DFID's Role in Building Infrastructure in Developing Countries: Government Response to the Committee's Ninth Report of Session 2010-12 - International Development Committee Contents


Appendix 1: Government Response


The UK Government welcomes the opportunity to respond to the report of the International Development Committee on "DFID's Role in Building Infrastructure in Developing Countries". We agree with the Committee that investing in infrastructure is crucial for growth and the wealth creation that will underpin sustainable poverty reduction, and that the UK Government has an important role in improving infrastructure provision in developing countries.

In this response we will respond to each of the conclusions and recommendations in turn. These form part of our strategic approach to infrastructure going forward, which includes the following six broad elements:

1.  Engaging with the multilaterals to ensure the highest development impact from UK taxpayers money;

2.  Working with the private sector to increase private investment in infrastructure;

3.  Strengthening regional trade corridor approaches in Africa;

4.  Infrastructure's role in low-carbon development and improving resilience to climate change;

5.  Infrastructure reconstruction in post-conflict states, and

6.  Direct provision of services to improve access for poor people, including water and sanitation, energy and transport, and infrastructure that enables access to health and education services.

The UK Government's approach to providing aid for infrastructure varies with context. In fragile and post-conflict countries DFID engages directly in the financing of infrastructure facilities. In more stable contexts, aid instruments can also include sector and general budget support. The operational plans for DFID country offices, available publically, provide more detail on the development results that DFID office plan to achieve over the next four years. Twenty three of 28 DFID focus countries plan to work on infrastructure, for example DFID DRC plans to construct or rehabilitate 1700km of roads over the next four years. DFID is also developing new delivery mechanisms such as results based financing, which are well suited to infrastructure provision.

The Committee concluded that corruption is a particular issue within the construction industry. The UK Government takes a zero tolerance approach to corruption and has tough safeguards in place to protect all aid spending. The UK Government is supporting a new International Anti-Corruption Academy aimed at boosting the fight against fraud, bribery and theft across the world. The UK Government has introduced a radical new aid transparency guarantee so people can see where UK aid money is going. We will publish detailed information about all new DFID projects and programmes, including all infrastructure programmes, on our website in a common standard with other donors.

The multilateral development banks also take a tough stance on corruption: firms or NGOs found to be involved in fraudulent or corrupt practices are typically debarred from future contracts. The World Bank has a robust range of processes and measures in place, including an Integrity Vice Presidency which holds the World Bank to account. Any firm or NGO debarred by the World Bank will be automatically debarred by the African Development Bank and the Asian Development Bank and vice versa.

The UK initiated the successful Construction Sector Transparency Initiative to tackle corruption in the sector. The CoST pilot phase showed that the CoST approach is technically viable in government systems and across all construction subsectors. DFID is now looking to the World Bank to lead the scale-up of the CoST pilot as a global programme to improve transparency in construction procurement.

DFID's comparative advantage in infrastructure lies in its policy thinking, support to innovation, strengthening governance and political commitment to sound policy. We partner with major infrastructure financing institutions including MDBs and the private sector to invest in infrastructure in developing countries. DFID brings a wide range of inter-disciplinary skills around growth, poverty, social development, governance, and environment to address infrastructure issues in the countries where we work.

DFID and infrastructure innovations

1. DFID has played a leading role in developing new and creative approaches to infrastructure through its support for such initiatives as the Nigeria Infrastructure Advisory Facility, the Public Private Infrastructure Advisory Facility and the Construction Sector Transparency Initiative. The uptake of the latter two initiatives by the World Bank demonstrates the sustainability of DFID's initial hard work. (Paragraph 17)

Agreed

The UK Government welcomes recognition from the IDC that our strategy for innovative approaches to infrastructure including supporting the work of the Nigeria Infrastructure Advisory Facility, the Public Private Infrastructure Advisory Facility and the Construction Sector Transparency Initiative, has been the right approach.

Private sector infrastructure and CDC

2. We commend DFID for establishing the Private Infrastructure Development Group (PIDG) and helping to stimulate investments from other donors, which are leading to improved infrastructure provision, job creation and economic growth in poor countries. DFID has made contributions of around £125 million to PIDG over the last decade. We recommend that DFID increase its annual funding of the Group in the period to 2013, in line with DFID's rising budget. We also recommend that at an early date DFID complete its consideration as to how the model could be replicated in the agricultural sector, where the need for infrastructure is particularly acute. (Paragraph 23)

Agreed (with spending decisions subject to ministerial approval)

The Department agrees with the IDC that the PIDG has made a major contribution to increasing investment into infrastructure in the poorest countries. The Multilateral Aid Review also found that the PIDG was one of the best performers, offering good value for money and recommended an uplift in funding. DFID is currently considering the next phase of funding support to PIDG. We will communicate our funding plans and expected results from PIDG by April 2012.

