§ 10.1 p.m.
§ The Parliamentary Secretary to the Ministry of Overseas Development (Mr. Ben Whitaker)
I beg to move,That the Caribbean Development Bank (Subscription to Shares of the Capital Stock) Order 1970, a draft of which was laid before this House on 1st December, be approved.The purpose of this order is to enable my right hon. Friend the Minister of Overseas Development to make payment from monies provided by Parliament in respect of Her Majesty's Government's initial subscription of £4,166,167 sterling, equivalent to 10 million American dollars to the capital stock of the Caribbean Development Bank in accordance with the agreement dated 18th October, 1969, establishing this bank. A copy of this Agreement signed on 18th October last year by my right hon. Friend the Chancellor of the Duchy of Lancaster on behalf of the Government has been laid before the House. The Government believe that regional development banks can play three valuable roles in promoting economic development.
First, they can help to mobilise local resources, secondly, they can assist in the promotion of regional economic co-operation and thirdly, they can also attract the donors who are interested in a particular region. The setting up of this regional bank was I think first suggested four years ago. Later it was one of the recommendations of the Tripartite Economic Survey of the Eastern Caribbean, which was sponsored jointly by the Governments of Canada, the United States and the United Kingdom in 1966. One of the main conclusions of the report of the survey was that to achieve maximum growth in the tourist industry and other areas of economic activity there must be increased regional economic cooperation. The report recommended the establishment of a regional development agency, which would include a regional development bank among its proposed services.
At a conference held in Antigua in November, 1966, at which the Governments of Canada, the United States and the United Kingdom were also repre- 646 sented, the Commonwealth Caribbean Governments decided to ask the United Nations Development Programme to study the possibility of establishing a regional development bank for the whole Commonwealth Caribbean. The regional development agency has since been established by the Eastern Caribbean Governments, as another regional institution, separate from this bank. Following the report of a U.N.D.P. mission, negotiations took place towards the establishment of a bank, in which the Governments of Canada and the United Kingdom participated.
The negotiations also had the active support of the United States Government, which, although unable to become a founder member of the bank, has indicated its readiness to provide substantial loan funds on soft financing terms to the special fund of the bank. The negotiations culminated in a conference of plenipotentiaries, held in Kingston, Jamaica on 18th October, 1969, at which the Agreement establishing the Caribbean Development Bank was signed on behalf of all the probable members. It is expected that the agreement will enter into force not later than 31st January, 1970, when the inaugural meeting of the board of governors for the bank is to be held in the Bahamas.
The purpose of the bank is to contribute to the harmonious economic growth and development of its member countries in the Caribbean and to promote their economic co-operation and integration. I regard it as particularly important that the bank will provide an international source of development finance for the countries of the Commonwealth Caribbean, particularly the less developed Caribbean countries, which is not at present available, since the small islands do not at present qualify for loans from the International Development Agency, World Bank and other international financial institutions. The bank should make a very significant contribution to the economic co-operation which is essential for the future economic wellbeing of all the Commonwealth Caribbean countries. In recent years the growth of such co-operation has been evidenced in the establishment of the Caribbean Free Trade Area—C.A.R.I.F.T.A. — the Commonwealth Caribbean Regional Secretariat, and the 647 Eastern Caribbean Regional Development Agency. I regard the foundation of the Caribbean Development Bank as a most important further step towards economic co-operation.
I anticipate that the bank will seek to achieve its purposes by assisting regional members in the co-ordination of their development programmes, promoting the expansion of their trade, assisting in the preparation and financing of projects, encouraging other public and private investment in development projects, helping to promote regional and locally controlled financial institutions, and by encouraging the development of a regional market for credit and savings.
The Overseas Aid Act, 1968, Section 2(1) lays it down that if Her Majesty's Government become bound by an international agreement for the establishment and operation of a regional development bank, which provides for the making by members of the bank of an initial subscription to the capital stock of the bank, my right hon. Friend may, with the approval of the Treasury, provide by order for the payment out of moneys provided by Parliament of any sum required for the purpose specified in that subsection. An order under this Section may not, however, be made unless the draft of the order has been laid before and approved by this House.
