APPENDIX 3
Supplementary Memorandum from Traidcraft
Exchange
Further to the Memorandum which Traidcraft Exchange
submitted to the Committee on the Commonwealth Development Corporation,
and in the light of the evidence presented to the Committee by
the Secretary of State and representatives of CDC on 7 July, we
should like to make a number of additional observations.
We welcome DFID's intention to ensure that commitments
to poverty elimination, to targeting investment to the poorest
countries, and to an ethical policy are enshrined in the Memorandum
and Articles of Association of the new Partnership. The wording
of these clauses should ensure that CDC pursues the highest possible
ethical standards in every aspect of its operations and in all
the businesses it supports.
However, we are concerned that effective arrangements
should be put in place to ensure that fulfilment of these commitments
is monitored, that they are reported upon, and that full transparency
and accountability in the operations of the new Partnership are
secured. The need to reassure private investors that CDC will
not be subject to political interference must be balanced with
the legitimate public interest in ensuring that the objectives
of contributing to poverty elimination and achieving high ethical
and environmental standards are met.
We therefore believe that there is a need for
close liaison between CDC and DFID in the planning of investments.
It is interesting to note that in the case of the International
Finance Corporation—the arm of the World Bank Group that
provides loans, equity and guarantees for the private sector—DFID
strongly supports joint planning with the other parts of the Bank
through the Country Assistance Strategy process. Similar liaison
through Country Strategy Papers should apply to links between
CDC and DFID.
Reporting is the second crucial element. Simple
financial reporting to shareholders will not be sufficient to
demonstrate that wider objectives have been achieved. Reporting
processes that involve broad consultation with a range of CDC's
stakeholders will be required. As suggested in our Memorandum
to the Committee, social accounting techniques offer a useful
model for such reporting. Accountability and transparency could
be enshrined structurally within the new arrangements by the establishment
of a Stakeholders' Council—as proposed in our Memorandum—to
oversee open reporting and ensure that a broad range of advice
and expertise is available to CDC.
CDC hopes to be able to attract support from
the ethical investment community. Current concerns relating to
the social responsibilities of business and corporate governance,
held within large parts of the investment community and not only
by ethical funds, suggest that CDC will need to demonstrate high
standards in these areas if it is to gain investor support.
Rob Lake
Traidcraft Exchange
16 July 1998
| 
