§ 10.1 pm
§ The Minister for Overseas Development (Mrs. Lynda Chalker)
I beg to move,That the draft International Fund for Agricultural Development Order 1990, which was laid before this House on 8th March, be approved.The International Fund for Agricultural Development —IFAD—was set up to help the most-disadvantaged sections of society in rural areas of developing countries to increase food production. Its focus is the small farmer, nomadic pastoralists, artisarial fishermen, the landless and rural women. IFAD's operations are relatively small-scale. In its first decade of operations, it has committed $2.8 billion for roughly 260 projects, an average of $10 million per loan.
Smallness is a characteristic of the organisation in other ways. It was designed to have only a small professional core staff, and to work primarily through other international agencies. Funding has also been on a relatively modest scale. These factors have shaped the institution and explain the rather special place it occupies in the network of institutions channelling assistance to developing countries.
Partly because of those various influences—its specific mandate to assist the rural poor, its small size as an institution and the relatively modest financial resources at its disposal—IFAD has been making greater efforts over the past few years to target its activities more closely on disadvantaged groups.
The causes of rural poverty are complex. They include scarcity of land, harsh environmental and climatic conditions, isolation and lack of assets to cushion the poor against unforeseen events or emergencies. Improving access of the poor to resources—water for irrigation and sanitation, fertilisers and seeds for increased agricultural production, marketing facilities for the sale of produce and so on—is one of the main aims of IFAD-assisted projects.
IFAD gives high priority to beneficiary participation in all stages of the project cycle, from design and appraisal onwards. One way it does this is through group lending —that is, village groups, farmer organisations, women's groups and other grassroots organisations. IFAD has pioneered a number of ways of facilitating access to credit by the rural poor, who are frequently ignored by traditional financing mechanisms.
Group lending, because of peer pressure, reduces the risk of default, as well as making it cheaper to reach small-scale borrowers. Perhaps the best-known example of this is the Grameen bank in Bangladesh, which has successfully provided credit to those traditionally regarded as the greatest credit risks, the landless or near landless and women. About four fifths of the loans are to women, whose repayment record, I am sure the hon. Member for Cynon Valley (Mrs. Clwyd) will be glad to know, is better than that of the men, although the bank's overall default rate is extremely low.
The loans finance a wide range of income-generating activities, including livestock, poultry and fisheries, small-scale processing and manufacturing, and trading or shopkeeping. IFAD was the first international agency to provide assistance to the Grameen bank.
A similar group lending approach has been used in the small farmer development programme in the hill regions of 567 Nepal, in the village development fund project in Mali, in the small-scale rural operations project in Senegal, and in many other IFAD-assisted projects.
IFAD is conscious of the link between rural poverty and environmental degradation, and how the weight of population growth in many regions, especially Africa, will exacerbate these pressures. Last year, IFAD produced an excellent discussion paper on the need to ensure effective integration of environmental issues into its lending operations. IFAD recognises that unless those issues are directly addressed, its efforts to alleviate rural poverty will be frustrated and the long-term sustainability of its projects undermined.
In Mali, IFAD has a project which aims to rehabilitate a poor pastoral community in an area devastated by drought, by focusing on improved soil and water conservation techniques. In Senegal, an agro-forestry project is helping to arrest environmental degradation caused by overcropping and excessive tree clearance. In Bangladesh, IFAD's ox-bow lake fisheries project is helping small-scale fishermen to develop sustainable fisheries by introducing biologically sound management practices.
Another policy orientation that we welcome is IFAD's efforts to promote the economic welfare of rural women by incorporating specific components into projects that are targeted at their needs. I have seen this recently in Bangladesh, where a credit union scheme through BRAC —the Bangladesh rural action committee—is working very well. We are now supporting BRAC through a new project which will extend the geographical coverage of BRAC's rural development programme and establish a new rural credit finance mechanism. The total cost is US$50 million. We will contribute 25 per cent. A recently approved Smallholder project in Ghana, for example, was preceded by a socio-economic survey that indicated that households headed by women accounted for more than one third of the target group; and a credit allocation of appropriate size specifically earmarked for women was incorporated into the project.
In India, the Tamil Nadu women's development project will offer opportunities in a wide range of income-generating activities, from horticulture and silkworm rearing to business courses and marketing skills. There is a dovetailing of formal and informal credit schemes with women's groups. The project is targeted to benefit some 40,000.
In the north-west province of Cameroon, an IFAD project has helped to increase food output significantly, and women farmers have been able to sell surpluses of maize to neighbouring areas. The project has introduced a soil conservation programme that promotes integrated crop and animal husbandry and safeguards the environment.
Because of these efforts to target assistance more effectively towards the poorest and most disadvantaged groups, IFAD attaches great weight to evaluation activities. It needs to weigh which approaches are successful, and which are less successful. We welcome its efforts systematically to incorporate lessons learned from previous activities in the design of new projects. The bulk of IFAD's resources, some two thirds of the total, are concentrated on the poorest countries
568 IFAD also operates in middle-income countries, however, in areas where there are pockets of poverty. To some extent, IFAD's desire to maintain a broad geographical coverage is understandable. But its projects are small in size, and the active loan portfolio in any one country is also small—often no more than two or three projects. We think that operating in so many countries is not warranted given IFAD's small size; and we should prefer to see a greater concentration of resources and effort in the poorest countries, espicially in Africa and Asia.
