance problems are addressed, and the way that the state operates, it's going to have continued decline. Take Nigeria: we're working on trying to sort out the electricity problem, and getting rather close to making some breakthroughs there. If that's sorted, then you can see an increase in GDP of about £130 billion. There are all sorts of specific factors, country by country, that are often very much more significant than global ones.

Jesse Griffiths: Regarding your question about what they would do if things got worse, the crucial institution in that discussion is the IMF rather than the World Bank, because obviously that's the institution set up to provide emergency funding. Oxfam and Development Finance International did some research looking at developing country Governments' budgets, and their relationship with IMF conditions. They found that the IMF has behaved much more flexibly during the crisis than in the past, in terms of allowing Governments to continue social security and other expenditures. That period of relaxation is coming to an end next year, and those Governments will be expected to cut back their expenditures on health, education and other crucial social programmes. There has been some flexibility, but also it's a short­term issue, so next year there is a big issue there for low­income countries. The issue you mentioned about second-round and other effects of the overall global economy are obviously vitally important to developing countries. I'm sure everybody has different opinions about the way that's going. The crucial issue is that there isn't really a decent crisis response mechanism for low­income countries, and I don't think the windows that they're proposing at the World Bank is the answer. For a start, it's taking a long time to set up for a crisis that started over two years ago—here we are in 2010, and it's still not agreed.

Peter Young: It might be ready for the next crisis.

Jesse Griffiths: It might be ready, but I think there are proposals for much more rapid methods. For example, during the London Summit in 2009, it was agreed to increase the Special Drawing Rights available through the IMF by $250 billion overall, but only $19 billion of that went to low­income countries. There ought to be mechanisms so you could transfer some of those Special Drawing Rights, for example. I understand the UK Government did look into that at the time, although I don't think any action was taken. There ought to be more rapid mechanisms that don't rely on the slightly slow bureaucratic procedures that the World Bank often puts in place in this kind of situation.

Peter Young: I was reading, in preparation for this session, the Special Themes for IDA16 paper from the World Bank in relation to fragile states. I'll just quote it. "Both external and internal factors continue to hinder implementation performance in FCCs. These include limited capacity of client Governments, limited Bank resources, and continuing challenges with Bank processing and fiduciary issues… Slow procurement has been one of the problems—in addition to limited capacity of implementing agencies and markets—in situations where speed and flexibility are crucial." That is basically the Bank saying, in its own bureaucratese, that its systems are not suitable for the very speedy response that you require in these fragile and conflict­affected states.

Q90 Pauline Latham: That's something we are going to touch on, because obviously Adam Smith International are highly critical of the World Bank. You've identified a number of inefficiencies in the host countries' procurement processes related to World Bank projects, and you've commented that "as a result of such inefficiencies, it was usually impossible to tell when the World Bank project would actually be delivered." Do you have any examples of this problem that you can tell us about? How widespread do you think these problems are? How do you think that DFID's procurement compares with that of the World Bank?

Peter Young: I can give you some examples of that. Here's a pretty good example: Nigeria, the GEMS programme, which is to do with growth. It is a large programme agreed jointly between DFID and the World Bank. There are three components of that financed and procured by DFID, and three that are meant to be financed and procured by the World Bank. The three DFID components have started; we are indeed implementing one of them. The World Bank components—it was meant to be an integrated project, all running at the same time—have not started. The World Bank's loans relating to them haven't even been approved by the National Assembly. What they next need to do, if they get those approved, is to go through a procurement process to hire a procurement manager, who will then procure those components. Given the time all that normally takes, it's two years off on an optimistic basis, by which time the bulk of the DFID components will have finished or will be almost finished. That is a very clear example of how the two things match. Fundamentally, DFID's procurement is staffed by capable people who are operating in an effective merit­based system, and can do things in a reasonable amount of time.

We really only see those things that we come into contact with. We're not doing research into the generalities. I can't comment on whether this is the case 80% of the time, or 70% of the time, or 30% of the time. It's just that one comes across an awful lot of cases where things are so terribly slow, and you never know when the World Bank things are going to start. There are many cases where we are implementing something for DFID, and the World Bank is meant to take over, but then our project has to be extended, and then extended again, and then extended again, and then again, because the World Bank stuff has never come into place. Those are direct comparisons. Obviously I can point to a number of individual cases. I think there are a lot of good examples to do with south Sudan Multi Donor Trust Fund, which is run by the Bank, where some of the procurements that we've been involved with—we are tendering to do some of the work—have taken four years and still haven't resulted in the award of a contract.

Q91 Pauline Latham: With examples like that, clearly the World Bank, like any organisation, has a budget for a financial year. They must always never hit the target. Or is it that they have so much money to spend in this financial year, that they are not going to hit this year's priorities, but they'll hit three years behind's priorities because they'll come into this year? Is that how it's working?

Peter Young: I have myself never studied the overall finances of the World Bank.  Perhaps my colleagues are better informed. I know, for example, that the money they will probably not be spending in Nigeria they want to switch to Pakistan, because Pakistan are short of money. Sometimes there are ways in which they can spend the money. The definition of what is spending money is often a rather unclear one. If a donor writes a cheque to a multi­donor trust fund, then that money, in the eyes of that donor, is spent, even though it may be sitting in the multi­donor trust fund for six years. I don't know whether, if the World Bank itself puts money into a multi­donor trust fund, it thinks it has spent it. In fact it has not actually been spent on anything in particular. I bow to my colleagues' superior judgement on those points.

Ed Hedger: The wider experience I think would bear out the real challenges, particularly around investment lending, which it comes back to, and a tenet of that is implementation around procurement and that being quite a systematic challenge. I wouldn't necessarily classify it as solely or largely a staff capacity issue to do with the relative competence of staff. Part of the challenge is a procedural one. There is a very strong compliance culture that seems to go on around the procurement side of the Bank, particularly borne out in fragile states. It's interesting to look at some of the pressures associated with that, which is from the bilateral donors who are represented in that group. On the one hand they are pushing for speed, faster disbursement, faster execution on the ground. On the other hand, many of those constituencies are also calling for the very same safeguards and for the financial controls and for the fiduciary role that the Bank plays in the stewardship of their funds. I fear sometimes there is a little bit of buck­passing, with some of those funders who are demanding one thing but also requiring that. That doesn't mean to say that the problem doesn't exist, but I would say it's perhaps a more complex institutional one than a pure one of getting the right staff in the right place.

In terms of the issues of fragile states, where the procurement is particularly strong, there seems a tension between the fiduciary aspects of procurement and the potential development aspects of procurement. Equally, there is a challenge of risk assessment, where the full framework of risk assessment is applied to everything, however large, however small. The one point I might make is it is perhaps worth distinguishing between what some of the multilateral donors are charged to do on behalf of the bilateral donors, and what the bilateral donors do direct. Large­scale infrastructure projects are the sorts of things that bilateral donors may be doing less of now, and those by their very nature may attract and to some extent require a slightly stronger process. I think that is worth comparing.

Q92 Chair: What you've both said does seem to imply that too much is done in Washington and not enough on the ground. That seems to be the implication.

Pauline Latham: Yes. That's what I thought.

Peter Young: The procurement is not done by the Bank. It is done by the recipient country, but it is micro­managed by the Bank. The Bank has to approve everything that's done, at a very detailed level. Because those procedures are, as my colleagues are saying, very tight, because of the increased risk of corruption, particularly in the fragile states, that adds even further delay to the thing. You have two sets of procurement things going on: one, the developing country Government, which basically doesn't have the staff to do it properly; and two, the World Bank, which probably has the same quantity of resources going into the procurement as it would have had if it handled it directly, checking every single thing, but not actually intervening to speed anything up. It really results in a mess, and it's just not a very sensible approach.

