DEVELOPING COUNTRIES (Hansard, 15 April 1991)

§ Ms. Joyce Quin (Gateshead, East)
I beg to move, That the clause be read a Second time.
The new clause introduces into the debate on this legislation an element that was not really covered at the Committee stage. We are concerned about how the ECGD's services will fit into the overall trade and aid arrangements between the United Kingdom and develop-ing countries. It has been pointed out to me that the equivalents of the ECGD in many developing countries are involved more closely in co-ordinating facilities for the promotion of trade and aid. A number of west European and other developed countries have state facilities to assist their industry to identify, and to develop involvement as technical partners in, sources of know-how and technology in projects in developing countries. Such projects often lead to opportunities for funding and for the supply of goods and services. There are such business development facilities in the Netherlands, Denmark, Germany, France, Finland, Ireland, Austria and Switzerland, as well as Japan and the United States of America. Business concluded via this system is very much in the national interest of the countries concerned and we believe that a similar approach by the United Kingdom would be in our national interest.
It is unfortunate that the Bill, in its present form, does not contain a provision that would enable the Secretary of State to make arrangements to give such guarantees as appear to him to be in the national interest, even though the original Act—the Export Guarantees and Overseas Investment Act 1978—does contain such a provision. For two reasons, the provisions of our new clause would be 41 very much in our national interest. They would certainly enable British industry to become involved at an early stage in business with developing countries. If British industry is not involved at an early stage, the way is open for other countries, and, because of their more co-ordinated structure, it is easier for them to become involved at an early stage.
Such an arrangement would be in the interests of developing countries, so the system proposed in new clause I would improve our aid and development efforts. It is important for Britain to avoid losing out in trade with developing countries. Similar considerations also apply to our trading relations with eastern Europe and the Soviet Union and to the use of ECGD in that context as we appear to be losing out to other countries because of our lacklustre approach. However, as new clause 1 is about developing countries, I shall resist the temptation to say too much about eastern Europe and the Soviet Union, although I believe that I have made an important point.
Using Indonesia as an example of a developing country, I shall quote part of an article which appeared in The Independent on Sunday on 31 March. It states: Her Majesty's Treasury moves in mysterious ways, as the Government of Indonesia will testify. In 1989 our then Prime Minister was touring the Far East, vigorously waving the flag and helping British companies pick up business in Jakarta. Because Indonesia is poor, the British Government lets it pay with low-interest loans called mixed credits, which are backed by the government export credit agency, ECGD. An umbrella arrangement for such deals was due to expire on 30 November last year, so when two telecommunications contracts and one for railway refurbishment, worth £89 million between them, came close to signature, the Department of Trade, the exporters and the embassy in Jakarta put pressure on the Indonesian government to sign by the deadline. It did, and then waited for the financing arrangements to be finalised—which would normally take about 10 days. It is still waiting. The exporters and their bankers are furious, for they see this delay, linked to the introduction of a new premium system, not only as potentially damaging to business in a fast-growing market, but also as a sign that the Treasury is yet again throwing spanners into the works of ECGD. That example bears out the worthwhile nature of new clause 1 which envisages a system in which such delays would not occur.
I wonder whether the Minister has seen the interesting proposals by Mr. Andrew Brzozowski of the Commonwealth Development Corporation. He suggests a one-stop bureau, a British industries overseas projects development bureau, which would achieve the co-ordination for which we are asking and ensure that ECGD services were brought into a network that would operate efficiently for British industries in developing countries. I refer in particular to part of the paper by Mr. Brzozowski where he points out that a number of countries have one-stop project promotions offices run by multilateral aid organisations with national Government funding. There are no similar one-stop facilities in the United Kingdom, and the Commonwealth Development Corporation, and Mr. Brzozowski in particular, feel that the Government should consider such an approach. I shall be interested to hear the Minister's response. Such a network would aim to bring together potential United Kingdom know-how and technical partners to joint ventures in developing countries. It would draw attention to the finances available, including grants, concessional finance, export 42 credits and commercial funding, and would provide a vehicle for assisting the development of a total United Kingdom response to major projects.