There are calls to the contrary, of course, especially from Latin American members of the fund, but we think management risks overstretching itself in attempting to respond to those demands. In our view, IFAD would stand a better chance of demonstrating the effectiveness of its approach to rural poverty alleviation if its resources were not spread so thinly across the globe.
Apart from the issue of regional allocation of resources, IFAD's credentials are solid. It has a dedicated team of professionals under the leadership of its president, Idriss Jazairy, a national of Algeria. Given its poverty-focused mandate and efficient operating style, the question may be asked why it has such difficulty in raising the resources it requires. The answer to that conundrum lies in the institutional structure of the organisation. IFAD was founded on the basis of a partnership between three distinct groups of countries. Each holds one third of the voting power and one third of the seats on the board of directors. Category I consists of OECD countries, category II of OPEC countries, and category III covers non-oil exporting developing countries.
Because IFAD is a partnership, it receives its funding from contributions negotiated jointly between category and category II. It started off for the period 1977–80 with just over $1 billion. Of that, 57 per cent. came from OECD countries and 43 per cent. from OPEC countries. The western donors argued from the outset that categories I and II should contribute equally, as each holds an equal stake in the institution. That was resisted by OPEC members and has been an issue at the root of IFAD's subsequent funding difficulties.
The third replenishment negotiations were concluded last year. In an effort to raise a higher total than last time, and in recognition of the continuing financial constraints on OPEC members, a two-pronged strategy evolved. First, OECD donors agreed that they would match contributions by OPEC donors in the traditional way, in a burden-sharing ratio of 60:40. That was the ratio established during the second replenishment negotiations. That element became known as the core funding.
Secondly, OECD countries agreed to match contributions in convertible currencies by other developing countries in a favourable ratio of 3:1, in the expectation that exceptional efforts by that group of countries would act as a spur to the OPEC donors. This became known as the supplementary funding element.
In the event, category II, OPEC donors, pledged $124.4 million, compared with $184 million last time. That sum will be matched by category I, OECD donors, in the ratio 60:40—that is, $186.6 million. The United Kingdom's share of that core-funding element is $8.9 million, representing 4.78 per cent. of category I's total contribution.
Category III, other developing countries, set itself a target of $75 million. Pledges of $63.8 million were realised. The OECD matching element for that 569 supplementary financing, therefore, will be $191.5 million. The United Kingdom share will be $10.9 million. Thus, the total resources raised in the third replenishment, will be $566 million. Of that, OECD countries will provide $378 million—two thirds of the total. That will cover IFAD's operations for the period up to 30 June 1992.
The outcome was more successful than the second replenishment, which raised only $487 million. Nevertheless, the underlying issue of the relative burden sharing between OECD and OPEC countries remains. Category III, other developing countries, regard their efforts in this replenishment as an exceptional measure, not establishing a precedent for future replenishment exercises.
The results of this replenishment have reinforced the view that serious examination must be given to IFAD's future financial basis before the negotiations on the next replenishment begin. A so-called high-level intergovernmental committee began consideration of these issues in 1986, but after some useful initial work, its work was suspended while the third replenishment was negotiated.
The committee will be resuming its work soon, in an effort to find a more acceptable solution that will put IFAD's resources on a more secure footing for the future. The crucial aim, as we see it, will be to engage OPEC countries in a frank and open dialogue, to see how their perceptions of the assumptions underlying the original foundation of IFAD have changed. We may need to realign the structure, and the voting power, so that it better reflects relative financial stakes in the institution.
The draft order authorises the Secretary of State to pay the British contribution to the new replenishment. Subject to parliamentary approval, we shall contribute £11.3 million, which is equivalent to over $19 million at the agreed exchange rate.
As I said earlier, our share of the total OECD core contribution remains the same as for the last replenishment—about 4.8 per cent. We intend to pay in three instalments, by depositing non-interest-bearing promissory notes. The first of the notes has to be deposited within 30 days of our instrument of contribution coming into effect, the second on the anniversary of the entry into effect of the replenishment, and the last by 30 June 1992. We expect them to be encashed over a period of years from about January 1992. The arrangements include provision for other countries to modify their contributions pro rata if one or more donors fail to meet their obligations in full.
I know that some of this may seem complicated, but the hon. Member for Cynon Valley wanted to know the detail of the IFAD replenishment, and as it crops up only once every few years, and I thought it worthwhile to put it on record. I commend the draft order to the House, in the conviction that its approval will help IFAD to continue its profoundly important work with the full support of the British Government and people.
§ Mrs. Ann Clwyd (Cynon Valley)
The Minister's enthusiasm for the International Fund for Agricultural Development is widely shared. IFAD plays a vital and unique role in development. As the only multilateral agency with a mandate to focus exclusively on agriculture, and particularly on poor farmers, it deserves our full support.
570 IFAD's focus on agriculture is unusual in today's world of economic adjustment. Its social focus on poor and marginal people in developing countries is even more remarkable. Most important of all, it succeeds in reaching and assisting poor farmers. The democratic basis of IFAD is also unique, thanks to the equal distribution of power between the Organisation for Economic Co-operation and Development, the Oil Producing and Exporting Countries and developing countries. IFAD has the full confidence and participation of Governments of developing countries. It is perceived in both the north and the south as more responsive to the needs of developing countries than other United Nations or World bank institutions.