Q93 Pauline Latham: There's an argument that people say, "We want to make sure that the money is spent well," and you can see how those sort of systems have built up. But it isn't like doing business in the States, doing business in fragile states. It's completely separate. Is it because of transparency that they're doing this, or maybe the lack of transparency, to show how the money is being spent as well as it could be? We're going down this route of saying, "Every £1 has to count," and of course it does, and we want to make sure that it's not going to corruption, that it's going to where we want it to go to. Do you think that's why the World Bank is so inefficient, because they've looked, as we are doing now, at how we can get the best value for money without it going to corruption? That is the thing that our constituents say to us: "Why are you spending all this money? It's going to corrupt Governments that just prop up themselves; it's not getting down to real people." One of the questions I asked when we were at the World Bank was, "How does what you spend affect the people on the ground?" Do you think that is one of the problems that they face, and that we may indeed face?

Jesse Griffiths: I think that is a critical question. Before I answer that, may I say, very quickly, in answer to your previous question about whether there is a discrepancy, that every year there's a discrepancy between the Bank's commitments, which are always larger, and its disbursements. This points to one issue, which is that the Bank has a culture of approval, so Bank staff want to commit money, because they have targets, but it has a much slower culture of disbursement, as people have highlighted.

Is it anti­corruption? I think part of it is, but part of it is also that the Bank is a bureaucratic institution, as we've heard, with its own particular rules that have built up over time and aren't necessarily always reviewed regularly enough. What the Bank ought to be trying to do is turning this discussion around. What really matters in developing countries is the overall procurement across Government, not just the bits that happen to be funded by the Bank or by other donor agencies. I think it is right that this issue of shadow systems alignment, as it's called, should take place. The Bank and other donors ought to be trying to use developing country Government systems when they lend to Governments, but make those systems better, rather than set up parallel structures that may make sure your particular £1 gets to where you want it to but will probably cost you more in bureaucracy. But it doesn't address the wider issue of how do we improve overall anti-corruption.

Peter Young: That wider issue is usually associated with Civil Service reform as a whole, because you are trying to get the Civil Service to work effectively, to be able to recruit decent, mid­level officials on a merit basis, who are paid properly, and so forth. By and large, the evidence, as I'm sure you're aware, of all the Civil Service reform programmes of the last 20 years, is that it hasn't worked. They've never really been able to accomplish substantive Civil Service reform. There are very few exceptions. The fact of the matter is, on a pragmatic basis, that the Civil Services in these countries are not capable of handling a procurement process properly. That is simply the fact.

What will happen, if you insist on them doing it, is that the Director General of the organisation, or the Permanent Secretary, will have to lead the process, and get involved in all sorts of details and whatever, rather than getting on with the more important things of policy and management and whatever his responsibilities are. So often, when we have some minor problem with the administration, you cannot get it sorted out unless you speak to the Permanent Secretary. If Permanent Secretaries in Britain were spending their whole time sorting minor administrative matters like that, they would never be able to get on with their job. That is indeed the case in most of the countries that we're talking about, particularly the fragile ones. Although it sounds nice to say "Let's rely on in­country systems," in practice it doesn't work.

Jesse Griffiths: That's a sweeping statement. It doesn't apply to all—

Ed Hedger: Yes.

Peter Young: Not in every case. There are some that are more or less all right, but broadly speaking, particularly in fragile countries, that is the case.

Ed Hedger: I would say there are two things. The examples of failed Civil Service reform almost necessarily won't be applicable to some of these post­conflict countries, where we're talking about the very risks there. It is the fundamental absence of capacity, not the failure to reform the Civil Service, that is one of the questions there. This other question is you said that there were risks in two directions: fiduciary control is served by avoiding use of country systems, but then the opportunity for development gain is also forgone. Part of the issue strikes at exactly what you're saying: what is the defence to the constituent about the tolerance of risk? These issues are not the exclusive challenge for multilateral donors, of course, but also bilateral donors, particularly around budget support. There's a strong amount of cross­country evidence on the merits of avoiding parallel systems, and of course a huge international architecture around that. There are examples—Rwanda, Sierra Leone, others—where to some extent that risk has been taken with what early evidence suggests are quite beneficial results. I wouldn't say it was a simple yes or no, but I equally don't think the evidence strongly supports that. A couple of points on the question of measurement as well, which is something that is shared. There I think it is a challenge around attribution versus contribution, and the question of the extent to which you can be clear on what you're getting.

Chair: You seem to have stirred up the Committee. About four people want to make interventions at this stage. I will let them do so, but I would be grateful if they and you could be crisp, because we'll never get to the end otherwise.

Q94 Mr McCann: Peter, you made a contrast between the DFID delivery and the World Bank delivery on that procurement point. If you go back then to the Government striving to get 2% administration costs, doesn't that tell us, in the example that you gave, that is based on the general austerity that we're facing in the UK, and not on common sense? The corollary to the point you made surely has to be that we have to increase our bilateral rather than our multilateral aid programmes through organisations like the World Bank?

Peter Young: I think, yes, we should increase our bilateral aid programmes. We did submit some evidence—I don't know if you looked at it—on the issue of the DFID administration, in which we said that you need to have enough people in order to carry out an effective programme. You're not actually saving money if you have too few people. I think there may be ways around this problem in terms of how people are classified, as to whether they are programme staff or administration staff, and possibly that is the pragmatic solution to this. But I am not au fait with—

Q95 Mr McCann: But that's a false economy. If they're doing administration, and it's just a different budget that they're coming out of, that's not saving administration.

Peter Young: If you're going to say that you're saving administration costs in the UK by handing over money to another organisation that's less effective and has higher administration costs, you're not taking into account that other organisation's administration costs in your analysis of how much money you're spending on administration. That whole administration thing is a nightmare of the first order, but perhaps we don't want to get into that here.

Chair: No. We have put these points to Ministers.

Q96 Hugh Bayley: Peter, you said one of the factors that delayed the World Bank's GEMS projects in Nigeria was their failure to get approval from the National Assembly. Do you think it makes sense to put a major World Bank scheme to the National Assembly? Did the UK get National Assembly approval for its GEMS work?

Peter Young: Again, I'm not familiar with the details of how this operates. It's DFID's responsibility, not mine. I think the way it works with DFID is that they get agreement for their programmes from the Government, and DFID programmes are not put to the National Assembly, because of course it is us spending the money. The money isn't going into the Nigerian Government's budget. Whereas with the World Bank, the way that the whole thing operates, where the Government is actually borrowing the money, means that it could come under the control of the National Assembly. I don't think that is a very good idea, because the minutiae of which loans to accept and which not is not particularly a useful thing for a National Assembly to consider. I believe in this particular case what happened was an administrative oversight. These things are normally included in the budget, and a lot of these World Bank loans were left out for some reason or another. When you get bound up in these in­country systems, these are the sorts of problems that inevitably occur.

Hugh Bayley: I passionately disagree. I believe Parliament should scrutinise the Executive. But I hear your point of view very eloquently put.

Q97 Alison McGovern: A swift question to Peter. You described the absence of good-quality, middle­ranking civil servants as being at the heart of some of the delivery programmes. If the World Bank ought not to continue working within a country's own administration, what solution do you see for that problem? How will that be solved, ever?

Peter Young: Firstly, by loading all these administrative tasks on to the country's administration, which it is ill­suited to do, and, as I say, means that all the top people are involved in this extra level of the administration, which is especially complicated because of all the corruption safeguards that are insisted upon by the donors, as we were discussing earlier, doesn't help. Civil Service reform really is the solution, and unless one gets to grips with that, which really involves some difficult governance issues, one will not make progress on that, I'm afraid.

