HC Deb 14 January 1991 vol 183 cc691-706 8.56 pm
The Minister for Overseas Development (Mrs. Lynda Chalker)

I beg to move, That the draft International Development Association (Ninth Replenishment) Order 1990, which was laid before this House on 10th December, be approved.

Mr. Deputy Speaker (Mr. Harold Walker)

I understand that it will be for the convenience of the House if we debate with this the motion on the Caribbean Development Bank (Further Payments) Order 1990.

Mrs. Chalker

The purpose of the first of these orders is to authorise a contribution of £619 million to the ninth replenishment of the International Development Association, known as IDA. This is the second biggest single commitment from our aid programme after our contribution to the seventh European development fund. We have a high regard for the World bank, of which IDA is a part. It plays a key role in the development process and the United Kingdom has been a firm supporter of IDA since its inception. IDA is by far the world's biggest provider of concessionary finance to developing countries. In the year to June 1990 IDA lending totalled !5.5 billion and in the same period the World bank approved loans totalling just over !15 billion.

IDA was set up in 1960 when it became clear that many countries were too poor to take on conventional World bank loans, which are on quasi-commercial terms. Because IDA terms are highly concessional, it is funded mainly by donors' contributions and not, as with the World bank, by borrowing on the financial markets. But IDA reflows—repayments of earlier loans that go back into the pot to help finance new ones—are becoming an increasingly important supplementary source of funds.

The World bank's goal is to promote economic progress among its borrowers so that they are fully able to turn to the world's financial markets to meet their needs. IDA, in turn, aims to bring its borrowers to the point where their needs can be met by the bank. Many countries have benefited in this way over the years. Former recipients that have graduated out of IDA as their economies have strengthened include Korea, Turkey, Thailand and Ecuador. However, most of the poorest countries of Africa and Asia continue to need substantial and highly concessional aid flows for many years to come. IDA has a key role to play in their development.

IDA resources are also significant for so-called "blend" countries that receive a mix of World bank loans on normal and concessional terms. Such countries include India, Pakistan, China and Nigeria.

Our aid programme is targeted to help achieve sustainable economic and social progress, especially in the poorest countries. Channelling funds through IDA, in collaboration with other donors, is an effective mechanism to advance that policy. At the same time, our substantial and effective bilateral aid programme is focused on the poorest countries. Thus, the funds channelled bilaterally and through IDA are mutually supportive of our central policy objectives.

IDA loans are used mostly for specific projects or programmes within individual countries. In recent years, however, a proportion of IDA resources has been used for non-project lending, mainly structural and sectoral adjustment loans. Adjustment lending of this kind provides vital foreign exchange to help finance essential imports needed to implement economic reform programmes agreed with the international donor community. As the process of adjustment proceeds, we should see a decline in the need to use concessional aid for general balance of payments support. The need will continue, of course, for sector investment and project lending to help sustain the growth that reform programmes are aiming to achieve. Up to 30 per cent. of IDA9 resources may be used for non-project lending, but the impact of the Gulf crisis will almost certainly intensify the need for adjustment efforts in many developing countries.

Our new obligation to IDA is set out fully in the White Paper, CM 1325, but it may be helpful if I comment briefly on the main features. The size and terms of such replenishments are determined through intergovernmental negotiation among interested donor countries. A total of 11.7 billion special drawing rights—about !15 billion—was agreed. Adding in the recycling of repayments on earlier loans, IDA should be able to achieve a lending programme of more than !17 billion over the three years of the replenishment. That is a much better result than we thought possible at the outset and represents a real increase over IDA8. The United Kingdom will contribute 6.7 per cent. of this total—the same share as last time. At the agreed rate of exchange, that means a United Kingdom contribution of £619 million.

We shall pay this sum to IDA by depositing three promissory notes, for equal amounts, over three years from 1990. Those will then be encashed over a longer period, to match spending incurred by IDA as a result of its commitments during the replenishment period. The costs of encashment will be met as they occur, from sums voted for overseas aid.

During the negotiations donors reviewed several policy issues. They underlined the importance of poverty reduction as IDA's central concern, and agreed that greater emphasis should be given to people and their environment. We warmly welcome this. Development will not happen if people remain uneducated and unhealthy and with insufficient access to resources. Development will not be sustainable if we do not take steps to protect our environment. The United Kingdom laid special emphasis on those issues during the negotiations and took the lead in urging the bank to do more to help with the revised tropical forestry action plan. I am also particularly pleased that more attention is to be devoted to trying to bring down the rate of population growth: a better life for all is just not possible if economic growth is outstripped by the growth in population. The prospects for sustainable development are greatly diminished when over-population leads, as it so often does, to environmental degradation.

Donors were also insistent that IDA resources must be used effectively, and that country performance should be an increasingly important factor. Again, we welcome that emphasis. We, the lenders, need to ask whether Government or public institutions are properly addressing the country's needs. Sound economic management, broadly based development, including the reduction of poverty and real efforts towards sustainable long-term developments, are all critical—in other words, good, effective government.

