Chapter 2 The International Fund for Agricultural Development and the Bill
The International Fund for Agricultural Development
IFAD is a specialised agency of the UN which was established in 1974
following food crises in Africa in the 1970s and a subsequent 1974 World Food
Conference. The Conference concluded that:
… the causes of food insecurity and famine were not so much
failures in food production, but structural problems relating to poverty and to
the fact that the majority of the developing world’s poor populations are
concentrated in rural areas.
Consequently IFAD’s mission, as currently stated on its website, is ‘to
enable poor rural people to overcome poverty’:
Working with poor rural people, governments, donors, non-governmental organizations and many other partners, IFAD focuses on country-specific solutions, which
can involve increasing poor rural peoples’ access to financial services,
markets, technology, land and other natural resources.
Specifically, developing countries receive ‘highly concessional loans
IFAD has a total of 168 member states, including 133 developing
countries. These comprise:
- 50 from Africa;
- 51 from Europe, Asia
and the Pacific; and
- 32 from Latin
A list of IFAD members is provided in Appendix C.
Australia was a founding member of IFAD in 1997 and had provided A$50.3
million before it withdrew in 2004. Between 1997 and 2004 IFAD had provided ‘US$10
billion to finance projects with a total cost of approximately US$25 billion.’
In 2011, IFAD ‘provided US$998 million in grants and low interest loans to
support poverty reduction projects.’
AusAID advised that:
IFAD works in over 26 countries in the Asia-Pacific region.
At the end of 2011, IFAD had 240 ongoing programs and projects in 93 countries
and 1 territory across the globe. This included: 42 projects in Near East,
North Africa and Europe, 61 projects in Asia and the Pacific, 31 projects in
Latin America and the Caribbean, 54 projects in West and Central Africa and 52
projects in East and Southern Africa.
Reasons for withdrawal in 2004
Concerns about IFAD arose in the early 2000s and culminated in 2004 with
a Parliamentary inquiry by the Joint Standing Committee on Treaties into
whether Australia should withdraw from the fund. During evidence to that
inquiry, witnesses from AusAID provided a list of criticisms of IFAD. The Treaties
Committee recommended withdrawal, although a dissenting report disagreed.
The submission from the Foreign Affairs and Trade Portfolio agencies
(FATP) advised that the subsequent decision for Australia’s withdrawal from
IFAD in 2004 was because, at that time:
- IFAD was not
delivering cost effective and tangible returns;
- only a small
percentage of IFAD programs were located within Australia’s priority countries
of Southeast Asia and the Pacific (only 7 per cent to Southeast Asia and there
were no active projects in the Pacific); and
- IFAD did not have a
clear mandate or role—it delivered most of its assistance through other
multilateral agencies and did not focus its activities into rural development
Australia has been the only country to withdraw from IFAD.
New Zealand is a member of IFAD but is not a fund contributor—it stopped
contributing in 2003 because of budget constraints.
The effective date of withdrawal was July 2007 when Australia made its final
payment to IFAD under its treaty obligation.
The Amendment Bill
AusAID told the Committee that in 2008 it ‘seriously started
contemplating why we withdrew and what that meant to us in terms of our
investments in food security’;
In 2007–08, … there was a global food crisis that unhappily
coincided with an energy crisis—a fuel crisis—as well as the global financial
crisis. … [It] caused us to reassess quite significantly our rural development
and agriculture portfolio. As a consequence of that occurrence in 2007–08 we
have significantly increased expenditure on food security activities …
… we started to look at the comparative advantage of the
range of institutions that we work with in the food security space. So we were
happily engaged in the UN’s global food price crisis response fund. … We are a
substantial member of the World Food Programme … We are a core funder of the UN
Food and Agriculture Organisation. So we have a strong portfolio of
multilateral investment in food security. But it came to our attention at
around that time that IFAD was a significant gap in our portfolio. It does do
what those organisations cannot do. It has a specific mandate to focus on
small-holder farmers and on rural poverty, which is different to the other
organisations that I have mentioned.
A proposal to rejoin IFAD was subsequently made to AusAID senior
management at the end of 2010—this progressed to a review of IFAD in 2011.