The Department is also considering how to best catalyse private investment in agriculture. There is a huge potential - and need - to invest in African agriculture. Investments are needed in rural feeder roads as well as irrigation systems, drainage, and post harvest storage to enable agricultural markets to work better. Investments are particularly necessary in areas where there is greatest commercial potential, for example in areas where there are strategic plans underway to develop agricultural growth corridors. The PIDG is allowed to invest up to 20% of its funds in agriculture related activities and InfraCo Africa is developing a new working model that would expand their capacity in this area

3. As a development finance institution with huge reach into poor countries, CDC can and should support more investments into the infrastructure sector. Earlier this year, the Government decided against taking up our recommendation that CDC have specific targets for funding neglected sectors such as infrastructure and agriculture. Neither does the new CDC Business Plan make specific provision for greater exposure to infrastructure. However, what the Business Plan does contain is provision for greater flexibility for CDC to become more 'hands on' in managing its investment portfolio. The fact that CDC will use a wider range of investment tools, such as debt, may enable it to target new markets where infrastructure is underdeveloped. With its new capacity to make direct investments, CDC should seek out infrastructure projects and increase the overall proportion of its finance which is directed to them. (Paragraph 28)

Noted

The Department agrees that the private sector will be a key player in the provision of improved infrastructure in poor countries and that CDC has an important role to play in helping to mobilise private capital to invest in infrastructure.

The CDC portfolio value by sector in 2010 for infrastructure is 15% according to the 2010 CDC Group Annual Review. The Committee's report of infrastructure being 8% of CDC activities is based on 2009 figures, which were the most recent available at the time of submitting evidence. The CDC reports information and communication technologies separately at 7% of their overall portfolio for 2010. These figures compare well with other European development finance institutions, not least because CDC recognises the important development impact of infrastructure. CDC played a vital role in supporting the first wave of infrastructure investment funds that have invested in Africa in the last decade and continues to invest in innovative funds such as its recent €15 million commitment to the Frontier Market Energy Fund which provides finance for renewable energy infrastructure in East Africa.   

Going forwards, CDC's newly created Innovative Investment Unit has £250m of capital to invest in the very poorest countries and most under-invested sectors over the next five years. Its particular focus will include investment in urban infrastructure, including power generation, water and sanitation, and the rural economy (potentially in agriculture production, processing and services).

As noted in our response to paragraph 82 of the IDC's fifth report of session 2010-2012 on the Future of CDC, we prefer not to set specific sector targets for CDC. For more details on this rationale please refer to the Government response to the IDC's report on the Future of CDC.

Water research

4. DFID is demonstrating some good approaches to helping countries build infrastructure that supports and manages water resources. We recommend that DFID scale up its support to research about water resources management that will help enable poor countries to take difficult decisions about their infrastructure priorities within the water sector. (Paragraph 33)

Agreed

The UK Government is in the process of scaling up research funding for water resources management in developing countries. DFID is developing a new programme on improving water security in a changing world, which will support research on three key areas: groundwater; inter-relations between water and energy; and the politics of trans-boundary water. The anticipated outcome from this research programme is that there will be greatly improved knowledge of the nature, development and management of water services and water resources in Africa and South Asia. The impact of this programme is expected to be greater water security for millions of poor people as a consequence of the use of better evidence in policy, planning and management of water resources and services.

DFID has created a new advisory position on water, with a focus on water security, in the Climate and Environment Research Team.

Urban development

5. We welcome the work DFID has undertaken on urban infrastructure and development following our predecessor Committee's Report on 'Urbanisation and Poverty', including DFID's publication 'Cities: The New Frontier'. We commend DFID for implementing the Committee's recommendation to support research into urban poverty through its funding of the International Growth Centre's research on urbanisation and infrastructure. (Paragraph 36)

Agreed

In a world of over seven billion people the countries where DFID works are experiencing rapid urbanisation. Our urban work continues including urban research from climate and security perspectives and country programs including Nigeria and India. The IGC Infrastructure and Urban research programme remains active, with a recent IGC event on cities and economic development at the 2011 Growth Week.

In Nigeria DFID is supporting the second phase of the Nigeria Infrastructure Advisory Facility, a programme to help the Government of Nigeria to improve planning, management, implementation and maintenance of infrastructure investments and related regulatory functions. The programme will help some of Lagos's poorest people by investing in power, water and transport in the city.

Regional infrastructure

6. We welcome DFID's support for projects which assist regional integration in Africa, including its promotion of 'corridor' infrastructure and improvements to border crossings under the TradeMark Southern and TradeMark East Africa programmes. Such projects can greatly improve regional trade prospects and can have an important impact on regional peace and security. We recommend that DFID carefully evaluate individual elements of success within these programmes and see if it is possible to replicate them elsewhere in Africa. (Paragraph 41)

Agreed

The current (November 2011) Trade Mark East Africa (TMEA) review will inform the ongoing re-design of our West Africa Regional Programme and future regional initiatives. The UK Government is working with others to ensure that the lessons from successful regional infrastructure development are made useful elsewhere in the Africa region. The high level Tripartite Infrastructure Investment Conference (TIIC) held in Nairobi at the end of September 2011 was an excellent opportunity to share information from TMEA and Trade Mark Southern Africa. In particular, the Horn of Africa Initiative was presented at the TIIC and experiences shared. We are also working to ensure that relevant information on these various regional initiatives is available, via our funding to the Infrastructure Consortium for Africa.

