Select Committee on International Development Minutes of Evidence

Examination of Witnesses (Questions 49-59)



  Chairman: Thank you very much for coming in and helping us on this inquiry. Thank you also for all that the ODI does at various times to help the Committee in its inquiries, which is much appreciated.

Mr Khabra

49.  Many of the NGOs have been critical of the Monterrey process whereas ODI and DFID have been more positive. Monterrey is an important stage in the building of an international partnership for government. The question is, how does the USA influence the Monterrey process? What should be done to encourage the USA to put its weight fully behind efforts to achieve the Millennium Development Goals?

  (Mr Maxwell) Thank you, Chairman. Can I say first who we are because we have one guest member of our team? I am Simon Maxwell, Director of ODI. John Roberts is a Research Fellow at ODI and Head of our Centre on Aid and Public Expenditure. The guest member of our team is Professor Paul Mosley from the University of Sheffield, who has a particular track record on aid effectiveness and aid selectivity questions. We may not all agree with each other.


50.  We will leave you to disagree publicly and chip in as you want to.

  (Mr Maxwell) Monterrey could easily be written off as a complete fiasco because it did not produce the concrete cast-iron commitments to 0.7 per cent of GDP in aid that everybody hoped for, but personally I think was rather a success in the sense that it created a climate in which it was very difficult for donors not to commit some additional money. The fact that President Bush went meant that he was inevitably going to have to make some kind of gesture, which in the end he did, and it was a significant gesture. We are nowhere near 0.7 and will not be, but we are making progress in the right direction. I think you are quite right, Mr Khabra, that the critical question is how to keep the Americans engaged in international development. To my mind there is a real gulf between Europe and the United States on development co-operation. The Europeans are all much more enthusiastic. We have a group of ministers who provide the initiative on international development and we have a lot of research and civil society involvement. That is not nearly so true on the other side of the Atlantic and one of the key challenges—and it might well be a challenge for this Committee—is how to inject some European enthusiasm into the American side. In due course the impetus that has been given by the President will begin to dissipate and we will need something else. The Americans are particularly keen on a track record, so if we in the aid community can demonstrate that aid works then I think it will be much easier to keep the Americans on-side.

Mr Khabra

51.  What are the reasons for the Americans to be reluctant to take more part in providing aid?

  (Mr Maxwell) That is a really interesting question and I think one you should ask the Americans. There are all sorts of theories about isolationism, about lack of commitment to internationalism. People talk about multilateralism minus one in other fora, in Kyoto, for example. Sometimes there is a belief that aid money has been thrown away. That is the misconception that has to be nailed because all the research that people like Paul and John have done shows that aid does work. I do not know whether this is an appropriate moment to ask Paul to say something about Monterrey.


52.  If we could stick with the Americans for a second, you used to have a kind of similar institute to the ODI in the States; is that right?

  (Mr Maxwell) The Overseas Development Council.

53.  Is that still functioning?

  (Mr Maxwell) It was founded as a sibling of the ODI and sadly folded about two years ago. However, a phoenix has been born and there is a new institution in Washington called the Global Development Centre directed by a woman called Nancy Birdsall, of which we have high hopes, not least because it is very well funded by a group of private philanthropists in the United States. We could do a lot here with $20 million.

54.  The reason I ask is that some of us are going to go to Washington in the not too distant future. The Committee as a whole hopes to go to Washington late this year, and one of the things we are interested in is establishing contacts with members of Congress and others who might be interested in taking this discussion forward. It may be that Nancy Birdsall and her team could give some help to us in pointing us in the right direction of who we ought to be talking to. Maybe we could have her e-mail address off you and start to do some work on it.

  (Mr Maxwell) We would be happy to share all our contacts with you. I do think that you could perform a tremendously useful service by putting key messages about in Washington. Gordon Brown's speeches before Christmas helped to do that, powerful speeches, well delivered, to the right audiences.

Mr Battle

55.  Could I just try to understand the American position because in the seventies and eighties there was a very strong anti-development focus coming from a kind of view that all aid was a waste of money? Is it now just pragmatism by the Bush administration or is there an underlying philosophy of thinkers that are chipping into an anti-aid view, or is it just circumstances at the present time? Is there some push in thinking that we have to address and have almost an ideological debate about?

  (Mr Maxwell) I am not a specialist on American attitudes to aid so I would not be a reliable guide. I do not know whether my colleagues want to comment. However, I do think there are different strands which you have to pick off one by one. There is clearly an isolationist strand that is not remotely interested. There is a hard-headed Treasury Secretary strand, if you like, which believes that aid is wasted money. There is going to be a strand which says, "Yes, let us have aid but use it very instrumentally to reward our friends and to punish our enemies." I suppose you have to engage on all those fronts. One of the points I would make about the United States is that the NGOs are not nearly as well organised as researchers, analysts and advocates in the US as they are here. There are some very big NGOs, like CARE, for example, and they do not have a quarter of the intellectual capacity that Oxfam, Save the Children or Action Aid have here.
  (Professor Mosley) There is no doubt that under the Clinton administration the emphasis shifted from foreign to domestic policy and that at that time interest in aid and international economic relations generally shrank somewhat. Since then there has been a clear revival, as witness the commitment of the Bush administration at the Monterrey Summit.
  (Mr Roberts) Just to add a short word on the way in which the Americans have tended to look at development. It is across themes, for example, HIV/AIDS, or tropical diseases more generally rather than on the basis of country problems and country based solutions. So that is a point which I think marks them out a bit from the way in which we have tended to look at matters in this country and in other European countries. Another strand in American thinking is related to their often sceptical attitude towards the international financial institutions, the IMF and the World Bank, which they simultaneously want to dominate and also in a sense side-track, particularly the World Bank, which they feel is possibly over-extended and they want to confine its roles.

