Select Committee on International Development Minutes of Evidence

Examination of Witnesses (Questions 60-74)




60.  Professor Mosley, can I just follow up something you just said about defence sales? I heard you correctly then, did I not?

  (Professor Mosley) You did.

61.  There are a couple of things which have been causing me concern, and I suspect other members of the Committee. The UK's largest bilateral aid programme is with India. India is a member of the Commonwealth and one downloads the country's strategy paper off the web site. It says that one of the reasons why DFID gives so much to India is that a third of the world's poor live in India, so over the next ten years we are due to give by way of bilateral aid something like a billion pounds in donor aid to India. At the same time we are about to sell Hawk jets to India, surprise, surprise, at a cost to India of about a billion pounds. That is one development. Secondly, Andrew Robathan, who is on the Committee, was recently in the Sudan and one of the things of course we know about an area such as the Sudan and other areas of Africa is that DFID do not give money to those areas because they are in conflict, but you have quite a lot of people who are extraordinarily poor, through no fault of their own, caught up in the conflict but receiving little or no development aid, and then you get some humanitarian development aid. Can I have your thoughts on those two conundrums about a billion pounds' worth of arms sales to India, the equivalent of a decade's worth of bilateral aid, but no development aid to large chunks of Africa which are in conflict?

  (Professor Mosley) On the second question of countries like Sudan, like Angola, like the democratic Congo and all those countries where there is no effective government, in part because of conflict, the logical way to disburse aid is through the NGOs and in all those countries that is the way it is happening, not because it is ideal but because that is the only way to make aid effective and to enable it to reach people who are poor. On the question of arms budgets, any particular arms contract may or may not be a reasonable one in terms of its necessity for national defence. The finding I was quoting was not remotely suggesting that developing countries do not sustain national defence, law and order, which indeed have become more in the spotlight as a consequence of the increased emphasis on security as a prerequisite of development. Rather what the research seems to suggest is that where you have countries which spend above a normal proportion of their budget on defence, that takes that country beyond the mere requirements of national defence into a level of expenditure which crowds out other categories of developmental expenditure.

John Barrett

62.  You mentioned conditionality earlier on. Obviously all the countries want their aid to be effective. They do not want to see aid going to buying a new Mercedes for whoever. There is obviously a different perspective as to what makes a good donor from the donor's perspective and from the recipient's perspective. Is there any consensus in concrete terms of what makes a good donor?

  (Professor Mosley) A donor which has a clear perspective of what kinds of policies will be effective within a particular recipient country and is willing to work sympathetically with that country to bring those policies and expenditure patterns about.
  (Mr Maxwell) I carried out an exercise on just this with civil servants and aid people in Ethiopia. I asked the question, "What is a good donor?", and produced a chart on how to be a good donor which I would be happy to submit as a supplementary memorandum[6]. The answer is, first of all, engagement on the overall strategy, and flexibility in the use of resources in order to deliver that strategy, so they have got not just food aid, for example, but also money. Recipient countries want accountability. If a donor says they are going to do something they want the donor to deliver on it. That is a big topic in, for example, the New Partnership for African Development: how do you hold donors accountable? It is also a little bit in the Cotonou Convention. Countries want serious technical partners. They want people who know the country and know the issues, that they can talk to for the policy dialogue that John was talking about. They want aid delivered on time and efficiently and with decent procurement procedures. It is not a very complicated list and it is astonishing how badly most donors do on it. DFID is well above average.

63.  How does that chart, where donors are also the good donors, compare to the charts that we have all seen as to what percentage of GNP a country is giving? The natural assumption is that the more generous donors are in percentage terms the better donors they are, but are there good donors but in other terms?

  (Mr Maxwell) At the time I did this piece of work I was working on European Aid, which at the time was a large donor but a poor performer. It is still a large donor and you have been discussing whether or not it is now a good performer. There are other large donors who perform well in some aspects of the chart. Obviously the Scandinavians are generous donors, although not necessarily very large donors. They do not always have a very good range of technical skills because they are smaller. The big question is the World Bank, I suppose. The World Bank certainly has the technical expertise, it has the in-country presence, especially these days, and it has a pretty good reputation for procurement. It is greatly handicapped by the fact that most of the money is loan money and recipients clearly prefer grants, and it has genuine issues of governance because the rich countries basically own the Bank, voting is proportional to GDP more or less, and there is this big question of accountability. If the Bank does not deliver, or delivers a bad loan, who holds the Bank to account? I would like to say something later on perhaps about the role of parliamentary scrutiny in that process and about how we can empower parliaments in developing countries to hold donor agencies to account. There are some interesting institutional possibilities that this Committee could encourage.