The importance of agriculture in development cannot be underestimated. More than two thirds of the labour force in most African developing countries work in agriculture. For the poorer citizens, agricultural production is the basis of their livelihood. Nothing—except perhaps water—is more important than the production of food. Farmers rely on what they can grow, and herdsmen rely on what they can obtain from their cattle.
The importance of agriculture is increasing for several reasons. With the world's population set to double to 10 billion, it is essential that agricultural production increases at the same rate. However, that is not happening. Agricultural output per head is declining in many countries, especially in Africa, where there were 100 million undernourished people by the early 1980s. Urban populations are increasing rapidly and that puts an extra burden on farmers, who must produce enough to support themselves and urban dwellers. The importance of agriculture is also increasing, because the pressure of rising population makes improvements in agriculture not only more urgent, but also more difficult.
In many areas there is not enough fertile land. Pressure on the land causes declining crop yields and overgrazing. Competition for land pushes farmers on to marginal land on the edge of the desert or in newly cleared forest. That only exacerbates the process of soil erosion, land degradation and the encroaching of the desert. Those environmental problems are mounting. We know now that the effects are cumulative and tend to be irreversible. It has proved only too easy to set off the vicious circle of land clearance, soil erosion, decreased fertility of the land, disappearing vegetation and an increasingly arid climate. There is no evidence that we can so easily reverse the process to achieve thicker vegetation and improved land fertility, humidity and productivity.
Therefore, immediate action to invest in environmentally-sound agricultural techniques is essential. That means that the long-term value of IFAD's investments in environmental protection, such as its projects to assist families with soil and water conservation in Lesotho, is immeasurable.
Despite the overwhelming importance of agriculture, it has been pushed to the sidelines over the past decade. Many donors and institutions tried with enthusiasm to work with small farmers in the 1960s and 1970s, but encountered problems and gave up. They are now focusing on structural adjustments, macro-economic planning and free markets.
IFAD continues to promote agricultural development. It is persevering and succeeding where many others have failed. For example, in Niger, IFAD projects have resulted in a 40 per cent. increase in crops.
571 Unfortunately, the British aid programme of the Government puts less priority on agriculture than other donors and institutions. In 1988, according to the OECD, only 9.1 per cent. of British aid was committed to agricultural developments, less than average for the Development Assistance Committee of OECD donors. It is a poor comparison to the 22 per cent. of Irish aid, 26 per cent. of Danish aid, 23 per cent. of Dutch aid, 21 per cent. of Swiss aid, 17 per cent. of Belgium aid and 23 per cent. of EC, World bank and United Nations aid.
Therefore, a renewed focus on agriculture is urgently needed. More research is needed on agricultural techniques which are appropriate for poor farmers, and on methods of adapting to a warmer climate, but the Government are cutting funding for agricultural research.
If IFAD had invested in agricultural developments by funding large private high-technology farms, producing cash crops from the labour of landless peasants, I would probably not have bothered to be here tonight. The strength of IFAD is that it works with the poorest and the most marginal in society. It supplies credit for investments, as the Minister said, to exactly those people who have least access to credit from the usual sources.
It is not just the quantity of agricultural crops produced that matters, but the quantity of food available to families. Too often development planners overlook the critical issues of food security in their eagerness for gross national product growth. Markets do not supply the family food; the family does. IFAD's approach recognises that.
Working with the poor is difficult at times, but also essential. Let me take Ethiopia as an example. Even if the rains fall for the next harvest, many farmers will have no tools or cattle to work with; they sold them off in sheer desperation to obtain food. IFAD has made loans to 70,000 peasants to buy oxen so that they can produce their own food next time round
A major factor in IFAD's success is its willingness to take up new ideas and new approaches, particularly ideas from farmers at the bottom, not the planners at the top. By building institutions within the local community, it provides projects with a secure foundation. Making loans through peer groups has achieved repayment rates of 95 per cent. in many countries.
Development funds have shifted away from the poor since the 1960s commitment to basic needs. Too many development planners are forgetting what development is, or should be, all about—improving the quality of life for the majority of people in developing countries. It is not just about percentage changes in gross national product, or about tonnes of concrete or miles of roads, or about changes in the trade balance. They are important, but they are only means to the desired end of improving people's lives. By working directly with poor farmers, particularly women, IFAD goes straight to the heart of development.
Of course IFAD could do even better. On the ground, it is not quite as ideal as it appears to be on paper. Like many international organisations, it faces the problems of bureaucracy and inflexibility. Its lack of field staff compounds the problem. Implementation of projects is slow. Its commitments to working with women and to taking full account of the environment are yet to be fully translated into action at every level. However, there is evidence that IFAD is doing better than many in limiting 572 these bureaucratic difficulties. I hope that the Government will play a constructive role within IFAD to ensure that it intensifies its efforts to reach women farmers and to adapt to their special needs, such as lack of legal status or of property to serve as collateral.
Given the importance of IFAD's work, the third replenishment is disappointingly inadequate. It does little to make up the losses suffered in the second replenishment. When IFAD began work in 1978, it had $217 million a year. That is equivalent to $396 million in 1990 terms. Therefore, this year's funding of $211 million represents a cut of 47 per cent. since 1978. The third replenishment would need to be increased by 40 per cent. if IFAD were to regain its initial financial strength in 1991. Nevertheless, with the Minister, I am glad that agreement has at last been reached on a third replenishment.
