A forest fund for the future

Overseas development aid has often suffered from a bad reputation, and I have played a role in burnishing that bad reputation. Back in 2010, working for Human Rights Watch, I researched and wrote a report called ‘Development without Freedom’ that detailed the politicisation of development aid by the government of Ethiopia. Food aid was distributed only to party members, all civil servants including teachers were required to join, and vote for, the ruling party, admission to university required not only grades but party loyalty.

Faced with hard evidence and tough questions, what did the major aid donors, led by the UK, do? They denied the problem and continued pumping money into Meles Zenawi’s repressive regime, arguing that the goal of reducing poverty trumped concerns about human rights. Only after we had supported a World Bank investigation that revealed major flaws in the monitoring, evaluation and oversight of the programmes, and the threat of judicial review after Ethiopian refugees sued the British government, was the offending aid programme (Britain’s largest at the time) finally suspended.

What followed is curious.

Protests demanding democratic reform spread, slowly at first then gathering pace across the country. Reformists gained the upper hand within the ruling party leading to mass releases of political prisoners and ultimately the election of Abiy Ahmed as Prime Minister in 2018. Ahmed negotiated peace with Eritrea and won the Nobel Peace Prize in 2019.

Ethiopia is a useful example of what can happen when repressive regimes learn how to deliver the statistics (numbers of people lifted out of poverty or numbers of children sent to school) craved by domestic civil servants eager to justify the effectiveness of their overseas aid budgets. Tasking staff shrunk by austerity to deliver ring-fenced budgets without the necessary rigour and attention encourages departments to “shovel cash out the door.”

The flip side is that when those statistics are shown to be fraudulent or their pursuit causes contradictions in the giving country’s own policies (DFID has human rights guidelines that it was suspected of violating in Ethiopia’s case), public support for aid is further undermined. Then the scramble for success stories resumes as repressive aid clients tumble. Rwanda’s Paul Kagame is a master of playing the aid game whilst getting away, literally, with murdering his opponents.

The 0.7 per cent of GDP target for overseas aid is not only morally right but it is a strategic investment in a happier world. But avoiding bad press and scrutiny of DFID’s aid programmes is not the way to make that investment effective.

A sensible way forward to insulate the 0.7 per cent contribution from domestic political pressure and from expenditure cycles tied to the financial year-end, is to set up a trust fund. This could be a kind of sovereign wealth fund wholly owned by the UK that would then make investments or expenditures to countries or other multilateral funds according to democratically agreed criteria and benchmarks but, crucially, on its own timetable: without fear that departmental budgets would be appropriated elsewhere or returned to the Treasury.

When it was established in 1997, DFID was intended to de-politicise aid and take it out of the hands of the Foreign Office where the former Overseas Development Agency was often used as a tool of foreign policy. What happened instead with Tony Blair’s privileging of Africa as a “scar on the conscience of the world” was that poverty reduction (or the appearance of it) became the national interest, with all the attendant politicisation that that entails.

A new UK trust fund would be the natural way to head off incipient populist criticism of the 0.7 per cent target and properly accomplish the laudable aim of DFID’s founders: to take aid out of the realm of politics and to solely focus on delivery.

It could begin with a fresh mandate acknowledging that the national interest and the global interest are entwined as never before in our era of ecological and climate emergency. A nimble, substantial, independent fund with a climate justice mandate could make game-changing investments and drive reform. It could operate in capital markets as well as within public spending regimes. It could offset the emissions of developing country exports, for example, work as an angel investor or underwrite natural climate solutions, (like buying up rainforests) in ways that would be impossible for a national aid agency.

It could be like Norway’s sovereign wealth fund, without the obligation to deliver a return; fully accountable to its charter and subject to scrutiny by parliament and the NAO. Not a mere hedge fund but a forest fund, one might say, on a global scale.

Read the rest of the pieces from our special Future of Aid report here