Many donors are above all concerned that IDA resources should be directed towards the poorest countries, particularly in Africa. In IDA8, it was agreed that up to 50 per cent. of the replenishment should go to Africa. The same share will be kept for IDA9, which I welcome. We are pleased that the needs of the large developing countries in Asia have also been recognised, but it is Africa which continues to face exceptional difficulties. The recurrence of the threat of widespread famine is but one facet of that.

Contrary to what the hon. Member for Cynon Valley (Mrs. Clwyd) said in a news release that I received today, the Gulf crisis is not hindering our famine relief efforts in Africa. Every time that Saddam Hussein refuses to withdraw from Kuwait, developing countries dependent on oil and facing increased oil prices are affected. However, I can assure the hon. Lady and the House that we are ready and prepared, and have made provision to maintain our relief programmes without interruption, come what may in the Gulf. That is extremely important.

Another difficulty is the need for economic reform and adjustment in Africa—a fact which is recognised by an increasing number of countries on the continent. The World bank has taken the lead in providing balance of payments assistance for countries prepared to adopt the necessary policy reforms. We strongly support those reform programmes and we have provided funds on grant terms from our bilateral aid programme to supplement IDA resources in such cases. Indeed, the United Kingdom is at the forefront of international efforts to increase resources available to support economic reform in the low-income, debt-distressed countries in sub-Saharan Africa. Under the first stage of the special programme of assistance for sub-Saharan Africa donors pledged a total of !6.3 billion of aid in addition to the finance available from the World bank and the IMF. That special programme is a World bank-led effort to ensure well co-ordinated financial support for the import requirements of economic reform programmes. For our part, we pledged up to £250 million of British bilateral programme aid over the three years of the special programme; that pledge has been fulfilled. A second three-year phase of the special programme has now been agreed and I am aiming to make available at least the same amount of bilateral support.

Measures have also been adopted—the "Toronto terms"—to ease the burden of debt on the poorest countries, mainly in Africa, undertaking economic adjustment. Those measures were first proposed by the United Kingdom. Nineteen countries have already benefited. My right hon. Friend the Prime Minister, while he was Chancellor, proposed ways of further easing the burden—the "Trinidad proposals". Those would involve a reduction of two thirds—!18 billion—in the stock of debt of the poorest countries. We are now seeking to persuade other creditor countries to accept those proposals.

I referred earlier to the effects of the Gulf crisis, which for most developing countries are severe. Apart from the increase in oil prices, many of those countries are suffering in other ways, notably from the loss of remittances from expatriate workers, plus the problems of reabsorbing those workers into their home economies. Many IDA recipients are seriously affected and will require extra help in this financial year, and beyond. Some countries with average incomes just above the normal upper limit for IDA are amongst those worst hit, and the bank hopes to be able to offer some IDA assistance to several of those latter countries, too. Indeed, it is because the bank is anxious to start helping as soon as possible, and because our agreement to contribute is expected to trigger IDA9's effectiveness, enabling the replenishment to be committed, that we are having this debate rather earlier than has tended to be the case in the past.

The extra assistance will come from a variety of sources, mainly by accelerated use of donor commitments both to IDA9 and to earlier replenishments that are not fully paid up and by voluntary contributions from donors. We expect to be able to help the former. We fully support IDA's central aim of alleviating poverty and its concentration of resources in key areas, especially in agricultural and rural development and in energy.

Mr. William Cash (Stafford)

Will my right hon. Friend tell us something about how we are responding to the famine in Ethiopia and Sudan and the extent to which the programme that she has identified and on which I congratulate her—she has done a tremendous job—will help to alleviate the immediate problem which is receiving so much attention in our press and elsewhere in the world?

Mrs. Chalker

I thank my hon. Friend for that comment. He will know that on 19 December I made a statement to the House announcing an extra £5 million for Ethiopia and Sudan on top of the £56 million spent in 1989 and in 1990 up to that date. I shall visit Ethiopia, all being well, at the end of this month to make a further assessment and to hold discussions with the Government and the relief organisations so that we can work out what further help may be necessary.

Unfortunately, because of the situation in Sudan it will not be possible for me to visit it, but I am in close touch with the non-governmental organisations, which are continuing, despite the pressures that they are under, to do such magnificent work there. We are receiving regular feedback of information on which we shall base future decisions. It will be very much harder to help Sudan, for the awful reason that its Government will not admit to the crisis or to the extent of the famine, and it is possible that they will not allow the food to go to the people who are starving.

As for Ethiopia, I can tell the House today that what was only a hope on 19 December has come to pass, and Massawa port has been opened. The first United Nations shipload of food has gone from Djibouti to that port and has been checked by both sides—by the Ethiopian Government and by the liberation forces. The food is now on its way to Eritrea. We hope that that project will continue well. The southern line is still being used, with food going in from the port of Assab up to Dese and being offloaded on to World Food Programme and other voluntary organisations' lorries to go to northern Wollo and Tigray. The airlift into Asmara has been working and I have put aside more money for it.

