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This speech was given to the All Party Group on Overseas Development in Parliament on 14 June 2007
It’s a pleasure to be asked to speak to the last of this series of meetings organised by the All Party Parliamentary Group on Overseas Development around the question: ‘What next for international development? Political perspectives’.
I’ve been in post five months – during which time I have met oodles of those involved in the development world – many highly expert - and many of whom are in this room! You are all very willing and helpful in sharing your expertise – and for that I thank you.
Coming from a conflict zone, as I did - Home Affairs, where every day war was declared on one sector of society or another – and Home Secretaries changed more frequently than some Members’ suits, it was miraculous to enter the relatively benign world of the Department for International Development (DFID), where St Hilary walked on water in the deferential terms he was referred to and DFID itself was almost universally praised - admittedly mostly by those in receipt of funding from it.
So – with a new Prime Minister almost in place, with the G8 being accused by Bob Geldof of being ‘creeps’, with the ongoing squalid scandal over the bribery allegations against BAE and the Government’s complicity therein, with disease, conflict, poverty, trade, aid, climate change the Millennium Development Goals, the rape of natural resources, micro-generation, water wars and the rest – I am spoilt somewhat for choice as to what areas to highlight in this opportunity you have so kindly given me today.
Clearly, there is no point in me trying to cover everything in the field – there is simply not enough time. However, I am happy to take questions on all or any of the issues I don’t cover in my speech. But what I think these meetings are useful for is the opportunity to explore the priorities politicians have, and whether, in your view, they’re the right ones. What are the most important issues we need to tackle?
I believe that the Government lacks political will, clarity and purpose over the level of ambition and aims for development - and that in turn not only inhibits development progress but also leads to an ineffective use of tax-payers’ money. There’s an almost schizophrenic approach from this Government – different ministries or departments working seemingly often at cross-purpose – undermining achievement, obstructing the introducing of any clear aims and causing us to miss out on getting the most bangs for our bucks. What they give with one hand they take away with another.
I will briefly examine some examples where the Government appears to have a gap between what it says and what it does, with departments failing to join up their thinking – the DTI and trade, the FCO and Darfur, the Treasury and vulture funds, Defra and climate change, MOD and corruption.
Within that framework, I will pay particular attention to the two key areas where the Government’s failure to pursue a clear and blindingly obvious course – that is the driving imperative to put climate change centre and to tackle corruption – is a signal failure.
Without these issues being effectively addressed progress will not only be slowed - it will ultimately be completely undermined as the level of improvement from spend fails to keep pace both with need and with events. This must be what’s next for international development – not just from the political perspective – but also the ultimate pragmatic one!
First let’s go to DFID and the DTI. It is obvious I hope that a key objective of international trade policies must be to stimulate sustainable development. No country has ever been lifted out of poverty by aid alone, and an over-reliance on aid and debt relief can lead to an unhealthy dependency – a vicious circle that can be impossible to escape from.
And it is vital that we reinvigorate the Doha talks, ensuring a positive outcome for developing countries. We must reduce agricultural subsidies and trade barriers in order to guarantee a level playing field for all. The WTO operates on a principle of “one country, one vote”, yet we have failed to give the poorest nations a voice in international trade negotiations.
The Doha round of trade talks has stalled, and a resolution seems increasingly unlikely. Negotiations are characterised not by serving the best interests of the developing world, but by protecting domestic interests – whether they be American cotton producers, French cattle farmers or German manufacturers.
While it is easy to blame the international community for the desperately unjust situation we are now in – and certainly the WTO and EU have had their part to play – it is necessary to look a little closer to home. The EU’s record on free trade is deplorable, and the British Government has been complicit in this. We had an opportunity in 2005 with the Presidency of the EU, and we did not take it.
DFID says we need to provide aid to cover education, health and welfare. However – crowding out means the domestic governments do not invest in their own infrastructure - leading to inflation and high interest rates which actually damage economic growth. We should instead be helping developing countries to build up their own economies and civil society, in order to move away from dependency. Look at China, look at India – these countries have pulled huge portions of their population out of poverty through economic growth, driven primarily through international trade.
We also have to realise that it is in our own interests to promote a liberal trade agenda. These farming subsidies are coming out of the public purse – tax-payers’ money is being diverted away from where it is most needed in order to fill the pockets of a small, but powerful, minority. And what do we get out of it? Higher prices in supermarkets.
The British consumer is losing out twice over – first we pay for the subsidy, then we pay the higher prices. Getting rid of these deplorable agricultural subsidies is not only the morally right thing to do for developing countries – it is also the right thing to do for our own best interests.
