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The Minister for Overseas Development (Mr. Christopher Patten) : I am grateful to my hon. Friend the Member for Ilford, South (Mr. Thorne) for giving us this opportunity to discuss the problems and challenges of development in south Asia. My hon. Friend is an acknowledged authority on Nepal and no one has done more to strengthen the good relations between the kingdom of Nepal and this country. I am also grateful to my hon. Friend the Member for Westminster, North (Mr. Wheeler) for contributing to the debate. Any contribution which my hon. Friend makes in the House is stamped with his considerable common sense.

I am aware of the strong views of hon. Members on this subject, as is my noble Friend, Lord Glenarthur, the Minster of State to whose correspondence my hon. Friend the Member for Westminster, North referred. The strong views expressed in this debate and in other ways will be noted beyond the House.

I want to begin by referring to the aid and development issues raised by my hon. Friend the Member for Ilford, South. On the face of it, there may appear a sharp contrast between Nepal, on the one hand, a small mountainous kingdom and still very largely an agrarian society, and, on the other, India, the second most populous country in the world with a large and growing industrial sector. In fact, their similarities are more significant than their differences. They both face the same basic challenge which is to raise the standard of living of their peoples, the majority of whom live in absolute poverty or close to it. Our aid programmes to both countries--the subject of the debate--are aimed at assisting them with that challenge.

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Nepal has only opened itself up to international trade and aid, and to all the influences that go with them, in the past 25 years. It is all the more encouraging that it has chosen to follow the path of economic rectitude and has adopted a structural adjustment programme under the aegis of the World Bank and the International Monetary Fund. It has followed that programme with considerable commitment and success. I commend the admirable progress made by the Nepal Government in the past few months.

During my visit to Nepal in March 1988--which was a particularly enjoyable as well as useful visit--I was pleased to be able to offer British support for is programme in the form of a pledge of programme aid worth £5 million. I also pledged £10 million of aid to Nepal's major hydro- electric development at Arun. That and other hydro-electric proposals lie at the heart of Nepal's development prospects. They offer the possibility of a massive jump in gross national product in the next decade or two--some reports say, as much as 25 per cent. The only market for power on that scale is India, which has its own implications for the future.

To put massive development of that kind into place, Nepal must first develop its basic infrastructure. The backbone of its transport and communications is the road system. That is an area in which we made a major investment through the aid programme--difficult though that can be--and we plan to continue doing so in future, in close collaboration with the Swiss aid programme. The Swiss have slightly more experience of road building in mountains than ourselves. Our aim is not only to develop, repair and maintain Nepal's road system but to strengthen the country's own capacity to undertake those tasks. That kind of institutional strengthening also lies behind our support for the Nepal Administrative Staff College, which trains Government officials in Nepal, and our close links with Budhanilkantha school, from which Nepal's future generations of leaders in government and industry will come. I paid a particularly interesting visit to that school and was very impressed both by the quality of education provided and by the spirit of community that one felt there.

Earlier I mentioned the major challenge faced by India and Nepal of alleviating poverty. It is entirely appropriate that His Majesty the King of Nepal pledged his Government to meet the basic needs of his people by the year 2000. That is an ambitious target. As one would expect of a very poor country, all the social indicators look grim. Levels of literacy are very low by south Asian standards, infant and maternal mortality is very high, and the population growth rate is alarming--especially given the rapid degeneration of the physical environment.

Nowhere are those problems more acute than in the hills. In our long- standing project on the Kosi hills we have assisted the local inhabitants in tackling those problems in an integrated fashion, with a special emphasis on forestry, agriculture and water supply. I should like more time to speak about forestry, which, as my hon. Friend the Member for Ilford, South said, is an extremely important subject. Alas, I must move on.

We agreed with the Government of Nepal that we should assist also in developing a system of primary health care that will reach out to the people in the eastern hills and provide them with the basic health services that they so urgently need. I cannot pass over the question of health without mentioning the British military hospital at

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Dharan, which was considered in the recent interesting report of the Defence Committee on the future of the brigade of Gurkhas. I do not wish to anticipate the Government's response to that report, but, as my hon. Friend will know from our evidence to that Committee, we propose to provide a package of £3 million of aid to assist in the conversion of that hospital to civilian use and to maintain the standards of care at that hospital for the benefit of the people in the eastern hills.

It will be clear from my comments that we have an expanding aid programme in Nepal. We expect that our aid disbursements for this financial year will be about 50 per cent. higher than they were two years ago--£14 million compared with £9 million. This programme reflects the long friendship between our countries, which has been exemplified by the brave and committed service of the brigade of Gurkhas, in peace and in war.

My hon. Friend the Member for Ilford, South referred to our aid programme in India. It reflects our historic connections with India and the considerable poverty and needs faced by India. More people live in absolute poverty in India than in the whole of Latin America. Over the years, we have found that we are capable of running in partnership with the Indian authorities especially valuable and effective projects. We are trying to help in the power, railways, agriculture and social sectors. I have been particularly impressed by projects which I have seen which attempt to alleviate poverty directly and improve education standards--for example, the work that we are doing in Visak and Hyderabad on slum improvement and on the primary education project in Andhra Pradesh. That is a good programme, and I hope that we continue to apply aid effectively in India. I turn to the kernal of the argument put by my hon. Friends. They referred to the current state of bilateral relations between India and Nepal and to the dispute which has arisen between them which concerns

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arrangements for trade, transit and similar matters. The Government greatly value the rich and diverse web of links which bind Britain to Nepal and to India and which are firmly rooted in tradition and history. I know the importance attached by hon. Members and people in the country to sustaining and developing those links. My hon. Friends have referred to that point in relation to Nepal and India. That is certainly the Government's aim.

It is naturally of considerable concern and regret to us that a dispute should have arisen between two countries with which we enjoy close and friendly relations. I well understand and appreciate the feeling in the House over recent developments. I share hon. Members hope that the dispute will not be damaging to the people of Nepal or India or have any lasting impact on their economic development. We have followed events with keen attention from the outset and will continue to do so. The World bank is evaluating the effects of the dispute and is co-ordinating with donors. There is no sign as yet that special measures are necessary. We shall consider any well-founded requests as sympathetically as we always do, but we look forward to the resolution of the dispute before that stage is reached. We very much hope that India and Nepal, as sovereign and independent countries, will soon resolve their differences in a way satisfactory to both and so bring the dispute to an end. I wish them every success in doing so. In this connection, it is encouraging that both sides are reportedly willing to hold bilateral discussions to bring about a resolution of the problem. My hon. Friends have set out their argument eloquently and potently and made clear their considerable anxiety about the dispute. I shall ensure that their views, including those of my hon. Friend the Member for Westminster, North on my noble Friend's correspondence, are drawn to the attention of Ministers in the Foreign and Commonwealth Office who, I am sure, will read the report of the debate with interest and concern. Question put and agreed to.

Adjourned accordingly at three minutes past Three o'clock.

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