I particularly applaud the exceptional contributions made by category 3 members—the developing countries. Nigeria, Gabon, Venezuela and others have increased their contributions, despite going through a difficult period of economic adjustment. I welcome the decision by the Organisation for Economic Co-operation and Development members, category 1, to match these contributions on a ratio of 3:1. I am glad, too, that a high-level intergovernmental committee is considering the future financial situation of IFAD. I hope that at the meeting in Rome next Monday, and in future meetings, the United Kingdom Government will seek to ensure stable and sufficient funding for IFAD in the future. I welcome the Minister's assurances on that point.
The third replenishment was disappointing, but the Government's attitude to the special programme for sub-Saharan Africa is, I am afraid, lamentable. The special programme for sub-Saharan Africa was launched in 1977 to enable IFAD to give greater support to agricultural development in Africn countries, stricken by drought and the encroaching desert, at a time of acute economic crisis. Since then there has been general approval of its work. By the end of the year, IFAD will have 30 projects in 24 sub-Saharan countries.
However, when a second phase of the special programme for sub-Saharan Africa was suggested in January, the Government stood out alone against a chorus of support to oppose the proposal. France, Belgium and Italy all supported the programme. Every African member of IFAD supported it. Latin American countries—Colombia and Argentina—supported it. Australia and Pakistan gave their support.
Why did the United Kingdom oppose it? There can be only two explanations of the Government's opposition. First, perhaps the Government believe that the first phase of the special programme for sub-Saharan Africa has not been successful. I ask the Minister whether the programme has been successful in raising the target funding of $300 million through voluntary contributions. Has it been successful in committing those funds for projects in sub-Saharan Africa? Has IFAD successfully co-ordinated the special programme with the work of the regular programme in sub-Saharan Africa? Has the Minister evidence of that? Does the Minister agree with the analysis of the United States and other donors that IFAD's work in Africa is generally positive? I doubt whether the Minister can answer no to any of those questions. The right hon. Lady can surely not oppose the second phase of the special programme for sub-Saharan Africa on the ground that it has not worked.
573 Possibly the only other reason for opposing the extension of the special programme is a belief that the situation in Africa no longer merits the programme. Is it believed that there is no longer an extreme and urgent crisis that needs priority attention? Is that what the Minister really believes? We are faced with the facts that GNP per capita is only $330, and has fallen by 2.8 per cent. since the 1980s, that debt service is 15 times greater than export earnings in sub-Saharan Africa, and that agriculture production per capita is falling. Surely no one can argue that Africa has recovered from the economic crisis of the 1980s.
Given the crisis in sub-Saharan Africa, especially that of agriculture, the region must be a priority for IFAD. The special programme ensures that Africa receives the special attention that it needs. If the programme is not extended, funds for IFAD's work in sub-Saharan Africa will be cut by 40 per cent.
Why should Africa be a priority for IFAD's work? Given the severe economic crisis, African countries do not have the funds themselves to invest in agriculture. In 1988, for example, $21.7 billion were transferred from Africa to the industrialised countries. As a result, investment in rural infrastructure and agriculture has plummeted. Donors are spending billions of dollars on structural adjustment programmes. Therefore, there should be an adequate response to the needs of the poorest who suffer the worst impact of recession.
The projects of IFAD assist those who are at the sharp end. The programmes of other donors that are aimed at alleviating the social impact of adjustment work mainly with urban consumers who are hit by higher prices for basic goods and the problems of those who lose their jobs in the trimming of state bureaucracies. In contrast, IFAD works with the very poorest. It can both shield them and help them to take advantage of opportunities that are provided by an improved economic climate.
As everyone knows, agriculture is even more important in Africa than it is in other developing countries. Eighty-four per cent. of Mozambicans, 77 per cent. of Ethiopians and 79 per cent. of Tanzanians work in agriculture. Most of the farmers are smallholders and women. Women produce 80 per cent. of family food.
The World bank has described the immense challenge facing agriculture in sub-Saharan Africa. It says:The task facing African agriculture in the 1990s and beyond is formidable indeed. It must cope with the needs of a rapidly growing population. It must achieve sufficient growth in food crops not merely to maintain output per person, but also to reduce food calorie deficits and to lower food imports. In the process, it must be a major employer of Africa's growing labour and compete on world markets to earn the foreign exchange that Africa needs to fuel its economic growth. And it must do all that while reversing the degradation of natural resources that threatens long-term production. This challenge requires a transformation of agriculture.The World bank estimates that to meet that challenge, agricultural growth should reach 4 per cent. a year compared with a record of only 2 per cent. over the past 20 years. Clearly that will require an enormous effort on the part of farmers, African Governments, agricultural researchers, western donors and IFAD.
We all know that the environmental problems in Africa are immense. We have heard much from the Overseas Development Administration about protecting the global environment, and about projects for the rain forests, biodiversity and energy efficiency. However, in our 574 concern for the headline issues of global warming and tropical rain forests, we must not forget the mundane environmental problems that threaten millions of Africans every day.
Deforestation in arid—not tropical—areas has been a major problem for many years. Women in Africa spend hours every day hunting for fuel wood. Only when deforestation became a problem for the atmosphere, not just for the poor, did the world start to sit up and take note. If this Government are truly committed to caring for the environment for the sake of the poor, and not just to producing glossy brochures and green platitudes, they will invest in tree planting projects in arid areas, in soil conservation and in local small-scale irrigation with the same enthusiasm that they put into tropical forests and biodiversity. If the Government emphasise such a commitment, IFAD and its special programme for sub-Saharan Africa provide a suitable channel to translate that commitment into reality.