Q98 Alison McGovern: Can you briefly be slightly more explicit about what you mean by "difficult governance issues"?

Peter Young: Take some countries: civil servants are appointed not on merit but on grounds of political patronage. We did a report on Pakistan recently, where that whole issue of patronage goes throughout the system. Decisions are all taken on patronage grounds. The state education system of Pakistan, which is staffed by civil servants, is in such an atrocious state that 36% of the population send their children to fee­paying private schools as opposed to the free state ones. The reason for that is all of those appointments are done on the grounds of political patronage, and most of the teachers don't turn up. The problem goes right to the top of the system in that country. Other countries have different sets of problems. It might be simply more to do with resources. You will generally find that Civil Services are too large, because they are used as a means of providing employment, and it would be better to reduce the numbers and pay people more. Sometimes simply the resources aren't available for that. It's not an easy set of issues, and I don't think that we can go into detail here. There has been very great difficulty in making progress on this, for all sorts of issues that vary from country to country.

Q99 Jeremy Lefroy: The Crown Agents are quite highly regarded in terms of procurement, if you know the Crown Agents. I don't know the extent to which DFID does use Crown Agents, but would this be a model that perhaps the World Bank could look at?

Peter Young: That's an interesting one. I had heard from, not Crown Agents but one of the other UK firms that is on the DFID panel, Charles Kendall & Partners, that they had been hired under a World Bank programme in Cambodia to run the procurement system. By that I mean not handling an individual procurement and then have the decisions taken by the civil servants or the ministers, but that they would have the final decision as to how the thing was run and who was chosen, and so forth. I think that is a model, contracting out the whole thing, including the politically sensitive decisions, as opposed to just having someone come in and help.

Ed Hedger: A very quick one, on a governance point. This is clearly not just an issue of World Bank versus DFID. If anything, DFID is a stronger supporter of the use of country systems than the World Bank, and the World Bank has a greater use of project implementation units. That argument will take you, curiously, away from that position towards the World Bank.

Specifically on this point of Civil Service reform, for most countries it creates a binding obstacle if you say that you cannot invest in strengthening country systems until progress is made, particularly on Civil Service reform, which is arguably the least tractable of the issues. To some extent, the experience leaves you with nowhere to go, except a permanent recourse to international expertise, supplanting and substituting for domestic capacity.

That leads on quite nicely to this role of international agents. The same point could be argued on all of the fiduciary functions: procurement, audit, and accounting. There is an array of models in post­conflict states, with an array of different performance. The critical distinction, it seems to me, is not whether the use of an agent in that function immediately is a good or bad thing—it is often quite necessary for an international constituency—but whether there is an explicit remit that is enforced for them to be starting to try to build capacity and to transition from that executive agency role into that advisory one. Too often, the incentives around the contracting and specification of work fail to achieve that difference, and there are examples of where it has been better done.

Peter Young: If you take Afghanistan, there was a three­year programme that DFID financed—in fact with that same firm, Charles Kendall & Partners—that attempted to improve the procurement functions of the Afghan administrations. The progress made just isn't sufficient for them to be able to carry things out properly. In practice, under this World Bank procurement system, they're often using some kind of agent. A lot in Afghanistan—you wouldn't really believe it—is actually done by a subsidiary of Indian Railways. It appears to have the views on speed and efficiency that one might expect from the Indian state railways circa 1952. The Afghans might be even more efficient than that organisation.

Ed Hedger: I think it's also the sense of expectations in a three­year period about what could be achieved. If we look at the course of change in the UK and some of the reforms, and the number of years that attempts were made to introduce Whole of Government accounts here versus what we expect of a fully fledged procurement system in three years. Part of it is that, if you have an expectation of what you can achieve, it's there.

Chair: Sorry, can I bring in Anas Sarwar?

Q100 Anas Sarwar: If I could pick up on what I think was a bit of a contradiction, Peter? Earlier on in the answer you were saying that part of the problem with the World Bank is that it's micromanaging too much, and there's too much decision making in Washington, and then later on it's in­country systems don't work. Which is it?

Peter Young: Both, because what you have is that they're relying on in­country systems, which they're adapting to their own rules, which often, as my colleagues have been saying, have been insisted upon by donors. They are micromanaging every aspect of that process. The developing country will do something like send out a request for expressions of interest in something or other. The text of that will have to be given a "no objection" by the World Bank. Then who are they going to send it to? That will have to be given a "no objection" by the World Bank. The control by the Bank over what is done is there throughout the process, without them actually doing it. It would be a lot easier if they just did it themselves.

Jesse Griffiths: It wouldn't solve the problem, though.

Peter Young: It wouldn't solve the underlying problem.

Jesse Griffiths: Exactly, and I think we should be interested in that.

Peter Young: The point of providing assistance is to achieve the objectives of the assistance.

Jesse Griffiths: No, it's not.

Peter Young: It's not necessarily to fix subsidiary problems a, b, c and d.

Chair: Can I just bring in Mr Griffiths?

Jesse Griffiths: I think we're all interested in trying to achieve the Millennium Development Goals. We're not interested in which bit of the Millennium Development Goals our money can be said to have achieved; we're interested in achieving them all. For example, if you take health, in order for health to improve in any developing country, overall the health system has to improve. A large part of that is about Government improvement. To suggest that we can say, "Let's care just about this particular project and make it perfect, and not worry about the issues throughout the Civil Service and the local Governments and all the other different agencies," is, if you like, abdicating.

Your point about the World Bank is critically important. The Bank and other donors should be doing their best to try to make the country systems work better in a way that does not add additional bureaucracy and problems for that country. As we've heard, what they're doing is saying that they want to improve country systems, but adding additional levels of bureaucracy. You get the worst of both worlds.

Q101 Anas Sarwar: Yes. Isn't part of development about, yes, aid programmes, but also creating systems in countries so these people can not be dependent on developed countries for the rest of their lives? Isn't part of the programmes that we do helping to set up governance, helping to set up structures, but also have an effective aid programme that is, for example, fighting malaria or something else? Would you see that as part of the World Bank's role?

Peter Young: I think there definitely should be a focus on trying to improve the administrative systems of the host country Governments. The particular solution the Bank has come up with, that involves relying on a mixture of those systems with its own detailed procedures and control, results in great inefficiency in much of the way that the Bank's money is spent. It's a balance. One has to decide on what is the most important thing. Would it be better to have started this GEMS programme in Nigeria at the same time as the DFID things and have a proper integrated programme? Or is it better to rely on the Government system, supplemented by the World Bank rules and so on, and start it three years afterwards, so it can't be run together? If using the intra­country procurement systems in every case, as adapted by the Bank, is the best thing, then let's start that one three years late. I'm just saying, from the practical perspective of someone who works on the ground, that much of this approach is not working and needs to be changed in some way or other. By contrast, the DFID system, where you're having the procurement administration done by DFID directly, does work to a much greater extent.

Q102 Anas Sarwar: Just following up on that, do you have any estimates of the actual cost of inefficiencies in the World Bank­funded procurement process?

Peter Young: No, because our remit is not to do those sorts of analyses. I'm just reporting to you some of the practical problems that come up. I think we highlighted in that paper that often, if you're actually implementing a programme, and you're reporting directly to the agency for which you are implementing the programme, it is difficult to deal with inappropriate behaviour on behalf of your client. They're the ones who pay your invoices.

