THE FUTURE OF THE COMMONWEALTH DEVELOPMENT
CORPORATION
ACCOUNTABILITY OF CDC
43. An issue which is unique to the PPP framework
concerns future accountability of CDC to Parliament as a substantial
minority shareholder. Clare Short was clear in expressing her
expectation that following the privatisation of CDC, the Government
would have only a minimal involvement in its expenditure or activities:
"We are seeking to set
up an institution which will entrench the public sector and developmental
interests and then allow that institution to run itself without
intervention unless it seeks to depart from those interests".[76]
Given this intention, it is crucial that Parliament
has access to information which enables it to ascertain whether
or not any departure from a developmental focus is taking place.
44. The measures which the Government proposes to
take to secure CDC's development role — the inclusion of
targets for countries in which CDC invests, and the Statement
of Business Principles — all relate to inputs (ie where
and how CDC is to make its investments). We have discussed in
a previous Report the importance of clear objectives and targets
relating to outputs,[77]
and we reiterate that argument here. Attention to inputs is not
always sufficient to secure a positive developmental outcome,
and CDC's success in achieving such outcomes is an integral facet
of its developmental role. The inclusion of monitoring procedures
in CDC's proposed Statement of Business Principles is a welcome
step forward in this respect.
45. CDC will presumably attract at least a proportion
of its private capital from ethical investors. This elevates the
importance of adequate reporting and monitoring procedures, as
ethical investors will presumably require assurance that CDC is
adhering to the Statement of Business Principles in the Statement
of Business Principles. Christian Aid raised this issue in their
memorandum to this inquiry:
"It is essential that
[the] CDC enhances its monitoring and reporting procedures. This
will enable it to demonstrate its success in blending commercial
interests with developmental interests and will facilitate learning
on private sector involvement beyond CDC".[78]
Accountability and monitoring are also identified
in the USAID review as key elements of successful venture capital
projects involving Government funding. The US established "enterprise
funds" for Hungary and Poland in 1989. The study states that:
"The relationship of
the funds to the US Government was initially confused. The Government
provided the resources but had no membership on the boards of
directors nor any voice in disposition of the funds. No clear
reporting or monitoring relationship with USAID or other US Agencies
was established, and fund managers initially resisted such oversight.
But use of public funds without public oversight proved unfeasible".[79]
We appeal to the Government to ensure that such mistakes
are not repeated in the PPP.
46. We recommend that the Articles and Memorandum
of Association include requirements for the publication of an
annual report which is subject to rigorous guidelines relating
to the information to be provided. As a minimum, this must include:
(a) an analysis
of new investments and the overall portfolio by sector and income
group;
(b) a detailed analysis of the development
impact of Commonwealth Development Corporation's investments based
on the monitoring procedures set out in the Statement of Business
Principles;
(c) an assessment of the Commonwealth Development
Corporation's achievement of the standards set out in the Statement
of Business Principles; and
(d) a statement of progress in the implementation
of an equal opportunities policy at all levels of the organisation.
47. In addition, the Department for International
Development should include in its Departmental Report:
(a) an assessment
of the Commonwealth Development Corporation's adherence to its
Statement of Business Principles;
(b) information on the achievement of targets
relating to investments in poor countries and countries in Sub-Saharan
Africa;
(c) an indication of whether it has been
judged necessary for the Government to use its golden share; and
(d) information on the stake currently
held by the Government in the Commonwealth Development Corporation.
76 Q. 51. Back
77 Fifth
Report from the International Development Committee: Department
for International Development: 1998 Departmental Report. (Session
1997-98, HC 711) para 37. Back
78 Evidence
p. 52. Back
79 USAID
review p. 14. Back
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