7. However, we question whether the outcomes sought by TMEA are sufficient. Border management is so poor that it should be possible to achieve much more than 15% improvements in five years. The increase in intra-regional trade should also be higher than 25% above-trend given that countries are approaching this from a low base. TMEA's target to achieve a 5% increase (above trend) in the total value of exports from the East African Community region to the rest of the world is also insufficiently challenging. Given recent rises in commodity prices, this may well be achieved simply by shipping the same quantities as before. We believe that TMEA's objectives are therefore insufficiently challenging, and recommend that DFID go back and collaborate with TMEA and other donors to revise them upwards. (Paragraph 42)[1]

Partially Agreed

The IDC conclusions were shared with TMEA who welcomed the report and appreciated the central message regarding targets and results. TMEA management offered the following response on indicators:

TMEA has a target to achieve a 30% reduction in time that it takes for a truck with a container to cross selected borders, from the time they join the queue to the time they exit the customs processing zone. TMEA's approach includes combining 'hard' infrastructure and information technology components and 'soft' integrated border management components that aim to address people-related issues such as knowledge, skills and attitudes such as trust and working together and incentives.

TMEA aims to contribute to a 15 per cent reduction in the time it takes to import or export a container from an East African port to Burundi and Rwanda. TMEA's work is based on the logic that reducing transportation time (and subsequently costs) will contribute to increasing trade. TMEA has estimated that this time savings could equate to savings of £3,700m for the private sector. Additional savings are likely to be realised also by the public sector. TMEA consider the 15 per cent target to be realistic given high levels of growth in trade volumes. A recent study[2] projecting freight volumes of the two main corridors that TMEA is working on - the Northern and Central Corridors - forecasts growth in freight volumes of four times and eight times over the next 10 years for the two corridors respectively. This makes achieving the 15 per cent target far harder given increasing demand for freight services and restricted supply. For these reasons the TMEA analysis suggests that meeting the 15 per cent target will be challenging and therefore DFID and TMEA do not propose revising the target at this point. TMEA will communicate directly with the Committee with more detail regarding the specific rationale for their targets.

Multilateral Development Banks and infrastructure

8. DFID is one of the largest contributors to the EU, the World Bank and the African Development Bank and also makes a significant contribution to the Asian Development Bank. The Secretary of State for International Development has pledged to get value for money and this applies as much to multilateral as it does to bilateral expenditure. We are concerned that DFID does not monitor spending as effectively as it could. In its response to this report, DFID should explain to us what safeguards it uses for its infrastructure spending through multilaterals, that is: what stipulations it makes regarding how its funds are spent; how it ensures these stipulations are met; how it tracks the expenditure of funding earmarked for particular projects; and how it monitors the quality of individual infrastructure projects. We intend to return to the issue of DFID's large, aggregated payments to the multilaterals in our forthcoming inquiry into the 2010-11 Departmental Annual Report and Accounts. (Paragraph 47)

Not agreed

Sufficient safeguards are in place in respect of those multilateral organisations that are responsible for the large majority of UK funding for infrastructure spending - the World Bank, Regional Development Banks, the European Development Fund (EDF) and the European Commission (EC) budget. These are achieved through the combination of shaping their policies and assurance processes, oversight of the application of these policies and processes, and monitoring via DFID country offices.

The UK has permanent staff representing British interests on all of the Banks' Executive Boards and is represented on the relevant EDF and EC management committees. These boards and committees are responsible for approving high level corporate strategies and country specific strategies that set the guidelines for the choice of projects. They also approve the policies that shape the design of individual projects - for specific sectors (e.g. energy and water where applicable) and for design issues such as generic policies on procurement, environmental impact assessment and management of fiduciary risks.

The most important single safeguard for project quality and compliance with corporate requirements is the review of individual projects by the boards and relevant committees on which the UK Government sits. In many cases, DFID consults relevant country offices and sectoral specialists in forming its views on the appropriateness of a project, and comments offered by DFID can shape the final project approved.

It is not possible to earmark UK support to particular projects at the Banks, EDF or EC. All donor core contributions to these organisations are combined. The Banks and the EC are responsible for the implementation and monitoring of individual projects. The UK relies on the Bank and EC's systems for tracking expenditure and monitoring implementation. The UK Government's multilateral aid review assessed these systems as being "satisfactory" for each of the MDBs, with clear and transparent processes for aid allocations linked to both performance and need. The MDB's generally strong reporting systems help them to proactively manage poorly performing projects, and there is evidence of resources being reallocated when deemed necessary.

The boards and committees on which DFID is engaged ensure that each multilateral institution has an effective set of assurance processes in place to monitor the effectiveness of projects and their compliance with corporate requirements, including environmental and social safeguards. These include regular reports on the performance of the portfolio of projects under implementation highlighting any projects at significant risk of failure. The boards and committees also assess the robustness of investigation processes to follow up any concerns relating to issues such as allegations of fraud.

In a number of cases, DFID also monitors the implementation of a multilateral project directly, usually because it is being co-financed by DFID. In addition the UK's representatives on the boards and relevant committees also visit recipient regional countries at varying intervals to monitor the implementation of projects. DFID also currently places senior infrastructure advisor secondees in key multilaterals, including the World Bank, European Investment Bank, and the African Development Bank, to influence MDB performance and to influence an increased emphasis in MDBs on results measurement. Together, these other monitoring opportunities provide an additional check on the effectiveness of an institution's assurance processes.