In April 2011, AusAID released its report reviewing Australia’s
engagement with IFAD. The report included the conclusion that there was ‘a
strong business case for Australia to rejoin IFAD’ for a number of reasons,
- IFAD’s work
contributed to directly to MDG1 (reduction of poverty), MDG3 (improving gender
equity), and MDG7 (environmental protection);
- IFAD was widely seen
as effective, results focused and providing value for money in the increasingly
important rural development sector;
- there was ‘close
alignment between IFAD and Australia’s priorities for food security and rural
- IFAD offered ‘partnerships
in regions and sectors where Australia wishes to expand but lacks deep
technical or country knowledge and presence’;
- IFAD offered the ‘opportunity
for strong Australian influence and profile.’
AusAID in evidence stated that the decision to rejoin IFAD was, to its
knowledge, not influenced by Australia’s bid for a non-permanent seat on the UN
It provided further information in a supplementary submission:
AusAID has consulted the United Nations Security Council Task
Force within [DFAT]. The Task Force has advised that there was no relationship
between the UNSC campaign and the decision to rejoin IFAD at any point.
In February 2012, the Government announced at the 35th session of IFAD
Governing Council that Australia intended to rejoin IFAD. This would take
effect in February 2014.
For this to occur, legislation must be in place for Australia to legally
accede to the Agreement Establishing IFAD. The original domestic
legislation—the International Fund for Agricultural Development Act 1977—had
not been repealed despite Australia’s decision to withdraw from IFAD. The Bill
therefore is intended to amend the 1977 Act and allow Australia to legally
accede to the Agreement Establishing IFAD.
The amendments in the Bill are:
- amending the
definition of ‘Agreement’ (Section 3) to ensure the legislation refers to the
most recent version of the Agreement;
- repealing a section
(Section 4) stating that membership of IFAD is approved; and
- removing the Schedule
to the IFAD Act 1977 (as it refers to the original IFAD Agreement) and
replacing it with a web link to the most recent IFAD Agreement, which is
updated as the Agreement is amended.
Have the 2004 concerns been addressed?
Delivery of cost-effective and tangible returns
The FATP advised that IFAD was improving its cost effectiveness by:
- increasing in-country
presence and direct supervision;
- increased project
- increased focus on
Increased in-country presence and direct supervision
AusAID told the Committee that ‘at the end of 2011 IFAD had more than
doubled the number of projects it supervised directly compared with 2008.’
FATP advised that ‘delegating to officers and staff in country can increase the
cost effectiveness, by ensuring closer follow-up on project implementation.’
Increased project efficiency
FATP advised that the size of IFAD projects was increasing and that
while the majority of projects cost between US$10–US$15 million, there was an
increasing proportion of larger projects. AusAID told the
… with larger projects you have economies of scale and that
is certainly something that we are encouraging, to avoid what we call ‘fragmentation
of aid, too many small inefficient projects.
The value of IFAD’s loans and grants had also increased from 2008 to
2011 by ‘almost 70 per cent’ while administrative costs had only gradually
increased. The ratio of IFAD’s administrative budget compared to total loans
… has decreased from 15.9 per cent in 2008 to 11.7 per cent
in 2011. This is significantly better than the target of 13.5 per cent. When
external resources directly managed by IFAD are also taken into account, the
efficiency ratio is 9.5 per cent, in line with figures for other multilateral
AusAID acknowledged the finding of a review by the UK Department for
International Development (DFID) that commented that administration costs were
currently too high and project efficiency needed to improve, but added:
It is really a question of progressive reforms that need to
be implemented. We believe that tremendous inroads have been made in terms of
efficiency. The direction of travel is correct. We would like to be involved in
influencing reforms moving forward and the best way of doing that is to be on
the inside of this organisation. … we are not saying that we are completely satisfied
with IFAD’s performance. … you need to be on the inside to influence those
AusAID drew attention to IFAD’s management reforms, such as:
… how they deploy people, how they focus on results—and other
management reforms including procurement reforms and other things that come
Additional value arises from providing funds to IFAD because there is a
When introducing the Bill, the Parliamentary Secretary for Foreign
Affairs noted that IFAD was able to leverage the contributions it received,
commenting that ‘for every $1 contributed, IFAD mobilises another $6 for rural
Increased focus on results
The FATP noted that IFAD had strengthened its evaluation processes by
having an Independent Office of Evaluation which was structurally independent
of IFAD’s management. It reported directly to the IFAD Executive Board.
Assessment of IFAD projects had shown that there had been a consistent
improvement against project performance indicators ‘in every indicator between
the last two replenishment periods.’
