Select Committee on European Union Minutes of Evidence

Examination of Witnesses (Questions 320-339)

Mr Nicholas Grono, Mr Gareth Evans AO QC and Mr Romit Jain

21 MARCH 2006

  Q320  Lord Hannay of Chiswick: Do you think the European Union is learning lessons from Australia at all? Do you think they even know what has been going on there?

  Mr Grono: I doubt it. I doubt that there is much interest in what happens on the other side of the world.

  Q321  Lord Lea of Crondall: Going back to the African equation, we have talked about the relationship between the security side and the governance and that, unless the governance is right, you would get more and more fire brigade requirements. However, it is also the case that, in terms of reaching Millennium Development Goals, economic development grinds to a halt overnight when you get these conflicts. I suppose, trying to think holistically about this, there is a question, which you perhaps cannot focus on because you are coming from a security perception. Would you say that the countries that have the most conflict have the least economic development, and therefore we in the EU have somehow to have an across-the-board emphasis on how the objectives of increasing economic development and the welfare of the people are being put at risk? I am trying to get round this sticks-and-carrots problem and the Chinese. The fact is, even if the Chinese can give you goodies, they cannot give you sustainable economic development unless they control the military side of things; and no one is suggesting at the moment that the Chinese are going to do that.

  Mr Grono: You have to look at what the problems are. Poverty on its own is not a conflict indicator; it is one of them. There are poor countries that do not go through a cycle of conflict on a regular basis. The World Bank has done some research and it says that if you want to look at indicators, it is the poor economies with declining growth and a predominant dependence on natural resources exports. So it is a combination of factors. You do not have to worry just about economies that are poor; you have to look at the factors that have this kind of strong relationship to conflict. Then obviously long-term development has a big impact on conflict. Richer countries are less prone, generally speaking, to conflict than poorer countries. Again, this is the World Bank view, if you move up the percentile. However, I think that you are better focused, if you are looking at the conflict perspective, on things like the natural resource cycle; identify the entry points and—

  Q322  Lord Lea of Crondall: Is that because, as in Nigeria, in the delta, there is huge wealth from the state owned oil companies; it is easy to siphon off; so it is easy to get your guerrilla bands paid for by somebody? Even the regional administrators will finance their own little armies.

  Mr Grono: It is a whole combination. There is this big debate in this area about greed versus grievance. Is it greed, this desire to capture resources and so on, that drives conflict? Or is it grievance, in terms of ethnic hatreds, exclusion from power and things like this? It really is a mix of all of these factors, but there are certain things you need to sustain conflict. You need resources; you need funding, and so on. So once conflict is underway, the access to resources can help ensure that conflict will last a lot longer than it otherwise would—which is part of the thinking behind things like the Kimberley Process on diamonds or the EITI. Attack the sources of revenue, shut down the revenue, and it will have an impact on conflict. In somewhere like Nigeria, therefore, there are disputes that have ethnic elements to them, but of course access to oil, and the bung climate and so on that goes on there, enables these conflicts to be sustained.

  Q323  Lord Lea of Crondall: Angola is another example of that sort of thing, would you say?

  Mr Grono: Angola is the classic example of oil funding government and diamonds funding the rebels.

  Q324  Chairman: Those sorts of issues are very difficult for the EU to address. Does the strategy really address that?

  Mr Grono: The EU has a key role to play in encouraging the success of the Kimberley Process and the EITI. In those initiatives I think that it has a very good role to play.

  Q325  Lord Hannay of Chiswick: The Transparency Initiative, of course, is precisely one of the areas that the Chinese can make nonsense of.

  Mr Grono: Yes.

  Q326  Lord Hannay of Chiswick: The idea that the Chinese will publish the accounts of the oil that they extract in the Sudan, or whatever it is, is probably for the birds!

  Mr Grono: Yes.

  Q327  Lord Hannay of Chiswick: I should have thought that is typically one of the areas where the EU has, as you say, a major role if it managed to spread across Africa, through European companies, proper accounting and, through those companies, compel certain African governments to show more of their hand; but this is exactly one of the areas where undercutting by the Chinese is only too likely to take place.

  Mr Grono: No, it is going to be a big problem; but there is still enough leverage, at least at this stage, for the EU to apply pressure to countries—both companies incorporated in the EU, companies that are trading on EU bourses, and so on, people who want access to EU markets. That is leverage, and even perhaps on the Chinese down the road. As the Chinese increasingly become international players, they will be engaging not just in China but also in Europe and in America. Theirs is perhaps a norm-setting role.

Lord Hannay of Chiswick: I think that transparency and accounting will be the last things they are going to come to us with.

  Lord Lea of Crondall: There is no reason why we cannot ask for this as part of the EU-China dialogue though.

  Q328  Lord Hannay of Chiswick: No, I agree. It is just that realistically—

  Mr Grono: You are right. It is a classic demonstration—

  Q329  Lord Hannay of Chiswick: . . . they are not naturally transparent people.

  Mr Grono: And it will be a big problem. Kimberley diamonds is another example: Europe is a major consumer of diamonds and it can encourage adoption of these processes.

  Q330  Lord Lea of Crondall: Do you get into money laundering at all? I do not mean personally!

  Mr Grono: Unfortunately my salary does not justify money laundering!

  Q331  Lord Lea of Crondall: The EU has a money laundering initiative and so on. I think that a quarter of the GDP of Africa goes out of Africa, and the amount of money that goes out of Africa though embezzlement is equivalent to all the aid money going in to Africa. That is the statistic. If it is true that you need a natural resource to fuel the conflict, it is also true that it is likely that you do put the money in the famous Swiss bank accounts.

