SECTION 3 - Consistency of Policies

The Importance of Consistency
The Environment
Trade, Agriculture and Investment
Promoting Political Stability, Social Cohesion and Responding Effectively to Conflict
Promoting Economic and Financial Stability

We shall

· ensure that the full range of Government policies affecting developing countries, including environment, trade, investment and agricultural policies, takes account of our sustainable development objective

· give particular attention to human rights, transparent and accountable government and core labour standards, building on the Government’s ethical approach to international relations

· use our resources proactively to promote political stability and social cohesion and to respond effectively to conflict

· encourage financial stability and the reduction of the external debt of developing countries to sustainable levels

The Importance of Consistency

3.1 Development assistance is an important part of the way in which we can help tackle poverty. But it is not by any means the only aspect of our relationship with developing countries. Both nationally and internationally, there is a complex web of environmental, trade, investment, agricultural, political, defence, security and financial issues which affect relations with developing countries. These are driven by a range of policy considerations, all of which affect the development relationship. To have a real impact on poverty we must ensure the maximum consistency between all these different policies as they affect the developing world. Otherwise, there is a risk that they will undermine development, and development assistance will only partly make up for the damage done.

3.2 In this section we set out how the Government is approaching four vital sets of issues where domestic, foreign and development policies need to be applied in a consistent way if the world’s poor are to benefit. These are:

· the environment
· trade, agriculture and investment
· promoting political stability, social cohesion and responding effectively to conflict
· promoting economic and financial stability

The Environment

3.3 Conservation and sustainable management of the environment is a cornerstone of our approach to international development. Perhaps nowhere is the need for consistency greater. Nor is there a clearer example of a mutual, global interest. It reminds us that development is not a rich country/poor country issue, and that it matters to all of us. We need to tackle environment problems at local, national and international levels.

3.4 At the national level, there is a strong link between poverty and environmental degradation. Poor people are often the main direct human casualties of environmental degradation and mismanagement. In rural areas, competition for access to resources, especially land, often squeezes poor people into marginal, low productivity lands, where they have no alternative but to over-exploit soils and forests. In towns and cities, poor people typically have to live and work where pollution is worst and the associated health hazards are highest.

3.5 Lasting eradication of poverty requires environmentally sustainable solutions. Consistent policies and better management are the key. Natural resources must be managed sustainably or else continued economic growth will not be possible. But some use must be accepted or development will not happen. We will help developing countries integrate environmental concerns into their decision-making by supporting their efforts to prepare plans and policies for sound management of their natural resources and national strategies for sustainable development.

3.6 Rural communities are still the majority in most developing countries. We will work to promote sustainable agriculture which tackles hunger and poverty while protecting the environment. We will focus on small producers and on productive systems which maintain or improve the productivity of land and water resources. This should promote both poverty reduction and environmental sustainability. Agricultural trade policies have an impact too and we will be proposing reforms that support our international development aims. Our new approach to the problem of deforestation will support work to improve management of forest resources in ways that lead to a range of benefits to poor communities.

3.7 By the beginning of the next century, more than half of the world’s population will for the first time in history be living in towns and cities. For most poor people, urban environment problems - such as air pollution, poor sanitation and contaminated water - will be a major concern. In many cases, the infrastructure to tackle these problems either does not exist or ignores their needs. We will promote urban development policies and programmes that focus on improving employment, shelter, education, health, water, sanitation and energy provisions for poor people.

3.8 At the international level, there is a self-evident common interest in addressing global environmental issues in a coherent and coordinated way. The poorest countries can and do suffer the consequences of the domestic environmental policies of the richer countries. The UK believes that the richer countries should lead on taking domestic action to combat those consequences, and is acting to meet its commitments. At the same time, the impact of developing country actions on the global environment is growing rapidly and their impact will be felt by developed as well as developing countries. An obvious example of the need for co-operation and coherence is climate change. Our approach in this area is set out in Panel 20 (see also Figure 11).

3.9 There is a range of other issues where we will work to develop coherent policies. We will use our approach to forests to press for comprehensive and coherent international arrangements to achieve sustainable forest management. We shall take a leading role in a programme of action to ensure optimal use and protection of freshwater resources. We shall support measures to combat land degradation and desertification. We will help developing countries meet their commitments to phase out ozone depleting substances. We shall also continue to help poor people in developing countries, often rich in species and habitats, but lacking resources, to manage and benefit from their biodiversity. Developing countries hold the bulk of the world’s wild animals and plants. Helping them to conserve such resources and gain income from them offers benefits both for the alleviation of poverty and the safeguarding of biodiversity.

3.10 Given the connections between development, the elimination of poverty and the environment, we shall play a significant role in the Commission on Sustainable Development. This will include promoting capacity building in developing countries and exchanging experience to achieve the important target that all countries should develop national strategies for sustainable development (see Panel 21). We shall also seek to play a full and influential role in the UN Centre for Human Settlements (Habitat) in supporting urban development policies that contribute towards the reduction of poverty and sustainable development objectives.

