Accountability

FCDO launch offers opportunity for more coherent policy but depends on better data

justin@developmentmonitor.org.uk Accountability, FCDO, Highlights, Transparency

The launch of the Foreign, Commonwealth & Development Office (FCDO) “charged with using all the tools of British influence” creates an opportunity for more coherent policies towards developing countries, but realising this opportunity depends on better data collection and use across government .

Bond, the UK network for organisations working in international development, has outlined 15 principles for the new department to support greater policy coherence. UK tax payers would also benefit from more coherent policies, as effective non-aid policies can be worth much more than aid spending. 

Just look at Nigeria – the UK spent an average of £240m on aid a year over the last 10 years, but improvements in non-aid policies could have been worth much more. For example:

  • Two corrupt payments out of Nigeria facilitated by a UK bank, alerted to but not acted on, by the National Crime Agency’s predecessor, were worth 2 years of aid spending.
  • Nigeria has asked for the return of stolen assets – it suspected at least $37 billion was routed through the UK in 2014-15. Returning a fraction of this would be worth many years aid spending. 
  • Cleaning up oil spills by the Nigerian subsidiary of UK-listed Shell has been estimated to cost at least $1bn, around 3 years’ worth of aid spending. The UK promotes awareness of voluntary guidelines on responsible business conduct but campaign groups argue that stronger rules are needed.

A huge range of UK policies affect developing countries beyond aid spending. They include anti-money laundering controls, return of stolen assets, investment and trade promotion, arms exports, trade agreements, tax treaties, policies on the environmental and human rights performance of UK multinationals, and transparency requirements for natural resource payments.

The UK has taken a leading role on several of these (e.g. transparency of payments for natural resources; tackling secret company ownership, modern slavery) and has world renown expertise in international development. But there is much more that could be done. The creation of new department with a new remit and approach is an opportunity to do so. 

A first step towards more coherent policy is to collect and publish relevant data: data that makes it possible to review and improve the performance of departments and public bodies with regard to the impact of their policies on developing countries, going beyond aid spending.

The good news is that there are a range of existing data sets, which are sufficiently complete and disaggregated to country level, that can already be drawn upon. These include trade in goods and services, CDC investments, business supported by UK export finance, and arms export licences. More data is emerging from transparency obligations imposed on UK companies, notably the publication of extractives payments to governments for natural resources.

However, in many other other areas data is published without a country level disaggregation, datasets are incomplete, or data is not collected at all. For example, the UK’s work on returning stolen assets and anti-money laundering controls aren’t reported by country, making it hard to know how much anti-corruption efforts are benefiting developing countries. UK direct investment data is missing for around half of African countries, making it hard to measure the effectiveness of African investment promotion activities. A small unit in DIT promotes the OECD’s guidelines for responsible business conduct to UK multinational enterprises, including those operating in developing countries, but awareness and implementation of the guidelines isn’t measured, making it hard to assess the effectiveness of its work.

Measuring and reviewing government performance using relevant data is already widely recognised as best practice, including by the NAO and Institute for Government, and necessary for government accountability. In practice the challenges of collecting and disaggregating data will vary considerably. In some cases, data already exists but needs collating and publishing. In others the design of new metrics will need to be carefully considered and systems upgraded. In addition, responsibility for collecting data lies across multiple departments and agencies. 

But improvements are achievable. Measuring the UK’s environmental performance is also complex with responsibilities across Whitehall, but government has defined and has started reporting on a wide ranging set of environmental metrics. Given the global challenges now being faced, the effort to collect better data on the UK’s international interactions must surely be worth it.

Photo by Foreign and Commonwealth Office – Flickr, CC BY 2.0

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What more could UK government tell us about its impact on developing countries beyond aid spending?

justin@developmentmonitor.org.uk 1 Comment Accountability, Highlights

The Department for International Development (DFID) publishes an Annual Report which sets out what it has achieved over the year, providing statistics on everything from the number of people reached with humanitarian assistance, lives saved through immunisation and people supported to access clean water. But the UK has a much wider impact on developing countries than its aid spending, and is committed to a range of other policies that affect those countries.