Unfortunately, it has been reported to us in the past couple of days that the airport at Asmara has been shelled by the Eritrean People's Liberation Front. We sincerely hope that the shelling will cease and that we shall continue to be able to use Asmara for the airlift at least for the rest of this month, until the running of the boat from Djibouti to Massawa port provides a regular flow of food into Eritrea and northern Tigray. I trust that that brings my hon. Friend up to date—

Sir David Steel (Tweeddale, Ettrick and Lauderdale)

May I press the Minister while she is still on this important topic? Can she give the House any information on what is happening in Somalia, given the chaos there?

Mrs. Chalker

Somalia is a very sad case. Sad to say, we have had to withdraw our staff and advise aid agencies to withdraw, too. I cannot give the right hon. Gentleman up-to-date information at this moment. There is food in the country, but it is bound to run out because while fighting is going on it will not be possible to get it from the point of entry to where the people need it. I am glad to say that our ambassador arrived back in this country safely today; when I have had a chance to talk to him later this week I shall try to put down on paper for the right hon. Gentleman what is happening in Somalia.

I welcome comments made by right hon. and hon. Members about the problems of Africa, because IDA9 will be much concerned with the needs of Africa. One of the critical aspects of the International Development Association is its central aim of alleviating poverty. I am delighted that it is concentrating its resources in key areas such as agriculture, rural development and energy. It is making welcome efforts to tackle the problems of the poorest and especially the poorer, indebted African countries. We also welcome the IDA's role in improving the co-ordination of aid from all sources.

The second order for which we seek parliamentary approval relates to a much smaller but none the less important exclusively regional institution. The purpose of the Caribbean Development Bank (Further Payments) Order 1990 is to provide for an additional subscription not exceeding US !20.9 million to the capital stock of that bank. Britain and Canada were the two non-regional founding members of the CDB and are the largest non-regional shareholders, with 10.44 per cent. each. Over the years we have given the CDB strong support, providing encouragement and guidance as well as technical and financial assistance.

The bank was set up in 1970 to promote economic and social growth in the Caribbean region. There is a hard lending window through which the bank borrows on the international financial markets on the security of capital stock. There is also a soft fund, a special development fund, whose resources are lent on concessional terms mainly to the poorer countries in the region or to those with special difficulties. At its last annual meeting in May the board of governors approved a capital increase of US !200 million of which !40 million will be paid in. The United Kingdom share is the 10.44 per cent. that I mentioned, or US !20.9 million. Of that sum, US !4.2 million will be paid in, equivalent to £2.2 million at the current rate of exchange. Payments will be phased over a number of years.

The CDB is one of the leading regional institutions in the Commonwealth Caribbean. It operates almost entirely with personnel drawn from the region and provides the focus for encouragement and retention of local skills. Its small size and restricted membership and the great disparity in wealth between its borrowing members impose constraints on its operations. We have encouraged the bank's management to improve the efficiency of its operations and not attempt too much. Last year the World bank approved a loan to the CDB for on-lending to smaller Caribbean countries. The World bank's assessment was that, although the CDB has made considerable progress in strengthening its operational and organisational procedures, some institutional weaknesses remained. Therefore, the World bank loan has a strong institution building emphasis which we welcome.

The World bank is the leading development institution and it is at the cutting edge of change for improvement in the social and economic conditions in developing countries. Successive British Governments have supported the World bank group, which includes the International Development Association, and our commitment is as firm as ever. The CDB also plays a valuable role in its region.

I commend both orders authorising additional contributions to these institutions.

9.18 pm
Mrs. Ann Clwyd (Cynon Valley)

As the Minister says, the World bank may be a leading development institution, but unfortunately it has an appalling record of funding disastrous projects and of forcing developing countries to restructure their economies so that they have to use their resources to pay their debt. It is focused on economic growth and not on people and the quality of their lives. Recently there have been signs of change. Last year, in its first report on poverty in 10 years, it recommended strategies to alleviate poverty.

The bank also appears to be developing an environmental consciousness. Both the IMF and the World bank have begun talking about taking into account how well Governments serve their people, rather than just the creditors, and are looking at—and frowning on—excessive military expenditure. These changes should be welcomed and encouraged, but we have heard words about the poor from the bank before, and nothing has changed.

Will there be a genuine shift this time? What will the Government do to monitor future bank lending? How do they propose that the bank should implement its new poverty focus? The Government have adopted a passive and complacent role, supporting both United States and World bank ideology. They have defended the bank's record, but with little debate on the issues involved. In what direction do the Government think that the bank should be going? What position was put forward by the United Kingdom executive director in recent debates on bank policy?