There is now a new threat to Africa—the risk of the diversion of funds to eastern Europe. The Government have repeated many times that there will be no diversion of aid funds from Africa to eastern Europe this year, but they will give no assurances for future years. The sorry comparison between the Government's eagerness in setting up know-how funds for eastern Europe and the bank for European reconstruction and development, and their opposition to a second phase of the special programme for sub-Saharan Africa tells a different tale. It is clear that Africa will lose funds if the special programme fund is not extended. It is shocking that the United Kingdom Government are the main opponent of that extension.
The most recent threat to Africa came from the Foreign Secretary last week. He waved the big stick, threatening to withdraw aid if African countries did not toe the line on free markets and elections. Many of his goals—democracy and economic growth—are desired by us all, but threatening to withdraw aid from the world's poorest is not the way to achieve them. The Labour party, of course, wants to see the Governments of developing countries pursue sound environmental policies, promote social progress and respect human rights. We do and will encourage such aims. However, democracy cannot be established overnight, and during the transition period we should not be penalising the impoverished citizens of those countries when we could be helping them.
Voluntary contributions to the special programme for sub-Saharan Africa have partially mitigated the effect of the overall cut in IFAD's regular funds on the poorest, most drought-stricken countries. The special programme enables donors who are willing to give extra support to the worst-off countries without breaking the principle of equal shares between OPEC and OECD in the regular programme. As long as OPEC countries feel unable to commit more money, and as long as OECD countries, particularly the United States, are unwilling for OECD contributions to outstrip OPEC funding, the special programme for sub-Saharan Africa will be essential to fund IFAD's work there.
Ideally, in the long term, the special programme will be incorporated into the regular programme. I hope that the high-level group currently working on IFAD's future funding will establish a system so that a high level of funding and a high degree of commitment to sub-Saharan Africa can be maintained through the regular programme.
575 But that will not happen yet. Until such a system is established, it is essential to extend the special programme for a second phase.
Thanks to the first phase of the special programme, 50 per cent. of IFAD's funds have been devoted to sub-Saharan Africa. If the special programme is ended, less than 35 per cent. of IFAD's funds will go to Africa. I stress again that that means that Africa's support will fall by 40 per cent.
I suggest that, by opposing the second phase, the Government are trying to deny Africa millions of pounds. They are actually trying to prevent other donors from making contributions that they are willing to give by closing down the channel for those funds. Surely, even if the Government do not want to contribute to the special fund, there can be no reason for closing down the options of other donors.
I hope that the Government will not only support the idea of extending the special programme for a second phase but will make a sizeable contribution. After all, had the third replenishment reached the original target of $750 million, the United Kingdom's share would be an extra $6.4 million. We should be ready to put that much and more into the special programme.
Even when the special programme for sub-Saharan Africa was launched, the United Kingdom was a recalcitrant supporter and an ungenerous donor. The 576 Government contributed $12.7 million, whereas Belgium contributed $33.7 million, France $34.6 million, Italy $33 million and Sweden $21.5 million. So the United Kingdom's share of the OECD contribution on the special programme for sub-Saharan Africa was 4.41 per cent. of the total from all countries.
I hope that the Minister will not dismiss the idea with the argument that the Government give extra support to Africa in other ways. The proportion of British aid that goes to sub-Saharan Africa is 42 per cent., compared to 69 per cent. from Ireland, 68 per cent. from Belgium and 57 per cent. from Italy. Certainly we give aid to Africa through other multilaterals, but it is not targeted on the poor.
What should the Government do? They should support the special programme for Africa and make a large contribution to it. More important, they should increase the shockingly low overall aid budget, so that the United Kingdom could afford to make extra contributions without denying funds to other worthy projects. The current aid budget of 0.32 per cent. of gross national product is one of the most miserly in Europe. It is planned to increase by less than 1 per cent. a year in real terms, even on the Government's optimistic inflation forecast. That is despicable.
Only when the Labour party is in power, with a commitment to reaching a 0.7 per cent. of GNP target in five years, will the United Kingdom even approach playing its full role in supporting developments around the world, and particularly developments in Africa.
§ Mr. Jim Lester (Broxtowe)
I almost hesitate to intervene in this debate after we have heard two eminent ladies discuss this very important replenishment. They both dealt fully with the amount of money that goes from the fund to women in Africa. Although I am a mere male, I have had a tremendous interest in the development of IFAD and its work, and I thought that I should support and welcome the third replenishment and the comments of my right hon. Friend the Minister for Overseas Development.
The hon. Member for Cynon Valley (Mrs. Clwyd) struck a slightly discordant note. My right hon. Friend the Minister told us how the proportions of support for IFAD were renegotiated from its original context. The OECD countries should be commended for picking up the shortfall of the other partners. I welcome the contributions made by the developing countries, but the fact that we have taken on a higher proportion of the assistance to keep the fund going should be commended and not criticised. I remember how critical the lobbying was in earlier years for the fund to continue. I welcome the change of atmosphere which my right hon. Friend the Minister revealed in that we are now considering a normal replenishment and we are taking a long look ahead at the way in which it can continue.