PANEL 20

CLIMATE CHANGE Climate change is perhaps the most serious global environmental problem we face. The Intergovernmental Panel on Climate Change advises that, if greenhouse gas emissions continue to rise, by the year 2100 average global temperatures will have risen by between 1 and 3.5 degrees centigrade. This will cause sea levels to rise perhaps up to a metre over the same period, trebling the number of people at risk from flooding - from 46 million now to 118 million. Important decisions will be taken at the Climate Change Conference in Kyoto in December 1997 on targets for reductions in greenhouse emissions for the period after 2000. Climate change is likely to have a significant adverse effect on areas of the natural world and human society, affecting eco-systems, human health, water resources, agriculture and forestry. The impacts will be felt by all of us, but developing countries and some of the poorest within them could be hit particularly hard. The very future of many small island states will be threatened and low-lying areas such as Bangladesh will be particularly vulnerable. The Government recognises that climate change is a global problem and one which requires a global solution. Developed countries have been responsible for the majority of emissions to date and have a moral obligation to take the lead in reducing emissions. That is why the UK, which is one of the few OECD countries on course to meet the emission targets set so far, is in the forefront of those pressing for significant reductions in emissions to be agreed by developed countries at Kyoto. But the threat of climate change will only be solved through global action. The total greenhouse gas emissions of the developing world are likely to overtake those of developed countries in the next 20 to 30 years. Therefore whilst the UK Government, in accordance with the Berlin Mandate, does not believe that developing countries should take on emission targets in this round of negotiations at Kyoto, it does believe that future stages of the process will require an increasingly global effort in setting emission reduction and limitation targets. Obviously as developing countries increase their efforts to tackle climate change and limit emissions, they will require appropriate assistance to do so. As the Prime Minister said at the UN Special Session on Sustainable Development in June: ‘Industrialised countries must work with developing countries to help them combat climate change...and other global environmental challenges. We must live up to our side of the bargain and ensure that they have the resources to do this.’ Developing countries need energy. A major element of the UK’s approach will be to help key developing countries improve the efficient generation, distribution and management of energy, particularly by building national capacity. We will, where appropriate, promote and encourage the use of renewable energy resources. We will also help developing countries to build expertise in climate change research and observation.

3.11 The UK also recognises that there is a need to provide additional assistance at a global level. Such assistance enables developing countries to take actions which benefit the global environment but which could not be justified solely on the basis of their national sustainable development needs. The UK will therefore continue to provide substantial additional commitments in support of global environmental objectives through the Global Environment Facility and the Multilateral Fund for the Montreal Protocol (see Panel 22).

PANEL 21

NATIONAL STRATEGIES FOR SUSTAINABLE DEVELOPMENT The Earth Summit (1992) called for countries to incorporate environmental considerations into their development plans and build national strategies for sustainable development. At the United Nations General Assembly’s Special Session - Rio Plus Five (1997) - countries agreed to have them in place by 2002. We see these strategies as the main vehicle for integrating pro-poor economic growth with a social improvement and responsible approach to environmental management. National strategies for sustainable development must respond to the specific needs of the country and its people. Important principles in developing and implementing them include: · securing strong political commitment and local ownership for the process and effective host country coordination of external development assistance · strengthening national capacity to develop and implement the strategies, aiming for early implementation of promising initiatives which will bring tangible benefits quickly to poor people · ensuring the full participation of the communities concerned, particularly those who are often ignored such as women, indigenous people and poor farming and slum communities · making the most of win-win opportunities which reduce poverty, boost economic growth and conserve the environment, eg sustainable agriculture and urban health programmes · focusing on the better management of key environmental and natural assets central to the livelihoods of poor people, eg water, soil and land · using poverty assessments and strategic environmental assessments to develop pro-poor, pro-environment policies and programmes whether of an economy-wide or a sectoral nature · framing policies and fiscal incentives which encourage socially and environmentally responsible behaviour by the private sector and communities at large We will: · work internationally to develop common approaches, and mobilise support for, the development and implementation of national strategies for sustainable development · support partner countries in their efforts to develop and implement such strategies

FIGURE 11 - Carbon Dioxide Emissions Per Capita, by Income Group of Country, 1980 and 1992

Data refer to emissions from industrial processes

Source: World Development Indicators 1997.

Data refer to emissions from industrial processes

Source: World Development Indicators 1997.