Mr Battle

64.  You mentioned in passing the recipients. I attended a very encouraging seminar in northern Ghana where they said, "Do not just send good DFID officials talking about participation, but when will DFID be accountable to us here in Ghana?" Accountability: what do you think that will mean in practice and will it improve the effectiveness of aid?

  (Mr Maxwell) Let me answer that first and then perhaps the other two would like to come in as well because, as I say, it is a big question. The first DFID White Paper talks a lot about partnership, quite rightly, and a number of us have asked ourselves the question, "What does partnership mean?" We looked at all sorts of models—tennis partners, bridge partners, business partners, aid partners, political partners. What characterises the most successful partnerships is first of all a good degree of trust, shared objectives, shared perceptions, all that kind of thing; beyond that, some clarity about what is expected of both parties, not just the recipient, if you like, in this case, but also the donor; some way of identifying whether or not those commitments have been met, preferably independently; and then some recourse if one partner has failed. For example, if you are a couple of plumbers working together and one of you lets the other down, there is a contract. You have a partnership agreement and, if the worst comes to the worst, you go to court. If an OECD donor lets Ghana down there is absolutely nothing Ghana can do about it except to feel cross. That makes the whole partnership relationship very difficult. Partnership, when one partner is very rich and powerful and the other is not, is really difficult. I call that asymmetrical partnership. What we need to move towards is some sort of symmetrical partnership, and that is where the donor countries have to give something. NEPAD is interesting from this perspective because for the first time there is talk about using a kind of peer review mechanism, Amongst the OECD donors there is a peer review system whereby two or three countries will review another one, so you will get the report on French aid written by the Portugese, the Greeks and the Swedes. What the Africans are proposing is that a group of African countries should review the donors. I think that is a great idea; a really interesting idea. It is not as good as having legal recourse but at least it gets into the public domain on the kinds of "how to be a good donor" issues that I listed earlier on. We could go further into a more contractual relationship and, as I said in one of the pieces that was submitted in evidence, there is the hint of how that might work in the Cotonou Agreement, which is to use parliamentary assemblies and arbitrators if necessary. But if a donor fails to deliver the aid it has promised it should be held accountable.


65.  I do not know whether the other two want to add anything?

  (Mr Roberts) It seems from the point of view of an aid recipient country, an individual country, receiving assistance from different sources, as Simon has said, that delivery is the most important thing. Will the aid be delivered on time as expected, or will it be caught up in red tape and delay and thus not fit neatly in with the country's own expenditure and programme plans? Delivery is extremely important- with timely, predictable delivery with transparent, simple procedures. However, there are some perhaps not so desirable aspirations by some people in developing countries with respect to donors. There are, for example, line ministers who want to have some extra money over and above that which is allocated to them by the ministry of finance in the normal budgetary process. Donors' positions have been abused in this way and donors have given encouragement to this abuse by in a sense going outside normal budgetary processes and ingratiating themselves here and there both with officials and with non-official partners by saying, "Here we will give you something in addition to what you will have anyway". That of course upsets priorities. It may be very satisfying for all concerned in immediate terms but in the longer term it is subversive of the poverty reduction strategy or the economic development strategy being pursued. We want to get into a position where that does not take place and so the country takes a holistic view of what donors are up to and not a sectional one. Perhaps I could mention one experience, which was the experience of the OECD's Development Assistance Committee, which looked experimentally at Mali in West Africa. They went there with a view to seeing how the donors performed in that country collectively. This was OECD and the Club du Sahel; the two were working in conjunction. What they found was really rather unsatisfactory. As already indicated, there were a variety of different procurement procedures, numerous different project disbursement accountabilities and monitoring requirements. The members of the Development Assistance Committee are at the moment looking at their donor practices with a view to trying to learn some of these lessons and with a view therefore to making themselves more accountable and more acceptable to their partners in development in the developing world. I think it is not a bad idea now that the World Bank, for example, has moved consultative groups away from Paris or Washington and now holds them in-country. Consultative groups are occasions when every two or three years donors meet with the partner country which gives a prospectus and indicates what it requires in terms of assistance, and when donors make their pledges and indications of what they are prepared to do. Now that that process is in-country it could possibly be enlarged to a review of donor performance in parallel with and to match the review of partner performance which is usually provided on these occasions by the World Bank.

Tony Worthington

66.  Can I switch to this idea of global public goods which is mentioned in the Zedillo Report? You might want to elaborate on the idea to start with. I have jotted down here about peace-keeping, agricultural research, prevention of contagious diseases, things which are not country specific, where there is a danger that they will be heavily under-funded, which is implying that existing funding mechanisms do not work in some quite important areas. Could you say a bit more about that concept, whether you see it as a value concept to be differentiated from other kinds of aid, and whether we need different kinds of funding for that concept of global public goods?

