I move: "That the Bill be now read a Second Time."
The purpose of this Bill is to authorise a contribution of £20 million by the Government to the twelfth replenishment of the resources of the International Development Association.
The International Development Association, or IDA for short, is an affiliate of the World Bank. It is one of the bank's main instruments in the fight against extreme poverty. It was set up in 1960 to assist the poorest countries which cannot afford to borrow money from the World Bank on its normal terms. It lends to countries with a per capita income, in 1998 terms, of less than $895, that is, less than $3 a day. There is also an exception for small island economies that have limited credit worthiness. The beneficiaries of IDA lending are essentially the 2.3 billion people, comprising 53% of the total population of the developing countries, who live in the 78 countries which are eligible to borrow from IDA. Today, 1.5 billion of these people survive on incomes of $2 or less a day, and some 1.07 billion on less than $1 a day.
The mission of IDA is to support efficient and effective programmes to reduce poverty and improve the quality of life in its poorest member countries. IDA helps build the human capital, policies, institutions, and physical infrastructure needed to bring about equitable and sustainable growth. Research conducted by the World Bank has shown, however, that positive growth rates do not automatically lead to poverty reduction. Additional measures are needed to ensure this takes place, and IDA is the primary multilateral agency which is specifically charged with ensuring these measures are identified and undertaken. IDA's goal is to reduce the disparities across and within countries, to bring more people into the economic mainstream and to promote equitable access to the benefits of development.
Sustainable poverty reduction depends on forming effective partnerships, and on systematic inclusion of the poor in the development process. To achieve this, the focus must be on: results, to get the biggest development return from scarce aid resources; sustainability, to achieve enduring development impact within an environmentally sustainable framework; and equity, to remove barriers and open up opportunities for the disadvantaged.
The current debate on development issues often focuses on cases where progress and development fall short of what was expected at the outset. While this is right and necessary if we are to improve performance, we should not lose sight of how much has been achieved over the years. Over the past generation, more has been done to reduce poverty and raise the quality of life than during any comparable period in human history. Advances in health care, in particular, have brought enormous benefits to the developing countries.
Since 1970, infant mortality rates have been cut in half and life expectancy has increased from 55 years to 64 years. Growth in food production has outpaced that of population. Child malnutrition rates are 20% lower than they were 30 years ago and certain nutrition deficient diseases have almost disappeared. Primary school enrolment rates in developing countries have reached almost 80% and gender disparities have narrowed, with the ratio of girls to boys in secondary schools rising to 45%. Adult literacy has similarly risen from 46% to 70%. There is greater consensus than ever before, in rich and poor countries alike, on what governments must do to improve the lives of their people. The developing countries themselves have been the motor driving these achievements, but their efforts have received strong support from donors, including IDA.
That said, it must also be recognised that a large number of developing countries at the lower end of the income spectrum continue to experience unacceptably high levels of poverty and deprivation. In these countries, poverty reduction strategies must help build capacities to address the weaknesses in governance and in institutions which lie at the root of their poor performance.
As a major step toward concerted action for development, the international donor community has agreed to focus on a series of key goals in partnership with developing countries. These goals, which are based on United Nations conferences and resolutions reflecting broad agreement by the international community as a whole, were set out in Shaping the 21st Century: The Contribution of Development Co-operation, issued by the development assistance committee of the Organisation for Economic Co-operation and Development, OECD, in May 1996.
The goals for 2015 include reducing by half the proportion of people living in extreme poverty, achieving universal primary education in all countries and universal access to reproductive health services, reducing by two-thirds the mortality rates of children under five and by three-quarters maternal mortality, ensuring full access to primary health care and reversing trends in the loss of environmental resources. The goals for 2005 include demonstrated progress toward gender equality by eliminating gender disparities in primary and secondary education and the implementation of national strategies for sustainable development in all countries.
IDA is operating firmly in the context of these goals. In relation to poverty, in particular, it undertakes research to reach a comprehensive understanding of poverty and its determinants with a view to choosing approaches to public policy which will have the highest impact on poverty alleviation.
The recently inaugurated Poverty Reduction Strategy Papers is an innovative approach in the fight against poverty, and one which has found wide acceptance among both donor and recipient countries. Among other innovations, they offer a framework within which the World Bank, including IDA, the IMF, donors and beneficiary countries can work together to enhance development impact in a participatory manner, integrating priority measures for poverty reduction and structural reforms within a growth oriented macro-economic framework.