PANEL 22

GLOBAL ENVIRONMENTAL ASSISTANCE Neglecting the global environment would eventually jeopardise all sustainable development objectives. The poor would be particularly vulnerable. Action to address national and regional environmental needs are insufficient to protect the global environment. As the Rio Earth Summit recognised, additional coordinated global action is required. Developing countries see the developed world as overwhelmingly responsible for current global environmental problems. They look to developed countries to take a lead in addressing concerns and in helping developing countries to do likewise. UK government departments work closely together to pursue these objectives domestically and internationally. Since 1990, the UK has made separate provision in its public expenditure framework to help developing countries tackle global environmental problems. These funds, managed by DFID, are separate from and additional to the development assistance budget. This separation is crucial as confirmation of the UK’s commitment to help developing countries meet global needs without diverting resources from our traditional bilateral and multilateral aid channels. The UK’s Global Environmental Assistance provision makes contributions to: · the Global Environment Facility, which helps developing countries and countries in transition meet the additional costs of global environmental actions in four focal areas: climate change; biodiversity; pollution of international waters; and (for countries with economies in transition) ozone depletion · the Multilateral Fund of the Montreal Protocol, which helps meet the costs to developing countries of their phase-out of ozone-depleting substances The UK is a strong supporter of these funds and will continue to be so. And we will be prominent in ensuring that the resources are efficiently and effectively deployed. The impact of developing countries on the global environment is growing rapidly. For example, developing country greenhouse gas emissions will overtake those of developed countries in 25-30 years. DFID will work in partnership with developing countries on integrating environmental objectives in their sustainable development strategies and, where appropriate, provide support through our bilateral programme.

FIGURE 12 - Commercial Energy Use Per Capita, by Income Group of Country, 1980 and 1994

Commercial energy use refers to the use of oil, natural gas and solid fuels, but excludes the use of firewood and charcoal.

Source: World Development Indicators 1997.

Commercial energy use refers to the use of oil, natural gas and solid fuels, but excludes the use of firewood and charcoal.

Source: World Development Indicators 1997.

Trade, Agriculture and Investment

Introduction

3.13 Trade and investment are crucial to poverty elimination. They bring resources that can help generate the growth needed to establish sustainable livelihoods. We particularly need to work to ensure that the benefits which follow from the fall of barriers to international trade and investment reach the least developed countries, and the poorest people, and lead to sustainable development. This means paying increased attention to issues such as labour, environmental and health standards, and helping developing countries build their own capacity to take advantage of globalisation.

3.14 For these reasons, trade and investment policies form a key part of the Government’s approach to development. The time is right for progress, with important changes either in train or in prospect both within the EU and internationally. We plan to play a leading role in helping to shape these changes, working within the EU, within the multilateral institutions, with other governments both in developed and developing countries, and with the private sector.

Trade Policy

3.15 The Government supports an open, fair and sustainable multilateral trading system - from which all countries can benefit. The World Trade Organization (WTO) provides the rule-based framework which underpins the system. We will encourage and assist developing countries to become more fully integrated into the multilateral system and to participate in the WTO (see Figure 13). We want to support their efforts to reduce their trade barriers, taking account of the time needed for their economies to adjust.

Improving Market Access

3.16 We will work within the EU and the WTO for increased multilateral liberalisation of trade in goods and services, and the continued dismantling of tariff and non-tariff barriers worldwide. A particularly important sector for many developing countries is textiles, where we will press for adherence to the agreed timetable for the dismantling of quotas under the multi-fibre agreement. For the future we are committed to negotiate further comprehensive trade liberalisation, in particular in the agriculture and services sectors.

3.17 Dismantling trade barriers takes time. In the interim we will continue to work for the best possible access to EU markets for developing countries, in particular for those countries that need this most to compete on world markets.

· We will press for the elimination of tariffs on imports from the least developed countries, and for eventual agreement to eliminate tariffs multilaterally within a WTO scheme.

· We believe that the current Lomé and Generalised System of Preference (GSP) terms should be brought into closer alignment by seeking ways to level up preferences and by extending product coverage within GSP to include all industrial goods and a wider range of agricultural goods. We will focus in particular on sectors likely to be of benefit to poor countries and poor producers.

· We believe that any bilateral and regional free trade agreements should be structured to promote economic development and be consistent with the multilateral trading system.

Source: World Development Report 1997.

3.19 WTO rules provide for antidumping, anti-subsidy and safeguard measures. Such measures are for use in exceptional circumstances and not as a means of protecting business from legitimate competition. We will work to ensure that they are not used as a form of covert protectionism to deprive developing countries of their comparative advantage.

Improving Trade Procedures

3.20 Complex and diverse trade procedures (such as export documentation and customs systems) can represent a significant barrier, particularly for the poorest countries and the smallest firms. The United Nations Conference on Trade and Development (UNCTAD) has estimated that the cost of such procedures could amount to as much as 10 per cent in value of trade in goods and services. We will make it a priority to work for a multilateral agreement to simplify such procedures.

The Reform of Agricultural Trade

3.21 Agriculture is a key sector for many developing countries. International trade in agricultural products has, however, been distorted by agriculture support policies throughout the world. A combination of domestic price support, import protection and export subsidies, in a variety of countries, has undermined the ability of many developing countries to compete successfully in a sector where they have natural comparative advantages.

3.22 Agricultural trade liberalisation will have major benefits for developing countries. The Government welcomes the important first steps that were taken in the Uruguay Round, but is acutely aware that there is a very long way to go, both in Europe and more widely.