  (Mr Maxwell) I will say a couple of things and then ask a real economist to say something. "Public goods" is a technical term in economics. The technical definition is that it should be non-rival and non-excludable, which means that one person using some of it does not block other people from using it, and one person using some of it does not mean there is any less of it afterwards. The classic example is a lighthouse. That is a perfectly legitimate concept and the reason why they are under-funded is precisely because it is non-rival and non-excludable, there is no reason for you to pay for it, or at least you will not pay as much for it as you would if it was private. We spend lots of money in countries on public goods. In Britain education has some public good characteristics, as do lighthouses and lots of other things. It is perfectly legitimate to talk about global public goods also, and some of the things you listed—knowledge, health, security—are all global public goods. What that does not tell you is how much you should spend on global public goods. Part of the reason that the concept has become so popular is that a number of agencies have picked it up as a vehicle for getting bigger budgets. It is a catchy phrase, it is attractive to donors. One of the points that we have made is that you can fund public goods but at the expense of other things. Given that the amount of money available is limited, you are not going to spend infinite resources on agricultural research and nothing on other things. That, it seems to me, is where the big argument has to come. Yes, we should have global public goods. They do exist and yes, we should fund them. It makes sense to fund them multilaterally and to have shared ownership of them, and the international agricultural research system is a good example - but that does not tell you how much to spend. That still has to be argued out in the context of budget-setting.
  (Professor Mosley) In some cases there is fairly clear evidence that the fact that things are difficult has caused them to be under-funded, and agriculture, as Simon has just mentioned, is a good example. Aid flows, bilateral and multilateral, to agriculture have decreased by around 20 per cent over the last 10 years. There is some evidence that, particularly in Africa, the fact that poverty is not falling very fast at all in most countries may be due to the poverty of agricultural performance and that in turn may be due to the deficiency of aid flows, and that in turn may be due to the fact that each individual donor is not putting its share into agriculture because the benefits accrue to the continents of the world as a whole. Certainly in the case of research on crops such as maize or rice, which are consumed almost universally in the Third World, there seems to be a pretty strong case for a global increase in funding on the grounds that this is a global public good which individual country allocations are not properly funding.
  (Mr Roberts) Perhaps I could add a point on global public goods as a concept. I think we have to see, in the absence of global government, that public goods for the most part have to be delivered by national governments. There is a high degree of overlap between national public goods and global public goods. To take the example of communicable diseases, communicable diseases are treatable. If we can combat them through vaccination campaigns or some other form of disease control locally, nationally, that will be of benefit not only to the people who are vaccinated but to others as well. That is the nature of a public good. It could also have trans-border ramifications and benefits, so we have simultaneously a national public good and a global public good. Much the same can be said about some forms of environmental protection. Even possibly in the field of education one might be able to see that sort of thing, particularly amongst countries which have close contacts with one another, as some African countries might do, where there is a lot of movement across borders. The distinction between global public goods and national public goods is not very clear. Most global public goods, international agricultural research being an exception but not the rule, and maybe some health research also may be the exception but again not the rule, have to be delivered locally, and so it is very important to build local capacity for delivery of these things. Although the term "global public goods" has fairly recently come into circulation and common use, I think as a result of a publication on this subject by the UNDP economist, Inge Kaul, a few years ago. In fact we have been producing global public goods for an awfully long time and the Consultative Group on International Agricultural Research is over 30 years old and has been in the course of its time responsible for, for example, the green revolution technology which transformed agriculture in the Indian subcontinent in the 1970s and 1980s. So we have been in this business a long time already. In terms of the financing of global public goods, there is probably no simplistic answer. The CGIAR itself is now asking itself existential questions because of the global growth of private intellectual property and the capacity for research in agriculture in the field which previously was the prerogative essentially of the public sector.

67.  Can I put two reactions to what you said and ask you whether I am right in this? Is this in a sense saying that when we set up something like a global health fund, which we have done recently to tackle three major groups of disease, that is a reflection of failure in the standard of disbursement of aid, that it has fallen through the cracks because it has not been funded? The other is, my impression with agricultural research is that a lot of it happens but not much of it gets too much done about it. It is not the funding mechanism there; it is the application system.

  (Mr Maxwell) All the evidence is that there is a very high rate of return to agricultural research. The problem in agricultural research is that more and more of it is now in the private sector and the private sector is not interested in technologies which help poor people; it is interested in—

68.  I was talking about public research.

  (Mr Maxwell) I would not worry too much about the effectiveness of public sector agricultural research on average. Africa is slightly more difficult because the institutional environment is not so good. On the question of health funds, my own view is largely that these funds are a gimmick, probably a very successful gimmick. If they raise the profile of a topic you get more money going into it. There is nothing wrong with gimmicks in principle, but we have other mechanisms for delivering aid to the same objects if we want to use them.