All of us who follow these matters support the IFAD principle and operation. That reflects great credit on Idriss Jazairy, who runs the organisation. We should seek to develop agriculture especially among the poorest wherever they are in the world. We all recognise that over the next decade and beyond it is essential to retain that commitment to rural improvement.
We recognise more clearly now that, although food is important and of course we want to encourage people to develop self-sufficiency and to provide the amount of food that they require in their communities, we must also encourage them to diversify from the traditional crops. Part of the problem with developing countries is their history of producing basic commodities for export. Those commodities can be profitable one year, but disastrously unprofitable the next because of changes in world commodity prices and the way they function.
I realised only relatively recently how little development of agriculture has taken place in many of the poorest countries with regard to the ability to exchange trade one country with another within regional groupings. My right hon. Friend the Minister referred to Mali. That country produced a surplus of wheat last year, but, because of a lack of infrastructure, it cannot sell that surplus to its neighbours which desperately need wheat. Mali's neighbours have to import it from hard currency countries. There is much that we could encourage IFAD to do, not only in improving the quality of growing food, but with regard to the range of crops and the development of regional markets, so that people in the countries concerned can improve their own position by trading with each other.
We must also consider the proportion given to the poorest families. I am not sure whether my right hon. Friend the Minister can tell us what the criteria are for the poorest families. Those criteria are critical. Those of us who travel widely in marginal areas know just how difficult it is to support those families and how difficult it is to get alongside them. We know how difficult it is for extension workers to operate in what are very often hard conditions 578 and spend the necessary time to bring about a change in pastoral habits and nomadic practices. We are not talking about schemes that will last one, two or three years or even, in parliamentary terms, four or five years. Often it will take 20 or 25 years for schemes to come to fruition and change those habits. That is why it is so important to recognise the criterion, the poorest, and to ensure that a large proportion is given.
The next point is how we link IFAD's priorities and operations with the ODA's aims and operations. Until I heard the speech by the hon. Member for Cynon Valley, I had always imagined that 68 per cent. of our ODA funds went to the poorest. I understand also that a high proportion goes to agriculture. A Select Committee report entitled "UK Aid to African Agriculture" analyses the figures.
One can often get an odd impression of what is agricultural and what benefits agriculture. Those of us who travel widely know that a road, for instance, may not be mentioned in the agricultural budget. However, a road that enables poor farmers to get their produce to big markets is essential to the development of rural agriculture. One has only to go to Kenya to see that. In countries such as Tanzania, food surpluses are produced in the highlands and in some other parts, but farmers literally cannot transport it to Dar es Salaam in time for the population to eat it before it gets overripe. Therefore, more food is imported to feed the urban population.
When we talk about necessary proportions for agriculture, we should recognise that agriculture requires access to markets. That is part and parcel of the development that we should encourage.
I have been involved in several recent conferences at which concern was expressed about the diversion of aid to eastern Europe affecting Africa and other developing countries. That topic is raised in almost every third-world country that one visits. I understand from the European Commissioner, my right hon. Friend the Minister and my right hon. Friend the Foreign Secretary that there is no question of diverting ODA funds to eastern Europe. Although we want to assist eastern Europe, no country in eastern Europe is sufficiently poor to qualify for ODA funds.
As far as I am aware, know-how funds, industrial funds and so on for eastern Europe have been additional to the agreed, expanding figures for ODA budgets. I assure my right hon. and hon. Friends that any suggestion that there should be any diversion of ODA funds to eastern Europe would be severely resisted. I am convinced that that option is not being considered. Norway's Minister responsible for overseas development made precisely that point.
The Americans have been the only people to divert short-term funds. I understand from their Minister that they have clawed it back. It was a matter of short-termism. The Italian Government have diverted funds in the first year. Again, I understand that the money will be clawed back. Funds that are desperately required for development in the third world should not be used for eastern Europe. That is a wholly different matter, even though it might come within my right hon. Friend's responsibility.
I disagree with the interpretation by my right hon. Friend the Foreign Secretary at the conference on prospects for Africa. We are talking about political conditionality and withdrawing aid from countries that do not meet certain standards. The voices that I have heard come from Africa as much as anywhere else.
579 If we want to see economic recovery and the standards of living of the poorest in such countries increase, I should have thought that we would need to ensure democratic accountability. That is one of the conditions that we have accepted for eastern Europe. We need Governments who seek to be free from corruption and who follow policies that profitably and sensibly utilise the resources that we want to transfer to them. It makes no sense to offer funds to Governments whose track record is such that the funds do not achieve the objectives that we all seek for the people of those Governments.
There is no suggestion that that would in any way damage humanitarian interests in countries such as Ethiopia, the policies of whose Government we have never supported, but we have none the less given millions and millions of pounds of humanitarian aid to ensure that people do not starve. If the Ethiopian Government began to have policies that we could see were benefiting their people, I would be one of the very first to encourage a development programme for that Government.
I do not accept that there is a "big stick" or that we have made anything other than a gradual incremental suggestion in line with the World bank and with many others, especially from the countries concerned, who seek the same standards as those enjoyed by countries in the west and which are now appearing in the east. We must ensure that the transfer of resources that many of us seek and want to see encouraged through IFAD and whatever other means are used to the advantage of the people we seek to assist.
Therefore, I commend the order to my right hon. Friend. I am glad that it has been moved. I hope that we shall continue to work actively with IFAD and to support its objectives. I further hope that we shall see the fund increase and diversify in some of the ways that I have suggested.
