Profiting from foreign aid

The amount of foreign aid spent on contractors has surged in recent years, from £540m in 2010/11 to £1.34bn in 2015/16.

British MPs are calling on the Department for International Development to review how it works with private contractors to ensure that companies comply with ethical standards.m In a report published on Tuesday, MPs said the department showed a “worrying over-reliance” on self-regulation in its use of private contractors and needed to take a “more robust approach” to set and enforce rules. The Department for International Development (DfID) and the aid watchdog, the Independent Commission for Aid Impact, are also carrying out separate investigations into private contractor use.

The report explained, “While competitive pressures in the market can drive value for money, they can also drive poor behaviours in contractors trying to seek a commercial advantage,” the report said and continued that  it shared concerns expressed by the cross-government stabilisation unit, which supports government activities in fragile states, over “possible tensions between profit motives and programme objectives”. 

The inquiry by the international development committee came after it had emerged that Adam Smith International (ASI), one of the UK’s biggest foreign aid contractors, had tried to profiteer by exploiting leaked department documents. ASI, which has received £450m in development cash since 2011, was also heavily criticised for trying to “unduly influence” a commons inquiry by engineering fake “letters of appreciation” from beneficiaries of its projects. 

Four executives at ASI quit last month, after the government froze contracts with the firm because of questions about its ethical integrity. ASI has also been criticised for using DfID money to pursue a free-market agenda in developing countries. A 2016 report by Global Justice Now found that electricity consumers in Nigeria faced price increases of up to 45% because of “a controversial energy privatisation programme supported by UK aid through a multimillion-pound project implemented by ASI”. And in Afghanistan, local civil society organisations reported that the country’s new minerals law – drafted with ASI’s support – had done little to improve their lot.

The inquiry said the findings on ASI “should not be approached as an isolated incident by DfID but as evidence that there is something inherently wrong with the culture in certain organisations”

Stephen Twigg, the chairman of the committee, said, "There should be ‘no room for excessive profiteering or unethical practices’ in this work to deliver aid to the poorest people across the globe,”

Nick Dearden, director of Global Justice Now pointed out that “The central problem with aid spending is an ideological bias towards contracting out to the same handful of for-profit businesses – just as we see across all government departments – regardless of how poor the results are. At the end of the day, it just cannot be right that so much aid money is channelled into British for-profit companies, as opposed to building up public services, social enterprise and small businesses in Africa and Asia.”