Under the International Development (Reporting and Transparency) Act 2006) DFID needs to report the effect of these policies. It should report the ‘“effects of policies… pursued by government departments on sustainable development … and reduction of poverty”. Whatever the policy priorities of a new government, reporting this information is important to support coherent policy making. DFID’s annual reports do provide some information but could tell us more about the progress being made on policies beyond aid.

Four policies which could be worth billions of pounds to developing countries

To illustrate what DFID’s report could say more about, consider the impact of policies beyond aid spending on one country, Nigeria.

Nigeria is Africa’s biggest country by population and its second largest economy. Despite significant natural resources, about 94 million people – roughly half Nigeria’s population – live in extreme poverty, according to estimates from the World Data Lab’s Poverty Clock. DFID recognises that Nigeria faces a number of challenges to its future growth and development and says that the UK is focused on helping Nigeria overcome its challenges. 

The examples below illustrate the relevance of policies beyond aid spending for Nigeria:

  • Anti-money laundering. Over $800 million of Nigerian government funds were transferred by JP Morgan from a London account to a company controlled by a former Nigerian oil minister convicted of money laundering.
  • Stolen asset recovery. Nigeria’s anti-corruption chief has said they suspect at least $37bn (£25.6bn) in stolen money from Nigeria was routed through London during 2014-2015.
  • Promoting responsible environmental management by UK based multinationals. Oil spills in the Niger Delta by the Nigerian subsidiary of UK-list Shell have had a disastrous environmental impact, with clean-up costs of at least $1bn, according a UN report.
  • Reducing migrant remittance costs. Reducing the average cost of sending remittances from the UK to Nigeria, to the SDG target of 3% could save nearly £100m a year.

These examples suggests that, in total, implementation of effective policies (beyond aid spending) could be worth many billions of pounds to developing countries.

Anti-money laundering 

DFID’s report sets out the actions it is taking to deliver its UK Anti-Corruption Strategy 2017 commitments, including “supporting the National Crime Agency (NCA) and Crown Prosecution Service to reduce incentives for corrupt individuals in developing countries to use the UK to launder money or for UK business and UK nationals to use bribes in developing countries.” 

Why UK policies are important for Nigeria

In its country profile on Nigeria, DFID recognises that the Nigerian government struggles with corruption and says it will support it in tackling corruption.

Corrupt money is sometimes laundered via the UK, so one way the UK can help tackle corruption is in ensuring it has an effective anti-money laundering regime.

For example, documents filed in a major corruption case show that JP Morgan Chase Bank transferred over $800 million of Nigerian government funds from a London account to a company controlled by a former Nigerian oil minister who had been convicted of money laundering. The bank says that it ‘received consent’ from the Serious Organised Crime Agency (SOCA, now part of NCA) before making the payments.

What more could DFID’s report tell us

The transfers in the above case were made in 2011 and 2013. Then in 2017 the Government committed to reform the Suspicious Activity Reports (SARs) regime, which banks and other organisations use to alert the NCA of potential cases of money laundering. A group of anti-corruption NGOs have called for greater transparency and accountability on the impact of modifications to the SARs regime.  

So, as well as telling us that DFID is supporting the National Crime Agency (NCA) and Crown Prosecution Service, the report could also tell us what progress has been made in improving the UK’s anti money laundering regime and reducing incentives for corrupt individuals in developing countries to use the UK to launder money. 

Stolen asset recovery 

In relation to assets stolen from developing countries, DFID says “From 2006 to the end of 2018, £783.2 million of assets were restrained, confiscated or returned to developing countries, including £57.3 million returned to the Government of Nigeria through our support”.

Why UK policies are important for Nigeria

At the 2016 anti-corruption corruption conference hosted in London, Nigeria’s president called for the return of assetswhich had been taken out of Nigeria via London. His anti-corruption chief said they suspected at least $37bn (£25.6bn) in stolen money from Nigeria was routed through London during 2014-2015.  Following the summit, in September 2016, the UK signed an agreement with Nigeria on returning stolen criminal assets to Nigeria.

The World Bank’s Stolen Asset recovery initiative estimated in 2007 that developing countries lose between $20 billion and $40 billion each year to bribery, embezzlement, and other corrupt practices.