The three priority areas identified for IDA9 are poverty reduction, support for sound economic policies and the environment. Have the Government reviewed past policies and recommended changes for the future? How does United Kingdom aid policy fit in with the new bank priorities? What changes in policy are the Government planning? What factors determine the level of United Kingdom contribution to IDA9 and the decision not to make supplementary contributions? The answer seems to be that, as usual, the Overseas Development Administration is muddling along with no clear policy or decisions, supporting a bit of everything. The Government's attitude to the world development report on poverty provides a clear example. The two-pronged strategy for the poor—labour-intensive growth combined with investment in health and education and a safety net for the poorest—marks a significant and important change in World bank thinking, and should be welcomed.

Like the ODA, the bank has focused on structural adjustment, earning foreign exchange and paying debts to the exclusion of all else. The newly announced policies should be welcomed as a significant change. Then, every ounce of political pressure must be put into ensuring that the new policies are translated into actions, and reforming United Kingdom bilateral policies to the same end. Unfortunately, the Government have hardly acknowledged the shift by the bank. Far from pledging that the United Kingdom will now focus on poverty alleviation strategies, the Minister conveniently gives the impression that all is in hand, that no change is needed, and that we can sit back and do nothing new.

Can the Minister, in all honesty, be so complacent? We are talking about whether 300 million people can climb out of poverty by the year 2000. We are talking about the lives or deaths of millions of children. We are talking about whether Governments in the north and south will take these extra steps and make these extra efforts for the quarter of the world's population living in poverty. Why does the Minister continue to give anodyne answers about all aid and growth benefiting the poor? She should admit instead that the bank and the ODA were wrong. Growth simply does not trickle down to the poorest. Structural adjustment in the 1980s has not solved the economic crisis. More than 1 billion people live in dire poverty and it is time to focus our best efforts on them.

What is needed in the 1990s is economic adjustment which redirects resources to the poor and invests in people, along with large flows of concessional funds, debt reduction and better trade. The recommendation that a Government's commitment to poverty reduction be one of the main performance criteria deciding the allocation of IDA resources has major implications. Just how much weight will be given to this?

The Labour party would be delighted to see international funds focused on Governments with a genuine commitment to helping their citizens. Are the Government willing to back up that policy? Perhaps the Government will tell us whether United Kingdom aid policy will change in line with the bank's new thinking. I understand that the bank has issued a handbook on implementing the new poverty emphasis. I wonder whether it has been issued to the staff of the Overseas Development Administration.

The bank projects that the number of people living in poverty in Africa could increase by up to 100 million. It notes that with an extraordinary effort by donors and Governments that increase could be avoided. The bank's report on Africa in October 1989 entitled, "From Crisis to Sustainable Growth", laid out a strategic agenda for donors and Governments and called for a doubling of spending on the development of human resources. It called the target of 4 per cent. to 5 per cent. annual growth in Africa "ambitious but achievable" if donors increase aid by 4 per cent. per year in real terms to reach !22 billion at today's prices by the year 2000. Can the Minister explain how, with an aid budget planned to stagnate in real terms, the United Kingdom will play its part?

The report on sub-Saharan Africa was not a one-off shot in the dark. The conference, which was organised by the Dutch Government, began by building a consensus around the report. Who represented the United Kingdom at that conference and what views did they contribute? Are the Government supporting the movement for a new global coalition or are they, as I suspect, dragging their feet?

The special needs of Africa for concessional flows have been recognised by the bank in the form of a special programme of assistance. There is now agreement that Africa needs more aid and more debt relief, but what is being done to secure it? The bank is funding a debt reduction facility to buy up the commercial debt of the poorest countries. Those are the IDA-only countries. The overhang of commercial debt is small but weighty because it inhibits new private investment and trade. Removing it is relatively easy, but vital. Just as damaging is the debt owed to the multilateral institutions. Sub-Saharan Africa owes more than !20 billion to the World bank and last year it handed over !1.5 billion in debt servicing. How can the bank possibly promote labour-intensive growth strategies and investment in the poor when the money that it puts in comes straight out in debt repayment?

Sub-Saharan Africa owes !20 billion to the IDA and the International Bank for Reconstruction and Development. The new policies being promoted in Washington cannot be realised until the contradiction is resolved; yet we have heard little from the Government about reducing multilateral debt. Debt undermines everything else. Bank loans still stress the importance of exports to earn foreign exchange to pay for debt servicing. Export promotion often means huge capital-intensive and energy-intensive projects. That means less money for investing in the poor, and more huge dams and power stations which displace people and destroy the environment.

The Minister implies that the United Kingdom is active in the World bank but prefers to keep quiet about the powerful muscles that are stretched behind the scenes. If the United Kingdom has been willing to stand up to the bank, how is it that millions of dollars have been spent on projects which have left hundreds of thousands of people homeless and decimated so many acres of agricultural land?

Why is it that the Sardar Sarovar dam in India is still going ahead after five years of bitter controversy? Total World bank funding is !450 million, of which !250 million is from the IDA. The project will submerge 13,744 hectares of forest and 11,318 hectares of valuable agricultural land. Ninety thousand people will be displaced—yet, six years into the project, no adequate resettlement plans exist. Crucial environmental studies were not undertaken at the beginning, and World bank policy on involuntary settlement has been broken. Even basic information about the project was kept from those threatened by the dam. Thousands of "oustees" have made peaceful demonstrations, and Indian non-governmental organisations have adopted a policy of peaceful non-co-operation, calling for the project to be scrapped. Several Indian Government officials now agree that the plans should be reviewed. Members of parliaments all around the world have called on the bank to cancel the project.