IDA offers loans which are free of interest, carrying only a nominal service charge. The loans have maturities of 35 or 40 years with a ten year grace period on repayment of principal. They are funded by IDA replenishments, which consist of grants provided mainly by its richer member countries. These donor replenishments are supplemented by repayments made by IDA's borrowers in respect of earlier loans and transfers from the available net income of the World Bank.
The twelfth replenishment, IDA12, amounts to SDR 8.65 billion and covers the period starting 1 July 1999. This donor funding, when combined with the reflows and World Bank transfers, will allow IDA to commit lending of about SDR 15.25 billion between 1 July 1999 and 30 June 2002.
The largest pledges to IDA12 were made by the United States, Japan, Germany, France, United Kingdom, Italy and Canada. Some less wealthy nations also contribute to IDA. Turkey and Korea, for example, once borrowers from IDA, are now donors. Countries currently eligible to borrow from IBRD – Argentina, Brazil, Czech Republic, Hungary, Mexico, Poland, Russia, the Slovak Republic, South Africa, and Venezuela – are also IDA12 donors.
The Irish contribution to IDA12 will amount to £20 million. This is made up of a basic contribution of approximately £15 million – 0.18% of total donor resources – an increase from 0.13 % for IDA11. We have also pledged a supplementary contribution of £5 million which brings the total for Ireland to about 0.24% of total donor contributions. Of the donor countries, Ireland, Finland, Greece and the UK have increased their basic shares from that in IDA11, in addition to which Ireland, Australia, the Czech Republic and Israel have added supplements to their basic contributions.
Deputies may note that the Irish agreement to exceed our previous share was instrumental in evoking increases in basic contributions and other supplementary payments and thereby helped bridge the funding gap facing IDA12 and bringing the difficult negotiations on this replenishment to a successful conclusion. The actual cash payments for IDA12 will be made over a six year period beginning in the year 2000. Contributions to IDA are payable from the central fund.
Although it is not specifically a matter for the current IDA replenishment, the HIPC debt initiative is of crucial importance for many IDA countries. As Deputies will be aware, one of the most serious problems with the implementation of this initiative has been the funding question. The IMF has now funded its contribution through donor contributions to the PRGF, formerly ESAF, HIPC Trust and through the sale of gold.
The principal vehicle for World Bank participation, together with some other multi-lateral creditors, is the World Bank HIPC Trust Fund. This fund provides relief to eligible countries on debt owed to participating multilaterals and is administered by IDA, with contributions from participating multilateral creditors and from bilateral donors. The bank has made transfers from its IBRD net income and surplus to the HIPC Trust Fund to provide relief on debt owed to IDA.
Nevertheless, only part of the total expected debt relief on IDA debt under the initiative is currently funded. The 13th IDA replenishment, on which negotiations will commence this summer, will, therefore, have to make provision not only for donor financing of ongoing IDA lending, but specific provision will have to be made for donors to contribute further to the relief of existing IDA debt owed by HIPC countries.
Contributions to multilateral bodies, such as IDA and the World Bank, qualify as part of Ireland's overall contribution to overseas development in the context of the UN target of 0.7% of GNP.
The resources to be provided by IDA12 replenishment represent the principal means through which IDA pursues its poverty reduction strategies. IDA does not simply throw resources at the problem. It has developed a careful, thoughtful, financially sound and economically, socially and environmentally sustainable policy framework for poverty reduction. The main focus points in this poverty reduction framework are: investment in people; investment in economic growth for sustainable poverty reduction; support for good governance for broad-based poverty reduction and protecting the environment for the future.
Investment in people will be delivered through the support of the social sectors, principally in the following areas: education, health, population and nutrition, social protection, gender equality, labour and capacity building.
IDA has not only developed a suitable framework, it has also set out its strategy to translate poverty reduction objectives into country allocations. These allocations will be performance-based.
IDA also intends to increase its effectiveness in reducing poverty by: working with partners to tailor IDA programmes; the Poverty Reduction Strategy Paper process; continued support for the HIPC debt initiative and promoting employment generating, private sector-led growth. It will also establish clear goals to monitor progress and aid effectiveness. Monitoring will take place in the context of the international development targets for the 21st century and specific poverty reduction targets for specific countries of operation.
As IDA12 funding is rolled out, IDA will monitor progress through: poverty assessments; social assessments; poverty monitoring and analysis; periodic poverty papers and public expenditure reviews and analysis. IDA will also try to enhance effectiveness through openness and transparency in its own operations. Country portfolio performance reviews are planned as the implementation of the IDA12 action plan is unfolded.
