Developing Countries: Tied Aid (Hansard, 22 June 2000)

§ Baroness Amos
My Lords, discussions have been going on in the OECD for over two years to reach an agreement on the multilateral untying of development assistance to the least developed countries.
Despite considerable efforts by the UK, other like-minded donors and the Secretariat of the Development Assistance Committee, I am sorry to report to the House that, yesterday, a small minority of countries continued to block progress towards an agreement. We do not accept that this should be the end of the matter, and the Government will pursue all avenues to secure an early and meaningful agreement.

§ Baroness Whitaker
My Lords, I thank my noble friend the Minister for that inevitably depressing Answer. Bearing in mind that an astonishing 71.6 per cent of American aid is tied to American products, so that the receiving countries cannot use their own procurement strategy or indeed local procurement, can the Minister say with more precision what can be done to hasten agreement over untying?

§ Baroness Amos
My Lords, given the difficulties in agreeing a text at the recent OECD meeting, it must now be a question of political will. We shall continue to use our influence. Discussions will have to be undertaken at the highest levels, including at the forthcoming G8 summit in Okinawa. I hope that like-minded countries within the OECD will also use their influence. The outcome has been extremely disappointing. The last two G7 summits, in 426 Birmingham and Cologne, urged action to secure early agreement on untying. This failure threatens the credibility of the OECD to deliver, and also sends mixed messages to G8 members who urge liberalisation on developing countries but cannot break the link between trade and aid in their own bilateral programmes.

§ Lord Howell of Guildford
My Lords, is not the problem that, while several important countries are refusing to play the same game, in principle we are all broadly in favour of untying aid, although I can see that not everyone's record is perfect? However, given the determination of some countries to continue to tie aid, will the Minister reassure us that British business and British exporters will not be placed in an unfair or disadvantageous position by premature unilateral decisions by the British Government and that she will work through multilateral decisions to see that everyone plays the game together?

§ Baroness Amos
My Lords, I assure the noble Lord that we take this matter extremely seriously and have been at the forefront of discussions in the OECD. However, we feel that the issue needs to be taken forward by all OECD countries. It has never been the intention of this Government to undermine the position of British business.

§ Lord Redesdale
My Lords, can the Minister say what action DfID has taken in building capacity in the procurement area so that countries can spend their budgets wisely rather than according to the size of the bribes being offered?

§ Baroness Amos
My Lords, DfID has taken action with regard to its own local procurement policies. I am pleased to be able to report to the House that, in the countries where we have piloted such initiatives, since 1997–98 the amount of local procurement has increased from 5 per cent to 12 per cent. We aim also to strengthen the capacity within developing countries for competent and honest procurement. In Tanzania, for example, we have a procurement consultant who is working with the ministry of health. We have taken a similar initiative with the forestry commission in Ghana, and we shall continue to examine the question of assisting developing countries in the whole area of procurement and corruption.

§ Lord Tomlinson
My Lords, as well as the OECD inquiries to which she referred, is my noble friend aware that a European Commission inquiry is being held into tied aid practices in EU member states? Will she encourage the Commission to conclude that inquiry as quickly as possible, especially in relation to EU competition and internal market policies? In that respect, is my noble friend in a position to say anything about DfID procurement policies in addition to that which she has already said about the local element of procurement?

§ Baroness Amos
My Lords, we are aware of the European Union action. We welcome any action 427 which the European Commission can take in securing agreement across Europe on the issue of untying aid. My noble friend may be aware that such action is being taken by the Commission following an initiative by Action Aid and some 900 European NGOs on the issue of tying bilateral aid programmes. My right honourable friend Clare Short raised the issue at the development council of the European Union. She pressed the European Commission to take a much closer interest in the matter and we have been looking to the Commission for early action. Therefore, we are very pleased that it has now decided to take that action.
With regard to DfID's own performance, noble Lords may be pleased to hear that, in addition to the points that I made to the noble Lord, Lord Redesdale, in 1998 80 per cent of the UK bilateral aid programme was untied.