Sir Tim Lankester, Chairman of the Council of the London School of Hygiene and Tropical Medicine and Advisor on South East Asia to the consulting firm Oxford Analytica, delivered a CIRS Focused Discussion on “The Politics and Economics of Britain’s Foreign Aid” on October 8, 2012. The talk was based on his recent book,The Politics and Economics of Britain’s Foreign Aid: The Pergau Dam Affair (Routledge, 2012), which he described as “a case study of what can go wrong when you do development assistance badly.”
Giving a background of the history of British foreign aid, Lankester said that the program was initiated in the 1960s and was driven by the British government’s belief that it had a moral obligation to its former colonies as well as practical political interests in those countries. In the 1980s, Lankester was the Permanent Secretary of the Overseas Development Administration – the ministry responsible for development aid. During his time in the ministry, “one of the most controversial projects ever funded by British aid” was taking place. This was the establishment of the Pergau Dam and power-generating project on the Malay-Thai border, which “was the largest funding in the history of British aid,” Lankester recalled.
The controversial Pergau Dam project was the result of a private agreement between some key members of the Malay and British governments and was based on Britain providing Malaysia with 200 million pounds worth of civil aid in return for sales of 1 billion pounds of defense equipment. Lankester recalled that an agreement based on the offer of British aid in return for arms sales was both unprecedented and against British policy and was thus divisive from the start. To make matters worse, once the agreement was signed between the two governments, the powerful contractors and companies assigned to building the project increased their estimates and the total cost for the project almost doubled.
Despite the increasing costs, and against the advice of British government officials and economists, the project went ahead with the support of Mrs. Thatcher and a host of others with special interests. Since both the prime ministers of Malaysia and Britain had backed the project, the other government departments buckled under the pressure and did not offer sufficient opposition to their leaders. Lankester described the situation as being one that suffered from conflicting policy agendas and the “excessive mixing of politics, business, and conflicts of interest.”
In his capacity as Permanent Secretary, Lankester was tasked with evaluating whether or not the money for the project was being properly and lawfully spent. Although the legal assessment at the time showed that the project was lawful, the spend for the project was based on taxpayers money and was so inefficient and uneconomic that Lankester felt obliged to formally disassociate himself and the civil service from it. “This,” he said “is a story of politics and special interests trumping sound development and sound economics.” Had there been more transparency, it may have been possible for parliament, the media, and other interest groups to formally oppose the project that ultimately damaged British-Malay relations at the time.
In conclusion, Lankester said that he was curious to know whether the very same project would have been viable today. His ex-post assessment, in light of increased gas prices over the years, was that the project would still be an uneconomic one by today’s calculations. As a final thought, he advised that the Pergau Dam case study provides valuable lessons for governments, and his advice was that “it is better to be transparent than obscure,” “don’t say one thing and do another,” “when things go wrong, don’t cover up,” and, lastly, “if you make one mistake, don’t compound it by making another.”
Sir Tim Lankester is a member of the joint advisory board of the Georgetown University School of Foreign in Qatar. He was UK Executive Director on the boards of the IMF and World Bank, and later Permanent Secretary of the Overseas Development Administration. He was Director of the School of Oriental and African Studies, London University, and from 2001 to 2009 President of Corpus Christi College, Oxford. He has published articles and book reviews on aid and development.
Article by Suzi Mirgani, Editor and Manager for CIRS Publications