§ 10.30 a.m.
§ The Under-Secretary of State for Trade and Industry (Mr. Anthony Grant)
I beg to move,That the Chairman do now report to the House that the Committee recommend that the Overseas Investment and Export Guarantees Bill ought to be lead a Second time.The Bill has three purposes. It proposes, firstly, that the Export Credits Guarantee Department should be empowered to operate a scheme for insuring investment overseas; secondly, that the 1478 Overseas Development Administration should be empowered to give grants for the purpose of encouraging pre-investment studies abroad; and, thirdly, that the limits on the amount of liability that the Export Credits Guarantee Department may assume under the Export Guarantee Acts, 1968 and 1970 should be raised.
The first two proposals were included in the White Paper—"Private Investment in Developing Countries", Command 4656—published in April last. They are essential elements in the Government's policy for encouraging such investment, and can conveniently be considered separately from the third purpose of the Bill.
In the White Paper the Government set out their reasons for wishing to encourage 1479 private investment benefits in developing countries. Given the right conditions, private investment benefits both Britain and the host country at the same time. Britain benefits through increased investment income and exports and in other ways. The developing countries benefit because British private investment provides capital, employment and a wide range of skills. These mutual benefits were recognised by the Pearson Report "Partners in Development", which affirmed that foreign investment had contributed greatly to the growth of developing countries and stressed the need for appropriate measures to encourage it.
This is not to say that private investment is a substitute for official aid: rather their rôles are complementary. As hon. Members will know, we have recently announced in the White Paper on Public Expenditure a substantial increase in the size of the aid programme at constant prices over the next four years. But for a country such as Britain, in which private enterprise plays a major rôle in the economy, it is natural that a major part of the resources made available to developing countries should be in the form of private investment.
Indeed, in 1969 and 1970 taken together direct private investment accounted for about one-third of our total flow of resources to developing countries. The maintenance of a high level of private investment is essential if we are to continue to meet the U.N.C.T.A.D. target of 1 per cent. of G.N.P. for total financial flows to developing countries, which the Prime Minister pledged that Britain would do its best to meet by 1975
On the other hand, it is clear that no measures by us to stimulate the flow will achieve success unless the developing countries themselves are ready to welcome overseas investment. It is only they who can decide whether to provide the conditions in which private investment can make its contribution to the achievement of economic growth. Both capital and the management expertise that goes with it are in short supply, and there are many attractive opportunities for investment elsewhere.
The Government have borne these considerations in mind in considering what incentives to offer to stimulate a greater flow of private investment to those coun- 1480 tries which wish to have the benefit of it and have shown that they will welcome it on fair terms.
Of the various measures proposed in the White Paper for encouraging private investment in developing countries, the scheme for insuring investors against political risks of expropriation, war and currency inconvertibility, is the most important. I believe it to be essentially uncontroversial. I recollect that when the Government's decision to introduce the scheme was announced the right hon. Lady the Member for Lanark (Mrs. Hart) was good enough to describe it as sensible, as indeed it is.
There is nothing new in the idea of an investment insurance scheme. The United States of America has operated such a scheme since 1948, Germany for more than a decade. Every major developed country in the free world has by now introduced one, and many of the smaller countries have done so as well.
The United Kingdom is the conspicuous exception. Successive Governments have resisted the introduction of such insurance on two grounds. It was argued, firstly, that we could not afford to stimulate investment overseas because of balance of payments difficulties, and, secondly, that it was still worse to encourage riskier overseas investment.
These arguments can no longer be given the same weight. The flow of investment to developing countries is not large in relation to the total flow of private investment overseas. With the balance of payments now in better shape, we do not have to worry about the scale of increase in the outflow which will be needed to meet the U.N.C.T.A.D. target in the next few years.
The scheme will, of course, encourage some riskier investment—that is to say, investment that is riskier in political terms. But we do not see this as a drawback. On the contrary, we think that the absence of a scheme has unduly discouraged many firms from undertaking sound investment yielding attractive returns.
An individual firm, unless it be very large indeed, cannot spread the political risks arising from its overseas investment and may therefore be more deterred by them than is appropriate to our economic interests. An insurance scheme will leave companies largely free to decide their 1481 investment policy by reference to commercial considerations. This should benefit not only them, but also the developing countries, particularly the poorer ones where the political risks may have seemed the most forbidding. It is sometimes said that private investment flows tend to favour the least necessitous of the developing countries. Investment insurance may do something to redress the balance.
The decision to introduce an insurance scheme was prompted by the need to stimulate the flow of resources to developing countries, but there are commercial benefits to Britain. British industry has long pressed for a scheme. It says its absence has often placed British companies at a disadvantage compared with their competitors abroad who benefit from the protection which insurance can give.
An investment abroad may often be necessary to secure the continuation of an export trade. In this connection, the view of the Reddaway Report may be recalled that investment in developing countries tends to be more worth while in terms of exports than investment in the more developed parts of the world. For example, many developing countries seek to replace by local manufacture or assembly their imports of certain types of consumer goods and mechanical and engineering products. When this happens British exporters are usually faced with the choice of losing the market altogether or investing in local manufacture which at least carries with it continuing opportunities for the export of plant, components etc. as well as invisible earnings.
The objection has been raised that investors, when covered against political loss by insurance, may become less responsible or careful in their attitudes towards the Governments of the host countries and less ready to reach negotiated settlements of disputes.
The host Government, it is said, may be more likely to take over an investment without paying compensation if the investment is insured. Experience, however—and other national insurers have acquired some already—does not bear out this thesis. Of course, the insurer must take care to protect his own interests, and E.C.G.D. is not unskilled in this. Under the provisions of the proposed scheme, which I will refer to shortly, the 1482 investor will not be covered for the whole amount of his investment, and he cannot claim at all if he has acted provocatively.
As regards the attitude of the host Governments, they must heed the fact that they are dealing, not only with the company itself, but also with the national insurer whose attitude may be crucial for any future investment. I believe that the danger of expropriation will be reduced rather than increased by the scheme.
Some have suggested that the job might be better done by an international body, such as the proposed International Investment Insurance Agency linked to the World Bank. But this has not yet got off the ground, and there is little prospect in the foreseeable future that it could replace national schemes, though a basis may be found on which it can supplement them. We are very willing to consider the possibilities along these lines.
The existing official schemes vary in their terms and precise objectives. Before drawing up our own scheme we made a study of the principal ones, about which information was freely and generously given to us. We concluded that our own scheme should be based as broadly as possible and should be operated flexibly. Provided that the investor wants to invest and the proposed investment is acceptable to the recipient country, there is a prima facie case for believing that the transaction will benefit both parties. This does not mean that considerations such as the development value of the investment to the recipient country, which is stipulated as a condition in some other schemes, will be ignored, but rather that they will be judged against the criterion of risk.
We shall not specify, as some schemes do, that the investment must further economic relations, but it goes without saying that cover should be refused if the proposed investment was considered to be harmful to the national interest.
The operation of the scheme is to be entrusted to the Export Credits Guarantee Department. This Department has had a long and successful record in the insurance of export credit. Its experience is relevant to this new field. The discretion which is to be accorded to the Department in the operation of the scheme does, 1483 however, place a heavy burden of responsibility on it. The Government have therefore appointed a small Committee consisting of members from the City and senior industrialists with special experience in the field of overseas investment, on whose advice E.C.G.D. can call. Unlike the Export Credits Advisory Council, the body which advises E.C.G.D. on export credit business, the new Committee is non-statutory and will give its advice on an informal basis; but it has some common membership with the Council.
I am particularly grateful to Sir Frederic Seebohm, the Chairman of the Advisory Council, for agreeing to be Chairman of this Committee also, to which he brings an unrivalled experience. May I also express publicly my thanks to the other distinguished members of this Committee—Mr. G. S. Bishop, Mr. R. J. Blair, Mr. G. V. K. Burton, Sir Hector McNeil, Mr. E. J. Symons, and Mr. M. T. Wilson.
To permit the maximum amount of flexibility, the powers proposed in the Bill are drawn in very general terms. It is impossible at the outset to envisage every type of circumstance or proposal that may be made, and the scheme that will be introduced if E.C.G.D. is given the necessary powers, will, no doubt, need to be reviewed in the light of operational experience. The details are contained in an outline description, of which I have arranged for copies to be put in the Library of the House and the Vote Office immediately after this debate.
It may be helpful if I were to refer to the main provisions, now for the information of the Committee. The scheme will be open to all firms carrying on business in the United Kingdom, though there are special provisions affecting foreign-owned firms and overseas subsidiaries. There are at this stage no formal limitations on the scope of the scheme in so far as relates to particular industries or countries, but the insurer must have discretion to refuse the risk or to attach special conditions to his cover if he judges this to be prudent on commercial grounds, and a pattern will emerge as the scheme develops.
Hon. Members will notice that the Bill makes no reference to developing countries—that is to say, it does not 1484 exclude developed countries. In practice, we think that nearly all the applications for insurance will be in respect of investment in developing countries for which the scheme is primarily intended. Should E.C.G.D. receive an occasional request for cover in a developed country, however, it is proposed to accept it for consideration in the ordinary way, bearing in mind the insurance principle of spreading risk.
As we announced in the White Paper, the scheme will not cover existing investment—though it can cover major additions to such investment. The Government recognise the interests of industry in the protection of existing investment, and wherever possible we will seek to conclude investment protection agreements with developing countries. Insurance of existing investment, however, is a different matter. It would impose an immense load of work at the outset and would not serve any of the policy objectives to which I have referred. Existing investment is similarly excluded from all other national investment insurance schemes.
However, investments which have to be committed before the scheme can be brought into operation—which I hope will be soon after Easter—can be considered for cover provided that the prospective investor consults the E.C.G.D. before committing himself.