The World bank responded by sending more missions and by laying conditions on the Indian Government, but in most cases it has acted too late, or has ignored the recommendations of its own staff to suspend the loan. In July 1990, credit was extended for a further year on condition that satisfactory progress was made with its conditions for improved resettlement plans. However, land has still not been found to resettle 90,000 people.

Can the Minister explain why that disastrous loan has not been suspended? Of course developing countries need energy to develop their economies, and it would be wrong to block projects which can benefit the poor because we in the northern hemisphere have abused the environment and are not prepared ourselves to end harmful practices. However, the projects in question do nothing to help the poor, but devastate their lives instead.

There is an alternative to that madness. Mega-disasters such as Sardar Sarovar need never have happened if the World bank had considered energy conservation properly. Research in America by the Environmental Defence Fund shows that if, instead of investing !1.5 billion in Sardar Sarovar, a smaller investment had been made in conservation measures—including high-efficiency motors and fluorescent lighting—that would have produced three times as much electricity. However, it is clear from World bank appraisals of that project that energy and irrigation alternatives were not adequately reviewed.

What are the irrigation alternatives? Of 246 large-scale projects begun in India since 1951, 181 are still incomplete. Some are World bank projects. Instead of sinking funds into new dams, why does the bank not review incomplete projects and finish those which are environmentally and socially sound? At the same time, the bank would do well to switch to small-scale irrigation projects which directly serve and involve local communities. Sardar Sarovar is just one example. Throughout the world, 70 projects funded by the World bank, and many IDA-funded projects, are displacing 1.5 million people; yet the bank cannot document one case in which a displaced population is not worse off than before.

Energy sector lending has become the World bank's biggest sector in recent years, accounting for up to one fifth of all loans. However, only 3 per cent. of energy and industrial sector lending has gone into inducing energy efficiency improvements in the past 10 years. In India, not one dollar of the !8.5 billion spent on the energy sector has gone into improving the efficiency with which energy is consumed. The economic benefits of energy conservation are clear. The World bank's own study suggested that conservation measures saving 20 per cent. of commercial energy used in the developing world would amount to about !30 billion per annum of total government savings, which is equivalent to about two thirds of total aid flows. It is equivalent to 60 per cent. of the net flow of resources from poor to rich due to debt servicing. Recent announcements that the bank will increase its support for energy efficiency and the recommendations on that in the IDA9 agreement are greatly welcomed. However, will the Government carefully monitor whether lending is indeed focused upon renewable energy, energy efficiency and least-cost planning from now on? A radical switch in priorities is an economic and environmental necessity.

The new IDA9 agreement contains unprecedented language on many environmental aspects of its work, and that is very much to be welcomed. It is good to see references, at last, to increased public access to information on IDA projects and programmes, public participation in IDA projects, and improvement and implementation of the bank's operational directive on environmental impact assessments. However, the bank still has a long way to go. It first announced its environmental reforms and the creation of an environmental department in 1987, but examination of projects since then shows that the hoped-for improvement in the bank's policies, especially regarding tribal people and forced resettlement, has not materialised. The goals and guidelines are there, but they have not been incorporated into the bank's operations.

The central environmental department has been marginalised as the 1987–88 reorganisation decentralised decisions to regions, while the four environmental units in the regional offices are hampered by lack of authority and small budgets. The operational directive on environmental assessment encourages, but does not require, public involvement in the process of drawing up environmental impact assessments. It states that the need for environmental impact assessments should be considered, not that it must be done, and it explicitly includes non-project and structural adjustment lending from environmental improvement assessments.

Can the Minister assure the House today that work is under way to ensure that the new environmental language in IDA9 is implemented? Can she report any evidence that the bank is making environmental assessments available to the public, carrying out environmental impact assessments in all necessary cases and involving the people most affected by projects?

The news that the World bank is to triple funding for forestry is worrying, given the bank's previous forestry record and the decision to channel those funds through the tropical forestry action plan. So far, TFAP has promoted commercial forestry and ignored the needs of indigenous people who rely upon the forests, and last year's review process has not solved that problem. For example, one of the first projects to be funded by the bank is a !23 million forestry and fisheries project in Guinea. In fact, it is a deforestation scheme, paying for the construction of 45 miles of road in or around two humid forest reserves totalling 150,000 hectares, two thirds of which are pristine forest, of which two thirds will be opened up for timber production. Just as the Government should refuse to channel funds through the TFAP mechanism until comprehensive reviews are in place, so should the World bank.