If any information was received from a DFID country office, or other sources, that suggested that any multilateral funds were being misappropriated, DFID would bring the matter to the attention of the appropriate investigative body of that organisation.

9. In particular DFID needs to explain how it ensures value for money for the funding it gives to the African Development Bank (AfDB) for infrastructure projects. The Department is the largest donor to the African Development Fund, the AfDB's concessional lending arm. Globally, Africa is the region facing the most severe challenges regarding infrastructure. The current replenishment of the ADF (ADF 12) is rightly prioritising infrastructure, but DFID's 2011 Multilateral Aid Review raised questions for the AfDB regarding delays, lack of poverty focus and the need to improve quality of staffing in fragile states. Again, in its response to this report, DFID should explain the safeguards it uses for its infrastructure spending through the AfDB. (Paragraph 48)

Agreed

The UK Government applies the approach, set out in our response to Paragraph 47, to the African Development Bank (AfDB) to raise the quality of its infrastructure projects. The AfDB has several departments that are responsible for assessing project and assuring the quality of their implementation, for example the Compliance Review and Mediation Unit, Operations Evaluations, Quality Assurance and Results, a virtual Performance Monitoring Group and the Ombudsman.

The Committee is correct that the Multilateral Aid Review identified some areas for improvement in the AfDB's performance that are relevant to its contribution to building Africa's infrastructure. DFID is working closely with AfDB management to help it address these, including through our engagement on these issues at the board and through our bilateral technical cooperation arrangement with the AfDB. This arrangement aims to improve the performance of the Bank in strategically important areas, including addressing capacity gaps in infrastructure, through our position on the AfDB board.

More broadly, the UK is also a strong supporter of the Bank's "decentralisation road map". This will result in more staff and responsibilities devolved to field offices, and more offices opened in fragile states. Four new offices have opened in fragile states this year and regional resource centres will open in Pretoria and Nairobi in 2012. DFID is supporting the Bank to conduct a fiduciary risk assessment of decentralisation. A successful decentralisation of staff to developing countries, including fragile states, will help the Bank improve the performance of its programmes.

10. We asked DFID whether it has access to research on the value for money provided by different multilaterals for the infrastructure projects that they finance. The Department referred us to a 2008 study of unit costs for infrastructure in Africa. It then identified a different process for spending decisions at the project level, which include a more detailed investigation of unit costs. We found this response unsatisfactory. We believe that assessing the comparative cost of infrastructure projects financed by the various multilaterals should be an ongoing process for DFID. We ask DFID to look at how it could undertake a more systematic approach to assessing the value for money provided by different multilaterals for the infrastructure projects that they finance. (Paragraph 50)

Agreed

At the 2011 G20 conference the UK strongly supported the priority given to infrastructure in discussions on development. Major multilateral development banks jointly proposed a new Global Infrastructure Benchmarking Initiative. Among other things, this would collect data on unit costs and other value-for-money metrics in a more systematic way than previous ad-hoc approaches, such as the 2008 study referenced by the IDC. The UK Government is actively considering whether to fund this initiative which would involve a more systematic approach for assessing value for money in infrastructure projects, through benchmarking unit costs and other infrastructure indicators. Through the International Aid Transparency Initiative, which the UK Government launched with other partners in 2008, we are pressuring the MDB's to publish the details of development projects to enable improved scrutiny by the UK Government and Parliament, and governmental and civil society organisations worldwide.

Improving MDB procurement and capacity building (paragraphs 52 and 61 taken together)

11. Procurement of goods and services offers the opportunity to reduce poverty by providing small and medium-sized firms with much-needed contracts and boosting local employment. We were concerned to hear that, when bidding for infrastructure projects, local contractors often do not stand a chance against international bidders, partly due to rigid rules used by multilateral development banks (MDBs) such as the EU and the World Bank. Sometimes developing country government procurement processes may be inefficient and corrupt, but they will only improve by being offered the chance to reform. We recommend that DFID use its leverage at the World Bank and the other MDBs to ensure that they build capacity within developing country government procurement processes, for example by specifying in large infrastructure projects funded by MDBs a certain level of local procurement, or the use of, or training of, local professionals. (Paragraph 52)

12. In order to contribute to poverty reduction, infrastructure projects in developing countries must seek to build local capacity to develop, build and maintain infrastructure. Infrastructure construction and maintenance also provides a vital employment opportunity in developing countries. Training both construction workers and relevant professionals such as planners, surveyors, water experts and engineers in developing countries can help avoid the cycle of "invest, neglect and (expensively) reconstruct." We recommend that DFID build provisions into the large infrastructure projects it supports via the multilateral development banks requiring local capacity building. This should include the training of construction workers as well as the relevant professionals necessary to design, build and maintain projects including planners, surveyors, water experts and engineers. (Paragraph 61)

Partially agreed

DFID agrees that local procurement is an important means to create jobs and stimulate economic growth and that the channelling of resources through country systems provides an opportunity to improve the effectiveness of these systems. Multilateral organisations also have an important role in building procurement capacity more generally in client countries. Many programmes, for example road sector projects, have significant local capacity development content. Where appropriate, programme results frameworks include additional jobs created and the share of work undertaken by local contractors.