The White Paper visualised that only direct investment would qualify, that is to say investment in which the investor has a management or trade interest. However, there are a number of specialist institutions in the United Kingdom which invest in developing countries, and it would be wrong to exclude from cover the contributions they make to the flow of developmental resources. Accordingly, portfolio investment in a new project will be permitted, subject to a minimum amount initially of £50,000 and 10 per cent. of the total capital. Loan capital as well as share capital is eligible.
The maximum period of cover is to be 15 years, with provision for covering earnings retained in the business up to 100 per cent. of the initial contribution. The normal percentage of loss payable will be 90 per cent.
§ Mr. John Nott
Could the Minister go a little more slowly? I am most 1485 interested in this, but I cannot really keep pace.
§ Mr. Grant
I apologise. I did not wish to detain the Committee unduly, but I shall repeat that for the benefit of my hon. Friend. I think that he heard me say that portfolio investment in a new project will be permitted subject to a minimum amount initially of £50,000 and 10 per cent. of the total capital. Loan capital as well as share capital is eligible. The maximum period of cover is to be 15 years with provision for covering earnings retained in the business up to 100 per cent. of the initial contribution. The normal percentage of loss payable will be 90 per cent.
The cost of this cover is to be fixed initially at 1 per cent. per annum on the amount currently at risk, plus ½ per cent. per annum on the amount of any commitment by the insurer to cover additional amounts in the future. A flat rate has the merit of simplicity, and differentiation between developing countries on grounds of risk would conflict with the objectives of the scheme. This follows the practice of all other national schemes. The White Paper stated that initially the premium rates would be based on those charged by other countries that have had experience of similar schemes for a number of years. The rates chosen are near the upper end of the international scale and are intended to strike a balance between the conflicting objectives of attempting to make the scheme pay its way over a period and of encouraging new investment in developing countries. They will not, I think, be regarded as unreasonable.
These are only a few of the features of the scheme, but they are the main ones. Hon. Members will no doubt study the outline if they wish to have further information on what, in detail, is a fairly complex matter.
The White Paper stated it to be the intention that this scheme should pay its way. But I must sound a note of warning. The incidence of political risk is completely unpredictable, and no actuarial calculation of the risk is possible. The long period of the insurer's commitment means that the insurer can do nothing quickly to protect himself from the consequences of an increased incidence of loss.
1486 The two national insurers that have had the longest experience in this field—those of the U.S.A. and Germany—had until recently paid very few claims; but, since the publication of our White Paper, the United States insurer, the Overseas Private Investment Corporation, has become faced with the prospect of claims arising in Chile which exceed the total amount of its premium income gathered since the inception of its scheme more than 20 years ago. This is a salutary reminder of the dangers. We cannot claim, therefore, that loss will be avoided, but we believe that the risk of loss is acceptable when weighed against the scheme's prospective benefits to developing countries and to the United Kingdom.
Hon. Members are not, of course, being asked to give E.C.G.D. a blank cheque. The Bill sets an initial ceiling of £250 million on the amount of the liabilities which it may assume. Additions to this amount will need the affirmative Resolution of the House, and a new Act would be needed before liabilities exceeding £750 million could be assumed. In addition, ordinary Vote provisions will, of course, have to be made and approved. It has not been easy to fix the right amount for the limit in the Bill, as we have as yet no experience of the demand for the scheme. Hence the provision for two increases without the necessity of a new Act. The figures appearing in the Bill have been adopted bearing in mind that United Kingdom gross investment in the developing countries is already over £200 million per annum.
In conclusion on this aspect, it would be wrong of me to claim that the insurance scheme will have a revolutionary effect on the amount or direction of our overseas investment, but it will, I am convinced, do much in these uncertain times to encourage firms which are doubtful about the future climate for private investment. It is, I believe, an essential condition for the maintenance and expansion of the existing flow of developmental capital, and it fills a long-felt want by United Kingdom industry. I commend the scheme to the Committee.
Clause 3, which is very much the concern of my right hon. Friend the Minister for Overseas Development and his Department rather than that of my Department, will enable the Overseas Development Administration to introduce a 1487 scheme of financial support for pre-investment studies by firms contemplating investment in developing countries.
As I mentioned earlier, this proposal was included in the White Paper on British Private Investment in Developing Countries. We believe that a scheme of this kind will be a valuable incentive to British firms to consider opportunities for investment in the developing world which they might otherwise not have considered.
The Clause is drafted in very broad terms; and, in order to give hon. Members more precise indication of the way in which it will be administered, copies of an outline description of this scheme also will be put in the Library of the House and the Vote Office immediately after this debate. Again, I will here only give the very broad outline of the way in which it will operate.
A British firm wishing to study an investment opportunity in a developing country will be able to apply to the Overseas Development Administration for the study to be covered under the scheme. The firm will enter into a formal agreement with the O.D.A. before commissioning the study; it will then be responsible for carrying out the study and meeting the cost initially. If as a result of the study the firm decides not to invest, the O.D.A. will pay 50 per cent. of the costs incurred in accordance with the agreement, subject to a maximum contribution of £25,000 towards any one study. The necessary funds will be found from the Aid Programme. It will be a condition of our payment that if, within three years afterwards, the firm decides after all to proceed with the investment, it will have to repay the Government's contribution.
The Bill does not limit this scheme to the developing countries, because it is impossible to draft a suitable legal definition of these. But the scheme will in practice apply only to countries regarded as developing by the Development Assistance Committee of the O.E.C.D.
In addition to pre-investment studies in the strict sense, the Bill provides for the scheme to cover studies undertaken by British firms to determine the feasibility of management agreements with enterprises in developing countries. Although such agreements do not of 1488 themselves entail investment, we believe that they deserve support. The lack of management skills is one of the most serious brakes on development in many developing countries, and the provision of such skills is, therefore, a valuable contribution to development. It is also of commercial value to Britain, and may often lead in the long run to actual investment.
The scheme will be available in principle to support studies by all British private firms. There is, however, one major exception which I should mention. We do not propose to cover studies in the oil and natural gas industries. There are a number of reasons for this: in particular, it is most unlikely that a scheme of this kind, and on this relatively small scale, would provide any incentive to oil companies to increase their investment overseas. Nor would it direct oil investment to developing countries which would not otherwise have received it.
The scheme will, however, apply to studies directed at the exploitation of other natural resources. The development of mineral resources is among the most important ways in which a developing country's economy can be expanded. Unlike the case of the oil industry, a relatively small incentive, such as this scheme will provide, could be of assistance in helping a mining company to investigate known mineral prospects. It is, of course, also of benefit to Britain that British firms should be associated with the development of the world's raw materials. This is a good example of the way in which private investment in developing countries can be of great value to both the host country and Britain.
There is an undeniable case for the use of official aid in support of private investment. Under previous Governments our aid programme to India, for example, brought significant relief to British firms operating there. As I have already said private investment has a major part to play in developing countries. It brings employment and capital, together with a wide variety of managerial, technical, and marketing skills. It is, therefore, of great value in the development process, and it is entirely appropriate to use a small part of the funds allocated for development aid in support of it.
1489 Many developed countries already operate schemes of this kind, and the Government believe that it is time for Britain to do the same.
I turn now to E.C.G.D.'s existing powers to give guarantees for the benefit of exporters. As the Committee will be aware, there are statutory limits on the amount of liability that the Department may undertake. The limits take the form of monetary ceilings, under which figures of E.C.G.D. liabilities can revolve—that is to say, as old debts are paid, they make room under the ceiling for new cover to be given. However, because our exports have grown steadily in value from year to year and the proportion of total exports covered by E.C.G.D. has tended to increase, new liabilities have built up faster than old ones have run off, and the limits set by Parliament have gradually been reached. It has, therefore, been necessary for E.C.G.D. to come back to Parliament every few years to ask for higher ceilings.
This happened last in 1970. The ceilings fixed by the 1970 Act were £4,000 million for Section 1, which covers "commercial" business undertaken with the advice of the Export Guarantees Advisory Council, and £2,500 million for Section 2, which covers other business undertaken in the national interest. When the 1970 Act was passed, the new limits were expected to last for three to five years.
It is now clear that it will be three years rather than five, because E.C.G.D. business has been growing at the fastest of the rates in the range envisaged when the 1970 Act was presented to Parliament. This is a matter for great satisfaction, since it reflects a high rate of increase in, first, the value of business won by our exporters—the value of our exports grew by nearly 14 per cent. during 1971—and, second, the use made of E.C.G.D. cover—the proportion of our total exports insured by E.C.G.D. rose to 38 per cent. last year from 33 per cent. in 1969. An increase in the 1970 ceilings will be needed, at the latest by early next year, if the support given by E.C.G.D. to British exports were not to come to a virtual stop. We have, therefore, taken the opportunity of the present Bill to propose an increase in the ceilings.
Once again, we are looking forward three to five years. Over such a period, great accuracy of forecasting is not possible, but the prospects for world trade 1490 are encouraging. I look forward with confidence to a continuation of the recent highly successful record of British exporters. This is likely to mean a correspondingly high demand for the services of E.C.G.D.
At 31st December, 1971, actual and contingent liabilities under Section 1 were £3,561 million against the present limit of £4,000 million. The new limit we propose is £6,200 million. As I have already mentioned, Section 1 of the Act, which accounts for about 90 per cent. of the export business covered by E.C.G.D., is administered with the help of the Export Guarantees Advisory Council.
