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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