What more could DFID’s report tell us

The figures quoted by DFID are total values for a 12 year period. The report could tell us what has been achieved over the last year and how significant these amounts are compared to estimates of the overall level of stolen criminal assets from developing countries. For example, it could clarify how much has been returned to Nigeria since the September 2016 agreement on asset recovery. 

A number of anti-corruption NGOs called for improved transparency and accountability in the asset recovery process in their 2018 report on UK compliance with the UN Convention against Corruption. The UK co-hosted Global Forum on Asset Recovery (GFAR) has established principles on transparency and accountability in asset return process, including that ‘information on the transfer and administration of returned assets should be made public and be available to the people in both the transferring and receiving country.’

Data on asset recovery cases is available on the Stolen Asset Recovery Initiative database. As at November 2019, the most recent UK asset recovery on this database was started in 2014.

Promoting responsible environmental management by UK based multinationals

DFID’s report tells us about many environmental programmes that the government invested in to mitigate and adapt to climate change and prevent environmental degradation. 

For example, DFID and Defra pledged up to £250 million to the Global Environment Facility (GEF), a mechanism for developing countries to address environmental challenges such as biodiversity loss, land degradation, international waters and chemicals and waste. 

Why UK policies are important for Nigeria

Oil spills by the Nigerian subsidiary of UK-listed Shell have had a disastrous environmental impact on the Niger Delta, according a United Nations report. The UN estimated that cleaning up the area will cost at least $1bn and take up to 30 years.  Shell’s subsidiary, which produces 39% of the country’s oil, has accepted that oil spills in 2008 resulted from the failure of old and poorly maintained pipelines. Other spills continue which Shell says are mostly caused by sabotage. Communities affected by oil spills have for years sought legal redress in UK courts. One community received an out of court settlement of £55m in 2015. Shell has sought to block another claim.

What more could DFID’s report tell us

DFID’s report could tell us about the effect of current policies towards companies listed and headquartered in the UK whose operations risk impacting the environment in developing countries.

For example, the report could tell us about the effectiveness of the UK’s ‘National Contact Point’ for the OECD’s guidelines for multinational enterprises. This aims to raise awareness of voluntary guidelines for responsible business conduct, which include environmental and human rights issues. Complaints can be lodged against businesses for breaching the guidelines and investigated by a ‘national contact point’ within the Department for International Trade, which can result in non-binding recommendations for the company.

The effectiveness of voluntary guidelines has been challenged by a group of civil society organisations who are calling for a law requiring UK companies to take action to prevent environmental harm, human rights and other abuses in their global operations and supply chains.

Reducing migrant remittance costs 

Remittances from migrants in the UK to Africa have been conservatively estimated at £4.1 billion in 2015, similar to the value of UK aid to Africa. However, the high costs of sending money to developing countries remains a challenge and the UK has committed to reduce the cost of sending remittances. The Sustainable Development Goals (SDGs) have a target (10c) to the reduce transaction costs for migrant remittances to less than 3% by 2030 and to eliminate remittance corridors with costs higher than 5%. As at September 2019, the global average for remittance costs is around 7%.

DFID last provided an update on remittance costs in its 2016/17 annual report. That report stated the UK’s commitment to reduce costs and actions taken during the year, although it did not provide information on the level of remittance costs between the UK and developing countries. DFID’s 2018/19 annual report did not provide information on remittance transaction costs.

Why UK policies are important for Nigeria

World Bank estimates show that Nigeria was the biggest destination for UK remittances, worth around £2.9bn in 2018, and ten times larger than UK bilateral aid to Nigeria (£297m). The UK was the second largest source of remittances to Nigeria, after the USA. In 2018, the average cost of sending remittances from the UK to Nigeria was 6.3%, so reducing costs to the SDG target of 3% could save around £95m a year.

What more could DFID’s report tell us

The report could provide an update on implementation of The UK National Remittance Plan and the impact of this, specifically changes in the cost of sending remittances form the UK to developing countries, including major destinations like Nigeria.

DFID has provided funding for the World Bank’s Remittance Prices Worldwide database to include additional UK remittance corridors, and data from this could be used to show what progress is being made on reducing remittance costs. 

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