Moving on to the Foreign Office’s record - simply giving money and food to somewhere like Sudan is not enough. The FCO’s reluctance to consider proper economic sanctions until now has been the reason that the rulers in Khartoum has been able to play us for fools – first saying the AU UN troops can be deployed – then they can’t.
We seem to have been happy to address the symptoms of genocide with aid but our Government refuses to address the underlying cause.
The Sudanese regime is one of the most brutal and destabilising in the world today. Some 400,000 black Darfuris have perished in the past three years due to the measures taken against them by the Government of Sudan and allied militias.
We seem to be caught in the headlights of believing that if we are friends with the Sudanese Government they will give us intelligence on Al Quida. Each time Bashir leads us on – we give him more time – and more Darfuris are murdered. The FCO approach is don’t upset the applecart – but we need actions. Nothing else will change the Sudanese Government’s belief that it can kill with impunity.
We need to stop the Sudanese Government transferring weapons to Darfur and we need an immediate and serious extension of the UN arms embargo to cover the whole of Sudan. We found out a few weeks ago that a British company has been transporting ammunition into Sudan in defiance of European sanctions. Where is the outrage from our leaders?
Crucially, Khartoum needs funds to pay for the genocide. The UK and the EU need to target those companies that are providing the regime in Khartoum with revenue, arms and diplomatic cover. For once, we should follow the Americans, who have moved to block transfers by US commercial banks of oil payments to the Sudanese Government.
The whole point is to change Khartoum’s perception of its own interests. We won’t stop the genocide by just giving more aid.
I hope that Gordon Brown will take action on Darfur when he becomes Prime Minister. However, looking at the Chancellor’s political will to sort out competing priorities on his own territory doesn’t provide too much hope.
Let’s have a look at the issue vulture funds. Vulture funds target the private debts owed by poor countries that can’t pay off their loans. Often operating through shell companies in the Caribbean, they buy debt obligations in secondary markets at a fraction of their face value in the hope of enforcing them through the courts at full value. This can be done because commercial banks often sell the debt cheaply because of the low probability of it being repaid.
In a much-publicised case Donegal International bought Zambian sovereign debt at a heavily discounted price of $3.2 million from Romania in 1999, and then attempted to sue for the full value of $40 million in the British High Court. In the end, $15.5 million was awarded to the vulture fund right here in our own country, just around the corner.
Gordon Brown’s latest written Treasury statement he said the UK would “take forward talks” about vulture funds. What does that mean? Nothing, it means absolutely nothing.
There has been talk in the Government of working on voluntary codes to guide vulture funds. I honestly do not know whether to laugh or cry. To date we have the Heavily Indebted Poor Countries initiative as well as the Paris Club and God knows what else. That is the problem in the first place! None of these have any teeth and another voluntary code will not do anything either.
To their credit, my counterpart Hilary Benn made sure that Zambia received some financial help while fighting Donegal International in Court. Yet that is addressing the symptoms rather than the cause.
Since most of the vulture fund contracts are governed by English law and the companies use British courts to sue - we must look at what we can do in order to change the law. In Britain that means tackling contract law and making it harder to sue with regard to sovereign debt, and outside of Britain we need an internationally binding agreement that makes it illegal for sovereign debts to be sold and illegal for companies to buy them. Why the reluctance? Why no teeth?
Whilst international action is required to solve this situation in the long term, Gordon Brown needs to start addressing the problem in his own backyard.
And what of the conflict between military sales and aid? I really only need mention the £28 million military air traffic control system that we sold to Tanzania – a country that has a miniscule air force. The sale was coterminous with our giving of £28 million of aid to – yes Tanzania. Read the debate in Hansard – it is all too clear how this particular bit of aid and trade are working.
So now we come to DFID’s spending – and whether it is effective – whether it delivers outcomes. We know how much goes in – but do we know what’s left at the other end. The C word is much bandied about in the development world. Corruption that is.
Corruption can add between 20% and 100% to the cost of government goods and services. So tackling corruption surely must be a priority: firstly because of the moral imperative, but also in terms of making sure we get bangs for bucks on our money - effective expenditure.
Whilst proposals around independent monitoring of DFID expenditure would be valuable and necessary - and I would myself advocate such scrutiny – in and of itself it won’t achieve change. Watching and measuring corruption is instructive – but we already know that it exists. If independent audit will give us more detail of each siphon with a name and a legal framework to nail them – then it would be extremely valuable. But only so long as we are prepared and allowed and determined to take action against those we find siphoning. And in order for real independent audit of outcomes it would take an army of people in itself and a Parliamentary scrutiny committee – maybe – but what level of job could it actually do?
Meanwhile there are four direct and possibly even more useful things that aid donors can do to strengthen the hands of political leaders in developing countries that need help in reducing corruption, and there are two other less direct measures that can be taken.