CAP and Fisheries Reform in the EU

3.23 The Government is committed to fundamental reform of the Common Agricultural Policy (CAP). This will bring substantial benefits to EU consumers and taxpayers. The Government will make full use of the opportunities which this presents over the medium term to benefit developing countries.

3.24 The European Commission’s proposed Agenda 2000 reforms are a necessary step towards further and more extensive reform, including significant improvements in access to the EU market. This is where the major medium and long-term development benefits will be. In the short term, the current proposals have some potential negative effects for particular developing countries (which export agricultural products to the high price EU market under special arrangements). The Government is committed to working with the Commission and other Member States to consider how to address these effects.

3.25 The EU currently has 16 fisheries agreements with developing countries. The Government aims to ensure that fisheries agreements provide value for money, promote sustainable fishing and are coherent with UK and EU development policies.

Multilateral Liberalisation

3.26 Multilateral liberalisation of trade in agriculture, including increased access to markets in all developed countries, and the phasing out of export subsidies, has huge potential benefits for developing countries. The prospects are promising, and indeed pressure for trade liberalisation from within the WTO has been one of the key factors which has made reform of the CAP increasingly possible. As part of the Uruguay Round, it was agreed that negotiations on further agriculture trade liberalisation would start at the turn of the century. The Government sees this as a major opportunity and is committed to achieving substantial further liberalisation in these negotiations.

Investment

3.27 Foreign direct investment can bring a range of benefits to developing countries, including employment, exports, new skills and technology. Portfolio flows can provide resources for local companies and deepen domestic capital markets. However, whilst private capital flows have increased substantially, they are heavily concentrated in a small number of the most advanced developing countries (see Figure 14). The least developed countries attract little foreign investment, and therefore continue to depend heavily on official development assistance.

3.28 We believe it is in the interests of developing and developed countries alike to create conditions which will help attract beneficial private investment to developing countries. This requires the right domestic policies and conditions in these countries, including political stability, transparent and accountable government and the prevention of corruption. These are crucial in order to attract and retain both foreign and domestic investment. We will encourage and assist developing countries to put in place such policies.

Multilateral Framework

3.29 In the Organisation for Economic Co-operation and Development (OECD) we are already in the process of negotiating an improved multilateral framework through the Multilateral Agreement on Investment (MAI), based on the principles of non-discrimination against foreign investors, open investment regimes and investor protection. The Government is working to ensure that the MAI fully reflects our commitment to core labour standards and that it prevents countries from lowering environmental standards to attract investment.

3.30 The Government will continue to participate actively in dialogue with developing countries about the MAI. In particular we will encourage those - mainly the more advanced - who have a particular interest to consider becoming parties to the Agreement. But we recognise that the MAI is not designed for the economic and institutional constraints of poorer developing countries. We are exploring how their needs can be taken into account. In parallel, we are playing a full part in WTO discussions, supported by analytical work in UNCTAD, exploring the links between trade and investment and the implications for development and economic growth. We will work towards the eventual establishment of a WTO agreement on investment. We support moves to make capital account liberalisation a specific purpose of the IMF and to give the Fund appropriate jurisdiction over capital movements.

FIGURE 14 - Total Not Resources Flows to Developing Countries 1988-1996

Source: External Debt Statistics 1985-1996, OECD, 1997

Competition Issues

3.32 In order to fully benefit from increased foreign investment, developing countries - like developed countries - need to have in place the right domestic policy framework to deal with a range of competition law and policy issues, such as monopolies, mergers and restrictive business practices. We will continue work within UNCTAD to help develop a model framework for national policies in these areas. We will consider how best to assist developing countries who want to strengthen their domestic regulatory framework before applying to join the MAI. And we will work with others to address these issues at the international level too, through the WTO Working Group on Trade and Competition.

Guarantees and Insurance

3.33 Guarantees and insurance are important mechanisms for encouraging private investment into developing countries. This is particularly important for infrastructure projects, where large sums of money need to be mobilised. The Overseas Investment Insurance Scheme of the British Export Credits Guarantee Department (ECGD) is increasingly utilised to help companies to invest overseas. We are considering whether this facility can be made more readily available to poor countries. We are also discussing with the World Bank Group how best to expand guarantee cover in developing countries - and particularly in poorer developing countries.

Intellectual Property

3.34 We are committed to rules on intellectual property rights which will facilitate the transfer of technology, and provide incentives for investment. We will pay particular attention to the impact of intellectual property rights on the interests of indigenous and local communities who depend on local biodiversity for their livelihoods and welfare. We will also work to ensure intellectual property rights promote the conservation of biodiversity. We will work with multilateral institutions, such as the World Intellectual Property Organization (WIPO), WTO and UNCTAD, to help developing countries restructure their intellectual property rights systems, and implement the WTO Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement, in order to support domestic investment and attract foreign investment.

Standards

3.35 Dismantling the barriers to international trade and investment is essential. But we also need to ensure that the benefits contribute to poverty elimination and sustainable development. Increasing attention is therefore being paid in international fora, in the business community and in consumer and development groups to the issue of standards.