Section 2 liabilities, actual and contingent, stood at £2,074 million on 31st December, against a ceiling of £2,500 million. We propose raising this to £4,300 million. Section 2 cover includes many of the long-term risks, and for this reason the limit figures turn over much more slowly than those for Section 1. Consequently, although Section 2 accounts for less than 10 per cent. of E.C.G.D. business in terms of exports going forward, a very much higher ceiling is needed relative to the value of current business than for Section 1. We expect fairly heavy demands to be made on the Section 2 limit in the near future, notably in respect of cover for aircraft, and we have therefore provided for a fairly generous increased. It is our firm intention that, in dealing with applications for Section 2 cover, E.C.G.D. should continue to exercise a proper underwriting judgment in the light of its now considerable experience, and reject any unduly hazardous risks.
Adequate credit arrangements are now essential to survival as world traders on our present scale. I think it is the general view of those knowledgeable in the field that E.C.G.D. performs its task with considerable efficiency and imagination. Indeed, I am glad to know that it is generally held to be at least the equal of any other credit insurance organisation, and superior to most others in the range, quality, and flexibility of its services.
Those are the three basic provisions of the Bill, which I commend to the Committee.
§ 11.2 a.m.
§ Mrs. Judith Hart
We are grateful to the Under-Secretary of State for his 1491 full explanation of certain aspects of the Bill. Although we shall support the Second Reading, he must expect many questions at the Committee stage, and a number of proposals where we do not agree with certain aspects of the Bill or of the scheme to implement it.
While it is sensible to provide an insurance scheme of this kind for private investment in developing countries—as the hon. Gentleman said, Britain is somewhat late in doing so; most of the other D.A.C. countries did it some years ago—I profoundly regret one point about which the hon. Gentleman has been very clear, that is, the motivation for bringing in the Bill now. He has been absolutely clear about it, and his right hon. Friend the Minister for Overseas Development was equally clear about it when we discussed the White Paper on the Floor of the House. The Government regard private investment as a major, if not the major, element in the British aid programme. Not only did the hon. Gentleman say that private investment was an essential part of the aid programme, but he said that it will be essential if Britain is to meet the 1 per cent. United Nations target by 1975. This, he said, was the stimulant. He used the word "stimulant".
The Opposition do not regard the private investment element in aid as one-tenth as important as official development assistance. We regret that the Government increasingly put their emphasis on the private investment element rather than the official element. The aid programme continues to increase, but the theology of it is of great significance. Not only can one argue that private investment should be regarded as much the least important aspect of the aid programme, but one can now argue, with many sources to quote in aid, that private investment should not be regarded as aid.
I was present at a conference at The Hague a few weeks ago, attended by a number of development specialists from the United Nations, from the O.E.C.D. and from other international bodies. The consensus, expressed in the report from that conference, was that no one in the development field now regards private investment as aid. There was a general consensus that the United Nations I per cent. target is, to that extent, not appro- 1492 priate and that the target which matters is the one for official development assistance.
There are many reasons for this, which I shall not go into in depth. We explored them when we discussed the White Paper some months ago. Private investment cannot provide the essential infrastructure and services needed by a developing country. It would not seek to do so. It would not be profit-making to do so. No hon. Member would dissent from the statement that when a private firm invests abroad, be it in a developed or developing country, the motivation is not primarily to bestow benefit upon the developing or developed country. The primary motive is to make a profit. There is nothing wrong in the theology of private enterprise that that should be so.
It is not surprising that private investment in the developing countries can contribute nothing to the essential services needed by developing countries, as these do not make a profit. They are costly. It is Governments who have to pay for them. Only official development assistance can help Governments to pay for those services. Private investment cannot help with what is increasingly realised to be the key sector in a developing country, the agricultural rural sector. There is little that private investment can do there. In the hey-day of imperialism, tea plantations, coffee plantations and rubber plantations were set up in Asia and in Africa, but we do not find an extension of that kind of private enterprise now in the agriculture of developing countries; there is a withdrawal from it. In Ceylon, for example, foreign plantation owners seek to leave Ceylon and have the Government take them over because it is no longer a very profitable operation for them.
Private investment cannot help in that sector, yet it is here that the key to development so often lies. In developing countries, where from 60 per cent. to 80 per cent. of the population, and sometimes more, is totally dependent on the rural sector, this is the starting point for the raising of incomes, which in itself can promote industrialisation. It becomes the key. Private investment is rarely attracted to the poorest developing countries.
§ Mr. Nott
I know very little about this subject, but I have always understood 1493 that the development of Mexican wheat in India was at the heart of the green revolution there. Surely this was, to some extent, sponsored by foundations in the United States, which came in the private sector. Is that not so?
§ Mrs. Hart
The foundations, yes. I think that the hon. Gentleman is confusing his definition of private investment here. The Mexican wheat research, and the rice research in Mexico and the Philippines, was carried out in Mexico by the Ford Foundation and in the Philippines by the Ford Foundation and by the Rockefeller Foundation. The money came from private concerns, but it was essentially a charitable operation. There was no profit in it for the Ford or Rockefeller Foundations. They were giving money to development when they did that. Hon. Gentlemen cannot pray that in aid for saying that private investment can in any way contribute directly as investment to the agricultural sector.
The third argument is that the poorest countries do not attract private investment. Indeed, at the last U.N.C.T.A.D. Conference in New Delhi in 1968 it was said over and over again by countries like Uganda and Afghanistan that they fail to interest private investment, mainly because they are too poor to have the market, partly because they are landlocked. To the extent that private investment may contribute technological skills or know-how, it certainly fails to do so in the most needy countries. Therefore, again it fails on a very sharp criterion of what is aid and what is not, in that aid must be increasingly directed to the poorer countries and not to the least poor of the developing countries.
Finally, when looking at the contribution and the rôle of private investment we need to be clear about who gets the benefits. More and more studies are being done which show conclusively that the reverse flows back to the country from which the firm comes—back to Britain, in this case—are much greater than the flows that result to the developing countries.
At the second meeting of U.N.C.T.A.D. the following figure was quoted on the basis of work done in the United States. In 1966 private transfers—that is, not just direct foreign private investment, but including export credits, invisibles, shipping, and the rest—were recorded as 1494 amounting to $5,000 million to $6,000 million. At the same time, investment income payments from developing countries to private firms in rich countries were estimated at nearly $5,000 million a year. Therefore, the measurement of reverse flows indicates clearly that the argument that private investment produces a flow of resources to developing countries is ill-based. The fact is that the flow is in the reverse direction and this is largely why the development specialists have been coming to the view that a 1 per cent. international target which includes private investment is totally unrealistic. It cannot be regarded as a flow of resources to assist development but rather as a reverse flow helping the private firm and the private interests.
Having said that, and regretting the motivation for the Bill, regretting this Government's emphasis on the rôle of private investment as against the rôle of official development assistance, I turn to some of the provisions of the Bill and some aspects of the scheme.
My first comment is that we very much regret the fact that, as the Under-Secretary has described the scheme this morning, the development interest is totally neglected in the insurance cover scheme. For example, the committee which he has announced under Sir Frederic Seebohm which is to advise E.C.G.D. on the implementation of the scheme, is, as he described it, a committee of industrialists, people with City and business experience, not a committee that he claims has any knowledge of development or of aid or of the needs of developing countries. In other words, it is an investor-oriented committee. The scheme is therefore investor-oriented rather than oriented to the developing countries.
As another clear instance of this, in his full description of how the Government propose to proceed in implementing the Bill, the Under-Secretary has not mentioned the need for the approval of the host country before insurance cover is given. I am surprised at this, because the investment guarantee schemes that have been introduced by a number of countries provide that the scheme must be approved by the official aid agency of the Government—in this case, it would be the Department of Overseas Administration—or that the scheme must be approved by the host country to which 1495 the private investor is going, or that booth kinds of approval must be ensured before insurance cover is given and the firm is brought within the scheme. I am very surprised that this is totally missing both from the Bill and from what the Under-Secretary said in describing the way in which he proposes to operate the scheme.
Then there is the question that the scheme is not to be confined to developing countries. It is to be allowed occasionally, in special circumstances, to cover investment in developed countries. We would like to know where some countries fall in his definition. Would it include, for example, Greece and Portugal? Would it include countries which do not normally fall within the list of countries to which Britain has in the past given development assistance and with which we traditionally involve ourselves? We are entitled to ask that the Bill itself should be a little clearer and more specific as to the limitation of countries to which the scheme could apply. It is not satisfactory that we have it as vague and as generalised as it appears to be now.
The Under-Secretary said that the Government will seek to conclude investment protection agreements with host countries. Again, it is clear from any study of protection given to private investment in developing countries that bilateral protection agreements are infinitely more effective in assisting private firms if there should be war or political risks than an investment insurance scheme. To concentrate on one, with only a vague generalised reference to the other, is to get the thing upside down and not to carry out the purposes which the Under-Secretary claims to have in mind in introducing the Bill.
There is the question of how far the expenditure incurred in this scheme will be regarded as private flows in the sense of the D.A.C. present figures. It is not at all clear whether it will.
I turn now to one of the examples that the Under-Secretary gave. He quoted the great costs that there can be in schemes of this kind and illustrated the example of the United States at the moment meeting very heavy insurance costs as a result of expropriations in Chile. The Chilean case illustrates admirably what the politi- 1496 cal risks of expropriation are—I use the word used by the hon. Gentleman—particularly in view of one of the examples the Under-Secretary gave as being very valuable in terms of Clause 3 when considering the assistance to private investment to undertake investment studies.
The Under-Secretary talked of mineral resources and the very valuable contribution that firms from Britain could make in developing the mineral and natural resources of developing countries. This comes into the picture, not only in terms of Clause 3, but also in terms of the insurance cover scheme, because presumably a firm which was developing mineral resources in a developing country would not only be eligible for pre-investment study help from the Department of Overseas Development Administration. It would also be a firm likely to be accepted into the insurance investment guarantee scheme.