The UK has been urging the World Bank to approve a new instrument focused on results that would use clients' procurement systems and procedures where these are judged to be acceptable. This new instrument would entail a significant focus on building client capacity. In addition, the World Bank has established a new fragile states centre of expertise that will focus on improving the World Bank's performance in fragile states including on procurement.

AfDB encourages the development of local and regional suppliers, contractors and consultants. The AfDB's latest bidding documents include provision for local or regional suppliers or contractors, use of joint ventures, as well as encouraging contractors to source local labour. Of AfDB-financed contracts in the last five years, African contractors won 96% of the total number of contracts and almost 45% of the total value. The proportion of African contractors winning larger contracts is expected to rise with the maturing of the African construction industry.

The Asian Development Bank (AsDB) has promoted local procurement through regular training on policies and procedures for procurement of goods, works and consulting services specifically targeted for improving capacity and opportunity for consultants, contractors and suppliers in AsDB's developing member countries. Technical assistance projects have sought to strengthen governance based on country and sector level risk assessments in the areas of local procurement, anti-corruption and public finance management. In addition, a new lending instrument is being designed that seeks to use local procurement systems and procedures and to build capacity of the governments involved. Finally, contractors are encouraged to use local expertise and materials, although AsDB has to ensure rigorous standards in procurement to avoid reputational damage arising from corruption.

The Caribbean Development Bank (CDB) has sought to help build capacity on procurement in the key public sector agencies of its Borrowing Member Countries. For example, following the launch of its revised procedures for procurement of goods and works, it conducted workshops for key public agencies on the guidelines in 2006-2008, and it will provide similar assistance to members on its revised guidelines on the selection and engagement of consultants approved this year. The CDB uses thresholds for different types of procurement and project-level procurement plans, so a reasonable amount of business does go through national competitive bidding. This ensures local suppliers get a reasonable share.

For all MDBs the use of technical assistance is an important way to build capacity, reduce risks and enhance project sustainability.

UK expertise

13. DFID should also consider how to use the UK's own engineers. We support the recent proposal made by the UK Institution of Mechanical Engineers for a DFID supported scheme that would second British engineers to developing countries. A minimal financial commitment by DFID could fund the administration of such a scheme, especially if engineers offered their time on a pro bono basis. (Paragraph 62)

Noted

DFID is in the process of launching a new programme to facilitate the deployment of UK specialist expertise for investment climate reform. The initial phase of this will be restricted to UK Government departments, but a review of the initial phase will scope the potential for including the members of UK professional engineering institutions in the programme. The IMechE proposal will be considered by DFID in this review. Our approach to working with external expertise will not compromise the principle that UK aid is tied to poverty reduction, not to promoting UK trade or other commercial or political ends.

DFID has a number of mechanisms and arrangements whereby additional expertise from across the industry is used to supplement that of our own in-house advisers. Existing resource centre contracts are in place with two infrastructure consortia ("TI-UP" and "ENGAGE") and with a separate consortium (called DEWPoint) covering water, sanitation, environment and climate change. Call-down arrangements under these contracts allow specialist expertise to be readily accessed in support of DFID programme objectives. Current contract arrangements for these resource centres and framework agreements will be completed in March 2012. DFID is currently designing future resource centre arrangements to enable UK aid programmes to be informed by the best available expertise.

The Stabilisation Unit actively maintains a register of over 950 Deployable Civilian Experts which includes over 50 infrastructure specialists. These persons have each been selected because of the competencies and readiness to deploy in fragile environments as the need arises. Personnel from this register are being used in a range of fragile environments where DFID is currently active.

Infrastructure in bilateral programmes

14. Initially we questioned DFID's decision to run a bilateral road-building project in DRC given it has little experience in road-building (outside Pakistan and Afghanistan), but decided that the circumstances demanded this being the best approach. We agree with the Minister that DFID must tailor its country programmes to the greatest needs within each context. (Paragraph 68)

Agreed

We agree that DFID bilateral programmes need to be tailored to the greatest needs within each context where we work. One example is how growth diagnostic work has highlighted the major bottlenecks to growth. This has led to increased donor attention to infrastructure, for example the power-sector reform work under the Nigeria Infrastructure Advisory Facility. DFID is in the process of updating earlier guidance on infrastructure in fragile states. This will be complete and communicated publically within one year.

Transport research

15. Building roads in Africa requires a different approach from roads in developed countries. More research on how to build appropriate roads in rural Africa is needed, and the substantial body of knowledge already amassed needs to be better disseminated. The Africa Community Access Programme deserves increased and ongoing support from DFID. This would enable it to take up opportunities to expand into new countries. We recommend that DFID increase its £7.5 million contribution to AFCAP, and that it commit to a new phase of support after the end of the current programme, expected in 2013. We recommend that DFID specify that this extra funding must result in extensive dissemination of research findings. We recommend that research findings to date are published in an easily accessible format. (Paragraph 71)

Agreed

DFID will increase our funding to AFCAP to £10.5 million to deliver more results in the provision and maintenance of roads in Africa and expand AFCAP to more countries. Already two governments, Ethiopia and Mozambique, have shifted to a more affordable and sustainable approach to road maintenance following AFCAP's support. The expansion will allow AFCAP to increase its work on reducing transport costs in Africa. We will ensure that findings published under AFCAP are extensively disseminated. We will also ensure that research findings from earlier DFID transport research are included on an infrastructure knowledge site that is being developed and are thereby made freely available to the wider development community. This will be publically accessible by summer 2012.