Firstly there is a need to tighten up procurement rules – both in terms of the legal framework and in terms of the rules around the use of aid. Obviously it’s easier to tackle the latter than the former. If you take the World Bank and the EU/DFID rules – they have significant loopholes or latitude. I understand for example that one such loophole, and others may know this better than I, resulted in DFID paying Nigerian lawyers $10,000 per day for work poorly done during – I quote - ‘very short days’! Nice work if you can get it. Problem in many places is that the system of procurement has built in legal bungs.
On another tack, there are lots of ways to trace the siphoning off of funds but efforts at identifying the beneficiaries are often pretty half-hearted. The World Bank and others use specialists to trace funds. Just look at how much Mobutu and Marcus money has been recovered after the fact. Aid donors need to do more of this. If governments including HMG are in possession of information on how and where money has been siphoned off, or can get it, why don’t they take more action? How many investigations has DFID commissioned to trace where our money is actually going?
We also seem to lack the will to use international law and the UN institutions. Many developing countries are recent signatories to the UN Convention. One requirement from the Convention is to have an anti-corruption institution. Whilst there are many anti-corruption aid projects, the legal position of many such bodies is weak, and many signatories are hardly complying with the letter and spirit of the Convention in practice and in law. There is much scope for extra leverage here by donors, in helping make these fledgling institutions robust.
Sadly, much corruption in developing countries is legal – ranging from an absence of prohibition on ministers owning companies that are recipients of hugely inflated contracts, through to permissiveness in capital markets which enable ministers, parliamentarians and officials to benefit directly from privatisations, bond issues, and state acquisitions of shares owned by politicians and civil servants.
Monopolies play a big role too, with bribes common for the granting of exclusive rights, to bribes payable for unnecessary ‘permissions’, and encouragement of regulators through bribes (e.g. free shares) to restrict the number of ‘licenses’ they issue to companies, thus excluding ‘unconnected’ small firms from the ‘legal’ market.
So we should be in there helping strengthen anti-corruption measures with a real review of the whole host of things from transaction and bribery prohibition, monitoring and penalties to anti-competition laws – cartels, unfair practices, and insider training, the governance of state enterprises and corporations – and many, many other areas.
From this short list it is obvious that the formation of an anti-corruption authority alone will have little impact on the level of corruption.
However, there are two less direct but very effective things that donors can do.
a) They can channel more funds through local government, which can serve to strengthen local government and vital local democracy. (Much large scale corruption occurs via singular central elites – and this leads to the ‘necessity’ of single tribes or ethic groups grabbing control of the reigns of central government). One central target which holds all the power and the wealth of a nation is a much greater danger than strong local government responding to local needs and demands.
b) They can work with governments to reform public service recruitment rules – to allow for easier entry into the service at professional levels on merit, and easier employment in the private sector and NGO sector of former public employees. This is very important for reducing larger scale corruption, where secrecy depends on a close-knit but large cadre of officials or party members who know about (and share) the corruption. Having professionals move in and out of government makes the chances of ‘whistleblowing’ much more likely and corruption more difficult.
But all of this good work which needs doing to begin to tackle corruption comes as a bit rich from us now. The UK’s ability to influence or tackle corruption and thereby improve the value of development funding and aid to the developing world means that we must be squeaky clean in our own dealings across the world – and right now we should hang our heads in shame. We are clearly do as we say not as we do – and our standing in the world is diminished once again by a government whose complicity in the stopping of the SFO enquiry into BAE and it’s knowledge of the bribes paid to Prince Bandar have set back our objectives for some years to come.
We must get our own house in order.
Ramping the ante even further up is an issue of overwhelming importance for international development: the threat of environmental degradation. In 2003, the first report of the UN’s Millennium Ecosystem Assessment showed that 60 per cent of the basic ecosystems that support life on Earth are being degraded or used unsustainably. Although catastrophic climate change is not the only environmental problem, it is, clearly, the most urgent one, particularly for poor countries constrained in their ability to react to a rapidly changing climate.
That message in itself is nothing particularly new, and certainly in the last one or two years it has come over increasingly in this country, in the media and in politicians’ speeches. What I’m not sure of, though, is whether Government action, and the wider debate around development, have really understood the need for urgent action.
Tackling climate change is the overriding imperative, and industrialised countries’ actions will in reality have more of an impact on developing countries than pledging more aid, or ever market access. The Make Poverty History campaign in 2005 was a brilliant example of civil society action to put pressure on the G8 – but I so much wish that equal effort and activity had been put into the other G8 priority that year, climate change – because uncontrolled climate change will undo all the good that debt forgiveness, and higher aid, will do, and more.