The indicators were:
- rural poverty impact;
- innovation, replicate
the ability and scaling up;
- relevance; and
Results International Australia (RIA) also provided information on IFAD’s
effectiveness. It stated that independent evaluation of projects and programs
- The proportion of
projects rated as satisfactory in their impact on rural poverty had increased
from 48% in 2002 to 2004 to 86% in 2007 to 2009.
- The proportion of
projects rated as satisfactory in their sustainability (providing continued
benefits after closure of the project) increased from 40% in 2002 to 2004 to
65% in 2007 to 2009.
The FATP added that IFAD was also prepared to communicate information to
IFAD now has an active program of knowledge management and
dissemination to external audiences. IFAD has commissioned and published policy
relevant research, often in partnership with other organisations, on topics
such as land grabbing; remittances in rural areas; weather index insurance;
indigenous peoples; community participation; and rural youth.
RIA commented on IFAD’s improved governance arrangements:
Since 2005, IFAD has also implemented an anticorruption
strategy, which gives its Office of Audit and Oversight unrestricted ability to
investigate complaints and allegations, and also empowers a Sanctions Committee
to decide appropriate action where a case of fraud is substantiated. … IFAD
also established an Ethics Office in 2011 to investigate and provide guidance
on ethical issues for IFAD staff.
During the public hearing, the Committee drew attention to a 2011 IFAD
report on its investigation and anticorruption activities. The report commented
that there was a:
… caseload of 59 active cases in 2001 (compared to 49 active
cases in 2010 and 33 active cases in 2009. Seventeen cases were completed in
2011 of which, five were closed as unsubstantiated or underfunded, five were
transferred to IFAD Divisions, and one was substantiated.
The report continued that a backlog of cases had prompted the engagement
of several consultants and the secondment of an investigator from the World
Bank as well as the creation of an additional investigation officer position.
As a result, the backlog was significantly reduced in early 2012 and that IFAD’s
Office of Audit and Oversight was ‘seeking additional resources as necessary to
ensure a prompt response to allegations in 2012.’
The report noted that of the 59 active cases, 16 were internal, 40 were
external, and three were a combination.
The Committee also drew attention to the emoluments of IFAD’s incoming
president which included a salary on par with the head of the much larger Food
and Agriculture Organisation plus allowances and generous housing costs.
Yes, we are aware of those allegations, and we think it was
an error of judgement by the incoming president. He has since corrected his
behaviour and moved into a less extravagant residence, and he is behaving more
Location of IFAD programs
The Committee questioned whether it was better for Australia to
administer its aid projects rather than relying on multilateral agencies.
AusAID could than select a project, select the players, badge the project and
effectively monitor it with presumably with greater administrative efficiency
than that of IFAD.
AusAID responded that with countries which were ‘most important to us
and the closest to us geographically, [the Committee’s] statement is probably
But, the further we get away from Australia and the fewer
people we have on the ground, it is not necessarily effective for us to deliver
the assistance bilaterally in all circumstances. … as we get into the regions
that are furthest away from us, we are better off working with our most trusted
partners, particularly the multilateral organisations such as the financial
institutions and the UN agencies.
The FATP noted that IFAD had increased its focus on East Asia and the
Pacific—the region was now receiving some 31 per cent of IFAD allocations.
RIA supported the view that IFAD was increasing its involvement in the
Asia-Pacific region and provided more detail:
… at the end of 2011 IFAD was
implementing 61 projects and programs in the Asia-Pacific region, with total
investment by IFAD in these projects of US $1.45 billion, or approximately one
third of the value of all projects. New projects in the Asia-Pacific region
approved in 2011 included an investment by IFAD of US$340 million, or 34
percent of new loans and grants.
AusAID advised that there were two small active projects in the
Pacific—in Papua New Guinea and in the Solomon Islands, with a further program
to commence in Tonga, in 2012–17. AusAID acknowledged,
however, that the bulk of the projects were in the Asia part of the
Asia-Pacific. Nevertheless, IFAD was developing a strategy for engagement with
the Pacific and AusAID was having technical discussions with IFAD.
Australia will encourage IFAD to
liaise closely with regional bodies and other donors in designing and
implementing activities to ensure effective coordination and harmonisation of
aid, increasing aid impact and reducing the transaction costs for Pacific
island countries. This is consistent with the objectives of the Cairns Compact
on Strengthening Development Coordination in the Pacific to which Australia
will seek IFAD’s commitment. IFAD Joining IFAD would enable Australia to offer
its knowledge and technical expertise in the Pacific to ensure IFAD projects
are implemented effectively.
