Democrat Union of Africa

A New Deal with Africa: From Promises to Performance

Introduction
Mr Chairman, Ladies and Gentlemen - it is a great privilege to be invited to address this important conference.

This is a crucial time for Africa:

• Most of Africa has been growing over the last four years.
• Democracy is spreading and putting down roots - we saw the first democratic elections in the Congo last week.
• Africa has seized the attention of the world which is committed to double aid over the years ahead.
• But at the same time the Doha Round of trade talks which sere intended to create new opportunities for Africa has broken down.

So we have wighty issues to discuss.

It is also a crucial time for Centre Right parties both in Africa and worldwide.

• Here in Ghana a centre right party - the National Peoples Party - has been re-elected for a second time and the success of your policies is a beacon of hope throughout Africa.
• The ideas you stand for - a smaller state and a bigger role for the individual, the family, free enterprise - have been shown to work.
• By contrast, we have seen Communism collapse, socialism fail and dictatorships stumble.

The left everywhere is in retreat.

Our ideas are in the ascendant. But at the moment too many of our centre right parties are in Opposition. It is essential to have the tide of ideas flowing in our favour. But it is not sufficient. We have to demonstrate to our electorates that those ideas can be converted into practical and relevant policies that will enhance their lives.

That is what the new leader of the Conservative Party is doing in Britain. He has reinvigorated our party and revived our fortunes. We are now consistently ahead in the opinion polls. Immediately he was elected, David Cameron announced a root and branch renewal cf our policies. He was determined to show that we are addressing the issues of today and tomorrow, not yesterday. So he identified six key areas and set up a policy group for each of them.

Globalisation and Global Poverty Policy Group

Most of those groups cover domestic issues. But he described one issue as the greatest moral challenge we in a developed country like the UK face:

How can we help to enable the billions of our fellow human beings across the globe who struggle to eke out an existence to join in the prosperity that globalisation has brought to the rest of us.

He asked me to chair this policy group on globalisation and global poverty.

• because I spent several years working on aid and development projects before I entered Parliament,
• because as Secretary of State for Trade and Industry I had been involved in the last round of World Trade negotiations,
• and also because as Secretary of State for Social Security I was responsible for tackling domestic poverty which has some lessons for tackling global poverty. Indeed I handled a budget greater than the entire world Aid budget and had to ensure that it genuinely reached those in genuine need and I wrestled to prevent it undermining self reliance and creating dependency and destroying personal enterprise all problems analogous to those in the field of international aid.

Most of you will have seen the Issues and Options Paper we published to guide the programme of research and policy development. I come here to ask your help in answering the questions we layout in that paper.

How can we in the UK make our International Development policies more effective in helping Africa?

I am immensely looking forward to hearing your views in the discussions and debates which are to follow. So your views will directly influence the development of policy recommendations for the next Conservative government. I am determined that those policies should reflect the realities of Africa.

One aspect of the Aid debate that has scarcely changed over the decades since I was working in this field, is how many arm chair theorists in the developed countries think it is their job and within their power to bring development to Africa.

This is nonsense - nonsense on stilts. African countries, or rather their peoples, will develop themselves. Just like every other country that has achieved prosperity. After all, prosperity is not measured by the amount of aid received. Prosperity results from producing the goods and services to consume or exchange, in greater abundance, with less effort and using resources more efficiently and sustainably.

Outsiders can at best help and at worst hinder that process.

Indeed, in development policy as in medicine, the first rule should be 'do no harm'. The sad truth is that many of our policies have been harmful. Our trade and agricultural policies have placed obstacles in the way of developing countries seeking to trade their way to prosperity.

Trade Policy

The World Trade Organisation's Doha Round was intended to be the development round. It was to be the first round deliberately aimed at giving priority to the interests of developing countries. So its collapse is unforgivable.

As Talleyrand once said in similar circumstances - "it is worse than a crime, it is a blunder". The crime is that developed countries have damaged the interests of developing countries. The blunder is that they have damaged their own interests too.

In the first place, freer trade benefits the giver as well as the receiver. If the rich countries reduce their tariffs, cut their subsidies and open up their markets to the goods of the developing countries they benefit their own consumers and taxpayers - even if those changes are not matched by similar cuts from the middle and low income countries. And as New Zealand demonstrated by abolishing all its farm subsidies, they are not necessary for a healthy agricultural sector.

Second, the rich countries cannot hope to persuade poor countries of the benefits of progressively opening their economies if we, the rich countries, are not prepared to take the lead in unilaterally opening our own markets to them.