It has been noted previously in the context of IDA replenishment proposals before this House that sub-Saharan Africa presents a particularly difficult development challenge. IDA will continue to make special efforts in this region, which has minimal access to alternative sources of investment capital, low social indicators and severe institutional and infrastructure constraints.
It is encouraging to note, however, that many of these countries are now pursuing sound policies and experiencing greatly improved growth rates, opening up a window of opportunity to improve the lives of their poorest citizens. The problem is that investment levels in these countries are too low to sustain this growth so substantial support from the international community, including both the public and private sectors, is still urgently required.
Under IDA 11, approximately 40% of IDA resources went to sub-Saharan Africa. In order to support African countries that are committed to poverty reduction, economic reform and sustainable broad-based growth, IDA intends to increase this share, with the aim of raising it to 50% of IDA12 resources as long as the performance of individual countries warrants it. During the recent replenishment negotiations on IDA12, Ireland fought hard to have the 50% target instituted as IDA's special focus on Africa is consistent with Ireland's ODA programme.
Deputies are well aware that high levels of external debt are a serious constraint to development for many low income countries. Why then does IDA assistance continue to take the form of loans, albeit on highly concessionary terms, rather than outright grants? Funding of IDA through donor replenishments accounts for only approximately one half of current IDA lending. The other half is accounted for very largely by repayments on previous IDA loans. A move to a system of grants, or to some mixture of grant and loan assistance, would ultimately require either a scaling back in IDA activity or an increase in donor contributions. In effect, the approach of increased donor contributions is the one chosen but it is being implemented through the HIPC initiative rather than within IDA itself, although, as I indicated, the 13th replenishment will have to address this matter directly.
IDA currently offers selective and limited grant funding. These grants are available under the terms of the HIPC initiative. At the finalisation of negotiations for the 12th replenishment, IDA had provided grants of US$75 million for an education project in Uganda, $150 million for economic reform in Mozambique and a $315 million grant was pending approval for Cote D'Ivoire.
In addition, IDA directors have recognised the unique problems faced by post-conflict countries, particularly in the immediate post-conflict phase, where quick action is crucial but where normal donor relationships either do not exist or have been disrupted by the conflict. IDA deputies agreed, in the context of a framework for post-conflict countries, that exceptional IDA grant funding could also be provided as a last resort where other funding sources are inadequate and where the use of IDA credits would be inappropriate. Such post-conflict IDA funded grants, if any, during IDA12 will, however, be very limited.
In relation to current IDA projects, it should be noted that because of their high grant element, IDA credits do not generally worsen borrowers debt service burdens at least in the shorter term, although they do not reduce them unless they are replacing non or less concessional financing.
Overall IDA assistance is positive, progressive and imaginative and is fully focused on meeting basic human needs and on raising the aspirations and potential of the poorest sections of humanity. It is not, however, sentimental. IDA assistance is now measured against the policy performance of the recipient countries. While neither IDA nor the World Bank group have any interest in taking control of the domestic policy-making process in recipient countries, the requirements of effective aid giving require that certain minimum standards are met in areas such as governance and the fight against corruption. To ignore these realities is to risk wasting resources which could be used to achieve real results in countries which are making serious efforts to improve their institutional capacity. Good governance is critical to sustainable, broad-based economic development and improvements in human well-being. Poor governance, including corruption, undermines the efficient and equitable provision of public goods and services and blocks opportunities for the poor and weak to benefit from the development process.
The key components of good governance are: good public sector management with accountable public institutions that give priority to productive social programmes and to policies designed to reduce poverty and support sound fiscal choices; transparent policy making and implementation; clarity, stability, and fairness in the rule of law; and openness to the participation of affected citizens in the design and implementation of policies and programmes that impact on them.
IDA has strengthened its analytical framework to assess the quality of overall policy performance in recipient countries, including governance factors, that will be applied in the allocation of IDA12 resources. Where weak governance is a big development constraint, the issue will be treated thoroughly in the country assistance strategy. IDA is fully prepared and equipped to render such assistance as is necessary to Governments which make serious efforts to address these problems
Ireland's membership of IDA was authorised by the International Development Association Act, 1960. Our contributions to the various replenishments have each been authorised by amendments to that Act. This Bill will enable us to make our contribution to IDA12. I, therefore, recommend the Bill for the approval of the House.