I brought along quite a good practical example. This is a letter, and I'm not going to say which organisation it's from, but from a bureau that we were implementing a World Bank programme for. The letter says: "The Bureau has a very high workload. Consequently the Director General, along with the top decision makers, is always under deadline pressure. The situation has led to cancellation of annual vacations for all the top management of the Bureau, which, as you know, is harmful to their health. It is in the attempt to arrest a total breakdown of their psychological wellbeing that we wish to propose a one­week vacation to countries of their choice under the sponsorship of your organisation. We wish to request your organisation extend the support you have given to this proposal by giving the Director General and her team of eight a deserved holiday abroad, which is expected to refresh the team and put them on a sound track for the furtherance of the programme."

If you get a letter like this, what do you do? If it was a DFID programme, you would say, "That's a very interesting suggestion. I will speak to the DFID Project Officer," and then you would report back, "They've said that diverting resources to this trip is not appropriate. We can't do it." But if they're controlling the money, and you've already had tremendous difficulty in getting your invoices paid because they keep losing them and so forth, do you say, "Most certainly not; we're not going to pay for this holiday. This is totally inappropriate," and they say, "We insist that you pay for the holiday." Are you then going to call up the World Bank task team leader and say, "We have a real problem here. They're insisting on spending this money on this holiday." The consequences of causing a huge fuss about it will be that your invoices will take yet another six months to get paid. Dealing with these issues on a pragmatic, day­to­day basis is problematic.

Q103 Chair: How did you deal with it?

Mr McCann: Did they take the holiday?

Peter Young: I believe what happened, as far as I can remember—and I wouldn't want to be held to anyone investigating the details—is that it was decided it was important to have a strategic think­in in a certain foreign country, where they could look in detail at the forthcoming programme and take a variety of decisions on how to organise things, free from the pressures of day­to­day work.

Q104 Pauline Latham: That's one of the problems, isn't it, that we face? People, if they hear stories like that, think money is going astray, and it shouldn't be happening. I was interested in the fact that you've done a report on Pakistan. Maybe we should get it and read it before we go ourselves. Can I come back to something specific? We've heard that the World Bank managed the pooled South Sudan Multi Donor Trust Fund, but it provided little funding for health facilities, years after it should have done, after it was established. I know this is one of your pet hates. How typical do you think this is of multi­donor trust funds? What needs to be done to improve the position? In this particular case of South Sudan, with the impending referendum, how do you think they will feel about that? Do you think it will have any impact, because they haven't had these health facilities that they should have had, many years ago?

Peter Young: I think the South Sudan example is a good one. There have been a lot of studies done on it; done, in fact, also by ODI. They showed that the whole emphasis being placed on trying to use the in­country systems, of which there were virtually none, because South Sudan was a new creation, and having emphasis placed on decisions being taken by the South Sudan administration as the prime objective, as opposed to getting the particular tasks completed, was mistaken. It added to a huge quantity of bureaucracy around that particular trust fund, and that meant, as you've mentioned, that for years and years and years most of the money wasn't spent. It really ought to have been spent quickly upfront. The problem with multi­donor trust funds—though you can get ones that are more efficient than others, certainly—is that again, no­one is directly controlling it. All the donors that put money into it want to put their own sets of rules on to it, because they can't control it directly. The Bank, if it's running it, has a hugely complicated set of rules to protect it and, added to the whole set of problems we've just been discussing, that means that it's an extremely inefficient way of spending money. We have just been involved in setting up a multi­donor trust fund in Afghanistan, and the process of negotiating with everyone, when everyone has a slightly different legal point of view, and so forth, is a real nightmare. That mechanism ticks all the boxes of the Paris Declaration on Aid Effectiveness, where everyone needs to join together and put all the money in one pot, and have one approach and so forth, but, in practice, you often have a very poor result.

Ed Hedger: On this question of trust funds, I'm interested in the contrast, potentially, as I understand it, between Afghanistan and southern Sudan, where it's generally accepted it has little to commend it. In Afghanistan, the other research and the investigation we've done suggest that there is more that has been more beneficial there. The stats I have suggest that of $3.4 billion put into the trust fund, $3 billion has been disbursed, which suggests quite a high spend, particularly through the recurrent window, which is trying to get money out quite quickly to support areas such as salary payments for key social sector workers. I know there's a different procedure then applied to the development window, as I understand it, in Afghanistan, which applies external procedures and has agencies. My understanding is that Afghanistan suggests the possibilities of how multi­donor trust funds can work effectively, and can strengthen country systems, in quite stark contrast to southern Sudan, where it doesn't. Perhaps, rather than concluding that this is an instrument without merit, it's rather a question of what it is about that country's specific context that can give it the possibility to work well.

Q105 Hugh Bayley: Can I just refer to the Committee's own Report on Afghanistan recently, which found that the United States had spent six times as much money as DFID on reconstruction and development. The lion's share of DFID's money had gone through a World Bank multi­donor trust fund, yet it was found to have produced half as much, in other words three times the value for money, as having a bilaterally managed programme where the work was given to American contractors. I'm not immediately persuaded that running things yourself, using your own in­house procurement system, and buying from your own people necessarily delivers good development. In South Sudan, it appears not to have worked well. I wonder whether this is a problem in South Sudan. How do you make the general argument stand up?

Peter Young: I would agree with Ed that you can have some multi­donor trust funds that work a bit better. That ARTF in Afghanistan does pump a lot of money into key sectors and has worked relatively well. It's a very big thing with very broad objectives that perhaps could be distinguished from the bulk of multi­donor trust funds. I believe there are about 500 trust funds of one sort or another run by the World Bank. Many of them have rather more specific objectives and much poorer performance. Where it's possible to set up something like the thing in Afghanistan, in practice, many of them don't work. We did a study of the plans to set them up in Zimbabwe, where they had gone down part of the route towards setting it up, and it looked like all of the problems of South Sudan were about to be replicated. The donors generally decided to pull away and not put money into that fund. Many of the things don't function.

Chair: We're not yet halfway through the questions we want to ask you, and we're three­quarters of the way through the time we've allocated. I think we're going to have to speed things up.

Q106 Anas Sarwar: Just very quickly, it's already been mentioned a few times that DFID is moving down to 2% of admin costs, and you quite rightly pointed out the fact that the World Bank has massively higher admin costs than DFID does. Do you think there is scope for the World Bank to reduce its administration costs if not to 2% then close to 2%, or is that a silly question?

Jesse Griffiths: As has been alluded to, it is extremely difficult to know what the answer is to the issue of admin costs. A critical component of this, which we haven't talked about, is the use of technical assistance. The OECD Development Assistance Committee did a report in 2005 looking at technical assistance, and estimated that, according to the statistics, 25% of aid is spent on technical assistance. If you dig deeper and include technical assistance that is attached to other programmes, it goes to 50%. The question is, to what extent are, for example, admin costs being offloaded? I used to work in DFID Nigeria, and if DFID has a programme and various different agencies implementing your programme, all of those agencies, who are classed as technical assistance, themselves have administration costs. That doesn't show up in the figures. I would worry very much about taking any of these figures at face value. In the World Bank's case, I think there are a lot of hidden administration costs. For example, the Bank sees itself as a knowledge bank and spends a lot of time on its information and research, but to what extent is that really necessary, for example, in some of the projects and programmes that it's implementing? To what extent is it just a way of finding jobs for World Bank staff to do whom you want to shunt to something that doesn't impact the programme, which we've discovered on different occasions. It's quite a complicated issue, and I certainly wouldn't take any of these figures at face value.