It is becoming increasingly clear that a developing country is unable to plan or succeed in development if it does not have control over its own basic resources. Therefore, when we talk of the natural resources of developing countries, be they copper or any other minerals, we are talking about the very heart of their potential for development, and in doing so it is totally unreasonable for private investors to suppose that a developing country will continue to be able to afford to permit private interests to be in control of these basic resources
In many cases the political risk is really a political necessity, for the developing country. It must transfer basic resources into the hands of the State. It must carry out what it calls public ownership, what we call expropriation, which is necessary for development. Thus, insurance cover is a reasonable proposition and it is one of the reasons for welcoming the scheme, because it reconciles the interests of private investors with the interests of developing countries. But it does mean that one must be careful about the motivation when, as in Tanzania or in Chile, nationalisation takes place. Expropriation occurs, and there are then difficulties about the payment of compensation.
Studies which have been made of private investment and the encouragement that can be given to private investment in developing countries show clearly that, 1497 as well as bilateral agreement with the host country, which provides more adequate protection than insurance cover alone, agreements on the legal system of compensation, which comes into play when expropriation occurs, tend to be more important.
That is how it is seen by the World Bank, which takes as its criterion of whether a developing country is behaving well in a process of expropriation what legal remedies there are to pursue the question of compensation.
There can be a danger of this insurance scheme being exploited, much as the Opic scheme in the United States is tending to be exploited by the copper companies which have been expropriated in Chile. It is becoming increasingly well known that during the past few years the reverse flows from Chile, the profits which have returned to the Anaconda Company, and the other copper companies in the United States, have been enormous because these companies failed to develop the copper mines normally, in anticipation of expropriation. Thus one has the situation that private companies, having nakedly exploited a developing country, are claiming insurance cover from official funds of the private firm's own Government.
There can be some very difficult equations here. These must not be overlooked when one takes into account that expropriation is increasingly likely to occur. Although it may become irritating to private firms, it should be welcomed as part of the process of development. That is not a popular thing to say to people whose interests lie in private enterprise rather than in developing countries, but it is, nevertheless, happening.
I should like to make one final reference to Clause 3. I know that my hon. Friends have much to say on the Bill. We have grave doubts about the wisdom of using official development assistance in order to give even a modest subsidy, since we believe that private investment is not to be regarded as aid. If the investment is not aid, it is illogical to use official development assistance to further private investment. We also have considerable doubts about the extent to which the official aid budget will be affected by this. It may be a tiny amount now, but it could be more. More than anything, 1498 it is the general principle which is involved here.
While we welcome the introduction of the scheme on investment guarantees, we do so without the misconceptions of the Government about its effect on developing countries. We doubt the motivations which led them to introduce the Bill, and we shall have a number of specific points on which we shall require more information, and perhaps some changes in the Bill itself, as we move into the Committee stage.
§ 11.25 a.m.
§ Mr. John Nott
I want to make one or two comments on the speech of the right hon. Lady the Member for Lanark (Mrs. Hart). She clearly knows a great deal about the subject—she held an important appointment in the last Government—but I think that her remarks were weighted by her political prejudice. We heard a lot of theology, and little practical advice. She told us that private investment might not be suitable for infrastructure, but she bracketed that with the comment that the Committee already realised this. We do realise that, and there was, therefore, no need to comment upon it.
Private investment has been vitally important in the oil sector, in the mineral exploration sector, and in the agricultural sector, and it will continue to be so. I am not clear why the hon. Lady grew so vehement on the subject of private versus public investment. After all, a few years ago the Select Committee on Overseas aid—not a sectarian Committee, but one consisting of Members from both sides of the House—concluded, in paragraph 170 of its Reportthat Britain should unilaterally insure private overseas investment in developing countries.That was the unanimous recommendation of that Select Committee, and its advice was good, even though the right hon. Lady may now dissent from its judgment on that occasion. That was the impression I gained from the tone of her remarks, because they were not friendly towards private investment. The right hon. Lady is entitled to her views on private investment, but both the U.N.C.T.A.D. and Pearson targets include a degree of private investment, and I am more inclined to pay attention to the U.N.C.T.A.D. and Pearson recommendations than I am to hers.
1499 As far as I know, the Pearson Committee laid down a percentage for public investment. It laid down 0.7 per cent. as the target for public investment, so I do not know why the right hon. Lady should get so heated about this subject. The Pearson and U.N.C.T.A.D. recommendations were in favour of a large proportion of the remainder—between the 0.7 and the 1 per cent.—being made up by private investment.
I realise that the right hon. Lady sees herself as the protector of under-developed countries throughout the world, but I would have thought that without her assistance they are perfectly capable of saying that they do not want private investment. There is no obligation upon an under-developed country to accept investment if it does not want it. The evidence is that throughout the world under-developed countries are keen on receiving private investment. Such countries can make up their own minds without advice from the House of Commons. It is clear that in a great number of countries—Mexico, India, wherever one goes—private investment from overseas is greatly encouraged, and that is an extremely good thing.
I would also have thought that the United States Agency for International Development is able to defend itself against Anaconda and the American copper companies, although no doubt A.I.D. may now and again need a little assistance from the right hon. Lady in deciding its policies.
The right hon. Lady said that the whole scheme was investor-oriented. This is an insurance scheme and this is its purpose. To that extent, it must be investor-oriented; it is not an insurance on behalf of the host country. I do not think that the right hon. Lady is so totally against private investment as she makes out.
I welcome this excellent Bill. Practically the first Amendment that I tabled when I became a Member of the House were Amendments to an E.C.G.D. Bill in 1967. Those Amendments, on 13th February, 1967, had the objective of giving an investment guarantee of this nature. It is rather a pity that we have had to wait so long, until the present Government came to power, to bring in measures of this sort. As the Under-Secretary said, we are one of the very 1500 last countries in the developed world to bring in an investment guarantee of this nature, and I certainly welcome it.
May I ask the Under-Secretary, as presumably he will speak once more, if the insurance is available for what I might described as creeping expropriation. In circumstances where an under-developed country has private investment, and where bit by bit it makes it more and more difficult for an investor company to operate in the environment of the under-developed country—for instance, it may make its transport facilities more difficult to operate—and slowly the company is squeezed out after a period of years, which is a common situation, would the insurance be valid?
I assume that insurance would cover convertibility and exchange risks. Would it cover devaluation or revaluation? I do not necessarily think it should, as this must be part of the judgment of the person making the investment. Will the insurance be able to cover reinvested earnings? The Under-Secretary said that 100 per cent. of the initial investment would be covered, but would it cover earnings which are brought back to this country?
Finally, there is the question of the premium. The average premium of E.C.G.D. is now about ¼ per cent. on E.C.G.D.'s cover for exports. Figures that I read were that up to now only 4 per cent. of premium income over 20 years has been paid out in the case of the United States and 2 per cent. over 10 years in the case of Germany. I see that we want a conservative start and that experience must be gained. but 1 per cent. seems a rather high figure to get this off the ground.
§ 11.35 a.m.
§ Mr. George Cunningham
May I, in the absence of my right hon. Friend the Member for Lanark (Mrs. Hart), say a word in her defence after the comments of the hon. Member for St. Ives (Mr. Nott), although she needs no defence from me. I did not regard any of my right hon. Friend's remarks as being unduly critical of the rôle of private investment in development. Everyone who has been engaged in this field for some time realises that there is some private investment which is very helpful and conducive to development of the host country and there is other private investment which is not. 1501 Of course a scheme of this kind is investor-oriented, in the sense that it is there to protect the investor against risks, but the investor-orientation to which my right hon. Friend was referring was the fact that it seems to us to be extended to protect the investor wherever he invests and whatever he invests in, whether his project is conducive to development or not.
The hon. Member for St. Ives referred to the Pearson target within the target of 0.7 per cent. of G.N.P. for official development assistance. I hope he will join those of us who nag at the Government to give governmental support to that target. The difficulty is that the present Prime Minister, who paid a very noble part in 1964 in getting the original U.N.C.T.A.D. 1 per cent. target through, which related indiscriminately to private and official flows, has become stuck on that idea ever since. if the Prime Minister notices that those interested in this subject have moved on and greatly desire a target within the target, he himself refuses to see it or to mention it. While our performance on the 1 per cent. target—the public and private flows together—has certainly been rising, our performance on official flows has been falling sharply. It is not a case that our performance on the 1 per cent. target has been rising principally because of private investment. It has been rising because of the private flows, and mainly because of the export credits element in the private flows.
It would have been more helpful if, instead of arranging the Second Reading debate and telling hon. Members that he would table a couple of papers that they would be able to read after the debate, which would enable them to study the scheme that he proposed to introduce, the Minister has tabled the schemes in draft to enable hon. Members to see them first. Instead of the Minister gabbling through his long written statement, which was not easy to follow, we could all have read it.
I have no doubt that the bureaucratic answer is that until the House has given its approval to the idea on Second Reading it would be wrong for the Government to prejudge the matter by pretending that they had their ideas all worked out. That is a lot of baloney, and if that is an established practice of the House 1502 of Commons, it is one of the many daft practices which we ought to give up as quickly as possible. We could have a more useful discussion if we had the schemes with us here now. This morning's discussion and that to take place on some other occasion, because I cannot see that we can get through this important business this morning, must be imperfect because we are trying to remember such points about the scheme as the Minister saw fit to give us in his speech.
There were a number of obvious points about possible schemes which the Minister did not cover. In the White Paper paragraph 11, the Government stated baldly that they hadconsidered, but rejected as being inappopriate and undesirable in principle, a variety of suggestions for subsidy, by way of grant or loan on preferential terms, of selective private investment in developing countries.No reasons were given as to why that was thought inappropriate or undesirable in principle. The Government may be right, but we are entitled in this debate, if not in the debate on the White Paper, to some explanation, and preferably a well reasoned explanation, of that decision.