The order now in draft before the House will provide for the payment by the United Kingdom of a sum equivalent to 10 million American dollars—that is £4,166,667 sterling—to the shares of the bank stock. The initial authorised capital stock of the bank will be 50 million American dollars, of which half will be paid-up shares and half will be callable. The amount of the initial subscription required of the United Kingdom has been determined at 10 million American dollars in accordance with paragraph 1 of Article 6, and Annexe A of the agreement establishing the bank. Of this, we would be required to pay a paid-up subscription of 5 million American dollars in cash and promissory notes over 6 years, and a further 5 million American dollars would remain on call in accordance with paragraphs 6 and 7 of the Article.
Within 90 days of our ratifying the agreement, a step which would follow 648 immediately the House's approval of the draft of this order, Her Majesty's Government would be required to pay the first instalment of the subscription, which is 1 million American dollars and my right hon. Friend would wish to make this payment as soon as possible subject, of course, to vote provision being approved by the House. This order would also enable my right hon. Friend to pay any sum required to maintain the foreign exchange value of our subscription to the bank, in accordance with Article 24 of the bank's agreement, which is designed to protect its security. My right hon. Friend would also be empowered to redeem non-interest bearing and non-negotiable notes issued by her as permitted by the agreement in place of currency due as part of our subscription and to pay into the Consolidated Fund any sums received from the bank.
A separate Special Fund is to be established by the Bank and Her Majesty's Government propose also to contribute a sum of 5 million American dollars over 5 years to this Fund for soft term financing. The terms and conditions of contributions to the Special Fund are at present under negotiation.
Her Majesty's Government attach importance to the multilateral and regional nature of the Caribbean Development Bank and welcome very much the intention of 16 Commonwealth Caribbean countries and Canada to become founder members. I am hopeful that the establishment of the bank will encourage other non-regional members to join and I welcome the intention of the United States to contribute to the Special Fund of the bank. The prospective Caribbean members of the bank regard its foundation as a major step in their economic development, and I am sure that the House will support their hopes in approving the draft Order now before it.
§ 10.10 p.m.
§ Mr. Richard Wood (Bridlington)
We are extremely grateful to the Minister for the explanation he has given both of the order and of the background to it. I wish to emphasise, what I think he implied, that British participation in the development bank is only one of a good many aspects of British aid to Commonwealth countries in the Caribbean.
649 This order is confined to the nature and extent of the British contribution to the bank itself and no doubt you, Mr. Speaker, will require us to limit ourselves to this reasonably comparatively narrow point. All I want to do is to ask the Minister one or two questions which I hope he will be kind enough to answer on what I think he will agree is a quite complicated subject. I shall try to put the questions with all the clarity I can muster. The first question is this. The order imposes on Her Majesty's Government an obligation to pay a call on shares not fully paid-up which the Minister has explained. I ask whether such a contribution as he has described is properly described as "an initial subscription". Secondly, who is to decide when the, call is made?
I am encouraged to ask the first question because Section 2 (1) of the Overseas Aid Act not only covers the initial subscription which the Minister mentioned but also, as I read it, an additional subscription. I understand there is clearly a future element involved in at least part of the subscription Great Britain will make to the bank, the future element of future calls on shares. I do not quite understand why the Preamble limits itself to talking of an initial subscription. Would it not be better if it also recited that part of Section 2 of the Act which deals also with additional subscriptions which the Act empowers us to make?
The second question is this: I find myself in difficult matters of this kind inclined to lean heavily on the Explanatory Note. I leaned very heavily on this Explanatory Note in this order. Reading Paragraph 3 I found that my confusion was not decreased but increased. I am bound to say however that the Minister's information was so clear that I believe I have the situation right in my mind, but I would be grateful if he will confirm it. The Explanatory Note does not mean, does it, that the 10 million dollars, whatever it is in sterling, represents the full value of the paid up shares with a further contingent liability sum for call on the shares? What I understood it does mean is that only half of the 10 million dollars will be payable in respect of part of the shares which will be paid up.