Ed Hedger: There are two parts to it. First of all, the pressure that is exerted on DFID to reduce its costs should absolutely be applied in the context of negotiations. On the DFID administration charge, I think the evidence by the Permanent Secretary two or three weeks ago suggests that programme posts might rise by 300 to 400. This is partly to do with the negotiations that it has had with the Treasury about admin in programme delivery, and how that's treated. This 2% risks being a little misleading, partly because of the negotiations internally on the way it's allocated, and equally because of the indirect overheads associated with the World Bank and other multilaterals. The question might be, were you to bring all of the multilateral spend back under a bilateral programme, could you run that programme effectively and achieve the same result on the 2%? That's a question that is well worth asking.

The other point, on the World Bank itself, there's this role that Jesse alluded to in providing global public goods and regional public goods, whether it is a knowledge bank or taking on other functions. That needs to be priced into that equation. It is a value judgment about the effectiveness or otherwise of that, but there are roles that other bilateral donors delegate to the World Bank on their behalf, be those fiduciary, knowledge, or the reliance on analytic sector work, which do increase those costs. Whether those are reasonable increases is, of course, a judgment call.

Peter Young: This whole admin thing is just barking up the wrong tree. The question is, is the money being spent wisely and achieving results? If it takes 10% admin costs, or 0.5% admin costs, it's not really important. The issue is to do with quality and achieving the results, and whatever you need and whatever you want to brand as admin should be applied in order to achieve the results.

Chair: A tick­box approach, unfortunately, seems to dominate the way these things are done.

Q107 Hugh Bayley: The Bank's Independent Evaluation Group has made some quite penetrating criticisms of the efficiency and effectiveness of certain Bank programmes. Does that mean it's doing a good job? What would you say about how efficient and effective the IEG is overall, or would you say that its investigations are too burdensome, too time­consuming?

Jesse Griffiths: I think the IEG does a good job overall. I don't think it's a large burden on the organisation, given that any organisation of that size ought to be doing the kind of evaluations that the IEG is doing anyway. It makes sense for an arm's length body to do it rather than in­house. There are issues, though. There are two main issues that I would highlight. First, the IEG bases its own evaluations on internal World Bank assessments. For example, when it reports what percentage of health programmes in sub­Saharan Africa are satisfactory, as it did and found that only 27% were, it's basing that on the Bank's own evaluation rather than doing its own independent evaluation.

That hits on a second critical point, which is that there isn't a culture of independence within evaluation more broadly within the Bank. The kinds of evaluations that the Bank does itself are more geared towards proving that what the Bank did was the right thing, than necessarily having an independent assessment that could feed back into better results. Independence overall within the Bank is probably a bigger issue, to my mind, than the IEG's own operation, which I think works, on the whole, rather well.

Q108 Jeremy Lefroy: I'd like to ask this question to Mr Griffiths first. You have expressed concern that a significant expansion of the Bank's work in health is commencing without evidence that the major failings that we've already discussed have been addressed. How do you think the Bank can improve its performance on health programmes?

Jesse Griffiths: There are three issues. The first is: should we be encouraging the Bank, which has a bad track record on health, to be massively increasing its role in health? Aren't there other organisations, like the Global Fund, or bilateral programmes, or other ways that health outcomes could be achieved more effectively? That's a very important question.

Secondly, the Bank still has issues in terms of the kinds of policies that it promotes through its health programme. In the past there has been this big debate about user fees. The Bank insisted on promoting user fees in developing countries for a long period of time, and only eventually gave in and agreed that it makes more sense for countries to offer health services free at the point of delivery if you actually want people to use them. Those kinds of issues about its overall health perspective still linger. For example there's a great deal of concern, which Oxfam has raised in a report called Blind Optimism, that it over­promotes the private sector's health provision role, when in fact in many developing countries that's either negligible or not the main way in which people receive health services. There are questions about the policies it promotes.

Then the IEG report is based on actual implementation problems—whether it achieved what it set out to do—and found that in many cases it didn't, particularly in sub­Saharan Africa. My question would be more: if the Bank has all of these problems, why is that we keep looking to the Bank to be the solution? My overall perspective on the Bank is that it should focus on the areas where it has an advantage or a strong track record, and other institutions can pick up other areas. Health, to me, doesn't seem to be one where an expansion of Bank activity is necessary.

Q109 Jeremy Lefroy: One follow­up to that: would you say it's partly to do with the kind of people, and the background of those people, the Bank uses in those projects? Clearly we have very different health systems in the developed world, ranging from state­backed insurance systems, such as in Germany, much more private­sector insurance systems such as in the US, or free at the point of delivery, such as in the UK. Is there a problem in that there are people from a certain background who are driving the health programme?

Jesse Griffiths: I think so. There is not quite an ideology, but there's certainly a perspective that the Bank has, which its staff have, which is not necessarily the one that would be most beneficial. It is promoting, if you like, a more privatised or private sector­led health delivery system, and not paying enough attention to the fact that you also need strong public institutions if you want to deliver health care for all in the developing world. In any country, in fact, you need either strong regulatory or strong delivery systems.

Q110 Alison McGovern: Very briefly, in Britain the Civil Service changed massively post­1945, because they had to deliver the NHS and large­scale public welfare programmes. Is this question in fact linked to our discussion earlier, which is that the development of public services and a sort of welfare state for developing countries is linked to the development of the Civil Service? Would I be right in making that assumption, would you say?

Jesse Griffiths: There is no question but that if you want to deliver, as the Millennium Development Goals set out for example, massively improved health care or education for populations in the developing world, then Government or Government­regulated service providers will play the majority role. The Oxfam Report looked at the evidence and found that, although the Bank, for example, highlights what percentage of people go to private­sector deliverers when they're looking for health care, mostly they're talking about going to a chemist, a local healer or some probably untrained person, rather than using an effective health system. It concluded that only the countries that had invested in public health infrastructure could actually demonstrate those kinds of improvements that we all want to see.

Q111 Anas Sarwar: I'll just move on slightly. Do you think DFID and the World Bank are doing enough to help developing countries counter tax evasion and also the misuse of tax havens by multinational and transnational corporations? If not, what more do you think they should and could be doing?

Peter Young: The issue of not paying taxes is most important in respect of the countries themselves. There are a lot of countries where, basically, the elites in particular don't pay tax. I won't list them, because it would be a long list. The most important thing is for those tax administration systems in those countries to be strengthened, the governance to be strengthened, such that people in those countries pay tax. If they don't pay tax, why should we be sending them money to enable them to afford not to pay tax? If they don't pay tax, they have no stake in the system. That to me is the critical issue, rather than what multinationals are doing, which is no doubt important in itself, but not nearly as important as making sure that people in the countries themselves, particularly those running the countries, actually pay some tax.

Jesse Griffiths: The amounts that developing countries lose every year, as I'm sure you've seen, in terms of tax avoidance and evasion, are in the hundreds of billions, so it is a very important issue, and I don't think the Bank is doing enough. In September, the IFC, the World Bank's private-sector arm, approves a loan to Petra Diamonds in Tanzania. Petra Diamonds is based in Jersey and the revenue from that will be channelled through a company based in Bermuda, so there are still serious issues. In April, the Bank finally issued a policy on how it deals with offshore financial centres, but most independent experts who have reviewed that don't think it goes anywhere near far enough. For example, there is no due diligence procedure that ensures that, for every project where offshore financial centres are involved, they should properly check that isn't being done to avoid tax. The Bank is picking up the issue but it ought to be doing a lot more.

Q112 Anas Sarwar: Is DFID doing enough?

Jesse Griffiths: It's hard to say, because I'm not sure it's necessarily DFID's responsibility to solve some of these issues. For example, many experts and campaigners are calling for country­by­country reporting, so that all multinationals should report what taxes they pay, what revenues they earn, in every country in which they operate, which is one of the main things that might help solve this problem, but DFID cannot do that.