Third, the position of the least well off countries and the large developed countries is not symmetrical.

If small countries distort their economies by tariffs, subsidies and protection - that may be unwise. But it is their problem. It has a negligible impact on world markets.

By contrast, when big economies protect, subsidise, and dump the resultant surpluses - they seriously damage others. US and EU cotton subsidies, for example, damage the livelihoods of hundreds ofthousands of families in West Africa whose only alternative is subsistence farming.

The only beneficiaries are a few thousand American and European cotton producers who would have viable alternatives were those subsidies phased out. So the priority from the start should have been for the rich nations to agree 'to liberalise without demanding matching reciprocity by the middle income, still less the poorest countries.

The UK should press hard to persuade our EU partners to reform the Common Agricultural Policy by abolishing all remaining production linked subsidies, scrapping import tariffs and removing all export subsidies.

In his evidence to the first public hearing of the Globalisation and Global Poverty Group, Bob Geldof put forward proposals for action if the Doha Round collapses.

He urged the OECD to agree a stand alone trade deal for Africa which would involve:

1. Granting 100% market access for African products.
2. Ending trade distorting subsidies which affect Africa, if need be compensating OECD farmers.
3. Leaving African countries free to determine their own trade policies without being forced into premature liberalisation by the IMF, World Bank or WTO.
4. Vigorously pursuing the Aid for Trade agenda to help with infrastructure and compliance with the quality demands of OECD markets.

The main responsibility for reviving or replacing the Doha Round lies with America and Europe.
But Africa has some options in its own hands.

The highest tariff barriers against African goods and services are those erected by African states themselves. The World Bank found in a 1997 survey that countries in Sub-Saharan Africa imposed an average tariff of 34% on agricultural products from other African nations, and 21 % on other products. As a result, trade between African countries accounts for only 10% of their total exports. By contrast 40% of North American trade is with other North American countries and 63% of trade by countries in Western Europe is with other Western European nations

Surely if Africa created a pan-African Trade Area, this would have significant potential benefits? It would not just cut costs for African consumers, but create a large internal market, attract foreign investment, and allow large African companies to develop that could eventually compete in the global marketplace. And it is something Africa can do to help itself. There is no need to wait for the rest of the World. It would be a sign Africa is not against trade in general and will one day open up to western companies - a sign which could help persuade the developed countries to open their markets now.

Removing trade barriers alone is not enough.

Aid and Development Policy

Aid has a role.

Geography and history have placed obstacles in the way of African trade and development. Africa has far fewer natural ports and navigable rivers than other continents. Its population is dispersed over a vast continent often far from road or rail links. Nigeria has only 29,000 miles of paved roads. By contrast, the UK, with half Nigeria's population and a quarter of its area, has 3S7,000 miles of paved road.

Aid can play a vital role in helping develop an infrastructure that will make both internal and external trade possible. 2005 was a crucial year for Aid. It was the year of commitment. Make Poverty History, LiveS, the Africa Commission report mobilised the public conscience. That put pressure on the G8 leaders to commit to doubling world Aid to meet the Millennium Development Goals. In the UK both major parties are committed to increase spending on Aid to 0.7% of Gross National Income by 2013. But giving is only the beginning of the process, not an end in itself.

The purpose of Aid is not to make the donors feel good. It is vital that the Aid actually does good. That it reaches the poor it is intended to help. And that it is used as effectively as possible to generate growth that benefits the poor.

One of the key themes emerging from our research is how extraordinarily little attention has been paid over the years to these questions. During the Cold War a lot of Aid was given to secure the allegiance of governments. Few questions were asked as to how it was spent. Likewise too much Aid is still tied - a hidden subsidy to the donor country's industry.

Few questions are asked as to how it is spent. The danger now is that the donor agencies are under pressure to disburse their rapidly growing budgets: to 'get the money out of the door'.

Once again, few questions are asked as to how effectively it is spent.

Increasing concern is expressed in the media in donor countries about the extent to which Aid is diverted by corruption. That is a serious issue - as you will know better than me.

It is one the six key areas we focus on in our Issues and Options Paper. I look forward to hearing your views on how corruption can be eradicated and governance improved. But it is becoming clear that corruption is not the only, nor even the major, factor that prevents every pound of Aid from producing a pound of value to poor people in developing countries.