The Committee notes that the total cost of these three projects
(US$80.6 million) is modest in proportion to the total cost of IFAD projects
IFAD’s mandate and role
The FATP drew attention to the 2011 AusAID review of Australia’s
engagement with IFAD and the review’s conclusion that IFAD had a clear mandate.
This was to:
… reduce rural poverty and hunger
through working with smallholder farmers, who are disproportionately
represented among the poor, vulnerable and food insecure.
IFAD’s mandate, the FATP noted, was well aligned with the Australian
Government’s policy statement, An Effective Aid Program for Australia:
Making a real difference—Delivering real results. Further, IFAD also worked
with governments to develop and finance programs and projects which enabled the
rural poor to themselves overcome poverty.
Other assessments of IFAD’s performance
Besides the AusAID 2011 review of IFAD, the FATP noted three other
independent reviews which had also drawn favourable conclusions. These reviews
were conducted by:
- the Multilateral
Organisation Performance Assessment Network (MOPAN), in 2010;
- the UK Department for
International Development (DFID) Multilateral Aid Review, in 2011; and
- the Australian
Multilateral Assessment (AMA) in 2012.
Multilateral Organisation Performance Assessment Network
MOPAN is a network of 16 donor countries which assesses the
effectiveness of the multilateral organisations they fund. The MOPAN review had
assessed IFAD ‘at an institutional level and across 10 developing countries’.,
The FATP advised that the review had found:
[IFAD’s] key strengths included a clear link between its
mandate and its result focused strategy; a good results measurement framework; transparency
in its aid allocation decisions; and independence of the evaluation unit. …
MOPAN also rated IFAD well with respect to anti-corruption,
through its increasing use of direct supervision, and in-country presence,
which will further reduce risks of corruption and increase its cost
UK Department for International Development Multilateral Aid Review
DFID’s review commented that:
IFAD is the only international organisation to focus
exclusively on rural poverty to make progress on MDG1 [Millennium Development
Goal 1]. It also places emphasis on empowering women, contributing to MDG3. …
IFAD is one of the largest sources of development financing
for agriculture and rural development.
The FATP commented that DFID’s review had:
… commended IFAD on its unique mandate, focus on poor
countries and its comprehensive results framework with clear targets. The
[review] also noted IFAD specialised knowledge, its pro-poor approach, its
focus on women and improved project delivery.
Australian Multilateral Assessment
The FATP advised that the AMA had ranked IFAD strongly in six categories
and satisfactory in one. The strongly ranked categories were:
- Delivering results on
poverty and sustainable development in line with mandate;
- Alignment with
Australia’s aid priorities and national interests;
- Contribution to the
wider multilateral development system;
- Strategic management
- Transparency and
The category ranked satisfactory was, ‘Partnership behaviour’.
Within this category, IFAD was ranked as weak in relation to ‘Plac[ing] value
on alignment with the partner countries’ priorities and systems.’
The FATP commented that the report advised that ‘the Australian
Government can have a reasonably high degree of confidence that IFAD will
deliver tangible benefits in line with Australia’s development objectives, and
will represent good value for money.’
Other suggested benefits of rejoining IFAD
AusAID advised that a significant benefit of rejoining IFAD was the
ability to influence IFAD decisions:
Given that we would be a significant member and donor to
IFAD, we would have good chances of contesting a position on the Executive
Council of IFAD, which essentially is the equivalent of a board of directors of
a private institution or a bank, for example. That is a body that is vested
with the power to make policy for IFAD, including approval of major
projects—that is, direction in policy, the areas that they focus on and
specific projects. So, subject to us being able to secure a seat on the
Executive Council of IFAD, we would be in a position to exert a high degree of
influence on its lending decisions.
If Australia rejoined IFAD, AusAID commented, every three years there
was the opportunity to further influence IFAD when Australia contributed money
to replenishing the IFAD fund:
… there is a separate question of how much money we
contribute to each replacement of the IFAD funds. We have the flexibility of
dispersing whatever the government allocates as the amount to disperse but also
to calibrate that amount to exert pressure and, if … reforms perhaps are not as
robust and not moving as fast as possible, we have the option of not dispersing
that money. …
… every three years we will have an opportunity to negotiate
with IFAD what their priorities are and what we want as part of a group of
donors negotiating the replenishments. We will have an ability to influence
their priorities and push for certain changes.
While IFAD projects were not badged to identify donor countries, AusAID
would use its ‘communication strategies to ensure that people are aware of the
contribution we make.’