Core Labour Standards

3.36 We are working for the world-wide observance of core labour standards for all workers, including those in the informal sector where female workers are concentrated. These are human rights and must not be misused for protectionist purposes to deprive developing countries of the opportunity to benefit from their comparative advantages.

· In the UK we are supporting collaboration between business and the voluntary sector in promoting ethical business, including the development of codes of conduct and ways of monitoring and verifying these codes.

· In developing countries, we shall look at ways of supporting local capacity to develop and monitor voluntary codes of conduct including assistance to Ministries of Labour, trades unions, NGOs and employers’ associations.

· At international level, we shall support the efforts of the International Labour Organization (ILO) to promote internationally recognised core labour standards. We shall seek to strengthen the ILO’s ability to make progress in eliminating exploitative and abusive practices throughout the world by increasing our support to its technical co-operation programmes, such as the International Programme on the Elimination of Child Labour, and by using its supervisory activities to encourage adherence to human rights in the workplace. We are active participants in the efforts of the international community to eradicate speedily all intolerable forms of child labour and shall do our best to ensure that the new ILO Convention designed to tackle this problem helps to stop the worst abuses. We shall also support the development of the ILO programme More and Better Jobs for Women.

· We shall promote a human rights based approach to labour issues in our support to multilateral organisations, including the European Community and the World Bank. We are supporting the use of positive incentives in the EU Generalised System of Preferences to link enhanced market access terms to adherence to these standards. We shall press for the EU to reaffirm at the WTO Ministerial conference in May 1998 its commitment to support the ILO’s work in promoting labour standards and to have this reflected in any Declaration. We shall also press for systematic reporting by the ILO and WTO Secretariats on their collaboration in this area.

3.37 Products which use natural resources sustainably can meet the growing wish of British and other consumers to minimise the damage that our consumption does to the environment and can offer sustainable livelihoods to some of the world’s poorest people. The Government will work with producers and importers to increase trade in sustainably produced products and services from developing countries, including by supporting voluntary certification and labelling.

3.38 Trade rules should not be used to impose unfair standards on developing countries or to discriminate unfairly against their exports. We will work to ensure that the interests of the environment are fairly reflected in the development of the global trading system. Most developing countries have signed the main Multilateral Environment Agreements. We will support their efforts to comply with those agreements and encourage others to join. In areas where clearer international standards are needed, we will support work to develop these.

3.39 The Government will work where appropriate with developing countries to support their efforts to raise their domestic environment standards. We will focus on this in order to help them meet the UN target of implementing national sustainable development strategies by 2005.

3.40 We shall strengthen the links between trade, environment and development as part of our review of our own Sustainable Development Strategy. We are also supporting work in the EU, WTO and UNCTAD on these issues.

Health Standards

3.41 We will do our best to ensure that the export and advertising of pharmaceutical products and other items such as tobacco and baby milk are conducted in a responsible way.

3.42 We are working with other governments towards a global ban on tobacco advertising. In the meantime we will support an international code of conduct for transnational companies advertising tobacco products, covering the content and exposure of children to advertising, and the use of health warnings.

3.43 We also support the World Health Organization’s (WHO) International Code of Marketing of Breast Milk Substitutes, which sets minimum standards for labelling, advertising and promotion of infant formulas and other baby foods. We will support efforts to defend the Code.

Standards of Business Conduct

3.44 Bribery and corruption divert resources from poverty elimination and development (see Panel 11). We are working with developing countries and at the multilateral level to develop and implement policies designed to raise standards in this area. These efforts are reinforced by companies which refuse to pay bribes in order to win business contracts, and we strongly support the OECD initiative to make the payment of bribes to foreign public officials in international commercial transactions a crime under national law. We will include anti-corruption clauses in all DFID contracts under our own development assistance programme, and we will work with partners in the Development Assistance Committee (DAC) of the OECD to include similar clauses in all contracts signed by DAC members. We will help partner governments to keep their own procurement procedures fair, transparent and up to date, and work to increase the professionalism of public sector purchasing.

Building Capacity

3.45 Dismantling barriers to international trade and investment will be of limited benefit if developing countries lack not just the supply but the human and institutional capacity to take advantage of new opportunities. We will support efforts to improve the multilateral coordination of technical assistance, and will also harness our own development assistance programme, in order to help developing countries build capacity:

· to manage the practical ‘nuts and bolts’ of the trade process, for instance customs procedures and trade regulations

· to improve their trade promotion efforts

· to participate fully in the WTO, and implement increasingly complex international obligations

· to meet international product standards

3.46 As old barriers come down, countries seeking to enter the market face new problems. The amount of information required to trade successfully in today’s global economy is daunting. Exporters need information about market opportunities, trade rules and procedures and product standards. Important work is being undertaken in this area by the International Trade Centre (ITC). We will support international efforts to find new ways of sharing knowledge and information, and assess whether there is a direct role we play ourselves in this area.