Road safety (Paragraphs 79 and 80 taken together)

16. Road safety is the leading cause of death for young people over five years old worldwide. The multilateral development banks are responsible for the overwhelming majority of donor-funded road-building projects in developing countries. MDB funded roads should be designed with safety as a paramount concern. DFID should work harder to ensure that road safety design is an essential part of the multilateral road-building projects it funds. We agree with the Global Road Safety Partnership that, when making decisions to invest in infrastructure, DFID should make a life-cycle risk analysis of the expected road crash death and injury scenarios that can be expected, and then require stipulations to be put in place to manage these risks as part of the funding packages. (Paragraph 79)

17. DFID claims to place a high priority on road safety, yet it does not directly fund road safety work. It is failing to honour the pledge it made in 2009 to give grant support to the World Bank Global Road Safety Facility of £1.5 million. DFID should review its decision; it should stand by its word and find this funding. (Paragraph 80)

Agreed

The UK Government recognises that the primary responsibility for road safety lies with country governments and the donor agencies, including the MDBs, which provide significant financial resources to road building. In April 2011 the MDBs launched an initiative to improve road safety including through the provision of safety measures in road infrastructure projects funded by the banks. The UK Government expects the MDBs to deliver on this action plan and ensure that road safety is integrated into road sector programmes. We also recognise the important work of the World Health Organisation in leading the UN road safety collaboration.

To support the global effort on road safety, we will allocate £1 million to the Global Road Safety Facility to achieve measurable results in improving road safety in developing countries. We will consider a further £0.5 million allocation to the GRSF contingent on the facility attracting finance from other sources and providing evidence of results. These funds will be allocated over a three year period.

We also agree that appropriate life-cycle risk analysis of expected road crash death and injury scenarios is needed, both in our own programmes and in the work of others. We will develop guidance for the inclusion of road safety design within UK-funded road programmes. We will continue to influence the MDBs, including through the GRSF, to hold the MDBs to account on their pledges on improved attention to road safety within their road programmes.

Construction sector transparency initiative

18. Given the success of the pilot phase and DFID's "zero tolerance" approach to corruption, we recommend that, as soon as the Bank confirms a new funding arrangement for CoST, DFID provide funding to a similar order of that it provided for the first phase (£4.8 million over four years). In order to benefit from the investment it has made so far, and to capitalise on the success of the pilot stage, we recommend DFID not only extend funding but also commit staff time to stay engaged in the CoST initiative. (Paragraph 87)

Partially Agreed (awaiting policy decision)

The UK Government initiated the Construction Sector Transparency Initiative (CoST) pilot in 2008 to test an approach to improve transparency in construction procurement, building on the positive lessons from the Extractive Industries Transparency Initiative. Independent evaluation concluded that the CoST pilot demonstrated the potential of the approach. The World Bank has recently agreed a grant of $0.5 million for 2012 to establish CoST as a global partnership programme and to continue the implementation of the existing CoST country programmes. This is the first phase of a 3 year support grant of $1.5 million, with the subsequent years' finance being dependant on attracting other donor funds. The UK Government welcomes this support from the World Bank. It is appropriate that this initiative is owned by the implementing countries and the major funders of infrastructure.

The UK Government will keep CoST in view and will review future core funding in the light of other contributions to the initiative. In the interim, DFID continues to fund local CoST activities at the country level.

Infrastructure in fragile states

19. We will return to DFID's approach to staffing in Chapter 4. Fragile and conflict affected states present particular challenges for infrastructure provision. We are surprised that DFID did not explicitly discuss these challenges in a recent paper on 'Building peaceful states and societies'. We urge the Department to ensure considerations regarding infrastructure are included in future publications about conflict-affected and fragile states. (Paragraph 92)

Agreed

Infrastructure sectors are frequently prioritised by beneficiaries and development partners working in fragile and conflict-affected states. The Building Peaceful States and Societies paper does discuss infrastructure as a priority intervention under inclusive growth and job creation. In this paper and others "service delivery" includes water and sanitation and the provision of other infrastructure services.

DFID is currently working on revising the Strategic Conflict Assessment process, working jointly with other government departments. Although this process will not specifically investigate sectors, infrastructure is an important component of the service delivery and the jobs and growth sections. The UK Government also provided funds to the World Bank's 2011 World Development Report on Conflict, Security, and Development, which identified lack of basic infrastructure as a major constraint to job creation in fragile states. DFID country offices are currently considering the implications of this report.

We agree that there could be more discussion of infrastructure challenges in fragile states including how infrastructure contributes to stabilisation objectives. We will commission a paper on infrastructure in fragile states which will synthesise recent programme experiences in conflict-affected countries and provide guidance for infrastructure programming in fragile and conflict affected states.