In the second half of that paragraph, the Government said:Less direct methods of achieving similar results by tax concessions have also been rejected.Again, no reason is given. I presume that, if one asked the Minister why one cannot have fiscal devices to encourage investment in developing countries, he would say that it is impossible to devise fiscal means which discriminate between countries. In fact, the Americans do it. The Minister claims to be familiar with the way in which other countries operate their schemes in this respect. And so he should be; they have all been well set out in published documents. The Americans have found a way of doing it. It is moderately effective in giving a little edge to investment in developing countries, and I should like the Minister to explain why the Government could not do that sort of thing here.
I doubt that the introduction of a scheme guaranteeing investment will have any visible, quantifiable or noticeable effect on either the volume or the distribution of British private investment. In some countries, for example, Canada, a 1503 country which is a big capital importer and where investors are not accustomed to investing overseas, or certainly in developing countries, the introduction of a scheme like this has a certain publicity effect in making investors more aware of market possibilities in developing countries, which may have an effect on volume and distribution. In the Scandinavian countries, also, which are not much accustomed to investing in developing countries, it may have the same effect.
On the whole, British investors are well aware of the markets for investment in developing countries and of the risks involved. While it must have the effect of increasing the level of investment rather than decreasing it, we shall not see as a result of this scheme more than a 5 or 10 per cent. jump in investment. Moreover, one could never claim that the jump, if it came about, was attributable to the scheme. There may be some effect in switching what investment does occur from low to high-risk countries and from low to high-risk projects. But even that has been questioned by people like Professor Paul Streeton who have been operating in this field for a long time.
I come now to Clause 4, which raises the ceiling for the outstanding credit under the Export Guarantees Act, 1968. In principle, it is desirable that those who wish to buy British goods should be able to have the extra facility available under this scheme. However, the Minister did not mention, and he should, the serious development in the statistics in recent times.
As I said a moment ago, the part of our performance on the 1 per cent. target represented by the increase in the outstanding amount of export credits is high, and is becoming higher. Up to about five years ago, one took it that that figure was about £40 million to £45 million a year. It seemed to remain almost suspiciously static, and I suspect that its static nature was attributable as much to imperfections in the gathering of the statistics as to what was really happening. In recent years, it has gone wildly up. In the O.D.A.'s latest publication of statistics, the figures go up, from 1966 to 1970, £47 million, £41 million, £58 million, £110 million, to £181 million. In 1970, £181 million was the increase 1504 in the amount of credit outstanding, and that is only to developing countries. That is quite a bit more than the net outflow of official aid.
Britain is not quite alone in this respect, but she is far in advance of the others. The other countries tend still to have something like a quarter of their official flows represented in the figure for the increase in export credits. If donor countries go on supplying export credits, on commercial terms, at that volume to developing countries, the indebtedness of developing countries will become even more serious than it is now. I do not say that, therefore, we should not have raised the limit on export credits, but this is an aspect of the situation and a danger of which the Minister should at least have shown some awareness when he introduced the Bill. He ought to touch upon it when he winds up.
On the question of the insurance scheme itself, will the scheme cover oil? Will investment in petroleum exploration be coverable by the scheme? The United States scheme, which is much more ambitious than most others, does not cover oil. The Minister may say that it is not the Government's intention to use the scheme to cover oil exploration. If that is the case, I should prefer to see that exclusion written into the Bill and not left to Ministerial discretion, since investment in oil activities is a large part of our overseas investment, as well as that of the United States and all Western donor countries.
I agree with my right hon. Friend in deploring that the Advisory Committee which is to help operate this scheme appears—although, again, we have to think of the names he mentioned and try to think who they are—to have no representation of people well informed on the aid and development scene. There is no provision, as my right hon. Friend says, such as there is in many other donors' schemes, that the O.D.A. has to agree to any specific proposal. There is no provision that the O.D.A., as such, will be represented on the Committee.
It may be said that we do not do that sort of thing, and we do not provide that, when one Department does something, it must involve another Department. In fact, we do it every day, and it becomes so normal that we do not notice it. Almost every Bill says that we can do 1505 something "with the consent of the Treasury". It would have been perfectly easy to say that the E.C.D.G. can do this with the consent of the Overseas Development Administration, the Foreign Office, or whatever is required. That is what some other donors have brought themselves overtly and in terms to do, and it is something which we should consider when we look at the Bill in greater detail.
The scheme is not limited to developing countries. I understand the difficulty in defining or in listing developing countries, but I was worried by the Minister's qualification to his statement that it was intended to operate the scheme only in developing countries. He implied that if an investor wants to invest in a developed country, that will be considered on its merits. If an investor comes along with an absolutely rock safe investment and chooses to pay the premium for it, why turn it down?—except that the risk thereby nominally taken on will bring one up against the ceiling earlier than otherwise, and will therefore, at least notionally, limit the amount of risk one can take on in developing countries. It would have been better to cut out developed countries entirely, and to say that there was no intention of operating a scheme of this kind in a developed country, leaving the definition of "developed" and "developing" to be decided by the Government at the time.
The United States and Germany specify that it will be a condition of the offering of insurance that there should be an agreement between the donor and the host Governments about the protection of investment. I agree with my right hon. Friend. I cannot see why that is not a provision in our scheme, too. This should be explained. In the White Paper we told that the scheme will be introduced. As an afterthought, paragraph 10 states:The Government will also seek wherever possible to conclude bilateral agreements …Surely there is an inter-relation that if there is an agreement the risk is less. It would be normal and only prudent to obtain from the host Government that degree of assurance before taking on the risk. If there is no agreement, that would, on normal commercial criteria, justify a higher premium. That is what other Governments have done. If we 1506 intend to do something different, we should at least explain it.
Most other Governments which offer a scheme of this kind specify that the projects covered must be projects with development priority or which are of a development character. The Danish scheme does that, as do the Swedish and Belgian schemes. On the Netherlands scheme—the Minister will be familiar with this, because he has gone into it deeply—I read an interesting passage:After lengthy debates"—on the Netherlands Bill, like that which we re now discussing:the Bill passed the Second Chamber with two amendments. … In the course of the debates great emphasis was placed by the Second Chamber on the primary requirement that investments by F.M.O. should have a substantial development value, and should in a meaningful way contribute to the social and economic advancement of the host country and as such be wanted by the host country. Amendments, stressing this point and requiring F.M.O. to receive in writing from the host country's competent authority approval of proposed investment were in agreement with the Governments views.….That scheme is not the same as ours. It is a more direct investment scheme. The principle is the same. The Netherlands and the other countries which I have mentioned, and Germany, all specify—all, except Germany, very specifically—that the project covered by the insurance must have a high development value. The Germans are more vague in their wording and provide that the scheme must be a "worthy" scheme, but development value is one factor to be taken into account in deciding whether the scheme is a worthy scheme.
One point of detail which the Minister should cover is this. So far as I can see in the Bill, while the person or company to be insured must be British or resident in this country, there is no requirement that if there is a local company that company must be controlled by the person being insured, and that he must have a majority control of it. I may have misunderstood the Clause. If so, I shall be grateful for reassurance. It is a common form in other schemes to specify that a company whose risks are being insured must, in its local activity—if there is a separate local activity—have a majority shareholding, because only then is it in a position to behave in such 1507 a responsible manner as not to provoke the expropriation.
Clause 3, on pre-investment studies, raises a number of questions which the Minister only skated over. We should know more if we had had the privilege of seeing the description of the scheme before the debate instead of afterwards. My right hon. Friend asked whether the cost was to count as official aid. I should like to know whether the Government believe that the cost would count towards performance of the 1 per cent. target either as official aid or as private. I do not see how it can count as one or the other. It ought not to come out of the aid programme figure for domestic purposes. There are plenty of precedents, from the years of the Labour Government for spending money of a quasi-aid nature in developing countries but deciding that because it was not pure aid enough it should not come out of the purse of the Minister of Overseas Development but from some other purse. That should be done in this case.
Some activities mentioned in the Bill will be self-financing. This activity will not. I hope that the Minister will say that the cost of the 50 per cent. share in the pre-investment studies, if it has to be paid, should be paid by the Government, but not out of the figure in the public expenditure lists for aid. We should also be told what the criteria will be for accepting investigations under the Clause.
There is, in this Clause, as in other Clauses, no limit to developing countries. Who will assess whether a project is worthy of the Government putting in the 50 per cent. figure? If the 50 per cent. figure is always to be applied, why is it not in the Bill? If the Government intend that in particularly deserving cases they will be prepared to carry more than 50 per cent. of the cost—as the Americans do—the Minister should have mentioned that, and there should be a provision in the Bill that the norm will be 50 per cent. but that the Government have a special right, in extraordinary cases. to carry more of the cost for stipulated reasons.
Those are all the points of a general character that I wanted to raise at this stage, but I should like to reheat that we could have had a much more useful debate had we been able to see the 1508 schemes in writing before the start of the debate.
§ 11.58 a.m.
§ Dr. John Gilbert
I add my congratulations to the Minister on the general principle that lies behind the Bill. It has been long overdue. Having said that, there are many weaknesses and gaps in the Bill, to which I, like my hon. Friends, shall wish to draw attention during the Committee stage.
Speaking generally, Clause 1 is particularly long overdue, though, like my hon. Friends, I have a certain reservation as to what increase in private investment this will lead to. Time alone will tell; it is not particularly fruitful to speculate about that now.
Clause 3, in principle, is generally helpful, but I share many of the reservations of my hon. Friend the Member for Islington, South-West (Mr. George Cunningham).