Submissions to the Inquiry have identified other benefits arising from
Australia joining IFAD. These included:
- providing another way
to implement Australia’s commitment to the UN Convention to Combat
Desertification (UNCCD)—IFAD hosts the Global Mechanism which is a subsidiary
body of the UNCCD;
- providing ongoing
support to Afghanistan after Australia’s withdrawal from that country—IFAD has
a presence in Afghanistan with its Rural Micro-Finance and Livestock Support
- IFAD ‘also works to
address large poverty concentrations in rural areas of emerging and middle
income countries, all of which are members of the G20’;
investment in the UN Food and Agriculture Organisation governance would be
enhanced by involvement with fellow Rome-based IFAD;
- providing an
opportunity to advocate Australia’s position on food security, agricultural
trade and development, and provide ‘targeted advice and assistance on issues
directly related to Australia’s agricultural interests’;
- supporting IFAD’s
micro-level interventions which complement the macro-level assistance provided
by the World Bank and African Development Bank;
- enabling assistance
to flow to areas of hostile or incompetent governments;
- IFAD implements the
Global Environment Facility (GEF) and its grants—South Pacific countries have
been unable to access GEF funds and Australia’s influence may facilitate such
identification of trade opportunities through involvement with IFAD projects;
- IFAD’s reliance on
external consultants provides opportunity for Australians—withdrawal has
resulted in a loss of $5.96 million annually because only citizens of member
countries can tender for IFAD projects;
- rejoining IFAD is
consistent with Australia’s objectives regarding the MDGs;
- influencing China’s
aid and assistance program—’IFAD is very effective in working with the Chinese Government
to change its behaviours with respect to its delivery of its own development
assistance and in the delivery of assistance to its own rural communities.
AusAID staffing implications
The FATP advised that the Government had appropriated $126.4 million for
IFAD in the 2012–13 Budget to cover commitments to 2015–16. This included:
- a maximum amount of
$120 million in 2013–14 to be contributed as part of IFAD’s Ninth
administrative costs of $1.4 million per annum to support a counsellor position
in Rome, one locally engaged staff, and two Australia-based staff (the
counsellor would also work with the other two Rome-based UN agencies—the Food
and Agriculture Organisation and the World Food Programme).
RIA noted that the impact on Australia‘s aid budget would be small:
Taking account of the expected growth in the Australian aid
program in the coming years set out in the Budget document on the overseas aid
program for 2012–13, the annual costs of IFAD contributions would be less than
0.4 per cent of Australia’s total aid in the period 2014–15 to 2017–18.
The Committee asked AusAID whether joining IFAD would result in ‘the
defunding of other programs to afford this priority’.
AusAID responded that the funding of its broad portfolio of investments
was ‘constantly changing’ and it was ‘already shifting [AusAID’s] resources
around to suit the circumstances of the day’. Suspension of funding was one
option, ‘but reducing the amount of expenditure on each item of the portfolio
is another way to handle it.’
The announcement of Australia’s intention to withdraw from the fund in
2004 has in part led to significant reforms. Since that time, not only has IFAD
changed, but Australia’s aid strategy has altered.
The Committee considers that IFAD’s annual report on its investigation
and anticorruption activities is a significant piece of evidence.
It shows that IFAD operates in an imperfect world, and that it is
serious about combating corruption, and is transparent in recognising
corruption and being accountable for its response to this issue.
By becoming a significant contributor to IFAD, Australia places itself
in a prime position to influence the direction of the organisation and maintain
its program of reform. Such influence is twofold: first through rejoining; and
thereafter every three years when the IFAD funds are replenished.
The Committee considers that the various reforms introduced by IFAD, in
part as a response to Australia’s withdrawal, have addressed Australia’s
- IFAD’s cost
effectiveness has significantly increased;
- its programs have
become more aligned with Australia’s aid program; and
- IFAD now has a clear
mandate and role.
The Committee notes that there are other benefits arising from rejoining
IFAD and these should not be ignored.
The burden on Australia’s projected aid budget imposed by rejoining IFAD
is small, and the additional staff employed, in particular the Rome-based
counsellor will be able to promote Australia’s interests with the other
Rome-based UN agencies.
The Committee concludes that there is significant benefit in Australia
The Committee recommends that the International Fund for
Agricultural Development Amendment Bill 2012 be passed.
Mr Nick Champion MP
Foreign Affairs Sub-Committee
Committee on Foreign Affairs, Defence and Trade