20. Conflict-affected and fragile contexts require careful co-ordination between DFID and the military and/or with security forces. This is vital if the balance of achieving quick results and maintaining a long-term perspective of reconstruction is to be struck. In its response to this report, DFID should provide details of how it ensures that effective co-ordination takes place between its staff and the military and/or security forces in focus countries affected by conflict such as Afghanistan. We will be exploring DFID's work in these environments in greater details during our current inquiry into Working Effectively in Fragile and Conflict-Affected States. (Paragraph 93)

Agreed

In fragile and conflict-affected states, DFID ensures coordination with military and security forces to ensure that infrastructure interventions are informed by local security conditions, that the comparative strengths of security forces are utilised, and that stabilisation objectives of infrastructure interventions are maximised. In DRC, where DFID is funding road construction, we are working with the UN Mission (MONUSCO) and the Government of DRC on a joint international stabilisation plan. The plan is intended to provide a programmatic approach, with road access being the first step in a sequenced set of interventions, followed by provision of security by MONUSCO and Congolese security forces and then the restoration of state authority. DFID investments in infrastructure including road building support this plan.

Working with other departments DFID has created structures for coordination at the global level. The joint MoD-FCO-DFID Stabilisation Unit exists to develop integrated planning and delivery across HMG. The Unit works closely with the military and UK Government departments throughout the whole programme cycle: from planning interventions, to pre-deployment exercises, delivery on the ground, back round to capturing lessons from the field and feeding these back in to support future policy making. The Unit has civil servant and military officer staff and works closely with the Military Stabilisation Support Group and the Royal Engineers. DFID has also worked to improve coordination through producing guidance, for example the 2005 booklet on best practice for Quick Impact Projects.

We also work directly with the British Army on infrastructure projects. In Helmand, Afghanistan, DFID ensures effective infrastructure sector coordination through: joint planning, including working to a single strategy; joint implementation with the military including working with Specialist Team Royal Engineers; joint financing where the Provincial Reconstruction Team budget operated alongside DFID's; and co-location of staff. In DRC, DFID worked closely with the UK military, UN forces and the DRC armed forces to rebuild a critical bridge at Ituri in north-eastern DRC. This bridge is now open and is a good example of how the comparative advantage of all parties worked well in delivering this high-risk project in a difficult security environment.

Working with China and India

21. China and India have a large and growing profile in funding infrastructure in developing countries, including fragile and conflict-affected states. We recommend that DFID explore ways of working with China and India in the provision of infrastructure. (Paragraph 94)

Agreed

DFID is scaling up our engagement with emerging powers, including India and China, on their impact in low-income countries particularly in Africa. DFID's Africa Division and DFID China are looking at how best to engage with China on the developmental impacts of its investments in Africa, including that in infrastructure. DFID India is looking at how to best engage with India on the developmental impacts of its investments in Africa, most of which are in infrastructure.

DFID is the only bilateral donor to have a Memorandum of Understanding with China on partnership to promote China-Africa cooperation. The UK Government continues to work in close cooperation with authorities in Beijing on issues relating to Chinese activities in Africa. We have also provided funding to the South Africa Institute of International Affairs to undertake research on the role of China in Africa's development. This project has developed a toolkit for African policy makers to inform decisions relating to China's investment in Africa.

The DFID-funded Infrastructure Consortium for Africa tracks investments from China and India in infrastructure in Africa and communicates figures and policy implications with African policy makers. We agree with the G20 High Level Panel on Infrastructure recommendation that membership of the Infrastructure Consortium for Africa is expanded to include China, India and other G20 members.

DFID is working with other government departments on issues relating to China and India's global role. DFID's Global Partnerships Department is working to ensure that development issues are on the agenda of the Emerging Powers Sub-Committee of the National Security Committee.

Communicating infrastructure (Paragraphs 98, 99, 102 taken together)

22. We are surprised that DFID makes no mention of infrastructure in its key documents, and particularly surprised about the omission of any reference to infrastructure in the Department's Business Plan 2011-15, DFID's guiding document for the next four years. The Minister himself was surprised to hear about this omission. The lack of profile accorded to the sector in the Bilateral and Multilateral Aid Reviews (BAR and MAR) is equally curious, both given their significance and given that DFID actually allocates a lot of its funds to infrastructure. Infrastructure takes a particularly low profile when compared with sectors such as health and education, which are written about and pictured in virtually all DFID publications. In fact, DFID has a number of strengths in terms of its support to the sector—not least, its development of innovative policy solutions, and its work on regional infrastructure. But DFID fails to convey the value it attaches to the sector. We fear that this could partly be due to the fact that infrastructure has not been a fashionable development issue in recent years. (Paragraph 98)

23. There are dangers in infrastructure taking such a low profile within DFID. Staff working on other issues such as health and education may not be sufficiently aware of the need to make cross-sectoral links to infrastructure. The multilateral institutions that DFID funds may infer that the Department is relatively unconcerned about infrastructure outcomes compared to other sectors. As development commentators observed after the publication of the BAR and MAR, DFID's—possibly unintentional— under-representation of the sector poses risks that other donors will follow suit, and that infrastructure will once again fall 'out of fashion' in the development arena, as it did in the 1990s. Therefore it is imperative that DFID take urgent steps to change the way it puts across its work on the sector. (Paragraph 99)