Clause 1(1) speaks about "insuring investment overseas". This is not a genuine insurance operation at all. It is a guarantee operation. An insurance operation is one which is properly founded on an actuarial basis. The Minister conceded from the beginning that we have no real basis for calculating what the loss experience is likely to be, and that the rates will therefore be set quite arbitrarily. He drew attention to the experience of the United States and Chile. We must be clear that we are not engaging in an insurance operation but in something of a totally different nature—a guarantee type operation.
I should like briefly to draw attention to various serious lacunae in the Bill. First, Clause 1(2) provides thatThe Secretary of State may under the arrangements enter into agreements with persons carrying on business in the United Kingdom".It would appear from that that any company or individual apparently domiciled in the United Kingdom would be eligible for guarantee coverage under the Bill.
That is a very unsatisfactory state of affairs. The Bill is drafted far too widely. It would be intolerable if we were to be handing out guarantees to corporations which, though normally domiciled in this country, in fact have their major beneficial ownership abroad. 1509 I am thinking particularly of subsidiaries of multi-national corporations where the parent company is outside this country.
One can imagine situations where the subsidiary in this country of an American parent company could ask the Department for insurance about an investment which it proposed itself to make in a third country. There is nothing in the Bill to prevent its being eligible for such coverage.
If we accept that view, the Government will be in a highly exposed position. As the Minister knows, there are a great many countries where the writ of the United States investment guarantees scheme does not run. As my hon. Friends have pointed out, the United States and Germany have requirements, which are not laid down in our scheme, that no guarantees will be issued except in respect of countries with which the investing country has negotiated a bilateral agreement.
As far as I can see, there is nothing to stop, say, the Ford Motor Company in this country having channelled through it a major investment by the Ford Motor Company of the United States in a country where the United States does not offer investment guarantee facilities. As the Bill stands, we should be in the position of having to guarantee an investment nominally undertaken by a company in this country but which, in fact, would be an investment by an American parent company.
When one considers various other gaps in the Bill in terms of how one determines the nature of the political risk that shall bring the contract into effect, one sees that we shall be in a highly exposed position. For example, a host country might take violent umbrage at the activities of the United States Government
One could envisage circumstances in which the behaviour and comportment of the investing company in that country were blameless but for some reason or other the host country took violent exception to an activity of the United States Government. The host country might for purely political reasons directed towards the United States Government turn round and nationalise, expropriate, confiscate or sequestrate the property of the investing company in its territory. We should then be paying the bill for political acts provoked by the United 1510 States Government. That is a degree of exposure which I for one find totally intolerable.
Again, the Bill is very vague in its description of the types of loss which are covered. The only reference I can find in the Bill is this:the Secretary of State undertakes to indemnify the other party to the agreement against any loss of a description specified in the agreement.Surely, before we can be prepared to agree to something like that we must have some idea of what the standard form of agreement says. Let us not be led astray by thinking that situations of this kind are on all fours with the other activities of the Export Credits Guarantee Department.
Everyone accepts that export credit guarantees are a useful job which is done in business with every other country in the world. But we are dealing here with matters of high political sensitivity. It is very important that we should know what types of risk will be covered under the Bill.
The hon. Member for St. Ives (Mr. Nott) raised the very important question of whether or not devaluation will be covered. I support his request for information on that. Will sequestration be covered? I could find no mention of it in the White Paper.
The White Paper just talks about political losses in a very general way. It says:The scheme will provide cover against all the main types of political' risks (i.e. loss due to expropriation…loss arising from damage to or destruction of tangible property as a result of war, revolution or insurrection "—there is no mention of civil war as distinct from insurrection:and the inability to remit profits or earnings or repatriate the original investment but not for commercial risks.No mention is made of situations in which losses can arise where the host Government have broken a contract, shall we say, with the investing country. It makes no reference to situations where political conditions have arisen which make it impossible for the investor to carry on his activities profitably although there has been no overt political act or breakdown of law and order which could be said to have contributed to that state of affairs.
1511 I can see nothing in the Bill which refers to the responsibility of investors to behave properly, along the lines which my right hon. Friend the Member for Lanark (Mrs. Hart) indicated would be necessary in terms of some sort of code of agreement for the investing corporations.
In this respect, I draw the Committee's attention to the phrase used in the United States agreements:The term expropriation 'includes but is not limited to any abrogation, repudiation, or impairment by a foreign government of its own contract with an investor; where such abrogation, repudiation, or impairment is not caused by the investor's own fault or misconduct"—That is a very important condition:and materially adversely affects the continued operation of the project.'Clearly, we shall need some safeguards of that type. I hope that the Minister will be able to give them when he sums up.
There are a great many other types of restriction on the activity of an investing country which can lead its operations to become unprofitable—restrictions on its ability to import vital materials or parts; restrictions on its ability to export to certain markets for political reasons; all kinds of political activities—tax discrimination against it, requirements of certain personnel policies, and so on. We want to know whether or not we shall be committed to covering losses caused by events however proximate to or remote from the operation of the investing corporation.
There is another matter which is not covered in the Bill and with which I hope the Minister will deal. There is no mention of how we shall know when a loss is deemed to have arisen. One could get a situation where inconvertibility might be regarded as a loss. How long does the inconvertibility have to persist before it is determined that a loss has taken place? We need more information on that.
What degree of inconvertibility will be deemed to have caused a loss? A host Government may declare that only a certain proportion of profits or capital may be remitted. If losses arise out of that because the other balances are frozen, shall we be exposed to risks of that kind? If there is a devaluation- 1512 type situation in which a certain proportion of capital and profits can be returned at a given exhange rate and the remainder at a considerably less advantageous exchange rate, are we supposed to be covering the investor for situations of that kind?
It would be intolerable if we were to be in the position of being asked to give a blank cheque to guarantee investors who are putting an investment into a country merely to milk it and take out 100 per cent. of the profits year after year, rather than plough them back into a country where this type of investment is supposed to be encouraged by the Bill. On that point, we must be very careful to see that political losses are not allowed to' shade into commercial losses. It is often difficult to find a satisfactory dividing line between the two.
The Bill says nothing about how we define "investment of resources". That phrase can cover a wide range of different types of investment. The White Paper referred tonew direct investment whether in equity or loan form",but that does not take us much further forward.
We want an answer to the point raised by the hon. Member for St. Ives about whether retained profits are to be invested, and we want to know the term for which any investment will be eligible for coverage. If an investment has been able to exist unimpeded by political activities for 20 years, will the exposure of the British Government continue? Will the British Government still require insurance premiums to be paid on that investment? Will the rate start to drop after a certain period?
There is, next, the point mentioned by my hon. Friend the Member for Islington, South-West (Mr. George Cunningham). We hope to see a requirement that the investment should be one where the investor obtaining a guarantee from the British Government would, in effect, have satisfactory control over the investment so that he could be held to be responsible for the subsidiary company acting in a proper and suitable way.
With regard to the definition of the term "investment", again I draw the Committee's attention to the United 1513 States scheme which defines this very closely. I do not say that it should be the be-all and end-all of our own attitude, but it is worth considering:The term investment is defined as including ' any contribution of capital commodities, services, patents, processes, or techniques in the form of (1) a loan or loans to an approved project, (2) the purchase of a share of ownership in any such project, (3) participation in royalties, earnings, or profits of any such project, and (4) the furnishing of capital commodities and related services pursuant to a contract providing for payment in whole or in part after the end of the fiscal year in which the guarantee of such investment is made.'It is important that we should know exactly what type of investment we are being asked to provide guarantees for in the Bill.
Further to that, I can find no provision in the Bill for any publication of reports of the activities of the E.C.G.D. under this investment guarantee scheme I draw the Minister's attention to Section 8 of the Export Guarantees Act, 1968, which provides that:The Board of Trade shall publish quarterly—That is the very least we could expect to have as reporting requirements under the proposed arrangements. For myself, I see no reason why the E.C.G.D. should not on a regular basis publish its country-by-country exposure under the scheme. The very least it can do is to indicate the number of guarantee applications that it has granted for each country.
- (a) a return showing the aggregate amount of the guarantees given under Section 1 of this Act since the date of the last previous return under this paragraph;
- (b) a return showing the aggregate amount of the guarantees given under Section 2 of this Act since the date of the last previous return under this paragraph, and of the amounts paid by the Board of Trade sine that date for securities created in pursuance of such arrangements…"
I entirely endorse what has been said by my hon. Friends on the subject of less developed countries. There is no reason whatsoever why we cannot have, if not a definition of less developed countries, a list of less developed countries, so that we know precisely to whom these guarantees will be available at any one time. If the list has to be changed from time to time, so be it.
There is no point in trying to pretend that the information will not come out, 1514 because businessmen will constantly request guarantees in regard to every country under the sun. We shall be reduced to trying to pick up bits from the gossip columns in the financial newspapers to find out whether one country is in or another is out. A thoroughly unsatisfactory state of affairs has been contemplated. There is no reason at all why we cannot have a full list of the countries for which the guarantees are available.
I note that paragraph 7 of the White Paper says:ECGD will have discretion to decide whether to cover investments in certain countries or particular cases, or to restrict or modify cover in any way.That is basically a negative discretion, a discretion not to do certain things.
It appeared to me that the Under-Secretary was seeking to give the E.C.G.D. unlimited discretion to guarantee investments wheresoever and in whatever amounts seem suitable to E.C.G.D. That, again, is the kind of blank cheque which I should be most reluctant to give to the Department—not that I have any criticism at all of the way in which E.C.G.D. has operated in the past. I have a very great admiration for its work. But we must realise that what is being proposed here is a very significant extension of its activities, and one which, as I said previously, has very sensitive political implications.
I note that there is no mention either in the White Paper or in the Bill of any element of Commonwealth preference in the scheme. I keep a fairly open mind about that, but I should like to hear the Minister's views. The world is unfortunately becoming increasingly polarised into rival trade blocs. There is the Common Market, with its associated territories. There are more and more frequent reports in the Press that the United States is trying to set up a rival bloc involving itself, Australia, New Zealand, Canada, Japan and the countries of Latin America. We should be told exactly why there is no proposal for preference to our Commonwealth associates in the scheme.