§ Mrs. Chalker
With the leave of the House, I should like to respond as briefly as I can to some of the points that have been made by my hon. Friend the Member for Broxtowe (Mr. Lester) and the hon. Member for Cynon Valley (Mrs. Clwyd).
Perhaps we could get one or two things straight at the beginning. The Foreign Secretary's speech to the Overseas Development Institute was not a new message and the prescriptions are not Thatcherite, as the hon. Lady said on the radio. As the hon. Lady would know if she had read it thoroughly, the World bank study on sub-Saharan Africa reached the same conclusions on the need for good government and economic and political liberalisation. It stated:Equally worrying is the widespread impression of political decline. Corruption, oppression and nepotism are increasingly evident. These are hardly unique to Africa, but they may have been exacerbated by development strategies that concentrate power and resources in government bureaucracies without countervailing measures to ensure public accountability or political consensus".The report contains many similar comments. We believe that it is absolutely essential that there is good government because without it our efforts, whether in Africa, Asia or anywhere else, will not be as valuable as they could be to the people who need our help. The hon. 580 Lady should think a little harder about what the Foreign Secretary said, because comments such as she made do not bear on the reality.
The result of economic activity in Africa has shifted increasingly to the informal sector. We need to help people in such countries to realise their own ambition. Things will be done if the people are involved, and that means good government. Without it, one cannot be successful.
My hon. Friend the Member for Broxtowe has almost dealt with the hon. Lady's other point about aid for eastern Europe. I simply reaffirm what he said: aid to eastern Europe is separate from, and additional to, the aid to developing countries that is provided through the aid programme. There is no diversion of funds. The £150 million over five years of the know-how fund for eastern Europe compares with a total of more than £1,600 million this year in assistance to the third world. Although I know that that fear has been raised, I assure the hon. Lady that, whatever she may think, we are not diverting funds to eastern Europe from the third world. There is a separate line in the public expenditure survey committee and that is what we are using.
§ Mr. Campbell-Savours
I do not see why it has to be briefly. Can she assure us that that principle will apply in subsequent years?
§ Mrs. Chalker
I assure the hon. Gentleman that, where we have a PESC line for support for Africa, the money intended for Africa and the third world will be spent there. I also assure him that, in all that we have agreed, the money for eastern Europe is separate from and additional to other money. I cannot bind successor Governments. I cannot make promises that my successors might wish to alter. What I can say is exactly what I have agreed and what I intend to do. I shall not be deflected from that.
My hon. Friend the Member for Broxtowe made a balanced and realistic speech. He said that agriculture is more than just growing food. How right he is. It is the ability of growers to get the food that they grow to the people who need it. That requires infrastructure and many of the other things that are taken care of by other programmes.
Let us consider what IFAD is. IFAD's aid to Africa is about one third of total IFAD resources. We have always felt that IFAD was useful but that it was not alone. It is not the whole answer for the development of sub-Saharan Africa in agriculture and associated matters. It is but one instrument among many.
The hon. Member for Cynon Valley made great play of her view that the United Kingdom contribution to the special programme for Africa was miserly. She must remember the United Kingdom's total aid to Africa. United Kingdom bilateral aid to Africa rose from £305 million in 1987 to £422 million in 1988. Over the period from 1988 to 1991 we have committed £250 million to the World bank special programme of assistance for sub-Saharan Africa. We have cancelled the aid debts of 15 African countries at a cost of £284 million. Half of IDA9, which we have just negotiated—some $15 billion—will go 581 to sub-Saharan Africa. Over 90 per cent. of the European development fund goes to sub-Saharan Africa. In 1990 the EDF will total about £950 million.
My hon. Friend the Member for Broxtowe asked about the criteria for the poorest countries. Two thirds of IFAD's aid goes to the poorest countries with special emphasis on the least developed and low-income food-deficit countries. IFAD seeks increasingly to target its assistance on those poorest sectors by undertaking socio-economic base line surveys before it implements the projects. It does a total job in its own way. However, it is only part of the whole, and we should always remember that, even though tonight we are dealing with the replenishment of IFAD.
We should also remember that IFAD works through other organisations. It relies on them for the implementation and supervision of projects. I know that IFAD is conscious of the need to intensify its efforts in these areas. There are increasing staff inputs for a greater direct IFAD role in project implementation. But if that were to go on and on, as the hon. Member for Cynon Valley seems to want, it would change the character of the organisation, which is essentially to target those who need special help.
IFAD was never designed to be a project-executing agency. That is done through other organisations. It is a funding agency and it is in funding special projects, which are clearly targeted, that it has had considerable success. However, if we try to make it outgrow what it was intended to be, I fear that it might well fail.
Of course, there is anxiety about IFAD's future. But there is a growing feeling among OECD donors that IFAD may not be able to continue as they originally envisaged unless OPEC countries live up to their collective responsibilities for their share of the basic funding. That is why the high level intergovernmental committee that will sit again shortly is important. I hope that when it resumes its work next week it will make sure that the issue of how to deliver the resources most efficiently to those most in need will receive the careful scrutiny that it deserves.
The hon. Lady asked about IFAD's policy towards women in development. I mentioned that in my opening speech. It takes a positive bias in its approach to the problems of rural women and enlists them as creative partners in the rural development endeavours. There is a special programme for women in development, which is designed to enhance IFAD's technical capacity to meet the challenges posed by poor rural women and its efforts to integrate them into the development process. It is a specialist job designed to meet a special need.