There is a vast amount of waste, duplication of effort and expenditure on bureaucracy at all stages in the Aid process. A recent ActionAid report found that each foreign adviser in Tanzania cost an average of $187,000 a year. Yet Tanzania's GDP per head is just $324. How many nurses, teachers, loans to small entrepreneurs could be provided for the same money?

When I talk to people working for NGOs, government officials, and staff of multilateral agencies, all confide their concerns that too much Aid is spent ineffectively. But they are reluctant to express their concerns publicly for fear that if the pubiic knew they would turn off the aid tap.

I understand their reluctance but I believe; it is wrong. We owe it to the poor in developing countries to ensure that Aid genuinely benefits them. The total World Aid budget appears vast, at an estimated $83 billion last year. Yet this still amounts to only $32 a year for each person living on less than $2 a day. And how much of that actually benefits, let alone reaches, them? We owe it to our taxpayers too. We will only retain their support for a massively increased Aid budget if they are convinced that every effort is being made to use their money to help the poor as effectively as possible.

Let me make it absolutely clear. We should focus on eradicating waste and improving Aid effectiveness to do more, not to spend less. We must reinvest every penny saved by eliminating waste on more, and more effective, Aid.

The reason there has been so little focus on the effectiveness of Aid is that the normal disciplines that apply in business and even in government do not apply. Commercial concerns have to satisfy the customers they serve or they will go out of business. Democratic governments have to satisfy the voters they serve or they will not get re-elected. But donor agencies and NGOs are not accountable to the poor they exist to serve. Of course they want to do their best by them.

But there is no automatic feed back to tell them what works and what doesn't. Competitive businesses are forced to specialise in markets they understand and products they are good at producing.

Indeed, it is specialisation that drives the process of growth in productivity. By contrast, Aid agencies face pressures to diversify their aims and activities to attract the widest range of donors.

Few agencies become experts in anyone country or specialists anyone activity. Should we not encourage Aid agencies to specialise in areas and activities that they are best at? That applies to government donors as well as NGOs.

For example, we have been told that the Dutch Ministry for Development Cooperation is particularly good at helping small and medium size enterprises. We are considering whether the UK should channel some of its Aid budget through other nations' Aid agencies where they are already obtaining good results - rather than trying to duplicate what others do well already.

Commercial pressures force businesses to measure their cost effectiveness. It is remarkable how little serious effort is made to measure the effectiveness of Aid. All too otlen the only measure of performance is the amount of money spent. Rarely the results achieved.

To be fair to the British Department of International Development, it has at least recognised the need to monitor its own effectiveness. I applaud that they have made fighting poverty their overall priority, unlike many development agencies, which seek to further their national geopolitical agenda.

And it is good that DflD has created a system of targets to measure their progress. But it monitors progress against targets which are largely outside its influence. It uses the Millennium Development Goals as its benchmark.

So, for example, it measures its success in Sub Saharan Africa by progress towards "A reduction of 4 percentage points in the proportion of people living in poverty across the entire region, against the 1999 baseline;"

You can't help wonder if there might not be other factors at work in Africa as well as DflD? Just possibly USAID, other donors, national governments, domestic producers, foreign investors, or trade policies may have contributed to poverty reduction?

Likewise, when evaluating individual projects DflD simply measures whether a project has achieved the objectives that management set for it - usually to disburse a certain sum over a given period via specified channels.

Surely we should be measuring tangible outputs such as the number of children fed or schooled, the number of vaccines distributed, or the (admittedly harder to estimate) number of HIV, malaria or tuberculosis infections prevented?

Commercial organisations also monitor closely the performance of agents they employ to distribute their products. So we should look closely at the performance of the multilateral agencies through whom a large proportion of our Aid is distributed.

Sadly, even DflD, which prides itself on its effective poverty focus, does not do so. The National Audit Office Report, "Engaging with Multilaterals" recenfly found that DflD often ends up allocating funds the multilateral organisations "not on the basis of the progress that funding offers in reducing poverty but for other reasons".

What is the Aid industry for if not to serve the interests of the poor? Surely we should not be channelling money through multilateral agencies unless and until we are convinced they can use it at least as effectively in reducing poverty as Dm? can itself.

Because every pound used ineffectively means a life threatened by disease that could have been cured, a child going to bed hungry who could have been nourished, a future blighted by ignorance that could have dispelled by education.

Conclusion

I have touched on only two of the themes which we air in our Issues and Option paper and which you are considering at this conference.

Above all we would welcome your views now and over the months to come as to how a future Conservative government could improve the effectiveness of Britain's Aid, Trade and Development policies.