§ Mr. Wood
I am grateful to have the hon. Gentleman's confirmation that that is the position. We support both the concept of the bank and the fact that we are to play an important part in it. We are also delighted that Canada has agreed to play a part. As we are clearly considering the relationship of our contribution here to our general effort in the Caribbean, I think it is in order, Sir, to ask if the Minister can give us some information about the relationship of the Caribbean Development Bank to the other agencies operating in the area. The hon. Gentleman talked about the Caribbean Free Trade Association. There are also the activities of the International Bank and the Commonwealth Development Corporation. I should be grateful, so that we can consider the effect of our contribution to the bank, if the hon Gentleman would tell us something about the relationship of that contribution and the bank itself to the work of the other agencies operating in the area.
Lastly, I understand that there has been some dispute about the location of the bank. Kingston in Jamaica and Barbados have been mentioned. I should be grateful if the Minister would tell us whether this dispute has been resolved.
§ 10.26 p.m.
§ Mr. John Fraser (Norwood)
The House will welcome the order and the subscription of shares in the bank by the British Government, first because of the contribution that the bank in terms of its charter will make to economic development in the West Indies, where, although this is sometimes forgotten, there is a very large unemployment problem and a real need for investment capital. The order will be welcomed particularly for the proposals that the bank has to develop local capital markets and the local institutions for saving and investment.
One of the difficulties found in Caribbean countries is that, apart from agriculture, such activities as tourism, local industry and mineral exploitation have a very low level of retained profits. As far as I can see, the bank's activities will be to try, whilst not discouraging outside investment, to generate local investment with its high level of retained profits and the subsequent economic and social stability which it will bring to this area of the Caribbean.
651 We welcome the development of the bank, secondly, as a sign of co-operation among the Caribbean countries. Some of the arguments for federation have now been forgotten. This is a real sign of co-operation between these countries which extend over an enormous area. It is sometimes forgotten that it is as far from Jamaica to the South Caribbean as it is from Jamaica to New York.
We welcome the order, too, because of the way in which the activities of the bank will fit in with the establishment of Carifta and the encouragement of local trade. At present, some of the Caribbean countries participating in the bank have the paraphernalia of independence without having the reality of economic independence. By encouraging local trade —in 1966 there was only 6 per cent. interregional trade—the bank will help to bring the reality as well as the paraphernalia of independence and the self-assurance which follows from that.
We welcome the order, finally, because it is not a moment too soon for this country to subscribe to inter-regional economic development which is so badly needed to redress what are bound to be the repercussions of Britain's entry into the Common Market on agricultural produce from the Caribbean countries.
Who is to be appointed as the British Governor of the bank? He will obviously need to be versed in Caribbean affairs and have sympathy and understanding for the economic development problems which will be found there. The Minister said that the participating countries are subscribing 10 million American dollars in share capital. I was indeed glad to hear that a further 5 million American dollars are to be provided on soft loan terms for the bank's special fund.
What other loans will be made available to the bank from the British capital market by way of fixed-interest loans or loans which do not involve taking profits for industrial development out of the region? At present, a great deal of sterling investment is going to countries like South Africa and Australia. What investment will be channelled to the bank by way of private investment to help us to achieve some of the Pearson targets on the private side? I believe that Canada has agreed to provide a loan of credit to the bank. What similar 652 private loans of credit will be provided for or encouraged by Britain?
