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Miss Joan Lestor (Eccles): This is the third Commonwealth Development Corporation Bill to come before the House in 14 months and, on each occasion, we have enjoyed the unusual experience of agreeing about something--at least initially. As the Minister said, the CDC should be congratulated on its successes: its financial performance, its attainment of agreed targets and, above all, its continuing important contribution to the strengthening of economies in some of the world's poorest countries.
However, we part company over the question of future plans for the CDC. The Labour party believes firmly that the CDC has a distinct and expanding future role to play within a Government-directed overseas aid programme. I am not sure that the Government hold a similar view--sometimes I am not convinced that they have thought about the CDC in the longer term, although the Minister's comments have reassured me a little. I look forward to further illumination in the winding-up speech regarding several issues that I shall raise during the debate.
The CDC makes a vital contribution to the United Kingdom's development programme. It pump primes private investment in some of the world's poorest countries, reaching the countries that other investment organisations will not even consider. Its activities are complementary to the Overseas Development Administration's efforts to provide bilateral and multilateral development assistance through Governments and non-governmental organisations and in partnership with international institutions such as the World bank, the International Monetary Fund and the European Union.
Against the background of a steadily declining aid budget, Ministers may point to increasing flows of private investment to the developing world; but where are those market-driven private funds headed? They flow not to south Asia or to sub-Saharan Africa but mainly to a very narrow band of middle-income countries in east Asia and in Latin America.
In 1994, 90 per cent. of private investment went to just 10 developing countries. Private capital flows to sub-Saharan Africa have amounted to less than 2 per cent. of the developing total since 1993. According to World bank figures, in 1992 to 1994, only 1 per cent. of private capital flows went to the most severely indebted countries. In 1993-94, 19 per cent. of the CDC's investments were in projects based in those severely indebted countries. Not only does the CDC target some of the poorest countries, but its investments are medium to long term and offer much needed economic stability.
The globalisation of the economy poses yet another threat to poor nations, widening still further the gap between the debt-ridden and the middle-income countries. That is why the CDC is, and will continue to be, an important tool in the delivery of development assistance in partnership with the private sector. We believe that properly managed, directed and focused private investment will play a key part in future development programmes under a Labour Government.
The CDC has carefully carved out its own market over the years. A CDC board member, Sir William Ryrie, writing in his organisation's magazine in December 1995, said:
Against that background, I welcome the Minister's assurances this evening that the CDC will remain in the public sector and that the widening of the CDC's powers as proposed in the Bill is not a prelude to privatisation. I ask him to reiterate the statement made by the then Foreign Secretary, the right hon. Member for Witney (Mr. Hurd), on 3 May 1994 that the CDC would stay in the public sector because it was generally felt that privatisation of the CDC would result in a financial structure, aims and objectives that were inconsistent with its development role. I share that view.
In my opening remarks, I referred to previous Bills that had come before the House. Concern about the Government's plans for the CDC undermined Labour Members' confidence that proposed new powers would not signal either a CDC sell-off or a noticeable shift in market focus away from the poorest countries and towards emerging markets in eastern Europe and in the former Soviet Union. The way in which the Government chose to present the Bills did nothing either to speed or to smooth their passage.
The first Commonwealth Development Corporation Bill, which was presented last March, was quite straightforward. However, it was swiftly followed by a
private Member's Bill originating in another place which we were assured was absolutely essential to the continuing success of the CDC. In that case, why was it not a Government Bill? If the new powers in the Commonwealth Development Corporation (No. 2) Bill--which are largely presented again in the current legislation--were so significant, why were they not in the first Bill? I have never understood that.
The key to CDC activity is the triggering of genuine additional investment. However, the proposed new powers to purchase equity funds did not meet that criteria automatically. We did not see why the CDC should get involved in asset trading relating to buy-out if such activity did not lead directly to new investment.
We were also worried about the reference in last year's corporate plan to a strategy aimed at targeting
That is why I commented last year that the debate that we had was unfinished business. I recognise that there are immense commercial and financial opportunities with which the CDC would like to involve itself--even a cursory reading through its annual report and current corporate plan reveals that it is straining at the leash--but there is one major hitch. I quote the CDC:
The CDC is therefore seeking ways to churn its assets to raise funds for new projects, and I note its intention to hasten equity realisations. The Commonwealth private investment initiative, which triggered the request for a change in legislation, is another mechanism to raise funds against a background of financial restraint by Government.
The Commonwealth private investment initiative was welcomed by the heads of Commonwealth Governments last November, and we join them in that support. They recognised, as we do, the dearth of private investment in Africa and the need for rehabilitation and rejuvenation of businesses in the continent that has suffered wars, chronic indebtedness and natural disasters for so long. In the African continent, private investment has concentrated on oil-producing countries, with Nigeria taking 30 per cent. of total flows. Obviously, market forces do not serve the poorest at all well.
The CDC was the obvious candidate to act as an investment catalyst, with its established reputation throughout the Commonwealth. I was delighted to note that the CDC's new business investments in sub-Saharan Africa increased from £41 million in 1994 to £154 million in 1995. We all welcome that. Against that background, we are asked to consider the Bill, which we are told is essential if the CDC is to participate fully in the operations of that new Commonwealth initiative and its first African investment fund.
Given our enthusiasm for that project, we would have liked to put our full weight behind the legislation, had it been more project specific. Why was legislation tailor
made to the needs of the CDC in relation to the Commonwealth initiative not forthcoming, and why has the Overseas Development Administration fallen back on resurrecting much of the Commonwealth Development Corporation (No. 2) Bill from last year? Surely it cannot be for lack of drafting time. Such a move would have resulted in the enthusiastic cross-party endorsement that it warrants.
The new powers proposed in the Bill will impact on all the CDC's activities, not only within the limits of the new initiative. Once again, the privatisation fear is raised.
Miss Lestor:
I know that the Minister has said--he shakes his head again--that there is no such fear, and I welcome that. Will he assure the House that the new powers will be applied to the CDC's activities only in the operation of the Commonwealth initiative? An alternative interpretation is that the Government have no plan for the future of the CDC--an organisation operating in a commercial environment, under Government constraints, yet remaining in the private sector. There is some confusion in that regard.
In Government, the Labour party will look forward to a long and successful relationship with the CDC--similar to that which a previous Government had. I welcome the emphasis in its current annual report on the development impact of its projects and on the need for assessments of their impact on the environment and of health and safety. I hope that the CDC will add workers' rights to that list. I also want stronger development input at board level. Would the CDC really miss one of the many bankers in situ if he were replaced by a development expert?
Earlier, I mentioned the Government's failure in the Bill to address the crucial issue of how the CDC is funded. There should be a review of the orthodox policy towards the CDC funding, and specifically a re-examination of the policies that prevent the CDC having access to private sector funding.
"It is not our role to finance companies which do not need our help and can raise the funding they need themselves--that is a waste of our resources. This would seem to leave only a narrow area for us to operate in, avoiding on the one hand unwise investments, which no-one should undertake, and on the other those which the markets will finance without our help".
However, the channel is not narrow. Sir William went on to recognise that most developing countries have a long way to go in cultivating their own capital markets. The CDC's role is assured well into the future.
"turning-point countries . . . with their higher growth potential".
No one would quarrel with the idea that it is sensible to concentrate scarce resources where the best effect can be obtained, but we were concerned that the concentration on pump-priming privatisation programmes might shunt the CDC away from the Commonwealth countries and towards emerging democracies in eastern Europe.
"The volumes of new business forecast by Representatives are at a higher level than can be funded".
The Bill does not address that fundamental dilemma.
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