Examination of Witnesses (Questions 49-59)|
TUESDAY 30 APRIL 2002
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.
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 challengesand
it might well be a challenge for this Committeeis 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.
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
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
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.
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
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.
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.
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
(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.
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
(Mr Roberts) I think this is done in
the best possible casesthe case of Uganda is often quotedthrough
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