Although the other countries participating in the bank are independent Commonwealth countries and we must obviously defer to them and allow them to develop the region as they wish, I hope that as far as possible the influence of British subscription and participation in the bank will be the promotion, so far as it is possible, of an egalitarian development. Quick economic growth can also bring rapid distortions in the pattern of distribution of wealth. It brings both the form and the reality of egalitarianism. The form can be seen in tourism when one sees the rich enjoying themselves on the beaches next door to the poor. The reality of inequality can be seen, for instance, when the bank or another institution develops local industry. Wages rise, new entrepreneurs appear, and new concentrations of capital take place. There is the reality of great inequality between one section of the population and another. So far as possible I hope that the bank will encourage an egalitarian development as the reverse of the trade coin and the investment coin. There is a real problem here in the Caribbean, albeit unintentional, but so far as the Government can resolve it through the bank I hope they will do so.
Finally, what sort of technical assistance will be made available by the Government to the bank in the form of technical advisers to help the bank develop its programmes in regional development and industrial development as well?
I conclude by giving a welcome to this order.
§ Mr. John Biffen (Oswestry)
First, I should like to apologise to the Minister for not being in my place when he introduced this Statutory Instrument and I may therefore be labouring under a misapprehension about the workings of the bank, because I was not able to hear his explanation. But as I read the order it will be taxpayers' money which is going to the Caribbean to the bank. I assume that is so, because of Article 3:Any sums received by Her Majesty's said Government in pursuance of the Agreement shall be paid into the Consolidated Fund.I rise only to make the comment that I hope that, as we are this evening voting 653 taxpayers' money to an investment purpose in the capacity, so to speak, of captive shareholders, we may soon proceed to the situation where individuals can invest freely in the Caribbean without being subject to the so-called voluntary restraints which are operated by the Bank of England. That point is given particular force by the remark of the hon. Member for Norwood (Mr. John Fraser) who referred to such matters as the investment potential in minerals and in tourism, and, I am sure he would also agree, in tropical agriculture. Those are all legitimate areas in which I believe private investment should proceed as freely and as unimpeded as possible.
Finally, I hope that the use of taxpayers' funds in this way will not be done with a view to promoting a predetermined social order, egalitarian or otherwise, in the recipient countries.
§ Mr. Whitaker
I think, Mr. Speaker, that you would rule me out of order if I pursued very far some of the points made by the hon. Member for Oswestry (Mr. Biffen), except to reassure him that I said in opening that one of the objects of the banks' activities in benefiting the economy of the Caribbean, will be to help attract both private and public investment in the area.
As for the social or political development of the nations there, many of them are now independent, and that is a matter for their Governments rather than for this House to dictate to them.
I am grateful for the remarks of both the right hon. Member for Bridlington (Mr. Wood) and my hon. Friend the Member for Norwood (Mr. John Fraser) in their welcome to the bank. The whole House is aware of the affectionate interest which both of them take in the Caribbean territories. I take, first, the right hon. Gentleman's question about whether it is correct to use the term "initial subscription" in this case. I am assured, on better authority than my own, that it is correct to term both the paid-up and the callable shares the initial subscription. It will be a matter for the board of governors of the bank to determine the circumstances in which the calls should be made. Fifty per cent. of the British contribution is callable and will be payable in instalments spread over a period of six years. The balance, 654 the remaining 50 per cent., is callable at the discretion of the bank, but it is, I am informed, really the bank's security as opposed to its operating capital, and that would be the distinction there.
Although itself independent, the bank is required by agreement to work in close co-operation with all the other development agencies which the right hon. Gentleman mentioned, whose activities the whole House approves. I am sure that there will be close co-operation between the members of the operating bodies.
The right hon. Gentleman asked also about the location of the bank's premises. The British Government feel that this is a matter to be decided entirely by the regional members, and we, therefore, take no view ourselves, except that we are hopeful that there will be full agreement about it. This is a matter which will be determined at the initial meeting at the end of this month.
My hon. Friend asked who the British governor will be. It will be my right hon. Friend the Minister of Overseas Development, following the precedent of her being the British governor for the Asian Development Bank.
I commend the order to the House. I am sure that hon. Members on both sides wish the bank a very successful career.
§ Question put and agreed to.
That the Caribbean Development Bank (Subscription to Shares of the Capital Stock) Order 1970, a draft of which was laid before this House on 1st December, be approved.