HC Deb 17 December 1975 vol 902 cc1378-80
10. Mr. Aitken

asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on his recent visit to Saudi Arabia and the Gulf States.

Mr. James Callaghan

I visited the area from 22nd to 30th November. I had wide-ranging talks with the Heads of State—except Sheikh Zaid of the UAE who was indisposed—and senior Ministers in each country, on political and economic questions, both bilateral and multilateral. I found abundant evidence of good will towards Britain and of the enormous potential for British exports. I am anxious that both Government and industry should exploit these openings to the full.

Mr. Aitken

Is the Secretary of State aware that British exporters, who, as he rightly says, have such tremendous opportunities in this area, are to some extent unable to capitalise on the good will engendered by the Government's diplomatic initiatives, because of certain special problems relating to performance bonds? In particular, does he realise that in Saudi Arabia many of the contracts awarded are in the range of £100 million and over, and that, because of this, many medium and even large British companies are finding difficulty in providing the essential 10 per cent. performance bond guarantees required to make them participate in those contracts? Since this is a week in which the Government are being generous in providing bank guarantees to American lame ducks in this country, does the right hon. Gentleman not think that he could do something, perhaps through ECGD, to be helpful in providing bank guarantee arrangements to successful British companies exporting to the Middle East?

Mr. Callaghan

I noted what the hon. Gentleman said in the debate on foreign affairs. When I went on my visit I took with me for the first time representatives of British industry as part of my official party. There seemed to be a lot to be said for that, and I think that it had some value. As for the financial aspect, that came up a number of times. The Joint Commission that has been established between Britain and Saudi Arabia will have its first meeting in January. This matter may be considered then. But in any case I shall draw what the hon. Gentleman says to the attention of the Secretary of State for Trade.

Mr. Flannery

Will my right hon. Friend accept it from me that many hon. Members on the Government side—and, of course, none on the other side—are deeply disturbed at the secondment of troops, amounting to their use as mercenaries, to the Omani Republic, that many of us regard this as a defence of feudalism against progressive forces, and that we deplore it and hope that it will never happen again?

Mr. Callaghan

It is true that for some years British Service men, on contract or otherwise, have been assisting the Sultan of Oman and his forces, but I feel that the invasion that has taken place and the support that the rebel forces have received from neighbouring States would hardly qualify for my hon. Friend's description. But what is important—I had a long conversation with the Sultan about this—is that, now that the rebellion seems to be pretty well over, the Sultan of Oman should proceed with a number of schemes for housing, education and social welfare. I understand from him that it is his policy to do so, and it will certainly be with the encouragement of Her Majesty's Government.

Mr. Tugendhat

Does the right hon. Gentleman agree that in the Arab world, perhaps more than anywhere else, it is important to have frequent high-level ministerial visits and extremely undesirable for those visits to be cancelled at short notice? Does he also agree that in the Gulf there is a great deal of good will towards Britain, but that that good will does not extend to the Gulf States leaving their money in London with the exchange rate of the pound depreciating at the rate that it has done over the last year and that if it continues to depreciate at that rate we cannot expect them to continue to leave their money here and bail us out?

Mr. Callaghan

On the first point, I found that there was a great desire for high-level visits from business men from this country, rather than leaving the transaction of business to legal agents and representatives. I hope that firms can do this. If the hon. Gentleman's remark about the cancellation of high-level visits was a snide reference to the Prime Minister's proposed visit, he might have the courage to say so—but in any case that has not been cancelled; it has been postponed for two or three months. Sheikh Yamani and I had a conversation about this yesterday. The hon. Gentleman's anxieties can be totally relieved.

As for the depreciation of sterling, the Arab leaders have a better appreciation of the situation than the hon. Gentleman has. They are quite capable of working out the rate of interest which can be secured in the City of London and the rate of return on the purchase of longterm gilts at the moment, and are quite capable of setting off that calculation against the depreciation of the pound—perhaps even more capable than the hon. Gentleman is.

Mr. Tudendhat

But they are not buying.

Back to