Q113 Anas Sarwar: Would you be in favour of such legislation in the UK?

Jesse Griffiths: Yes.

Q114 Pauline Latham: We know that the World Bank is a bit patchy on gender. We also know that the gender­related MDGs are particularly off track. You said earlier that women choosing to have fewer children, women getting a good education, women getting good health care, improves the lot of everybody in the country and the wealth of the country. How do you feel that the World Bank could improve its performance on gender?

Jesse Griffiths: There is a serious issue in terms of how it mainstreams gender across its overall portfolio. The IEG Report found that in the financial year 2009 the number of World Bank projects that were gender­informed fell from 45% to 38%. There is a sense that maybe they're not taking it seriously enough. They did have this gender assessment plan and strategy that we had hoped would push them forward, but it doesn't seem to have done that. I know DFID has made gender one of their key issues for the IDA replenishment, which is welcome. Like all of these things, it requires a real step­change in attitude and culture at the Bank. That can only come from the top, and yet there doesn't seem to have been enough attention paid to it, to my mind, by President Zoellick.

Q115 Pauline Latham: Do you think that the new shadow chairman of UN Women will have an impact on the World Bank as well as on the UN?

Jesse Griffiths: I hope so, but I think it will be difficult. Certainly in terms of relative power and influence, the Bank is much more powerful than most UN agencies, so it often tends to be the other way around that influence spreads. It was a good idea to set up that institution and merge existing institutions into it, and I hope that it will have that impact. That requires that institution to be backed up by Governments, including the UK's Government.

Q116 Jeremy Lefroy: Do you think that the World Bank is supporting the right sectors in developing countries? Are there particular public sector areas or industries that you feel that the World Bank should be supporting but isn't at the moment?

Ed Hedger: One piece of evidence from our side was some survey analysis we carried out in a range of countries in Africa and South Asia, asking about the comparative advantages of different multilateral organisations. One thing that was reported there was a preference for a focus in a lot of the cases on infrastructural and productive sectors, which is not necessarily well attended to by some of the bilateral organisations that don't have the scale of budget to address that, nor sometimes the inclination, in tandem with the social sectors, which are obviously absolutely critical as well, so that sort of feedback. I wouldn't have a particular view on whether it supports the right sectors. Of course, one of the arguments in favour of the multilateral channels is that they are capable of supporting a whole range of sectors and therefore dealing with systemic issues, but that specific feedback was given on productive and infrastructure.

Q117 Jeremy Lefroy: That would therefore add greater weight to our concern about the problems you've already raised on procurement, because infrastructure programmes inevitably require much greater procurement.

Ed Hedger: In our discussion, we've ranged across fragile and post­conflict states, and other aid­dependent low­income countries as well. Of course there is the IBRD class of borrower countries, where there might be much stronger countries. I suggest it wouldn't be right to generalise across that whole range of countries. Much of the problems you're talking about are particularly focused on the most fragile and, therefore, the most weakly capacitated countries.

Q118 Jeremy Lefroy: Would you view agriculture, which many of people have raised as a sector that needs far more investment in the coming years, as one in which the World Bank has expertise and could make a contribution to, particularly smallholder agriculture?

Ed Hedger: I'm not a particular specialist in terms of my knowledge on that. I could certainly ask colleagues who do work on that to offer a view.

Jesse Griffiths: The truth is the Bank engages in almost every sector. That's part of the problem, as I mentioned earlier. For me, it's more how it engages in different sectors. Yes, it is right that much more attention should be paid to agriculture. There have been problems with the Bank's overall approach. For example, the Foreign Investment Advisory Services, which the Bank runs, have been implicated in pushing changes to developing country laws that facilitate the "land grab" as people are calling it—the increasing buying­up of developing country agricultural land by foreign investors and countries. There are problems about the approach it takes. One that is particularly controversial at the moment is to do with energy, because the Bank is reviewing its energy strategy and yet, this year, lent its highest ever amount, over 6 billion, to fossil fuel projects. That is not to say that the Bank should be telling developing countries what kind of energy systems they should be running, but rather that the Bank, with limited resources, might better focus on energy solutions that actually reach the poorest and help countries transition to low­carbon solutions, rather than providing its expertise and support to large infrastructure coal plants, like they did in South Africa this year, for example.

Ed Hedger: Related to that is one of the Independent Evaluation Group Reports at the moment looking at this issue, which suggests a lack of innovation in the way that the Bank approaches this, and also some lack of the mix of instruments it uses. Perhaps grants, which create less risk from the recipients, might be used to approach the more innovative alternatives to coal power, which could then be followed up by borrowing if those worked, so perhaps some more innovation in the selection and mix of instruments, as well as the services.

Peter Young: Certainly in talking with some of the former World Bank staff about these issues, they stress there's a lot of innovation in the whole knowledge area. I think it's a very good investment in the World Bank that it does put so much into research and thinking through these various issues, but there's much less innovation in the lending area. The priority is largely to get money out of the door, because people are judged on how much money they get out of the door, more than anything else. I agree very much with what you're saying there, Ed.

Ed Hedger: Added to that, another push in terms of negotiations around the replenishment is this question of the results­based lending instrument and what that starts to look like, which I understand is still some three to six months away from board approval. Therefore, the decision can be made of allocation ahead of that, but that might start to push away from disbursing loans into something that looks at tackling the results in general more strongly.

Q119 Hugh Bayley: In your evidence and your comments today, the Bretton Woods Project has advocated some quite sweeping reforms for the World Bank. You seem to be arguing that the UK's IDA16 contribution, whatever size it is, should be made conditional upon changed behaviour by the Bank. In other words, conditionality should apply. We've put these questions to DFID, and their senior officials had this criticism of conditionality: if each and every IDA donor attached conditions to their IDA contributions, so that they could withdraw funding or hold back funding if various conditions weren't met, you could have absolute chaos. There'd be a lack of predictability for the Bank. She said to us, "There would be absolutely no certainty, no predictability and no ability for countries to know how much money they were going to get, and the whole thing would collapse." One obviously wants to change for the better some of the things the Bank does badly, but surely it would be a very bad thing to make funding to IDA conditional in the sense that it could be withdrawn partway through the IDA round if certain conditions weren't met. How would you coordinate the conditions? Different donors would have different views about priorities.

Jesse Griffiths: I actually agree 100% with that, so I think we were mischaracterised, perhaps, in that evidence session. In fact, I think it is a problem with the IDA round that it does focus attention on what donors want and not so much what developing countries want or what civil society and Parliament want, for example. There's very little interaction in that round from people who are more impacted. What we say, and we've said this in a statement with nine other UK NGOs, is that what matters, at the end of the day, is the total amount given by the UK Government. That, if you like, is an assessment by the Government on: has the Bank made enough progress that we can give it more or less money? When it does that, it should take into account the critical issues, which we think are things like climate and energy, gender and overall governance. I guess our assessment is that the Bank hasn't made enough progress on those to be given the seal of approval that would come with the UK increasing its dollar contribution.

Q120 Hugh Bayley: That's very helpful. Also in the evidence that we received from DFID was a suggestion that the Bank needs a crisis intervention window. If you look at the way that the IMF and the World Bank responded to the global financial crisis and the global food crisis, there was a lot of resource made available and speedy responses, particularly through the IMF, to countries—by and large not the poorest countries—to help them protect themselves against the international financial crisis, but relatively less funding was available to the poorest countries, because the instruments weren't available. Does the panel in general support DFID's ambition that some World Bank funds should be held back to deal with crises of this nature when they affect low­income countries? In particular, she had a proposal that, since IBRD has become recapitalised quite substantially, one might set up a mechanism whereby IDA could in effect borrow from IBRD and then make grant funding available to low­income countries and pay back IBRD in the fullness of time. How would people react to those two suggestions?