The Minister mentioned the effects of the Gulf crisis, and the level of replenishment of IDA9 more than maintains the real value of IDA8. That is also to be welcomed if the reforms are implemented and the money is well spent on genuine development. However, there is no doubt about the enormous need for concessional funds in developing countries, and the Gulf crisis has certainly exacerbated the situation.

The oil price rise is devastating third-world countries. In Mozambique, one of the five countries hit by famine, flights of food supplies have been cancelled because fuel costs are too great. In this context, I was glad to hear the Minister say that the increased costs would not hamper famine relief for Ethiopia, the Sudan, Angola and Liberia.

According to United Nations economists, the world's poorest countries will have to find an extra !32 billion for oil this year. Already crippled by debt repayments, they simply cannot afford to buy the oil to keep their economies going. At the same time, many developing countries have lost a vital source of foreign exchange as their nationals have had to flee home from the Gulf. Before the invasion, one third of Bangladesh's foreign exchange earnings came from workers in the Gulf; now Bangladesh has not only lost vital earnings, but has had to cope with transporting and supporting thousands of refugees.

The crisis has already cost African nations !2 billion last year. India, Pakistan, Bangladesh and Sri Lanka lost more than !2.5 billion. All four import oil, had strong trade links with Iraq and Kuwait, and depended on remittances from thousands of citizens working in the Gulf.

Under article 50 of the United Nations charter, countries affected by United Nations actions can claim compensation, but the United Nations' has no budget allocation with which to pay them. Egypt, Jordan and Turkey are receiving aid in partial compensation for the enormous toll that sanctions take on their economy, but the poorest nations, which are devastated by the oil price rise, have received nothing. The Government should work with others to set up a United Nations' fund to finance article 50. Without that, those least able to pay will bear the costs of the crisis.

Finally, I must say a few words about the Caribbean development bank. Like other regions, the Caribbean needs aid and capital flows, but debt and the Gulf crisis are taking their toll there as well. The current oil crisis means that Jamaica will have to pay an extra !50 million each year for its oil imports. Uncertainty over the Gulf, combined with recession in the United States and Canada, is already hitting the tourist trade, a major source of foreign exchange. Jamaica is one of the most indebted countries in the world—its !4.5 billion debt represents !1,800 for every man, woman and child on the island while gross national product is just !1,200 per person. A hefty proportion of the debt is owed to the World bank and the International Monetary Fund. Along with bilateral donors, those official agencies are now taking more out of Jamaica than they are putting in through new loans. Not surprisingly, research shows that one third of Jamaicans are unable to feed themselves adequately. The Jamaican Government want to invest in health and education, but under IMF auspices the percentage of public spending devoted to those essentials has declined.

The need for the Caribbean countries to develop and diversify their export base has long been recognised. Continued dependence on goods such as bananas could be crippling after 1992. Not enough thought is yet being given to the impact of the European single market on developing countries. The various mechanisms, such as the Lome convention and the United States Caribbean basin initiative, have not brought about sustained export growth in new sectors. The Caribbean development bank must support the continued effort for export diversification. For the British dependencies, the Caribbean development bank provides a valuable link with multilateral funds to which they would not otherwise have access.

I welcome both the orders, although I enter a caveat in regard to the Caribbean development bank. That part of the world needs every possible form of help if it is to overcome the major structural problems that exist in the region as a whole.

9.44 pm
Mr. Jim Lester (Broxtowe)

At the end of her speech the hon. Member for Cynon Valley (Mrs. Clwyd) said that she welcomed both orders. Until that point I felt that much of her curmudgeonly criticism implied that she did not. I am glad that she does. All those hon. Members who take an interest in the third world, and poverty in particular, have a very soft spot for the International Development Association and its work. As my right hon. Friend the Minister for Overseas Development said in her speech, IDA has played an increasingly important co-ordinating role in terms of both bilateral aid and major World bank aid. The fact that IDA lends on such advantageous concessionary terms—even down to no interest at all—means that it is one of the most effective ways to lend money without causing an increasing debt problem.

In recent years there has been a convergence of thought about the transfer of resources to the developing world. That convergence is to be seen in the World bank and other United Nations agencies, but it is seen in its most welcome form in the South-South report that was compiled by the third world. Many of its recommendations repeat exactly the same conditions as are laid down by IDA and the United Nations Development Programme. That convergence ought to allow us to be more forthright in supporting the ninth replenishment order.

My right hon. Friend suggested that the order deals sensitively with the principal issues and concentrates on those that cause us most concern. Poverty, which was referred to by the hon. Member for Cynon Valley, is one of the most difficult problems to overcome, not because of the World bank's original policy and our own bilateral aid but partly because of the way in which such matters are dealt with by various Governments. For example, the Government of the Sudan do not consider that all the poor people in their country are part of the system. It is difficult, therefore, to offer aid that will provide long-term assistance for the poorest people in the Sudan and similar countries. Their Governments do not recognise the existence of poor people.