24. We believe that an important step towards raising the profile of infrastructure work within DFID would be the development of a departmental strategy for the sector. A strategy could set out details of the 22 bilateral country programmes with infrastructure content in one place. It could break down DFID's multilateral spend on infrastructure projects. It could spell out the underlying strategy behind DFID's infrastructure work: the rationale for its importance; the close links with the MDGs; the links with governance and corruption; and DFID's areas of 'comparative advantage' (from which can be inferred the 'division of labour' that needs to be carried out by other donors). Finally, the creation of a unifying document that clearly sets out DFID's approach would help communicate DFID's often impressive work in this area. We recommend that DFID produces this paper as soon as possible, and certainly by the summer of 2012, in order speedily to rectify any misunderstandings amongst DFID's stakeholders resulting from the Department's previous under-representation of the priority it attached to the sector. (Paragraph 102)

Agreed

DFID publications seek to demonstrate to the UK public the development results achieved with taxpayers money. Infrastructure programmes are often means to development ends, where the stated impact is wealth creation or jobs. We accept that this can mean that the contribution of infrastructure to those outcomes is sometimes not made explicit.

Our commitments as set out in the document "UK Aid: Changing Lives, delivering results" do include a number of infrastructure commitments particularly in relation to water and sanitation. The operational plans for country office programmes, publically available on the DFID website, outline the infrastructure content of the UK bilateral aid programme.

We will produce a position paper on infrastructure and development in coming months. In the preparation of this paper we will commission additional research as necessary. We will also seek to ensure that the UK Government's work on infrastructure in developing countries is effectively communicated other ways, for example links with relevant DFID ministerial speeches, through the UK media and by strengthening material on infrastructure on DFID's external website.

Staffing

25. We welcome the announcement during the course of our inquiry that seven new infrastructure advisers had recently been appointed within DFID. We agree with the Minister that, whilst good use could be made of even more advisers, in the current climate of austerity it will be difficult for DFID to expand its infrastructure cadre any further at this time. We also commend recent changes to the deployment of DFID advisers; for example, the location of infrastructure specialists within the Department's new Private Sector Department. (Paragraph 108)

Agreed

Managers continue to value the contribution that infrastructure advisers make to their programmes. It is also worth noting that other advisors, for example economists and private sector development advisors frequently have key roles in delivering infrastructure programmes, including on private sector infrastructure. In every case DFID infrastructure advisers work in multi-disciplinary teams.

26. We recommend that, instead of expanding its internal pool of knowledge further, DFID look to bring external expertise into the organisation. In addition to its use of resource centres, we recommend that DFID set up an Expert Advisory Panel comprising specialists on infrastructure. This should include members of the UK engineering community who are currently under-used but could be a highly valuable resource for DFID. A range of engineering and related specialism's should be represented to reflect the complex array of operations involved in the infrastructure sector, from water to roads to power. (Paragraph 109)

Agreed

DFID is currently designing new resource centre arrangements to provide technical support to DFID programmes on a call-down basis. It is expected that these will establish panels of advisory experts to inform and quality assure the external advice that DFID draws on through these resource centres. In developing a position paper on infrastructure and development we will ensure that recognised international and UK experts inform and peer review the process.

27. We were concerned to hear that nine of DFID's 22 country programmes with infrastructure components did not have infrastructure advisers within their teams. These nine countries include a number of very poor, fragile countries with severe infrastructure deficiencies, such as Liberia, Malawi, Mozambique and Somalia. It is vital that DFID has infrastructure advisers in all 22 countries. We ask DFID to give priority to the deployment of new advisers to those countries currently lacking an infrastructure adviser. We believe that the distribution of adviser's right across the organisation will have the added benefit of raising the visibility of infrastructure across the organisation: internal communication of the DFID's prioritisation of infrastructure is as important as external communication. It will also facilitate cross-sectoral work between infrastructure and other sector advisers (for example, health and education). (Paragraph 110)

Partially agreed

Staffing decisions for each country are the responsibility of the Head of Office and will be determined by the programme mix within the office. A balance will be struck between Home Civil Service staff and Staff Appointed in Country. A number of countries have shared programme teams rather than having a dedicated team. For example, Somalia is covered from Kenya and Liberia is covered from Sierra Leone. Further provisions for all countries, including those without infrastructure advisers, include additional support from infrastructure advisers in headquarters, and external advice from the infrastructure resource centres. We have created an internal web-based resource for country office staff to access infrastructure expertise.

In the recent recruitment of advisers a high emphasis was given to recruiting advisers who were prepared to deploy to fragile states and locations where historically it has been difficult to fill posts. As a consequence we have recently placed infrastructure advisers in Sudan and Pakistan.




1   See also Trade Mark East Africa's response to this recommendation in Appendix 2, page 19 of this Special Report Back

2   Northern and Central Corridor Diagnostic Study, Nathan Associates, sponsored by DFID, USAID and JICA, March 2011. Back


 
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Prepared 19 December 2011