69.  The problem is they are a distraction; they might be worse if they give the impression that something is being done which is not actually being done.

  (Mr Maxwell) There was something I meant to say about the United States and I did not but it is relevant here, which is that one of the features of the US aid system is that funds are heavily earmarked. Congress has set innumerable restrictions on the aid programme and earmarked aid for certain things, which makes the aid administration very difficult in the United States. The European system has suffered from the same problem, with far too many budget lines, and they have been trying to deal with that. If you set up lots and lots of funds you achieve the objective of raising the profile of a topic and perhaps increasing the total size of the cake and perhaps getting a bigger share of the cake for your particular topic, but at the expense, of enormous complications.
  (Mr Roberts) The global fund for TB, malaria and HIV will in fact be, as I mentioned earlier, supporting national programmes essentially and so it will be a funding mechanism lying alongside existing funding mechanisms for support in institutional strengthening of national health administrations.

Tony Worthington

70.  Could I ask you to carry on, John, on the Chancellor's International Development Trust Fund which you talk about in the memorandum, about the strengths and weaknesses of it, but furthermore is it a goer?

  (Mr Roberts) I do not think it is for us to decide whether it will fly. It is a mechanism which would generate, if agreed amongst a sufficiently large quorum of countries, rather rapidly some rather significant increases in aid flows. That is the virtue of it. The difficulty arises with the fact that it has to borrow not only to finance ODA flows but also to pay interest on its previous borrowings for a period of time, so it clocks up very rapidly very significant quantities of debt which, according to the projections, would then have to be paid off over quite a large number of years after 2015, as the intention is, and probably for a good 15 years thereafter.

71.  How do you rank it, if we are all looking for ways in which to increase the expenditure on development, as a possible effective way of generating more funds?

  (Mr Roberts) I rank it as a quick actor but possibly not the one to be deployed on a very large scale because of the tail end problems of how to pay down a potentially extremely large volume of debt.
  (Mr Maxwell) Is not most of the money going to come from additional aid rather than from borrowing?
  (Mr Roberts) If you are talking about the initiative in its totality, yes, but that is covered in conventional aid and that would not be formal novel financing.


72.  You obviously know more about the International Development Trust Fund than we do. We had some other witnesses last week who seemed to know very little about it. It is quite interesting that in the Budget Red Book it refers to shortfall by Monterrey and the Chancellor's proposal that some of the shortfall will be made up by the International Development Trust Fund. It talks about levering in private sector money. We are not quite clear how it is going to determine this, whether there is going to be some huge PFI for international development. John, it sounds to me as if you are on the right examination paper and at least know what the questions are all about. If you can share all this at some stage, what you understand the International Development Trust Fund to be, who is actually funding it, where the money is coming from, all these various things, we would be very grateful[7]. You are the first person who has shown some understanding of what it is all about. Simon, do you have any thoughts on the International Development Trust Fund?

  (Mr Maxwell) No collective thoughts. Just have a look at the governance, I would say, and if this is simply a device to put a great deal more money into the hands of the World Bank you can expect developing countries to be very anxious about who controls disbursements.

73.  Do you and your colleagues have any final thoughts about all this—what makes a good donor, effectiveness? Is there anything that you have not been asked about that you would like to have been asked about?

  (Mr Maxwell) There is one quick topic which we have been practising. One of the big debates in development has been around aid effectiveness and famous World Bank studies show that aid only works where the policies are right. That has been very much debated in academic circles and Paul has been practising a one-sentence summary of the arguments and a seven-sentence summary of what it means and I think you ought to hear it.
  (Professor Mosley) The World Bank's line was that aid only works where policies are right in the sense of openness, in the sense of budget deficits being low and in the sense of inflation being low. This seems to have been based on flawed research and the best available knowledge suggests that aid actually is effective across an overwhelming majority of countries whether policies in the World Bank sense are right or whether they are wrong, suggesting that, even in places where policies are currently illiberal and not very effective in poverty reduction, none the less, by appropriate persuasion along the lines that we have been describing, aid may become effective. Which I think is a very encouraging message for donors who have been worried about whether it is worth increasing aid totals by abiding doubts about whether it is going to be effective. The evidence suggests that in a huge majority of countries aid is effective either because it is backing up policies which are already good or, alternatively, by amending those which are bad. That really was not known and established until about a couple of years ago.

Mr Robathan

74.  I hate to ask for a paper but could you give us a brief summary of where the evidence has come from because this is quite a radical view which you are expressing towards a lot of things which some of us have thought and heard in the past? I do not think we can discuss it now but if you could give us a short summary I would be thrilled. I will even read it.

  (Professor Mosley) Glad to.

  Chairman: Thank you very much for your evidence.

6   Ev 61. Back

7   Ev 61. Back

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