When the amount of money needed for replenishment was debated, the problems in the Gulf had not arisen. Those of us who have travelled recently in developing countries know that the prospect of an increase in the price of oil, particularly in those countries that depend on the Soviet Union for their oil supplies at subsidised rates, causes dread. My right hon. Friend ought to keep that point very much in mind. Part of IDA's funds is used for essential imports. For many countries, their most essential import is oil. After the order has been approved, a further statement ought to be made about our intentions if we are to solve the oil problem for these countries in a co-ordinated and helpful way.

I welcome the statement that 45 to 50 per cent. of IDA's funds should continue to be given to Africa. Despite the bad news in the Horn of Africa—Somalia, Ethiopia and the Sudan—many of us believe that welcome changes are being made in Mozambique. It is also possible that the civil war in Angola will come to an end, which is to be welcomed, as is the prospect of the end of apartheid in South Africa. During the next three years there is the potential for pump-priming assistance to be given to those countries in Africa, such as Mozambique and Angola, that have tremendous national resources. All they need is peace and the opportunity to concentrate on their own future. Aid in the form of pump priming would be paid back a hundredfold in terms of the relief of poverty, particularly in Mozambique, the poorest country in the world yet the one with the most tremendous development potential.

Those who think much about Africa recognise that, far from being in the third world, some African countries could slip into the fourth world and way below anything that we have seen so far. We want to maintain and ensure the commitment of the ninth replenishment.

I welcome the comments of my right hon. Friend the Minister on the Trinidad terms—we seem to be debating all the "Ts"—and the Toronto terms for debt relief. I hope that the new Chancellor will pursue this with the same enthusiasm as his predecessor. We must act quickly if we are to fulfil the conditions and rules by which we approve both orders.

9.50 pm
Mrs. Chalker

With the leave of the House, I shall respond briefly to the hon. Member for Cynon Valley (Mrs. Clwyd) and to my hon. Friend the Member for Broxtowe (Mr. Lester). My hon. Friend showed that we have come a long way since the earliest days of International Development Association concession funding. Perhaps the hon. Lady did not realise quite what a change there has been: one certainly would not have thought so from her remarks tonight.

The hon. Lady asked about the poverty focus of our aid programme. I stressed our efforts, through IDA and World bank loans, to focus on poverty. More than 80 per cent. of our bilateral programme is focused on countries with a gross national product per head of less than !700. We target the poorest developing countries by encouraging and supporting economic reform programmes. We need to help them to stimulate their own growth, which is critical to their long-term success. We try to ensure that their reform programmes take into account the needs of the poorest and most vulnerable so that they are safeguarded. That is part of the general approach of the World bank, and certainly of the IDA programmes.

A further way by which we seek to help under our programmes is direct poverty alleviation, which in India alone amounts to more than £130 million worth of commitments from the British aid programme. There is much going on under the British aid programme, let alone under the enhanced focus of the World bank, which we have been in the forefront of encouraging.

The hon. Lady sought to say that we do not do very much and used that awful word "complacent". My goodness, I shall never be complacent while there are mouths to feed and people who need help in the third world, let alone in our own country. She does not realise that sometimes one must work for a long time to get something as well focused as the ninth replenishment of IDA. The World bank has come a long way in the past two or three years. The hon. Lady need have no fear, because through our executive director in Washington we shall continue to play the fullest possible role in the decisions of the bank. That is why we ensure that we are represented at all the international meetings, including the one in the Netherlands on Africa. That was not a World bank meeting but a mixture of many of us who are thoroughly involved in the development needs of Africa and the third world. Unfortunately, I was unable to attend, but it was attended by my deputy secretary. I received a good report, and I have been in touch with my Dutch opposite number to get as much as one can from the meeting without being there in person.

The hon. Lady said that the World bank was not paying enough attention to people and poverty. I could tell her at length—I will not do so because I know that she is tired after returning from the far east—what has been going on.

I was glad that the hon. Lady welcomed the world development report. We also welcomed it. The board of the World bank will give special consideration to how to deal with poverty through all its projects later this month. That is a result partly of the discussions that we have had about the IDA replenishment and partly of the general emphasis which is now placed on poverty alleviation. The board of the World bank is doing exactly what the hon. Lady criticised it for failing to do. I assure her that we shall press it to continue to take the matter seriously.

The hon. Lady said that the World bank handbook had been issued. I believe that it has not yet been issued, but if it contains anything from which we could learn or which we could utilise, we shall do so. We are not embarrassed about adopting good ideas wherever they come from, provided that they will work and can be helpful.

The hon. Lady went on to talk about debt relief, another subject on which we could have an entire debate. I shall not speak about it at length. Suffice it to say that the IDA has !100 million to help recipients to buy back commercial debt at a discount. The assistance is limited to !10 million for any one country. To qualify, countries must have a satisfactory adjustment programme, and debt management strategies. The assistance is in grant form —a fact which many people do not realise. Niger has had its operation approved and discussions on Bolivia and Mozambique are taking place. It is a modest facility and it can be used only in certain cases, but it will help many countries in the future.

