HC Deb 26 July 1977 vol 936 cc463-8

10.55 p.m.

The Parliamentary Secretary to the Ministry of Overseas Development (Mr. John Tomlinson)

I beg to move, That the draft African Development Fund (Further Payments to Capital Stock) Order 1977, which was laid before this House on 12th July, be approved. The African Development Fund started operating in 1973 as the concessional loan arm of the African Development Bank. Membership of the Bank, which operates along normal commercial lines, is restricted to independent African States. The Fund, whose membership now includes most of the industrialised Western countries, lends on very soft terms to finance development projects undertaken by those African countries which would have greatest difficulty in servicing external debt on commercial or near-commercial terms. Since January 1977 the principal guideline for Fund lending has been to give priority to countries with a 1975 gross national product of less than $400 a head.

The United Kingdom was a founder member of the Fund with a subscription of 5,211,420 units of account—approximately £2 million.

Late in 1974 the Fund calculated that commitments would soon exceed the resources provided for the first three-year operating period. Members of the Fund approved a special increase of resources, but resulting pledges were insufficient to allow the desirable rate of further commitment up to the end of the first triennium in July 1976. The Fund therefore decided to terminate its first operating period at 31st December 1975 and sought new pledges to support commitments during a new triennium from 1st January 1976.

The agreement establishing the Fund defines the unit of account as being equal to a fraction of a gramme of gold. But following the demonetisation of gold in July 1974 sterling could not properly be converted into Fund units of account to determine the value of the subscriptions of Her Majesty's Government to the special increase and the first replenish- ment. In this situation we were unable to subscribe. However, the Fund is expected to amend its articles as soon as possible to value its unit of account in terms of IMF special drawing rights. Being anxious to participate in maintaining Fund activity at what we believe to be an appropriate level, the Government have now, subject to approval of the House, agreed to make payments to the Fund's capital stock. These payments, when made, must be valued in terms of an internationally recognised unit. This unit will now be an agreed fraction of our IMF special drawing right.

The purpose of the order now before the House is to enable the United Kingdom to make the following payments to the African Development Fund: first, £2 million as further payment to the capital stock; secondly, the additional sum of £8 million as further payment to the capital stock for the Fund's second operating period of three years beginning on 1st January 1976; and, thirdly, to maintain the foreign exchange value of the further payments so authorised. Both these further payments will attract voting rights.

I am sure that hon. Members will wish to approve this order to maintain the level of Her Majesty's Government's active participation in the work of the Fund in providing development aid to the poorest countries in Africa.

10.59 p.m.

Mr. Richard Luce (Shoreham)

It is perhaps strange that we should be taking an order of this nature on the Floor of the House. In view of the heavy pressure of business that must be got through, I shall endeavour to be brief. But it would be absolutely wrong to allow this order to go through without posing one or two scrutinising questions as we are being invited to approve the payment of an extra £10 million of taxpayers' money to the African Development Fund.

I should make it clear that I certainly do not oppose the order. The initial subscription order to the African Development Fund was introduced by the Conservative Government in 1973 by my right hon. Friend the Member for Bridlington (Mr. Wood).

When we are considering the provision of money of this nature it is right that we should examine it in the context of Whether it will be of real and practical benefit not only to the countries to which it goes but to ourselves. It must be considered in the context of developing and enhancing the trade between Britain and the countries that benefit from the aid.

I should like the Parliamentary Secretary to comment briefly on several issues. The Explanatory Memorandum states that one of the objectives is to maintain the foreign exchange value of the further payments. What exactly are the implications of that for the British taxpayer? What are the implications in terms of fluctuations in the pound? Have we agreed to such arrangements for other overseas development funds?

How sound are the operations of the Fund? To what extent is there a commercial criterion in the operation of the Fund? How viable are the Fund's projects?

Can the Parliamentary Secretary confirm whether the money is provided within the context of the changing emphasis in British aid, which means that greater emphasis is put on the poorer countries and rural areas? Do more and more projects now comply with the new priorities? If they do not, they do not fit within the overall objectives of our aid policy.