Bilateral arrangements with host countries have been referred to. It was pointed out that both Germany and the United States require arrangements of that kind before they are prepared to issue any type of guarantee arrangements. 1515 I have a relatively open mind about this subject. I can see drawbacks in either type of arrangement.
There is no mention of bilateral arrangements in the Bill, although the Under-Secretary apparently has aspirations in that direction. If we are to have bilateral arrangements there must be some incentive for countries to enter into those arrangements. It is not good enough to say that we shall have bilateral arrangements with some countries and not with others: they must be with all or none. If guarantees are to be issued to certain countries which have not negotiated a bi-lateral arrangement with the United Kingdom, there will be no incentive for other countries to agree to such arrangements.
If we are proposing to negotiate these arrangements, is it intended that they shall specify separate sets of risk? I am not familiar with the German scheme, but the United States negotiates separate arrangements to cover war risks, expropriation, and inconvertibility. It has three specific types of agreement with the less developed countries. Is it proposed that we should follow that pattern, or that we should attempt to negotiate comprehensive agreements covering all types of political risk? If the Minister proposes to try to obtain comprehensive arrangements, I warn him that he will find much resistance and some resentment on the part of certain developing countries because—understandably—they feel that their self-respect is involved.
I have some reservations about the value of such arrangements, because I can understand why a less developed country should feel it demeaning to enter into an agreement which presupposed that it might at some time contemplate acting less than honourably towards those who had invested in the country. It might also feel it insulting that the agreement should envisage a civil war or revolution in the country. It would be understandable if the Minister found, when he came to negotiate agreements of this sort, that countries were extremely reluctant.
The hon. Member for St. Ives raised the question of the rates charged. I, too, should like to hear more from the Minister on that subject. Is it proposed that we should have a single rate to 1516 cover all types of risk? Are the guarantees to cover all types of risk? Is it essential that someone applying for guarantees under the scheme should apply for coverage for all types of risk, or will he be able to specify the type of risk under the headings of war, insurrection or revolution, and inconvertibility? Will there be facilities for standby arrangements? The United States has an arrangement under which it charges ¼ per cent.—half the rate for the existing insurance—for standby arrangements under the scheme. That would be extremely helpful to investors and would materially advance the general objectives of the Bill.
Is it contemplated that rates will vary from country to country, as between the different risks to be covered, and as between the different types of industry making the investment? Some industries have a high degree of exposure and are much more liable than others to be confronted with evidence of political hostility in the countries in which they have established themselves.
§ The Chairman
Order. I remind the hon. Gentleman that this is a Second Reading debate. He is verging on the very detailed minutiae of the Committee stage.
§ Dr. Gilbert
I accept your rebuke, Miss Quennell. You will be glad to hear that I have almost reached the end of my remarks. I wished only to give the Minister some warning of the sorts of point which I, for one, propose to raise at considerable length during the Committee stage, unless I receive assurances from him.
I repeat that I give a warm welcome in principle to the Bill, but, when it comes to its detailed provisions, I find it in some respects far too wide and in others not wide enough. My hon. Friends and I will seek drastically to amend the Bill in Committee.
§ 12.25 p.m.
§ Mr. Robert Cant
You give me courage, Miss Quennell, to rise to make one or two very general points, though you may rule me out of order for going too wide of the Bill. I suppose that it is inevitable that, in a Second Reading debate in a Committee Room, one becomes involved in such detailed points as those which have been referred to.
1517 Although I welcome the Bill, I think that, perhaps because we are in a period when we have a substantial balance of payments surplus, we are encountering some of the problems raised by export guarantees which were very widely discussed before we entered this euphoric period. One thing which emerges from the presentation of the Bill is that one of the important matters to which the Minister should give attention is the need for a world conference on the whole question of export guarantees. As it is evolving, this amounts to a question of subsidies to exports, barriers to trade, preferential arrangements, and so on. So, although in general terms I welcome the Bill, I feel that we should not lose sight of the fact that the world is getting into a strange position in this context. It may he, as my hon. Friend the Member for Dudley (Dr. Gilbert) has said, that the more we become polarised in terms of trading regions the more resentment and hostility will he generated if growing nationalism leads us into a period of increasing protectionism and declining world trade.
The other aspect of the problem is that our expenditures in respect of export guarantees are rising very rapidly, probably much more rapidly than was expected. This, in a way, throws a burden on the balance of payments. Nobody bothers about that when we are in a situation of having a balance of payments surplus of considerable magnitude. However, the Government are being compelled to reflate. It would be out of place to bring politics into our sedate discussions. Nevertheless, the Government may find that they are caught up in a situation in which that reflation leads to a balance of payments deficit more rapidly than they might have hoped for the sake of their future election tactics. In such circumstances, these little rocks which formerly looked menacing on the seashore but which are now covered over at high tide might begin to figure in our arguments once more.
In general, one cannot avoid this sort of programme, nor can one avoid extending the provisions which have been made in the past. It is rather like value-added tax, if I may throw that Common Market problem into our midst, in the sense that we are compelled to have the tax because other nations have it, 1518 though there might be profound arguments against it if it were taken by itself. The same is true of these export arrangements.
I ask the Minister to keep an eye on this growing financial burden, because we shall not always, I hope, be in the position of having 1 million or 1½ million unemployed, and a glorious balance of payments surplus of £800 million. When that surplus disappears, we are likely to have an entirely different and less euphoric discussion of the role of export guarantees, the expansion of our arrangements, and so on.
To develop that point rather differently, I do not wish to be called suspicious, but I think that we are moving into a new stage of economic development in which we may find that if we offer too generous export guarantees to underdeveloped countries we shall produce a problem for the balance of payments and, indeed, for British industry. I suspect that the Americans are suffering from that at the moment.
Moving from the current account to the capital account, there can be no doubt that the United States is greatly embarrassed in terms of its balance of payments deficit because the multi-national corporations are moving considerable amounts of short- and long-term capital to the less developed regions. That will happen at an increasing pace, and it may affect this country within the decade. Therefore, that is again a situation on which we must keep an eye.
If we ask ourselves why this is happening, clearly it is because the pattern of production in the advanced industrialised countries is changing rapidly. I remember meeting a delegation of industrialists from my constituency. One industrialist who asked questions about costs, production, and so on, was told point-blank by one hon. Gentleman opposite that the economic logic of the situation was simply that he, the industrialist, should re-establish his factory in South Korea. That may seem rather far away, and it certainly took my friend by surprise.
What is happening is that, led by the United States, though certain European countries are following the trend, industries which need relatively cheap labour are tending to establish themselves in the countries of Asia. These are not high technology industries, but industries of 1519 the secondary technological level. This is happening at such a rate, certainly as far as the Americans are concerned, that not one television set bought in the United States now is produced there. I do not want to stir up alarm and despondency on a beautiful morning like this, but if we project our thoughts forward ten or fifteen years we may find our industrialists setting up this type of secondary technology well beyond the borders of this country, and certainly outside the Common Market countries—perhaps even in South Korea or Africa.
I do not wish to dwell on that but, clearly, the more we develop export guarantees in the areas contemplated in the Bill, the more we shall encourage such a state of affairs. We shall encourage a two-fold effect. We shall put a strain on both the balance of payments current account and the balance of payments capital account, and we shall be faced with the controversy which is beginning to rear its head in the United States. As American productivity declines, unemployment rises. I think that we should consider carefully whether we should have more foreign investment abroad, or see to it that we keep investment in this country.
I am sure that I have ranged far too wide, though I may perhaps have provided a counterpoise to the detailed arguments put forward from both sides. I conclude by saying that we must welcome the Bill and the proposals to extend the arrangements in question, but I suggest that the Minister should use the interest which the Bill will generate to remind his hon. Friends that the whole question of export guarantees raises an important question in world trade and that it will become much more important as the Government reflate the economy and the balance of payments situation declines from a rosy surplus into a deficit.
§ Mr. Anthony Grantrose—
§ The Chairman
May I remind hon. Members that, in Second Reading debates, Ministers or hon. Members can speak twice only by leave of the Committee?
§ 12.38 p.m.
§ Mr. Grant
This has been an extremely interesting and thoughtful debate. It has ranged from detailed, but extremely helpful, probing points by the hon. Member for Islington, South-West (Mr. George Cunningham) and the hon. Member for Dudley (Dr. Gilbert), to the little treat of a broad-ranging, philosophical speech from the hon. Member for Stoke-on-Trent, Central (Mr. Cant), which reminded me of the times when I used to sit in Finance Committees and finance debates in the House and enjoy his contributions. I think that I need say to him only that many of his observations were meant for a wider governmental audience than myself, and I have no doubt that he will be returning to his theme in the Budget debates, for example. Nevertheless, I assure him that what he said about the dangers of the export credit rates and of a wild extension of export credit guarantees is well understood by the Government in general, and by the E.C.G.D. in particular. Britain and E.C.G.D. are very active and in the forefront of attempts to avoid the galloping credit race, which could do enormous damage to world economy. We appreciate what the hon. Gentleman says. We do not necessarily dissent from it. We have this very much in mind.
Moving to the other end of the scale, very detailed matters have been raised which are primarily for the Committee stage. I say to the hon. Member for Islington, South-West (Mr. George Cunningham)—who has great expertise in this matter and understands the problem in considerable depth, from his past experience—that no discourtesy was intended by the fact that the outline scheme will not appear until after Second Reading. This is a Second Reading debate in the broad sense. When the hon. Gentleman studies the scheme in detail, he will find that many of the questions that he and the hon. Member for Dudley (Dr. Gilbert) raised will be satisfactorily resolved. So far as they are not, there is an opportunity to return to them in Committee and to table the appropriate Amendments. I assure both hon. Members that we shall carefully study their speeches.