The Minister may remember that in Committee we referred to the example of an exporter who was interested in establishing a telecommunications project in Kenya but was unable to get export credit assistance from the ECGD. The Minister subsequently sent me an unsatisfactory reply which did not give any hope that such facilities would be available to that exporter in future. If there were a co-ordinated system, as we are suggesting in new clause 1, the chance of that exporter getting ECGD assistance would be improved and he would be aware of other sources of assistance. For example, he would be referred automatically to the Commonwealth Development Corporation. I understand that that would not be the case at present.
Many of our major industries would be interested in the system proposed in new clause 1. For instance, companies in the Export Group for Construction Industries are involved in many large-scale projects in developing countries and are well aware of the value of ECGD services. They want those services to continue and to be efficiently and effectively organised in future.
Perhaps I should make it clear that, although I am anxious that we benefit from project and trade opportunities in developing countries, nothing that I have said so far undermines our comments and the amendments that we tabled in Committee. We expressed concern about the scale of military exports and sought to ensure that any project in developing countries should comply with environmental safeguards. However, we believe strongly that an effective co-ordinated system would be a good way of organising future projects in developing countries.
The Minister may say that the new clause goes rather wide of the Bill. That would be a fair comment, but we seek some reassurance on how the system will work in future. We know that there have been some moves to co-ordinate the export services of the Department of Trade and Industry and the Foreign Office recently, but our aim, and Labour party policy, is to ensure that all export promotion interests, including the Government and other agencies working with developing countries, are properly co-ordinated. For that and all the other reasons I have given, we hope that new clause 1 will get a sympathetic response from the Government.

§ The Minister for Trade (Mr. Tim Sainsbury)
I am certainly sympathetic to the objectives that the hon. Member for Gateshead, East (Ms. Quin) set out. However, I fear that I will disappoint her by saying that, although I am sympathetic to her objectives, I cannot be as sympathetic to new clause 1. Perhaps she recognises that the legal and practical effects of new clause 1 are rather unclear. It is not at all clear to me or to any rational reader how it would attain its objectives. Another problem is that the hon. Lady's remarks seem to be based on an assumption that ECGD support is always helpful to a developing country.
In effect, ECGD support is another form of commercial loan. There is a real problem —although we wish that it did not exist—that when a country is unable to service its existing foreign debt, it does not seem helpful to add to its burden of indebtedness. Quite the opposite. The hon. Lady 43 used Kenya as an example. That country has a problem servicing its existing debt burden. In those circumstances, it is more appropriate to give aid in another form.
Having said that, I assure the hon. Lady that we are conscious of the importance of co-ordinating the Whitehall machinery for aid and the activities of ECGD in respect of trade. Machinery exists for co-ordinating those activities with those of other Departments concerned with developing countries and third world development. We should not fall into the trap of confusing the role of the ECGD with that of the ODA. The ECGD's function is not to provide assistance to overseas countries, but to encourage British exports by providing services to industry here. We recognise that there is a need to co-ordinate ECGD's activities with those of the ODA and of the DTI and I assure the hon. Lady that machinery exists for that purpose.
First, in respect of export projects assisted by the aid and trade provision, for which ECGD cover for the related commercial export credit is a normal pre-requisite, long-standing procedures exist which ensure that the interests of ECGD, the ODA and the DTI are effectively co-ordinated.
Secondly, in respect of commercial export credits supported by the project group—I think that I am right to say that the hon. Lady referred broadly to commercial export credits—further machinery exists to ensure that the views of all interested Departments, which could include the Ministry of Defence, the Foreign and Commonwealth Office and the Treasury, are brought to bear in assessing the national interest case for giving cover.
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The hon. Lady will appreciate that national interest can encompass a wide range of factors—employment, security and diplomatic and trade factors. However, it can also include the developmental benefits to which she referred. A formal Whitehall committee of officials exists to co-ordinate the views of different Departments.