The G8 commitments last week may have been a step in the right direction, but they are not in reality that impressive. Tony Blair was very enthusiastic about the progress made when he came to the House on Monday – but he is always enthusiastic!
It is good that the G8 agreed to a UN-sponsored process on climate change – but in fact there is already one, the Kyoto Protocol, which involves all the key developing countries. The Protocol’s first commitment period comes to an end in 2012, but not the Protocol itself – and given that it took ten years from opening negotiation on Kyoto to it entering into force, trying to come up with a wholesale replacement for it seems to me to be wasting time which is very scarce. If President Bush is serious about wanting to involve the US in climate talks, all he needs to do is ratify Kyoto and join the ongoing talks about targets for the second commitment period, post 2012.
Clearly, developing countries need to accept emissions reductions commitments as well – but equally as clearly, we cannot expect them to do this unless the industrialised countries move further and faster – a principle, incidentally, written into the UN Framework Convention on Climate Change, which almost every country, including the US, has ratified.
International institutions also need to adapt much more urgently to the new world of an increasingly unstable climate. The World Bank still does not pay enough attention to these issues, and the IMF almost none at all. The World Trade Organisation similarly treats environmental issues as an unimportant sideshow – it is notable that the environmental components of the Doha agenda have all been abandoned.
Clearly, I hope that the Doha Round does reach agreement, but its agenda is now so circumscribed – revolving mainly around agriculture – that its benefits will be highly limited, and in terms of development will mainly accrue to the middle-income agricultural exporters, not the poorest countries.
We must work for universal climate-proofing of development assistance to ensure that climate change is mainstreamed into development programmes and initiatives. This will require coordinated action through the World Bank, IMF and the OECD Group of Export Credit Agencies to ensure that development objectives fully support climate mitigation.
On that note, we must all be deeply concerned at the failures in DFID’s approach revealed in the Environmental Audit Committee’s report in July last year. As the report said:
‘the vital role of the environment in development and poverty reduction means that a clear and coherent approach should be absolutely central to DFID’s role.
‘And yet the only conclusion we have been able to come to during our inquiry is that, so far, DFID has failed this challenge … there does not seem to be any sense of urgency in dealing with the very serious problem of integrating the environment into direct budgetary support. In the long run it is entirely unacceptable that the UK should be providing aid to developing countries regardless of the environmental consequences …
‘DFID’s climate change policy lacks coherence … it is directly and indirectly responsible for very significant emissions of carbon into the atmosphere through the projects it funds … the conclusions of the recent assessments of DFID country programmes could not be more damning. They demonstrate DFID’s failure to implement a coherent approach to integrating the environment on the ground’
The White Paper is another missed opportunity for DFID to make the environment as central to its work as it has made clear it should be in many of its policy documents. In his first White Paper speech the Secretary of State called the idea that developing countries can pursue growth and worry about environmental sustainability later a myth. Yet again it appears his Department has show little willingness to apply these fine words in practice.’
I have considerable admiration for DFID’s performance in many areas, but if the EAC conclusions are correct – and they do seem to reflect what I know was Clare Short’s approach to sustainable development – then this is lamentable failure. I think Hilary Benn has done many good things, but if he leaves DFID in two weeks’ time without having started to correct these failings it will be a scar on his record.
I understand that Andrew Mitchell mentioned last week that there were talks of some climate change issues being moved to DFID by Gordon Brown. No doubt that is the Government’s response to the Select Committee’s excellent report and that would be a very interesting proposal with some logic and potential - but this mustn’t be just another opportunity for the Government to say they are doing something for the headline if the reality turns out to be two members of staff who specialise in the development agenda being seconded to DFID, isolated from DEFRA and then left to fend for themselves.
This year sees the twentieth anniversary of the Brundtland Report, which marked, at least in theory, international acceptance of the concept of sustainable development, development that meets the needs of the present without compromising the ability of future generations to meet their own needs’. Despite the rhetoric, despite the Earth Summit in 1992 and despite the World Summit on Sustainable Development ten years later, we still pay little more than lip service to the principle of sustainable development. But now we must. Now it is a question not just of good policy, but of survival.
So in conclusion – I am saying that what’s next in international development will be impaired, reduced, slowed, diminished if the Government fails to sort out its own weaknesses. The counter-productive nature of the departmental silos which currently deliver contradictory and ineffective outcomes must be addressed. Our spend must deliver effectively – which means tackling corruption not just saying we are tackling corruption and the driving imperative of development must become inseparable in all its incarnations from the environmental cataclysm that is climate change.
That’s what needs to be next.
(c) Lynne Featherstone, 2007
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The World Trade Organisation similarly treats environmental issues as an unimportant sideshow – it is notable that the environmental components of the Doha agenda have all been abandoned.