I should like the Minister to comment on the Government's view of the efficiency in the deployment of multilateral aid. Do the Government intend to spend more money on this type of banking operation, as opposed to providing money through United Nations agencies? Have the Government formed a view about the relative efficiency of the different multilateral agencies? It is important that they do.

Since we are the principal donor, what evidence is there that a considerable number of orders for the equipment for these projects come to Great Britain? It is important that we should know at least whether we are getting some return benefit.

My last general point concerns our rôle as donor. What is Britain's share of the total resources of the Development Fund? The Government's White Paper of autumn 1975 emphasised the importance of the rôle of the Arab oil-producing countries in the development of the Third world. What rôle are the Arab oil-producing countries playing in the Fund? Are any of these countries members of the Fund. If so, what resources do they contribute?

We must remember that we are being asked to approve the provision of £10 million of taxpayers' money.

11.5 p.m.

Rear-Admiral Morgan-Giles (Winchester)

I am entirely in favour of the generality of providing funds from this country and the developed world as a whole to the developing world. I say that before I ask the Minister one question: Will he tell us whether any of the fund for which further benefits are being paid is being sent to Mozambique in present circumstances?

11.6 p.m.

Mr. Tomlinson

I thank the hon. Member for Shoreham (Mr. Luce) for the general support he has given to the African Development Fund Order.

In relation to the maintenance of value, he asked what we had done concerning other funds. I give him the case of the fourth replenishment of the IDA as an example where we have managed to get a situation where there is no obligation for the maintenance of value contribution. However, that is not the case with the African Development Fund, and it is Her Majesty's Government's intention to seek amendment of Article 13 of the Fund's charter to remove the requirement for maintenance of value before the next replenishment becomes effective in 1979.

It was not practicable to do this in circumstances where we were challenging the validity of the Fund's unit of account, but when that is settled we shall press strongly with the Fund—and the managers of the Fund are aware that we shall do this—for removal of that requirement.

In the meantime we have to make provision for the existing obligation but we shall press most strongly for removal of maintenance of value obligation before coming to the next replenishment.

On the hon. Member's question about the efficiency of the Fund. I said in opening that the bank applies commercial criteria on this, although the terms of the loans are very soft and concessional. Commercial criteria are applied in the use of money.

The hon. Member asked whether the activities of the Fund coincide with the objectives of our aid policy. Clearly, the emphasis of the activities of the African Development Fund is in line with our aid policy.

The Fund concentrates its activities on countries where the average per capita income in 1975 was less than $400.

On the more general question of multilateral and bilateral aid, we could spend a long time in discussion but in the context of this order it would be wrong to give a glib or superficial reply. There are major advantages and disadvantages which vary between different multilateral organisations and I should not like to give a simple one- or two-sentence answer. It depends which multilateral agencies one is talking about, but the present balance in our aid policy is about right.

On the matter of benefits to the United Kingdom, I question the words that the hon. Member for Shoreham used when he said that we are a principal donor. The share of United Kingdom resources in the Fund is only 4.37 of the Fund.

A large number of countries contribute more: Canada, Germany, Italy, Japan, Norway, Sweden and the United States are all higher-percentage donors. Of the Arab countries, the sum contribution of Saudi Arabia, Kuwait, the United Arab Emirates and Qatar is 10 to 11 per cent., which is two and a half times greater than the contribution of the United Kingdom, but benefits to the United Kingdom exist, although not to the same degree as in some bilateral projects, because the contribution to the Fund is largely in rural development and agriculture where there is not necessarily the same degree of spin-off as there would be in other areas of activity.

Mr. Luce

Has any calculation been done on the basis of past evidence?

Mr. Tomlinson

I cannot say that for this Fund a calculation has been done of which I am aware. I shall look into the matter and write to the hon. Member about it, trying to give him fuller information.

I think that those remarks cover the main thrust of the hon. Member's question.

On the question of Mozambique, the list of recipient beneficiary countries of ADF loans that I have before me does not include Mozambique.

I think that I have answered all the specific questions that have been raised. I commend the order to the House.

Question put and agreed to.

Resolved, That the draft African Development Fund (Further Payments to Capital Stock) Order 1977, which was laid before this House on 12th July, be approved.