  Mr Grono: It is the issue of capital flight. Not so much money laundering, but another problem with conflict is funding from diaspora communities, which often will support more extreme elements internally and is a very active sort of funding. We have seen that in Sri Lanka and elsewhere.

  Mr Evans: Perhaps I may add one thing on the money issue. To the extent that the loss of resources is through formal channels, finance ministries, government, either receipt-gathering agencies or expenditure agencies, the most robust form of intervention there has ever been internationally in this respect has been in Liberia, with this particular programme that the World Bank and the other donors insisted on and stuffed down the throats of the previous Liberian quasi-government. Ellen Johnson-Sirleaf has accepted it. It is hugely invasive of sovereignty, but none the less it basically involves, if someone is caught cheating the GEMAP—what is it?

  Mr Grono: Governance and Economic Management Assistance Programme.

  Mr Evans: Assistance involves an international sitting right in the central governing financial institutions and controlling the money flow, in and out, to ensure that at least it starts off going to the right places.

  Q332  Lord Hannay of Chiswick: That is what the Europeans did to the Turks in the Ottoman Empire in the late 19th century.

  Mr Evans: It is pretty successful, if you can make it work. It has been successful in Liberia. There is an attempt now, which we among others are advocating to be done in the Congo, for example—which is one of the most catastrophic examples of diversion of resources.

  Q333  Lord Hannay of Chiswick: Because of the history, I would suspect that it would be extremely unwise for the Europeans to do that. It would be much better for something like the World Bank or someone who has a little less of a post-imperial history.

  Mr Evans: A lot of that is not for Louis Michel, I suppose, as a Belgian.

  Mr Grono: The way it worked in Liberia was that the EU was engaged. It conducted audits, and ECOWAS conducted audits of the institutions. There was such blatant corruption that the donors, including the EU and the World Bank, said, "We won't get engaged here unless you introduce these controls": among them being this co-location of internationals, with the idea that the money comes transparently into the central treasury and, hopefully, is disbursed for proper purposes. The other side of GEMAP, which is a very interesting side, is on the one hand intrusive financial controls and, on the other, to pull out of the political sphere—so do not micro-manage the politics; encourage the development of civil society; encourage things like freedom of the press, freedom of association; and hope that civil society will play an active role in ensuring appropriate disbursement of these monies. At one level this might sound like pie-in-the-sky NGO stuff, but in Liberia over the last year hawse have seen a very active role by civil society, to the extent of levelling corruption allegations against the Speaker, the Deputy Speaker, the head of the maritime registry—who were in the end charged. I think it has been quite a while since Liberia has seen corruption charges against figures like this, who have stepped down or been prosecuted. So something we tout, for Liberia at least and maybe adapted it elsewhere, is a very interesting use of conditionality, encouraging civil society with a mix of different approaches. Liberia is not a special case, but Liberia is a small country with, potentially, a great amount of domestic wealth from timber, from diamonds, from the maritime registry.

  Q334  Lord Lea of Crondall: Iron ore?

  Mr Grono: Iron ore. So there is potential for something like that to work there.

  Mr Evans: The Liberian strategy is so intrusive that it is almost impossible to imagine it being able to be imposed or implemented elsewhere; but it remains an ideal, in the sense that if you can get local buy-in and can work to get local buy-in through a transitional period, it is so tough and so robust a strategy that it can cut the sequence and give you a chance of starting again. So, yes, it is not totally pie-in-the-sky to think about recommending that in this context.

  Mr Jain: The European Commission launched a project at the end of last year to reform the chain of payments of the army in the DRC. That is an instance, therefore, where the European Union is getting involved.

  Mr Evans: A payment chain which was a classic diversion and siphoning-off.

  Mr Jain: It is to make sure that it is the soldiers on the ground who are getting the money, rather than it going to the generals and then dispersed or put in their pockets.

  Q335  Chairman: Is there anything that you want to say to us that we have not asked you?

  Mr Grono: I think that we have covered it pretty exhaustively. There is just one thing.

  Q336  Chairman: Perhaps you could tell us that and also, if you were writing our report, what would be your number one recommendation?

  Mr Grono: If I were writing your report, my number one recommendation . . . .

  Q337  Lord Lea of Crondall: While you are thinking about that, what was it that you were going to say?

  Mr Grono: I was going to say that one of the issues in which we think the EU can play a more active role, and there are certain restrictions, is the need for security sector reform. It kind of touches on security sector reform, but in the past has been constrained: partly because of DAC guidelines—the OECD Development Assistance Committee—which basically said that you cannot spend money on military matters. However, if you go into somewhere like the Congo, the military and the security structures are so wrapped up in their problems that it is not a case of funding their military, et cetera. If you want to address the root causes or some of the drivers of conflict, you have to address their security apparatus. You can only do that by going in and engaging in security sector reform, which embraces a whole lot of the issues that the EU very strongly supports. At its broadest, it includes rule of law and so on, but it is effective, responsive military, chain of command, all that kind of stuff: security forces that are adapted to their functions, whether it is protecting borders or looking after the civilian population. Aldo Ajello, the EU Special Representative for the Great Lakes, has been banging on about this for years, because the EU will fund a whole lot of things but tends to step away from security sector reform because of this problem. Military that prey on their populations, security forces that prey on their populations, are a huge problem and something that does not get enough attention. As the EU seeks to engage more actively, it is something that I think they could very usefully look at.

  Q338  Lord Hannay of Chiswick: Presumably the decision which appears to be coming out, that they are going to support the Africa Peace Facility and all the other things from the EDF, is precisely that, is it not?

  Mr Grono: But the EDF has the same restriction.

  Q339  Lord Hannay of Chiswick: Yes, but they must have overcome those restrictions.

  Mr Grono: No, they fund certain things and cannot fund other things. There is a pool of money, including bilateral contributions by states.

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