Institutions

3.47 Developing countries must be encouraged to participate fully in the WTO. Its provisions already recognise their interests and that they cannot always assume their obligations, for instance to open their own markets, as rapidly as developed countries. We support work in WTO and UNCTAD to enable member countries to adjust effectively to meet these obligations and take advantage of their rights and to enhance the understanding of countries in the process of accession. We also support work to analyse the impact of trade agreements and issues on the international trade agenda from a development perspective.

Promoting Political Stability, Social Cohesion and Responding Effectively to Conflict

3.48 The promotion of a peaceful and stable world is a key element of British international policy. Political stability both within and between states is a necessary pre-condition for the elimination of poverty. Half of the world’s low income countries are suffering, or have just emerged from, serious conflicts. Today there are some 28 major and more than 100 minor armed conflicts affecting some 70 countries. The nature of warfare has changed with a greater preponderance of intra-state conflict; civilians are now 10 times more likely than soldiers to be the victims of such conflicts.

3.49 Violent conflict generates social division, reverses economic progress, impedes sustainable development and frequently results in human rights violations. Large population movements triggered by conflict threaten the security and livelihood of whole regions. There are currently over 30 million refugees and persons displaced by violence who count amongst the poorest people in the world. The 10 poorest countries in the world are all hosting, or have generated, refugees. Some measures to address migration issues, which relate not only to refugees but also voluntary migrants, are set out at Panel 23.

3.50 Conflict prevention is therefore crucial to combat poverty and reduce suffering. Although tensions and disputes are inevitable in the process of development, problems arise when society cannot represent and manage its different interests in a constructive manner.

PANEL 23

INTERNATIONAL MIGRATION Migration is a long-standing phenomenon. It can be driven by, for example, disasters, conflict and the persecution of minorities, and economic factors. The pressures of a growing population combined with the fragile environments of many poor countries has increased migration as people leave their homelands - no longer able to gain a secure livelihood because of drought, soil erosion, desertification and other environmental problems. In 1990, 120 million people -or around two per cent of the world’s population - were living outside their country of origin. Developmental impact. Migration can have both positive and negative effects on development. Migrants may meet critical labour needs in the receiving country. Many send home remittances which are a very important source of foreign exchange for a number of countries. However, a brain drain may slow development in the sending country and the social fabric is weakened by family break-up. In the short term sudden disorderly large-scale migration flows - frequently the case for refugee movements - can make social and economic integration difficult, and can impact adversely on receiving countries. UK policy. Our objective is to help developing countries manage migration flows as beneficially as possible: · We will work through the UN and other international organisations and within the EU to pursue our objective · We will be active in the field of conflict prevention as well as providing humanitarian assistance · We will support broad-based economic growth, which will help to reduce migratory pressures · We will fund research into the impact of migration on development and the environment in order to refine our policy · We will not, however, target scarce resources directly at reducing voluntary migration, not least because there is no evidence to suggest that this is effective · We will seek to build on the skills and talents of migrants and other members of ethnic minorities within the UK to promote the development of their countries of origin

Understanding the causes of conflict, and helping build the will and capacity of state and civil society to resolve disputes non-violently will be central to our international policy. To achieve this, we shall deploy our diplomatic, development assistance and military instruments in a coherent and consistent manner to:

· spread the values of civil liberties and democracy, rule of law and good governance, and foster the growth of a vibrant and secure civil society

· strengthen social cohesion, promote mediation efforts and encourage the regeneration of societies recovering from conflict

· protect and promote the full enjoyment of all human rights

· help solve political and other problems before they cause conflict

· advocate measures to control the means of waging war

· provide humanitarian assistance for victims of conflict and persecution

· contribute to international peacekeeping

3.52 Preventive diplomacy will continue to be pursued bilaterally, and through membership of other international bodies. Within the European Union, we shall seek better linkage of foreign, security and development co-operation policies, and implement existing Council Conclusions on conflict prevention. In addition, we intend to develop stronger peacebuilding and conflict management roles for the Commonwealth, the Organization for Security and Cooperation in Europe (OSCE) and other regional organisations, and will support practical measures to build up such capabilities in other regions, particularly Africa. In peace time we can deploy the extensive experience of our own armed forces to promote mutual understanding and confidence, and to help other countries to develop democratically accountable armed forces. In times of crisis, early deployment of military forces can promote stability and thus stem or prevent conflict. We will continue to provide forces for operations in support of international order and humanitarian principles.

3.53 Our development co-operation effort in divided societies will be informed by the OECD Guidelines on Conflict, Peace and Development. We shall encourage the European Commission, UNDP and others to take a proactive approach to peace-building. In our bilateral programme, we shall seek to find alternative channels for mediation; we shall promote social cohesion and support bridges for peace which reach out to marginalised groups through access to political decision-making, social networks, economic resources and information. We shall seek to strengthen local capacities for peace-building in particular with women who are traditionally excluded from such efforts. Social exclusion, for whatever reason, creates an unstable environment in which the well-being of all may ultimately be threatened.