The hon. Lady spent a long time making great play about the third replenishment and asked why we could not contribute more. The size of our contribution depends on the overall size of the replenishment. That is decided by negotiation with other members of the fund and on the basis of burden sharing. The OECD members in this replenishment have made considerable efforts to achieve a satisfactory outcome. Of the total of $566 million raised, $378 million—almost 70 per cent.—is being raised by the OECD countries.
The hon. Lady asked why we had contributed less in percentage terms to the core contribution of this replenishment than we did to the last replenishment. She did not put it quite that way, but I think that that is what she meant. Our share of category 1 core contribution is down by 0.1 per cent.—from 4.79 per cent. in the second 582 replenishment to 4.78 per cent. in this replenishment. The reason for that is that Greece has transferred from category 3 to category 1 membership for the first time.
There are many more technical details that I will not discuss tonight for the sake of my hon. Friends. However, I must say that the net flows of official development assistance to Africa have remained strongly positive throughout the 1980s. One would never have thought that when listening to the hon. Lady. We all know that the problem with IFAD has been the sharp reduction in the OPEC pledges. The OECD does not feel that it should be putting up more than three fifths of the resources, although the voting power remains equally shared. The second replenishment only raised a disappointing sum—$400 million—and that was why we had the voluntary fund, the special programme for Africa. That programme, which was proposed in 1985, was important as it came in the wake of the famine and at a time when the finalisation of the second replenishment was still in doubt. The pledges were voluntary, not negotiated, and the target of $300 million was reached. It focused on 24 countries suffering from drought and desertification. However, that programme does not finance famine relief but is used for longer-term development, and it was there just at the time when we were having trouble with the second replenishment.
I do not think that we can continue to have special programme after special programme; we do far better to concentrate our resources on mainstream programmes and ensure that they get through to the people for whom they are intended. Special programmes cause extra costs in administration. One of the problems is that, as time goes on, donors tend to put more and more money into such funds and less and less into core programmes. Those core programmes then break down and fail to deliver the real intent for which they were established.
In the case of IFAD, a voluntary fund of that special sort and size also poses some clear dangers to the process of negotiated contributions on which the institution is founded. Only OECD donors with token sums of support from the countries have made contributions. When we announced our contribution of £7 million, we made it clear that we regarded the programme as justified, but only in the context of the disappointing outcome of the second replenishment. We expect the activities that were taken up by the special programme for Africa to he fully incorporated into IFAD's regular programme in the next replenishment. That is important if we are to keep down the bureaucratic costs of special programmes.
We are not in favour of continuing to increase special programmes. We are in favour of targeting effort to those most in need, of making sure that our approach is rounded, of seeing that it focuses not only on the growing of food but on the delivery of that food when grown, on its efficient and sound storage and on the sensible use of the resources that are available.
I am certain that the special programme for Africa has been valuable. The hon. Member for Cynon Valley said that it breached the principle of burden sharing. That is not the case. The SPA relied almost entirely, as I said, on contributions from OECD donors. We are not opposing others contributing; we merely make it clear that in relation to a case for an extension of the programme, the circumstances are now very different from those of 1986, when the programme was put forward.
583 Looking again at the World bank's long-term perspective study for sub-Saharan Africa, one realises the importance of agriculture—which accounts for over one third of Africa's GDP—both as an engine of growth and as a major contributor to improving food security. One appreciates the constraints on land availability. That means that growth must come largely from increased productivity. That, in turn, can come only through technological change. Such changes must be conservation-oriented if they are to be sustainable. That is why the World bank has the right approach to the whole question of agriculture in the long term.
That study also described Africa's decline in economic performance over the last 20 years. None of that is new. But, above all, that study managed—we should focus on this in discussing agricultural development in Africa—to accentuate the two main priorities. They are, first, the need to increase the role of the private sector in pricing and marketing agricultural products and farming inputs and improving financial services to farmers; and, secondly, the need to identify and disseminate new technologies to increase productivity.
It is important, in the latter context, to revitalise Africa's agricultural research and extension institutions, which are currently not doing much useful work but are doing it at great expense. We are not cutting back on that. We are making sure that in our programmes we target our aid to deliver what is really needed. IFAD is but one instrument. It has been most effective and useful, but it cannot do everything and it was never intended to do so. It would be wrong to try to develop it beyond its natural life, particularly if the funding is to remain solely on the shoulders of the OECD countries.
The hon. Lady also mentioned the environment. IFAD recognises environment as a key issue. It has focused on environmental sustainability alongside rural poverty alleviation. Given that focus, it is clear that it has become increasingly aware of the systematic linkages between environmental degradation and rural poverty alleviation.
IFAD's two reports last year detailed the approach to environmental sustainability and rural poverty alleviation, and the policies outlined in those reports are totally compatible with the policies adopted by other institutions. I believe that we can get on with the job well if we use IFAD as one useful instrument, but remember that we have many others and that we should work in all the spheres to tackle the many and varied problems as they arise.
There is no way in which I would favour cutting back on what we do to help agricultural development in Africa, but that must be approached in an intelligent and widely based way and not in the rather simplistic way that the hon. Lady suggested tonight.
§ Question put and agreed to.
That the draft International Fund for Agricultural Development Order 1990, which was laid before this House on 8th March, be approved.