HC Deb 20 July 1965 vol 716 cc1324-6
23. Mr. Tilney

asked the Minister of Overseas Development what is Her Majesty's Government's policy at the meeting of the Development Assistance Committee of the Organisation for Economic Co-operation and Development this month with regard to the relative importance of private investment insurance against nationalisation and failure to remit profits.

Mrs. Castle

I do not expect formal proposals to come before the Committee. The report on the subject to which I referred in my reply to the hon. Member for Walthamstow, East (Mr. John Harvey) on 1st June last is being studied by the International Bank.

Mr. Tilney

Since other countries, such as the United States of America, Germany and Japan, have a form of insurance, would the right hon. Lady say that she agrees that this is a form of aid, and that private investment can produce valuable techniques in developing countries, and would she also agree that through joint stock companies in developing countries, especially in partnership with those who own capital in this country, much progres can be made in development?

Mrs. Castle

As I have already told the House, we have no objection in principle to the establishment of a scheme of this sort, but the question whether we could accede to it when the bank has finished its studies must depend on the exact terms of the proposals which come before us and also our current economic situation at the time.

Mr. Longbottom

Is the right hon. Lady aware that when the United States, Germany and Japan ran similar schemes to the one posed in this Question they were extremely successful in attracting private capital into projects where, but for that private capital, British capital would have been necessary?

Mrs. Castle

I am aware of the actions of those countries, but I am sure the hon. Gentleman realises that none of those which he has mentioned has the tradition of investing in developing countries that we have developed strongly in this country. We are studying the matter, but I am sure the House realises that in our difficult economic situation we must proceed carefully.

Mr. Carr

Does the right hon. Lady really suggest that entering into a scheme of this kind would involve any substantial burden on our balance of payments?

Mrs. Castle

As I understand the purpose of the scheme as urged by hon. Gentlemen opposite, it is to encourage the extension of private investment. This must be considered in relation to our capacity for overseas expenditure or investment of any kind, and must, as I have said before, be considered in relation to the aid programme.

Mr. Carr

Will the right hon. Lady please consider again carefully the background fact that private investment in the developing world by this country and by other countries has been falling, and as far as we know is still falling? Therefore, it is not building up something which is rising; it is propping up something which is falling.

Mrs. Castle

The right hon. Gentleman is giving me my point. Private investment in the developing countries is falling because of the necessity to create the infrastructure there which overseas aid alone can create. It is, therefore, a question of getting our priorities right. We cannot do everything at once, and I would rather start by laying firm foundations for economic development.

Mr. Tilney

But surely it is the fear of political repercussions which really prevents private capital investment going into some Asian and African countries? If these were an insurance, would not it be possible to reduce Government aid?

Mrs. Castle

Political anxiety is certainly one of the factors, and this is something which it lies within the power of the developing countries themselves to allay.