3.54 We shall continue generous provision for humanitarian assistance through UN and Red Cross agencies, NGOs and partner governments. Recognising the problems of diversion and manipulation of external assistance in conflict situations, such help will be based on carefully assessed needs. We shall seek agreement on a code of ethical conduct for organisations working in conflict areas. The protection and promotion of human rights and the observance of international humanitarian law will be integral to all of our programmes of humanitarian assistance. We shall actively work with the International Committee of the Red Cross, the UN High Commissioner for Refugees, the UN High Commissioner for Human Rights and other agencies to find better means of safeguarding humanitarian workers. We shall work to ensure that humanitarian issues are properly taken into account when considering international political and peacekeeping interventions. Seeking durable solutions to long-standing crises, including for refugee and displaced populations, will be a priority.

3.55 In seeking to limit the means for waging wars, we shall continue to be active in arms control negotiations. We support the proposed EU programme on curbing illicit trafficking in conventional arms. We shall complement our own moratorium on the use and bans on the import, export, transfer and manufacture of anti-personnel landmines with vigorous efforts to secure the widest possible, permanent global ban, and continued support for mine clearance programmes. We shall seek to discourage excessive military expenditure in developing countries by helping further to develop the OECD Agenda for Action, and encouraging the international financial institutions to focus on this issue in their policy dialogue with developing countries.

Promoting Economic and Financial Stability

3.56 Economic and financial stability depends crucially on political stability; but the same is true in reverse, and badly regulated financial systems, volatile capital flows, upheavals created by money -laundering or drugs trafficking and corruption can lead in their turn to political instability. Developing countries are particularly vulnerable to such instability, and it is important that there should be a well-managed and regulated set of international mechanisms to support beneficial regulation and stability and bear down on corruption. The international community has an important role in contributing to financial stability, for example, through surveillance by the IMF and work on banking supervision.

Debt Sustainability

3.57 While developing countries finance much of their investments from their own savings, nearly all need to import some of the necessary capital from abroad. While some of this may be in grant form or private investment, loans are also important. But money these countries borrow accumulates as debts and needs to be repaid.

3.58 Often this goes well. The capital is invested wisely, and the country follows beneficial and transparent economic policies. But sometimes a country over -borrows - a problem often made worse by lenders who do not make responsible creditworthiness assessments. Money may be wasted or spent unproductively, for example on excessive military spending. Or sometimes countries may, through no fault of their own, suffer a severe external shock such as a collapse in the price of its exports.

3.59 Countries may then have an unsustainable debt burden (see Figure 15). They may not be able to export and earn enough foreign currency to pay the debt service due each year. Some of the poorest countries now have to pay out over half their export earnings in external debt service, and may have to allocate far more to paying old foreign debts than to health and education (see Figure 16). And the overhang of unpayable foreign debts may discourage new investment and therefore growth, thus creating a long-term barrier to development.

3.60 Britain has long recognised the burden of excessive debts carried by some developing countries. In 1978, the UK started a policy of converting aid loans into grants to the poorest countries, benefiting over 30 countries so far and providing relief of some £1.2 billion. As part of the Mauritius Mandate (Panel 24) we announced that the UK was willing in principle to cancel the remaining aid debt due to the UK from lower income Commonwealth countries at a cost of up to £132 million. Relief will be provided to those countries which are committed to the international development targets and are following sound economic policies which benefit the poor, and which promote responsive and accountable government, encourage transparency and bear down on corruption. We will encourage other donors to follow our lead, and are prepared to extend the initiative to non-Commonwealth countries, in concert with other donors.

3.61 Of course the UK alone cannot deal with the problem. We must work with our partners and fellow creditors. The international community provides debt relief, linked to IMF programmes designed with the debtor country to support approved economic policies. Relief provides balance of payments support during an adjustment programme. Over the last decade the Paris Club of creditors has written off a substantial part of the debts of some poor countries. As part of this process the UK, like others, provides relief on export credit-related debts. Money owed to commercial banks is discussed in the London Club, which generally follows similar principles.

FIGURE 15 - External Debt as % of GNP, 1994

Source: Human Development Report 1997.

Source: World Development Indicators 1997.

Source: World Development Indicators 1997.

3.63 It has already been agreed that the first country to benefit under the HIPC Initiative will be Uganda, which is expected to receive debt relief from multilateral creditors as well as further relief from bilateral creditors in April 1998. A number of other countries will be considered before the end of 1997. As part of the Initiative, the UK will contribute to financing relief on Uganda’s debts to the African Development Bank, which is the only one of the regional development banks unable to support all its own contributions.

3.64 At the Denver summit of eight leading industrialised democracies (the G8) in June 1997, the Government supported further implementation of the HIPC Initiative and the expectation that additional countries would qualify in the months ahead. We also welcomed the news of a preliminary agreement between Russia and the Paris Club. It has since been confirmed that, prior to it joining the Paris Club as a creditor, Russia will write off a large proportion of its nominal claims on poor countries, greatly reducing the unsustainable debt overhang of some of them.