1521 I also assure the hon. Member for Islington, South-West that the O.D.A. will be consulted in all cases. It would not be appropriate to require in the Bill that the approval of the O.D.A. must be given. The O.D.A. has not been included in the advisory committee itself, because there are established Whitehall procedures for consultation. The hon. Gentleman can rest assured that the O.D.A. will not be isolated in this respect.
§ Mr. George Cunningham
Why would it be inappropriate to provide in the Bill that the O.D.A. could be consulted? We provide that the Treasury will be consulted. What is the difference? I know it has never been done before, but too many things in this place are not done because they have not been done before.
§ Mr. Grant
We will bear in mind what the hon. Gentleman said, but I believe that the established practice should apply in this case. The difficulties which he envisages are not likely to arise.
My hon. Friend the Member for St. Ives (Mr. Nott) referred, as did the hon. Member for Dudley, to the dangers of creeping expropriation. The hon. Member for Dudley also wanted further information about the type of risk to be covered and similar details. It is our intention to safeguard against the risks which these two hon. Members had in mind. The precise scope of the risks is being worked out in the process of drafting the standard form of contract that will be used. The points which have been made will be taken carefully into consideration.
My hon. Friend the Member for St. Ives raised the question of devaluation. Devaluation will not be covered, but lack of convertibility will be. Re-invested earnings can be covered up to 100 per cent.
As I understand it, the rate of premium proposed is a little less than the United States' rate. We must bear in mind that investment insurance is a 15-year commitment. With other rates the period is perhaps shorter. I was right to say in my speech that, broadly speaking, we hit at the upper range in this particular field. This is probably about right.
1522 In answer to the hon. Member for Dudley on the question of interest rates, we thought it right to have a flat rate, rather than a differentiating one for different countries and different circumstances, because this has the merit of simplicity. Differentiation between developing countries, on grounds of risk, would conflict with the basic objectives of the scheme. This is probably the right approach to take. As I said before, we intend to try to strike a sensible balance between what seem to be the conflicting objectives of making the scheme pay its way over a period and encouraging new investment in developing countries.
The points raised by the right hon. Lady the Member for Lanark (Mrs. Hart), were of a broader nature. She referred a great deal to motivation. The Government believe that the fundamental motive behind this scheme is one which we can all share, which is to assist in the development of the developing countries. The difference between us is only one of means, not of fundamental motive. I hope that the right hon. Lady recognises that.
I do not want to go over all the debate again, as to whether it is better to have official aid or private investment. I want only to say that the right hon. Lady highlighted one point of controversy. I maintain that our proposals are quite consistent with the Pearson proposals. They are consistent particularly with what we are in Britain—a country, rightly or wrongly, primarily concerned with private enterprise as the motive force in its economy. They are consistent with what other nations throughout the world, broadly speaking, have done. It is not right to suggest that we are doing something that is peculiar in the developed world as a whole. We are not. We are following the general broad pattern, though not in every conceivable detail.
Official aid is important to developing countries, because of its greater continuity, its concessionary terms, and its availability for many purposes for which private capital is not readily forthcoming. It is precisely in recognition of this fact that the Government have announced substantial increases in official aid in the recent White Paper on Public Expenditure. This has been a pattern and 1523 a policy which we shall adopt. Nevertheless, private investment brings benefit in the forms of essential capital and technical and marketing skill. The Pearson Report and the second U.N.C.T.A.D. both recognised the importance of foreign private investment in developing countries.
The Government believe that both aspects or aid are important. They are complementary rather than in conflict. For a country such as Britain it is natural to expect that a substantial part of financial flows will be given in the form of private investments. There need be no excessive controversy in this respect.
The right hon. Lady asked whether the repatriation of profits from foreign private investment cancel, in some ways, the value of investment in the developing countries. The Government do not believe that this is so. The Pearson Commission said that'available facts suggest that direct foreign investment has added substantially to the real national income of developing countries. In doing so, it has also enhanced their capacity to finance their future development.'Following that, the Government do not believe that there are dangers from repatriation of profits in the way the hon. Gentleman suggests.
I apologise for taking the points rather at random, but it is as I took them down.
The right hon. Lady referred to the question of the approval of the host country to an investment. The outline scheme will make it clear that any scheme or proposal must be acceptable to the host country. It will not be the practice of E.C.G.D. or its advisory committee to agree anything which was not manifestly acceptable to the host country. The outline scheme deals with this in greater detail.
The right hon. Lady referred to the question of countries to which cover may be extended. She cited Greece and various other places. In principle, investment in all countries will be eligible for cover. However, the E.C.G.D. will have discretion whether to cover investments in certain countries and in certain cases or to restrict or modify its cover in any way, depending on the view which it takes of the risks involved. Decisions on individual countries will, in general, be 1524 decided in relation to the circumstances of the application. We believe that it is right to give E.C.G.D. the discretion to consider each case upon its merits and that it would be a mistake to tie down too dogmatically, in an Act of Parliament, a set of criteria which might change from time to time. I am sure that we can trust E.C.G.D., with its great experience, to deal with this matter wisely and in the best interests of Great Britain and of the developing countries.
§ Mr. George Cunningham
Is the Minister suggesting that the decision will be taken purely on commercial criteria? In the case of somewhere like Greece or Portugal, would there not also be the potentiality of a political bar to guaranteeing investment?
§ Mr. Grant
That is true. I repeat that the E.C.G.D. will have to look at the circumstances of the particular case —whether it is in the interests of the developing country that the investment should be made; whether it is an acceptable risk, having regard to the national interest; and what degree of insurance cover should be given. It is not possible to be dogmatic in a Bill, and to lay down criteria. Each case would have to be decided on its own circumstances.
On the question of an investment protection agreement or treaty with the host country, it was implied by some hon. Members—it may have been by the right hon. Lady also—that the insurance should be tied in some way to the existence of such a protection agreement with the host country. It is our view that this would be unduly restrictive, as negotiations for such a treaty are inevitably lengthy and, indeed, might not even be practical in some cases. Therefore, we do not think it is right to tie the insurance cover to a particular investment protection agreement with a country.
1525 On the other hand, the existence of such an agreement or treaty would be a significant factor in determining the availability and the terms of the insurance for an investment in a particular country. That is probably the right approach to the problem.
There was reference to the question of taking out excessive profits in such a way that the investor in some way provoked the host country to expropriate. If I remember rightly, the right hon. Lady cited examples from Latin America. As I made clear earlier, we shall have the power to withhold cover in the event of the expropriation being provoked by the investor. This is considered in more detail in the outline scheme, where we deal with the question of particularly extortionate profit taking. Again, it seems right to leave the matter there.
I take note of the right hon. Lady's remarks, but when she studies the outline scheme I doubt she will find it to be inconsistent with the view she holds in this respect. It is the intention of the Government that there should not be cover for a company which provokes forms of expropriation. Once again, this is a matter which can undoubtedly be dealt with best by leaving it to the discretion of the E.C.G.D.
A great number of other points were raised, with which time is too limited for me to deal. For example, the hon. Member for Islington, South-West raised the question of costs. Under the investment insurance scheme, the administrative costs of E.C.G.D. in this respect, and any claims paid, will not count as an addition to our aid programme.
The hon. Member for Dudley asked why, if the scheme is directed towards developing countries, will all countries be eligible for cover. The vast majority of applications will inevitably be for investments in the developing world, because the political risks there are thought to be the highest. We do not consider that there is any need to exclude consideration of the occasional cases where an investor might seek cover for investment in a developed country since this would help to spread the insurer's risk. It is best to have a reasonable spread of risks so far as possible. Certainly, however, it would be an unusual case in which investment would be backed in 1526 what is, broadly speaking, called a developed country.
I should like to answer the right hon. Lady on one of the points which bothered her particularly, both today and in the debate last June. She fears that the effect of these schemes would be to make the poorer countries—which are the ones particularly needing aid—in some way worse off than they are already. My view is different; the absence of insurance cover for investment in the past may have led, not unnaturally, to the poorer countries receiving less investment for that reason. The fact that such a scheme is being introduced, which will give cover against risks which hitherto have frightened away investors, will do something to redress that balance about which she is worried.
I have dealt a far as I can with as many points as possible. There are many others of considerable detail which, as I said earlier, will be looked at extremely closely. It will be possible for the hon. Gentlemen, when they have studied the outline schemes, if they are not satisfied with them, to deal with these in Committee, when we shall consider sympathetically anything which they have to say.
At the moment, we seek to introduce a scheme, which is new to this country but which has been in use in most other countries in the world, as I indicated. I believe it is something which will be helpful not only to the British industry, which wants it, and our own national interest, but also will be in the interests of the developing countries themselves. I hope, therefore, that the Bill will have a Second Reading.
§ Question put and agreed to.
§ Mr. Anthony Grant
Before you finally leave the Chair, Miss Quennell, on behalf of my colleagues may I express our gratitude to you for presiding over our proceedings, knowing—as I do personally—the heavy weight of constituency work which you have to do.
|THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE|
|Quennell, Miss Joan (Chairman)||Hart, Mrs.|
|Atkinson, Mr.||Holt, Miss|
|Cant, Mr.||Nott, Mr.|
|Cunningham, Mr. George||Page, Mr. John|
|Eyre, Mr.||Tapsell, Mr.|
|Gilbert, Dr.||Walder, Mr.|
|Grant, Mr. Anthony||Wall, Mr.|
|Green, Mr.||Walters, Mr.|
|Harper, Mr.||Warren, Mr.|
§ Committee rose at one minute to One o'clock.