The Future of UK Development Co-operation: Phase 1: Development Finance - International Development Committee Contents

7  Global partnerships

Relationships with multilaterals

85. We have noted in previous Chapters that different multilaterals use a wide range of finance instruments, and have specialist skills and experience of using these in different countries and sectors. One option open to DFID would be to channel more of its finance through multilaterals, rather than attempt to replicate this diversity in its bilateral programmes. DFID delivered 43% of its total programme expenditure in 2012-13 through central funding to multilateral organisations, and 38% of its bilateral spending was also delivered through multilateral organisations.[173]

86. Some witnesses pointed to the relative strengths of multilateral organisations. Oxfam GB suggested that DFID should wherever possible fill any funding gaps via multilaterals, because "aid delivered via multilateral organisations can have cumulative lower transaction costs, reduce fragmentation, tackle global problems, and provide support for global public goods that cannot be addressed by bilateral aid".[174] Professor Dercon commented that action on global public goods, almost by definition, was often best addressed through multilaterals and partnerships.[175] Owen Barder suggested that the case for multilateral support was becoming ever stronger in the changing development world:

    in the world we will see in 30 years' time, there is a stronger case for multilateralism, but there is also a stronger case for multilateralism right now. It is not just that because the world is changing we should be doing more multilaterally, but there are strong biases towards bilateralism that I think are unhelpful, and we should be, in any case, looking to spend more money through the multilateral system.[176]

87. However, bilateral programmes have the advantages of giving DFID greater choice in the focus, delivery and monitoring of outcomes, and DFID notes that it has more control over the types of programmes administered through its bilateral spend.[177] DFID country teams running bilateral programmes are in a good position to influence multilateral programmes in that country. There are also concerns that administration costs are higher for multilaterals.[178] We have noted in other Reports, the imperative of ensuring that any spending through multilaterals achieves value for money, and a key challenge for DFID is how to assess the performance of multilaterals in countries where DFID has no bilateral programme. We recommended in our recent report on the Multilateral Aid Review (MAR) that DFID should compare each multilateral organisation with bilateral alternatives as an integral part of the 2015 MAR. We also recommended that DFID put pressure on multilaterals to reduce their administration costs.[179] The Secretary of State told us that DFID had been looking at this over recent months in order to "try to get much more clarity around how you drive value for money and the comparative effectiveness of these different channels".[180] Professor Dercon explained that, in order to monitor the effectiveness of multilaterals, DFID's approach was to get "very strong representation" within multilaterals, rather than trying to have a presence in the countries where projects were delivered.[181]

88. One option open to DFID would be to channel more of its finance through multilaterals, and to make use of their wide range of specialist skills and expertise, rather than attempt to replicate all of these in its bilateral programmes. In order to determine the appropriate balance of bilateral and multilateral spending, DFID must be able to compare the relative outcomes and value for money of these different channels, both in countries where it has a bilateral presence and those where it does not. We reiterate the recommendation that we made in our recent report on the Multilateral Aid Review, that DFID develop mechanisms for comparing the relative effectiveness of bilateral and multilateral aid.

89. Whilst we recognize the strengths of multilaterals in some areas, we firmly believe that DFID must continue to maintain a strong bilateral presence in order to maintain the UK's influence in individual countries, and to monitor the performance of multilaterals which the UK finances. DFID must also maintain sufficient influence within multilaterals in order to monitor and influence their spending priorities. We recommend that DFID explore the potential for embedding more DFID staff within key multilaterals, and for increasing the opportunities for sharing learning and experience with its partners.

Partnerships with emerging economies

90. DFID has identified the strengthening of its relationships with emerging powers on global development as one of its strategic priorities. Through this collaboration, it aims to make development assistance more effective and to enhance the development impact of investment in poorer countries. It lists its priority countries/regions as China, Brazil, India, South Africa and the Gulf.[182] During our visit to Brazil, we were told that Brazil was keen to develop South-South cooperation,[183] using Brazilian experience and expertise to address development challenges in developing countries, and that there was great demand for this. Brazil currently uses bilateral, trilateral and multilateral arrangements to share and transfer technical expertise in policy areas where it has already achieved domestic success and international recognition. This includes expertise in agriculture, food security, social protection, health and other sectors. Its structures and policy for international development cooperation are still under development, but it currently cooperates with more than 80 countries, mostly in Latin America and Africa, and there is the potential for DFID to work with Brazil so as to facilitate and strengthen its spread of development expertise, and to increase its impact on LICs.

91. As Brazil's wealth has grown, DFID's role in Brazil has changed. Its bilateral programme with Brazil was closed in 2004 and the current role of the small DFID team in Brazil is to work with Brazil on promoting poverty reduction in developing countries elsewhere. This is an integral part of DFID's Global Partnership agenda which seeks to cooperate with key emerging powers to tackle poverty globally. During our visit to Brazil, we heard about a number of innovative projects and policy developments which could potentially be used as models elsewhere, and could in particular be of assistance to LICs. Some of these are summarised in Annex 3, to illustrate the potential for shared learning.

92. The Secretary of State told us that DFID had developed a very good working relationship with both Brazil and China, and that she co-chaired the Global Partnership for Effective Development Cooperation which was one of the mechanisms which had been established to improve the sharing of knowledge and to promote South-South cooperation.[184] She said that DFID's Brazil office had been "extremely good for broadening out our relationship with the Brazilian Government and for transitioning our relationship on development with Brazil.[185]

93. We welcome DFID's work on promoting South-South cooperation, as a complement to development finance efforts. Emerging economies, such as Brazil, have much to contribute to developing countries. DFID has only a limited presence in Latin America, and we recommend that it explores the potential for small DFID teams to work closely with multilaterals on specific projects, so as to benefit from their specialist knowledge and to contribute to its learning from emerging economies. We recommend that DFID establish an innovation and knowledge transfer unit which would be responsible for identifying good development practice and transferring relevant knowledge and experience to other projects and country programmes. We would expect the unit to be based in the UK, but to have sufficient capacity to deploy a few people to participate in and learn from country programmes, and to cooperate with the FCO where necessary. We also recommend that DFID explore ways of helping low income countries to share their knowledge and experience with each other.

173   DFID Annual Report 2012-13, p 85 Back

174   Ev w5 Back

175   Q 255 Back

176   Q 42 Back

177   DFID Statistics 2013, p24 Back

178   International Development Committee, Ninth Report of Session 2012-13, DFID's Annual Report and Accounts 2011-12, HC 751, para 28 Back

179   International Development Committee, Multilateral Aid Review, Fourth Report of Session 2013-14, HC 349, para 16 Back

180   Q 256 Back

181   Q 258 Back

182   DFID Global Partnerships Department, Operational Plan 2011-2015, Section 3 Back

183   South-South cooperation is the sharing of knowledge and experience between South America and developing countries, particularly in Africa Back

184   Qq 262,263 Back

185   Q 264 Back

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Prepared 13 February 2014