IDA assistance is also available to countries with outstanding International Bank for Reconstruction and Development debts. Repayments of IDA credits are mostly committed in advance of the new lending. It would be imprudent to commit them in full as all the expected repayments may not be forthcoming. So 10 per cent. of the expected reflows each year are not committed in advance but are used to supplement IDA credits to IDA-only countries with IDA supported adjustment programmes which have outstanding World bank debts. Certainly the IDA is helping many countries in that position.

During the months that the hon. Lady and I have faced each other at the Dispatch Box, she has made several criticisms of the environmental aspects of World bank projects. She knows how keen I am to make sure that only environmentally sound projects are undertaken. In the past projects have been initiated which were subject to fair criticisms. But it is only a handful of projects, all of which are old ones which began before the World bank became aware of environmental issues.

The hon. Lady should remember that the bank's presence and the conditionality of the projects help to mitigate the damage. That must continue to be so. The bank is seeking to improve its performance and to make what improvements are possible to old projects. The various regional vice-presidencies, which are responsible for the country programmes, each have environmental units and if we found anything of the nature that the hon. Lady described we should take it up with them.

The hon. Lady mentioned one such project in detail. It would be sensible for me to write to her about it and put the letter in the Library. Often at the beginning of major projects an agreement is made that the recipient country will safeguard the resettlement and rehabilitation of people who are displaced by a project which they fully support. If the World bank finds that that is not done, it is landed with a problem not of its own making but for which it is blamed even though the recipient Government did not carry through the original agreement.

In many cases that is at least part of the answer to the sorts of problem which the hon. Lady and I come across and which we wish not to see in future projects. In other words, we should seek to ensure that the World bank takes safeguards to ensure that the recipient country cannot fall down on the rehabilitation and resettlement of those whom it undertook to look after. Once that has happened, it is extremely difficult to put right. The bank is making considerable efforts to persuade the Indians to deal with resettlement on the projects which the hon. Lady mentioned. Unfortunately, it is taking a long time, but we shall see what can be done to assist.

I thoroughly agree with the hon. Lady that energy projects should be energy efficient. She will know from previous debates that we are insisting on much more efficient use of energy in all our bilateral programmes. That is also becoming true for the World bank. If she comes across a project, whether a World bank project or, I hope not, even a bilateral project which she believes will not meet environmental or energy-efficient guidelines, I want her to tell me straight away so that I can do something about it. I hope that that will not happen, but if it does, let us at least avert the impending disaster that she perceives by acting on the first possible knowledge.

The hon. Lady also mentioned problems in forestry. She said that the World bank had supported several forestry projects which were less than sensible. It is unrealistic to expect logging simply to stop. I think that she knows that in her heart of hearts when she thinks about what it means. The bank has had problems with certain Governments who saw logging as a way of getting income. The bank has been seeking to persuade those Governments to log only sustainably managed forests. That must be how it should work in future.

Logging cannot be wholly eliminated. Indeed, forestry experts tell me that it should not be, but that it needs to be properly managed. I hope that the World bank will consult non-governmental organisations on projects to make sure that logging is from sustainably managed forests always and that indigenous people are given proper management training on how to maintain the forests.

The hon. Lady went on to say something about the Gulf crisis. I fully agree with her about the serious impact on many poor countries. There is a good chance that many of them, such as Jamaica, will get help from IDA. If there are adequate voluntary additional donor contributions that may be possible.

Many of the other aspects of our short debate on which the hon. Lady touched concern the Caribbean Development bank. Its work is interesting and exceptional. We have a programme in Jamaica where the disbursements are likely to be in excess of £5 million this year. In the past 10 years, capital aid to Jamaica has been provided largely as programme aid in support of its structural adjustment programmes. The £7.5 million loan which we agreed three years ago is being used in part to provide textbooks in secondary schools. We have provided a further £3 million grant to assist with reconstruction after hurricane Gilbert in September 1988. A further grant of £7.5 million was agreed last April, of which £3 million of programme aid was in support of its latest economic recovery measures.

All donors find it takes time to identify sound projects, but when we do we can commit the loans that we have agreed to ensure that there is a full disbursement of the balances and that the grants are likely to continue as planned from the beginning.

My hon. Friend the Member for Broxtowe referred to Africa as being one of the most needy continents, particularly at this time, and on that there will be no difference between any of us in this House. We must ensure that we spend our money wisely and efficiently in the best interests of those in need. We should discuss with them at all stages what their interests are and ensure that the programmes that we work out with them address the key issues of poverty alleviation, environmental conservation and the building of a more healthy and better society for those people. We hope that IDA, the concessional arm of the World bank, will achieve that to an even greater extent in the future than perhaps it has done in the past. We shall leave no stone unturned to ensure that.

Question put and agreed to.

Resolved, That the draft International Development Association (Ninth Replenishment) Order 1990, which was laid before this House on 10th December, be approved.

Resolved, That the draft Caribbean Development Bank (Further Payments) Order 1990, which was laid before this House on 10th December, be approved.—[Mr. Nicholas Baker.]