Jesse Griffiths: That second suggestion I think would be wrong, would be a disaster, because essentially what it's saying is that, in times of a crisis, we should allow low­income countries to borrow more money.

Q121 Hugh Bayley: Forgive me, I don't think that's what she was suggesting. She was suggesting there should be borrowing by one arm of a bank from another to enable grants, aid in the form of gifts, to be made available to a low­income country hit by a food crisis where it has a food deficit.

Jesse Griffiths: If you're talking about a transfer from IBRD to IDA, which could then be given as grants, in terms of retained income from IBRD that goes to IDA and is given as grants, I don't have a problem with that. My understanding of the proposal is more that IDA could make use of the borrowing capacity of IBRD. Maybe I misunderstood but, if it is a loan from IBRD to IDA that then has to be repaid, then it has to be paid back. Maybe I don't quite fully understand exactly what she was proposing.

Q122 Hugh Bayley: The idea of having resources retained to deal with crises is something that certainly you support, but you'd like to know more detail about how it would be financed.

Jesse Griffiths: I support it but I worry about whether the Bank is the right window in which to do that, given how slowly it reacted this time around. As with all the problems we've discussed about disbursement, can we really rely on that to react more quickly next time? I wouldn't be so certain.

Hugh Bayley: ODI and Adam Smith?

Ed Hedger: Part of this question is bound up in what the instrument looks like, and an instrument that should attract support is one that is capable of overcoming exactly these rigidities. My understanding of the proposed instrument, which I think incidentally represents, to some extent, an emerging success for UK negotiation within the IDA round—it was added in later in addition to the special themes, because of this response, these problems around slow lending—is to break down these silos of trust funds. The particular class of trust funds associated with fragile states in these crisis environments is locked in funds. The Indonesia one particularly has a large amount locked into it. A mechanism that can do that and can respond faster, which has soft earmarking rather than hard earmarking, would seem to be sensible. Related to this question of sweating other bank assets in order to provide temporary additional resources to IDA, it's one again that I haven't looked at in detail, but more looked at the additional contributions through the CRW.

Peter Young: I would also agree that the Bank really isn't the organisation to react quickly to things. I quoted earlier from the Bank's own analysis of its implementation in fragile states, where it referred to all of those problems. One of the difficulties is that donors are giving money to the World Bank. They don't then have direct control over it, so they want to impose greater controls over how it's spent to make sure that things are done properly and whatever. It's an awful lot easier just to control the funds oneself and then spend those quickly. Accountability is much more immediate if it's to DFID or whatever it is that's spending money directly. You don't have to construct these elaborate rules and so forth, have them interact with the Bank's own rules for this and that. Generally speaking, crisis stuff, best to do it bilaterally, I would have thought.

Ed Hedger: Part of the challenge is these rules are the rules insisted upon by those who are making the financial contributions.

Peter Young: That's exactly what I'm saying. The donors want to insist on the rules, because they can't be absolutely sure it's going to be spent. You get the extra rules imposed by the donors, which then make it difficult to move fast. Why don't the donors just spend it themselves, then it's easier.

Ed Hedger: I think it's probably a question of scale of resourcing and also perhaps it's convenient to be able to pass those rules across.

Jesse Griffiths: Any crisis response would have to be done multilaterally, otherwise you get the "donor darling" effect where some countries, if it was just done bilaterally, may have access and others wouldn't.

Peter Young: They can agree with each other. We'll put in this amount of money; they'll put in that amount of money.

Ed Hedger: CRW is a potential mechanism in order to achieve that. The breakdown in that co-ordination is exactly typified by the challenge there.

Q123 Chair: We're getting close to the end, but not there yet. You mentioned climate change before. I don't want to pursue that other on a very specific point. We raised your concerns with the Minister about low­carbon and high­carbon investment. His comment is, "If there is an alternative," that's an alternative to fossil fuel or particularly coal, "that can be delivered for energy production in [a particular] country … it's not just fine; it's desirable. But the problem is that in so many countries you cannot, at the flick of a switch as it were, have another source of energy production." The question of IDA16 is: to what extent is it realistic to believe it can deliver low­carbon solutions, which, after all, are more expensive? Are you actually suggesting that they shouldn't under any circumstances, as opposed to the South African circumstances, support coal­fired or other forms of fossil fuel power stations?

Jesse Griffiths: I think they should phase it out. That is the position we and other NGOs have adopted. Over a time period, I think to 2020 for the low­income countries and for 2015 for middle­income countries, we have suggested the World Bank phases out of fossil fuel funding, for a number of reasons. First, if it's serious about climate change, then it shouldn't be making the problem worse. Secondly, the World Bank in energy is a very small player, particularly in middle­income countries but also in many low­income countries. With its limited resources, where is it best for those to be focused? We think there are two areas: first improving energy access for the poorest, which is actually an interesting question. If you really want to improve energy access for the poorest, for example when we know that the majority of poor people live in rural areas, which are often a long way from electricity grids—

Q124 Chair: Sorry, that's not entirely true nowadays. There are increasingly poor people living in urban areas, where they can get access.

Jesse Griffiths: Absolutely the urban poor is growing as a whole, but still the vast majority of people living on less than one dollar a day live in rural areas. Those are the difficult­to­reach people for energy access that an institution like the Bank, focused on poverty reduction, ought to be focusing on. In those cases, the decentralised low­carbon solutions are much more applicable.

Peter Young: What is that by the way? Where's the energy coming from?

Jesse Griffiths: If you're talking about rural areas without access to the electricity grid, you have to talk about, for example, solar or other ways.

Peter Young: Solar will power a light bulb but it won't power motive power. We're working mainly on the energy in Nigeria, and there one of the main problems is there isn't much electricity to speak of, which is a terrible problem for the economy. You have to build gas­fired power stations, because there is gas, and actually that is environmentally beneficial, because at the moment they're flaring the gas. Flaring untreated gas is very, very bad. All sorts of pollutants go directly into the atmosphere. In that case, it's absolutely essential that one pushes ahead with a programme of constructing gas­fired power stations, which one hopes is done mainly by the private sector. It varies country by country, as to what is the appropriate solution. The main problem there is the electricity grid is there, but there's no damn electricity coming down the wires. That's what the problem is there.

Jesse Griffiths: You're absolutely right: there doesn't seem to be any problem with the private sector building gas power stations, coal power stations or fossil fuels in general. The question is always: why does the Bank have to take part in that?

Q125 Chair: Just to clarify before I bring in Richard Harrington, you obviously have a difference of view, but in a sense what you're saying is the World Bank's involvement is low and it should therefore concentrate on trying to help low carbon, but you don't disagree that the mix is required. It's more of an argument of how funds it.

Jesse Griffiths: Yes.

Peter Young: There are things the Bank can do, for example providing some of the partial risk guarantees that will take away some of the political risk that would allow the private sector to come in and put in the appropriate investment. Those things in the energy area are very helpful and important. Whether it's just the traditional thing of trying to build bits of infrastructure, the Bank really doesn't have the funds and we have to rely on the private sector. We come back to the same issue of some of the deficiencies in some of the systems. We're generally not involved in building infrastructure, but we are a little bit in Nigeria in overseeing it. In some transmission lines, the contracting process started eight years ago and not one single pylon has yet been built. Some of those problems also exist in the infrastructure area.