3.65 At the Commonwealth Finance Ministers’ meeting in September 1997, the Government proposed a new Commonwealth debt initiative - the Mauritius Mandate (see Panel 24) - where the UK sought support for an international commitment to deal with the problem of unsustainable debt once and for all.

Money Laundering and Drugs

3.66 Money laundering - the movement of criminally derived funds for the purpose of concealing their true source - is an international problem. It damages and distorts countries’ economies - producing unfair competition for legitimate businesses and handicapping governments’ ability to make proper economic judgements. In extreme cases, money laundering can corrupt the entire political and financial systems of a country. It is the poor that bear the burden of this inefficiency and waste.

3.67 There is a growing consensus about the need for effective anti-money laundering measures as a key element in any strategy to combat international crime. With our partners in the G7 and EU, we have given strong support to the work of the Financial Action Task Force (FATF), whose internationally accepted recommendations set out the legal and regulatory measures that countries should take to combat money laundering. We have also played a leading role in encouraging the establishment of regional task forces, modelled on the FATF itself, which should help all countries round the globe to design and implement comprehensive anti-money laundering strategies. In addition we are pressing the International Financial Institutions (IFIs) - the International Monetary Fund, the World Bank and regional development banks - to take account more explicitly of the need for all countries to have effective and efficient anti-money laundering controls in place. The IFIs also have a role in the provision of policy advice and technical assistance.

PANEL 24

A NEW APPROACH TO DEBT RELIEF At the Commonwealth Finance Ministers’ annual meeting in September 1997, the UK Government launched its Mauritius Mandate. This aims to ensure that, by the year 2000, all eligible poor countries have at least made a start on having their debts reduced to affordable levels. It also calls for faster implementation of the Heavily Indebted Poor Countries (HIPC) Debt Initiative. Specifically, the Government is seeking firm decisions by the Millenium on the amount and terms of relief for at least three quarters of the countries eligible under the Initiative. And those countries that have already established strong track records of economic reform should receive the maximum possible relief in a shorter time frame than the six years envisaged under the current rules of the Initiative. The Mandate also emphasises the need to persuade other government creditors to be prepared to write off, where necessary, all categories of bilateral debt (including that most recently incurred), for the international community to analyse whether any gaps exist in current mechanisms and for debtors to have a strong voice in debt negotiations. The UK will provide a lead by: · contributing around £6.5 million towards reducing Uganda’s debts to the African Development Bank · cancelling - at a cost of up to £132 million - aid debts still owed to the UK by those lower income Commonwealth countries which are committed to pro-poor and transparent policies · offering technical assistance in debt management to poor countries, particularly those in the Commonwealth · pledging, without condition, around £20 million to the IMF, to help it meet its share of the costs of implementing the HIPC Initiative · confining official credits for heavily indebted, poor countries to productive expenditure, for a two-year period, whilst we seek to negotiate an international agreement covering all poor countries In launching the Mandate, the Government called on creditors (ie other governments and international financial institutions) to follow the UK’s lead, and urged debtor countries to adopt and keep to the sound policies needed to achieve sustainable development

3.68 Measures to combat money laundering are an essential part of any global anti-drugs strategy. Coordinated action on drugs is a high priority for the Government nationally and internationally. The international illicit drugs trade - cultivation, trafficking and use - is detrimental to the sustainable economic and social development of many countries; and it is a threat to the social fabric of our own society, especially poor neighbourhoods.

3.69 The drugs problem and its contribution to poverty will only be successfully tackled through a wide-ranging strategy covering demand reduction, law enforcement, alternative development and crop eradication. The UK is one of the major donors to the United Nations Drug Control Programme through which we are able, with other donors, to fund a wide range of individual projects. The EU is also a major source of funds for drug-related assistance. We have used this to advantage in the Caribbean, where narco-corruption poses a particular threat to the stability and development of the smaller democracies.

3.70 Other sources of international cooperation and influence are the IFIs. In association with like-minded countries, and to the extent that their statutes permit, we are pressing these institutions to take into account borrowers’ money laundering policies and legislation when considering country programmes, and to seek opportunities to support drugs-related projects in priority countries.

3.71 The Government’s policy will be to focus more drugs assistance on key drug exporting countries or regions, taking account of the gravity of the situation, the extent of recipient country commitment to tackling the problems and the UK’s capacity to help. This can include law enforcement training, equipment, support for alternative development and demand reduction. The UK’s resources are limited and so must be tightly targeted and conditional on effective supporting policies on the part of recipient governments. In geographical terms, the bulk of UK drugs-related assistance (80 per cent) is directed at South East Asia and the heroin transit routes to Western Europe; and the cocaine route in Latin America and the Caribbean. Poverty is one of the root causes of the drugs problem in many developing countries. By tackling poverty and helping to develop legitimate livelihoods for poor people we can help to stem the international trade in drugs.