Tony Worthington

56.  Can we put it the other way? Who are friends and what does the opposition consist of? Who are the people who battle on year after year in a European way believing in development?

  (Mr Maxwell) Again, I am not an expert. I would have thought the churches and religious groupings in general would be strong allies in the United States, and many of the NGOs have a strong religious element to them, so that would be one strong group. There is going to be a group of Congressmen who are committed to internationalism, partly because they have constituencies with large immigrant populations or because they have personal experience of working or living overseas.

Mr Walter

57.  You submitted a very comprehensive memorandum to us and I would like to pick up on the second section of that which was written by Mr Roberts on how successful financing of development has been[5]. I will just refer you to a paragraph [on Ev 42] where you say: "As commitments to higher ODA flows are implemented the questions about whether they wish to be selective in the countries to which they provide aid, how to create the conditions of aid effectiveness in poorly performing countries, and how to avoid unsustainable aid dependence will be posed with even greater acuity than now." I wonder if you could tell us what are the conditions of aid effectiveness that you are referring to there and do donor imposed conditionalities succeed in creating the conditions for aid to be effective?

  (Mr Roberts) There are a number of conditions which I have jotted down before coming along which I will run through. I do not think these are necessarily exhaustive. There are always country specific factors which would have to be borne in mind which are often determinate in particular circumstances. One element of course would be the country government's commitment to the development process, the commitment to poverty reduction and political perseverance in this commitment against a background in which there may well be countervailing forces within the political class structure of the host country. The second point, which is very important, is governmental systems for public expenditure management. If we are providing government to government assistance it is important that part of that government has well honed and reliable and effective systems for public expenditure management, ensuring that funds go where they are supposed to go and that the job gets done effectively. Another overarching condition for maximum effectiveness is a tolerable degree of macroeconomic stability. The amount of macroeconomic stability required varies a bit from case to case. There is no panacea, there is no golden rule, but countries which are beset with high levels of inflation, burdened with excessive internal and external debt have a lot of difficulty in keeping their eye on the longer term development ball. Political stability, of course, it goes without saying, and also, moving now into the conditions which make the private sector function efficiently and confidently, physical security is important. Also a framework of law which enables enterprise to flourish, which encourages businesses of all sizes, from the smallest to the largest, to invest. I think these are some of the conditions. There are also conditions pertaining to the character of aid itself. These days, quite rightly, we are emphasising reducing transaction costs of aid, which is a way of saying that we do not want to over-burden partner country governments with our procedures as aid donors. Our procedures should as far as possible be congruent with those of the partner government itself. If we cannot use their procedures immediately, for example, for financial accountability purposes, at least we can help them to get to that position as fast as possible. We should not promote large numbers of separate rather egotistical projects. We should as far as possible back the expenditure plans of the host government.


58.  Professor Mosley, would you like to add to that?

  (Professor Mosley) I would like to add to John's list, the idea of using aid to facilitate patterns of public expenditure which facilitate poverty reduction. Research, which I have done, suggests that the more aid flows and public expenditure patterns are concentrated on education, especially primary education, health and especially primary health, agriculture expenditure and especially research and extension, and the less public expenditure goes into weapons expenditure, the greater the impact of aid on poverty will be.

Mr Walter

59.  Both your answers, particularly Mr Roberts' answer, lead very neatly into the second question that I want to ask about this conditionality. You were talking about the local or national factors which are under the control of the government locally. It is very often said that local or national ownership is an important feature of these development plans. How can you make those conditionalities that you talked about compatible with national ownership?

  (Mr Roberts) I think this is done in the best possible cases—the case of Uganda is often quoted—through a long period of what is known in the jargon as policy dialogue, of exchange of ideas, of in a sense osmosis between the donor and the recipient. In the past the donor community made mistakes by trying to be too specific about the conditions that had to be fulfilled, that you must do X and Y and Z by such and such a time. That has typically not worked. Nevertheless, the process of policy dialogue I see as having been rather successful over the years in as much as the way in which the vast majority of developing countries now look at their own development, at the instruments of economic management and of poverty reduction which they seek to deploy are now quite different from the ones which they were using 20 or 30 years ago. This arises from this process of contact with the donors which has not always been smooth. It has often gone through fits and starts but it has resulted in a set of ways of looking at the development process which I tried to summarise on the previous page of that little note which we submitted to you, and which represents I think what might be called the post-Washington consensus.
  (Professor Mosley) I would like to stress that the way in which conditionality happens often is very gradual and very unconventional in the sense that it does not represent a response by the recipient country to an ultimatum. Uganda is a perfect example, but to a lesser extent also Ethiopia, Tanzania, Mozambique. Uganda particularly in the late eighties was not developing in the free market, it had pegged exchange rates, it had all kinds of discouragements to trade. Uncharacteristically, the donors did not come in with a battle axe. They very gently suggested possibilities for moving to a free market. To begin with nothing happened. By about 1992/93, by a process of gentle persuasion, it had reached the point where, when advice was needed, where Uganda had sometimes turned internally to the ministry of finance, the ministry of finance would then turn to the aid donors. The aid donors fed in a message about the need for a poverty related pattern of public expenditure that led the Ugandan Government to decide what, in the light of its priorities, would be the right way to do that. They came up with their own list, favouring primary health, education and agricultural expenditure, and in this way a pattern of public expenditure was arrived at which has now borne fruit and the rate of poverty in Uganda has gone down over the 1990s from over 50 per cent to under 30 per cent. The important thing was that the donors were willing to play it long, they did not push Uganda too hard, they condoned things like an export tax on coffee in 1994. They showed that they were willing to trust the Ugandans and in the end they were rewarded.

5   Ev 40. Back

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