Q126 Richard Harrington: Conveniently, Peter, just mentioning the private sector and their own development, which we have not covered very much today, I'm obviously very aware that the Bretton Woods Project has expressed serious doubts as to the value added by the use of the private sector. I would be very interested in comments on what people feel about the relationship between the World Bank Group and the private sector, whether it should be further developed and, if so, how that should be.

Peter Young: I think private sector investment is absolutely critical, because the resources aren't there in the public sector to solve these development problems. Trying to facilitate private sector investment is absolutely a critical thing for the Bank and other donors to be focusing on. The Bank does do that to a good extent but, I agree with you that that should be central to the Bank's activities, as well as that of other donors.

Jesse Griffiths: I agree. We're not at all critical of the role of the private sector. It plays a vital role in development. It's a question of how the Bank interacts with the private sector that we're concerned about. Mostly that's the role of the International Finance Corporation, the private sector arm of the Bank, which has a number of different concerns about what it does. If you look at the most recent IEG evaluation of that, it found that, in only 25% of cases did it add value; i.e. did it do something that the finance that could be available through banks and other private-sector institutions wasn't doing. In only 25% of cases did it actually provide something in terms of improving social environmental sustainability or improving the design of the projects. One of our main concerns is that here you have a publicly backed institution—the British taxpayer provides the capital on which the IFC lends—doing things that are in a sense replicating what private-sector lending institutions are doing, and not adding that much value. There is a real problem with its overall focus. What is the point of the IFC if it doesn't do stuff that the private sector wouldn't do?

Q127 Richard Harrington: Does the IFC actually compete for loans? They'll be a loan process; somebody wants to borrow some money and the IFC will compete against commercial—

Jesse Griffiths: In essence the IFC's strategy is to follow the market. Wherever the market is, we try to engage in that. There's a rationale for that, but our argument is that that's in no way, for example, opening up new markets to companies that can't get credit.

Q128 Richard Harrington: You think it should follow defects within the commercial financial sector really, rather than keeping within mainstream lending.

Jesse Griffiths: Exactly, it should be trying to lend to countries and businesses that find it very difficult to access credit, so small businesses in particular, small and medium enterprises, and low­income countries. As the DFID submission points out, only 10% of IFC lending went to low­income countries in the last round so, to our mind, it's focusing where it doesn't need to focus.

Q129 Hugh Bayley: Two final questions: the first to Peter Young; the second to Ed Hedger and Jesse Griffiths. Mr Young, I'll probably appal you by saying I found your approach this morning statist in the extreme. You seem to be arguing it should be for donor countries and their Governments to just get on and do the job, and engaging with civil society and parliamentarians in the country in question was just an encumbrance; it would just waste time and delay delivery and make the whole process slow and ineffective. How would you respond? If you look at the American role in Afghanistan, by spending money outside the Government of Afghanistan process, they were failing to develop Afghanistan's own capacity to manage its own affairs, and were spending money hopelessly inefficiently compared with the World Bank. How would you respond to this appalling charge that the Adam Smith Institute is statist in the extreme?

Peter Young: Firstly, I want to say that Adam Smith International is not the same as the Adam Smith Institute. It's a separate employee­owned company, so I don't want to be held to account for what the Adam Smith Institute says. I think also that your characterisation of my views is entirely incorrect. You give the example of me saying that adding the Nigerian Parliament into the process of approving every single bank loan was going to slow the whole thing down to suggest that I would be against consulting with local people, including with the Parliament, on the direction of what a particular donor should be doing, engaging with civil society and so forth. I think that's all a very good thing. The processes that one uses once you're trying to actually do something need to be relatively streamlined, so that you can do something within a reasonable amount of time. If it's going to take you five years after you originally identified it as a problem, the problem is probably a different problem by that point.

With regard to USAID in Afghanistan, I hope that no one from USAID pores over the minutes of these meetings, but I don't think USAID is a terribly efficient donor. I would agree with that. They seem to spend very large amounts of money compared with the results that are often achieved. This whole business of tying their aid is clearly the wrong thing: forcing everyone to travel on US airlines and all this type of thing. It's a very, very bureaucratic organisation, not too dissimilar in fact to the EU's aid programme. I don't think you should mix up the issue of use of in­country systems with the issue of trying to get support and understanding from the Government. If you agree with the Government, after a consultation on what you want to do, you can involve the Government or the host country in that procurement process. For example, have them sit on the panel; have them express their views, but don't ask them to do the whole thing themselves if they don't have the administrative systems to do so and the result will be the thing's a mess. Get their involvement and support, but in appropriate ways.

Q130 Hugh Bayley: Thank you for correcting my misrepresentation of your views. I'm grateful. To Mr Hedger and Mr Griffiths, I think and I believe you think and indeed Mr Young thinks it's important for the Bank to be transparent and engage with people in the countries they're trying to help to make sure that their policies are regarded as sensible, useful and benign. How should the World Bank better engage with civil society and parliamentarians in Part II countries?

Ed Hedger: I would say, firstly, directly, which it's likely to do. For example we're talking in the governance sphere, in strengthening parliamentary oversight, scrutiny, committees, working with those sorts of capacity­building efforts, engaging civil society. There is greater work more broadly around participatory processes and poverty­reduction strategies and so on, so there is progress under way. Indirectly, it's partly by greater attention to the internal dynamics, so these questions of accountability. Conditionally was raised earlier. For example, in Liberia it took a very long time to pass the public financial management revised law, because it was stalled in the Parliament for 18 months, whereas the responsibility for conditions that were missed was not met. The executive was incapable of meeting them, so a greater sensitivity and attention to those sorts of details would be important.

Jesse Griffiths: I think it's possibly the most important question for the Bank, and there are lots of different parts to the answer. Transparency of the Bank's operations is important, and the Bank's new disclosure policy is a lot better, but there are still problems of implementation. Also, one major area where transparency doesn't apply is in terms of the Bank's negotiations, or the process by which the Bank ends up with, for example, a project or a loan that is not visible to parliamentarians or civil society, so you only get it when it actually gets approved, which I think is problematic. Secondly, the point you raised about parliamentary approval: of course it makes sense for Parliaments to scrutinise the Bank's overall approach and the Bank's activities in that country, particularly in countries that are heavily aid­dependent, where the Bank will be a major player, not just in terms of delivering projects but also in terms of influencing the overall Government's approach to different issues. If there is no parliamentary scrutiny there then, in effect, you're undermining democracy in that country if the Bank is just allowed to get on and do what it wants to do.

Conditionality has been mentioned. I think progress has been made but a lot more progress needs to be made. I simply don't agree that it's right for the Bank to set conditions in sensitive policy areas, which should really be agreed by the Government in negotiation with the Parliament and its people, not by the Government in negotiation with a donor. Finally, I think there are still issues of accountability. What are the mechanisms, in particular recourse mechanisms, that people have if they are impacted by Bank projects on the ground? The Bank does have an inspection panel and various other bodies, but we are particularly concerned, or a lot of NGOs are particularly concerned, about the lack of recognition of human rights responsibilities that the Bank has. You can't, for example, have recourse on human rights grounds to the Bank as an institution in a country, which I think is a severe problem.

Chair: Thank you very much. We had a lot of questions, but quite a lot of others were raised that we didn't have, and I think we've had some very interesting answers. I just might mention to you, as you made passing reference the role of the European Union, that the Committee is considering an investigation into the European Union as a development partner for DFID, so we may well be looking to you for a contribution on that in due course in light of some of the comments you made en passant. Thank you, all three of you, very much. It's good to see a debate among the panel as well as collective evidence, so thank you for that and obviously for your submissions. We look forward to working with you again. I'm sure we will. Thanks very much.

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Prepared 1 March 2011