The closure of DFID's aid programme in Burundi

Written Evidence Submitted by Adam Smith International

1. Adam Smith International (ASI) would like to submit to the International Development Committee a brief assessment of the Department for International Development (DFID)’s decision to end the United Kingdom’s bilateral aid programme in Burundi. Our ongoing engagement on a crucial revenue reform programme initiated by DFID in 2009 has given us the opportunity to assess the impact of UK’s bilateral involvement and the risk of some impressive progress to date being lost if DFID disengages fully.

2. As a landlocked country ranked 166 out of 169 countries on the Human Development Index, with one of the lowest per capita incomes ($150 in 2009) and highest population densities in the world, and persistent risk of internecine conflict, Burundi could very much benefit from broad based economic growth and improved governance. Hitherto, DFID’s programmes have contributed significantly to the Government of Burundi’s efforts to improve access to primary education and health services, and access to justice.

3. Perhaps, the most tangible and measurable results have been in the revenue reforms initiated by DFID through the establishment of a unified revenue authority in Burundi. Since September 2009, ASI has been the principal provider of technical assistance for the establishment and development of the Office Burundais des Recettes (OBR) under DFID’s Regional East African Integration Programme (2008-2013). OBR is led by a high performing Commissioner General (CG), Kieran Holmes, who was recruited and appointed by DFID and TradeMark East Africa (TMEA). ASI continues to support OBR under the funding of TMEA and currently has advisers in place who provide support on various aspects of tax and customs reform. ASI has supported the CG and his team to deliver an impressive array of achievements so far, which include:

3.1. The recruitment of 414 new members of staff to fill senior and middle management roles in OBR, through what was Burundi’s first open and transparent recruitment process. The knock on effect on public perception about OBR has been tremendous. The CG is also leading the implementation of a comprehensive organisational development plan and a five year strategic plan.

3.2. A 33% increase in revenue collected from July 2010 – April 2011 over revenue collected in the previous year. The increase in revenue collection between January-April 2011 has been 43.5% over the same period in the previous year. There is a growing appreciation at the highest levels – namely the President and the two Vice Presidents – of the utility of high tax to GDP ratio in reducing dependence on external aid. The amounts of money involved are significant for a small country such as Burundi. OBR is on course to bring in an additional BIF 100 billion+ over and above the Treasury Plan in 2011. That would work out at about an additional USD $80 - $100 million.

3.3. The establishment of a code of conduct for OBR and the dismissal of numerous staff for corruption.

3.4. Introduction of modern tax collection methods such as self-assessment and greater computerisation in tax and customs, in addition to the creation of open plan offices to improve transparency, and transfer of special accounts held by Ministries to OBR.

3.5. Improvement of border controls, including plans to establish one stop border posts, VSAT facilities at borders and development of specialist skills to reduce smuggling of goods.

4. That OBR means business about collecting taxes and reducing corruption has been the strongest message coming out of this reform process. There is considerable resistance to change within OBR and in some sections of Burundian society. OBR officials are frequently harassed and the CG is currently protected by 17 Presidential Guards. However, the constituency of supporters for revenue reforms has grown as the government realises the fiscal independence it is gradually acquiring through improved revenue generation.

5. The revenue reform process in Burundi has been aided by DFID’s leadership based on its experience in revenue reform in various post conflict countries (Rwanda, Sierra Leone, Afghanistan etc.), the experience of the CG in leading complex revenue reform projects (Rwanda, Lesotho and Yemen) as well as ASI’s ability to draw on our expertise in revenue reform in Afghanistan, Palestine and Uganda. DFID’s institutional knowledge in championing revenue reforms in post conflict countries is not immediately substitutable by other donor agencies or programmes.

6. Moreover, the major multilateral institutions such as the World Bank are a poor substitute for an efficient bilateral donor such as DFID. They are generally slow and unpredictable in their supply of technical assistance, which is often of mixed quality.

7. The revenue reforms and Burundi’s integration into the East African Community are currently being supported through TradeMark East Africa (TMEA). If the DFID office in Burundi is to close it is critical that such support to Burundi through TMEA continues for a considerable period. There is of course the risk that broader governance, accountability and stabilisation reforms that could entrench revenue reforms will be neglected. Improved revenue collection does also need broader tax policy, public financial management and expenditure reforms in order to lead to good governance and stability. DFID’s expertise and experience in wider political economy analysis, design and implementation of interlocking reform programmes and coordinating with other donors will be missed in Burundi. Equally, the instability in the Democratic Republic of Congo is inextricably linked to Burundi and Rwanda; stabilisation efforts there are more likely to work if they are paired with engagements in Burundi on governance, accountability, access to justice and natural resource management.

8. Broader issues related to the East African Community should also be taken into account. Burundi has the most closed economy of all the ECA member countries and will require substantial assistance if it is not to act as an obstacle to opening up and making effective the ECA and thus substantially increasing trade flows.

9. If DFID does close its programme in Burundi one alternative approach would be to increase assistance provided through regional instruments available to DFID such as TMEA.

05/2011

Prepared 31st May 2011