I said that I was sympathetic to the objectives of new clause I, but the machinery for which it asks already exists. We would not wish to confuse the role of the ECGD with that of the ODA and we do not believe that it is helpful to add to the burden of debt of a country that already suffers severely from excessive debt. I cannot ask the House to accept the new clause, I urge hon. Members to reject it.

§ Mr. Jim Cousins (Newcastle upon Tyne, Central)
The Minister's answer is much less impressive than it should be, because he has merely outlined precisely the point made by my hon. Friend the Member for Gateshead, East (Ms. Quin). There is no co-ordination of the Government's activities. The Minister mentioned a range of Departments, all of which are dabbling and meddling in different respects with different functions and purposes. He said that it would be unkind and unfair to ask developing countries which already have a substantial burden of debt to incur even more. That is fine, but where does that leave an exporter who wishes to trade with Brazil, Mexico or Nigeria? My hon. Friend asks for systematic, publicly known and well co-ordinated arrangements to deal with precisely that issue.
My hon. Friend alluded to a key issue which concerns us all, which is that on the question of military exports, 44 there is great confusion between the Ministry of Defence, the Department of Trade and Industry when it issues export licences, the ECGD and other Departments that might be involved. That is of great significance. We have heard a major statement in which co-ordination was one of the hidden themes which underpinned the discussion on that statement. The Minister merely said that a range of public and semi-public agencies such as the banks and others are engaged in this issue, but offered no assurance that they are co-ordinated, which is the purpose of the new clause.

§ Ms. Quin
The Minister said that he feared that his reply would disappoint me. I can at least say that he has been consistent, given his replies to the amendments that we tabled in Committee, where he was unwilling to accept the many excellent ideas that were suggested by my hon. Friends and I.
I am grateful for the comment made by my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) because it reinforced the points that I made. Those points were made properly and related to the position of developing countries as well as to the need for British industry to be involved in those countries as much as possible.
I did not intend the new clause to increase the indebtedness or the debt burden of developing countries and I do not believe that it would do so. We merely sought to ensure that the ECGD is brought into an overall system of aid and trade assistance and that the machinery of government and the co-operation between the Government and other relevant agencies work smoothly and effectively. From the evidence that I have seen of the way in which many European countries do that, I believe that it is something we should at least consider in detail and decide whether we should alter the way in which we organise such matters. We believe that the interests of aid and those of British industry are not necessarily incompatible. Therefore, the two should work together as much as possible in pursuit of a variety of objectives.
My hon. Friend the Member for Newcastle upon Tyne, Central referred to the debate on military exports and I referred to considerations of the environment, but those issues are not, in themselves, arguments against the co-ordinated system for which we ask. In many ways, they reinforce the request for such a system, because such considerations could be built into the system at an early stage. That would work in the long-term interests of us all.
I hope that the Minister will at least be prepared to examine closely the proposals to which I referred from the Commonwealth Development Corporation—which have been around for some time—and discuss with that organisation how the work of his Department on exports and on relations with developing countries could fit into its concerns. The new clause was devised not in a vacuum, but in response to difficulties that we know exist. Despite what the Minister said, we do not believe that the mechanisms exist to ensure that if an exporter does not receive ECGD cover for a project that he has in mind, he is automatically referred to other agencies which could assist him. There seem to be gaps in the system and exporters do not get the information that they would like. The information may not be available in sufficient quantity at a regional or local level. As the Minister knows, we raised in committee the 45 question of the desirability of proper regionalised services linking ECGD and other export services and a later amendment refers to a regionalised network.
We are aware of the gaps in the system which affect exporters and which can therefore lose valuable orders for this country and discourage exporters from trying to use the service in the future. We do not want a system that deters exports, but one that favours exports and their expansion in he future. Therefore, we do not apologise for raising this issue. We are disappointed by the Minister's response, but we shall not press the new clause to a Division.