Draft Asian Development Bank (Seventh Replenishment of the Asian Development Fund) Order 2001

[back to previous text]

Mr. Tom Clarke (Coatbridge and Chryston): The hon. Gentleman is making an excellent speech. Would he enlighten the Committee about his discussions with the Prime Minister of Bangladesh and what role, if any, non-governmental organisations are performing to add to his important representations?

Mr. Wells: The two major NGOs in Bangladesh—I cannot remember their names off the top of my head—are playing a major role in economic and social matters, including a human rights programme for women, which is one of the best examples of a project to teach illiterate women their human rights. The hon. Member for Richmond Park (Dr. Tonge) was with me when we visited the country and saw some of the programmes being carried out. It is a large NGO, which usurps much of what would usually be operated by the Government. The Bangladeshi NGO is relatively free of corruption and wholly admirable.

Well-run local NGOs are extremely important. They are probably the best instrument for implementing programmes and organising them properly, as they are tailored to a country's needs; they know its problems, weaknesses and strengths as hon. Members sitting in Westminster cannot. However, there is some corruption—

Dr. Jenny Tonge (Richmond Park): The hon. Gentleman touched on what I was going to mention. It was staggering to see how much power and control the NGOs had in Bangladesh. Some members of the International Development Committee were doubtful about how uncorrupt they were. The feeling was that there was some self-interest in those organisations. We must be very careful, even where NGOs are concerned.

Mr. Wells: I agree with the hon. Lady. I should call her my hon. Friend, as all members of the Committee care very much about the issue.

Indonesia is one of Asian development bank's major clients. The Department for International Development states:

    ``The Bank's portfolio is overly concentrated in a few countries, with 25 per cent. of outstanding loans being to its largest borrower—Indonesia. We have called for a proactive and long-term policy to reduce this concentration.''

I wholeheartedly support that statement and I want the Minister to say how far the Department has been successful in persuading the bank to diversify its investment. The Indian and Chinese programmes seem to provide an opportunity to do so.

Indonesia is one of the major sufferers from the Asian development crisis. How far has Indonesia failed to repay loans made on business terms, as opposed to repayments to the Asian development fund? The failure of Indonesia to pay back loans to the Asian development bank will undermine its financial stability. Although it is a conservatively run bank and has good reserves, if those reserves are used, they will not be available for developmental purposes. If there is major failure by Indonesia to repay the loans due, will it undermine the bank's financial stability?

The Department said that the bank's borrowing headroom is coming under pressure because of failures resulting from the Asian crisis and that the bank intends to carry out a review of its capital adequacy. As the relevant paper is well over a year old, I ask the Minister whether the review has taken place and, if so, what was its result. If it is not adequate, we will be in serious trouble.

There is disturbing news about Indonesia from an international source, Nurina Widagdo, writing on behalf of the Bank Information Center in Washington, DC. The Bank Information Center is an independent, non-profit making, non-governmental organisation that provides information and strategic support to NGOs and social movements throughout the world on the projects, policies and practices of the World Bank and other multinational development banks.

The Bank Information Center advocates greater transparency, accountability and citizen participation in all the multilateral development banks—objectives that we can all share. It told me of a case not in Indonesia, but in Thailand, called the Samut Prakarn waste water management project, which is a perfect example from the ground of how the Asian development bank's policies are inadequate in safeguarding against adverse project impact—a euphemism for a project that has gone seriously wrong. The Government of Thailand invested in 59 per cent. of the Samut Prakarn waste water management project, the Asian development bank invested in 34 per cent., and the OECF—the Japanese overseas economic co-operation fund—invested in 7 per cent. Its total cost is $687 million.

There is the problem of serious corruption. The design of the project is to deal with the waste water collection and effluent-monitoring systems in an area of Thailand. It proposes a central waste water treatment plant, an industrial pollution prevention and clean technology transfer programme, and an institutional capacity building for government agencies responsible for waste water management. The first thing such a programme has to have is a site. In the course of the project implementation, the location of the central waste water treatment facility was transferred from Bang Pla Kod to Bang Poo Mai on both sides of the Chao Phraya river to a distant location on the east bank of the Klong Daan district. The existing site is further away from the factory sites. That means that longer pipes will be needed, and implies additional costs to the Government. While the original site cost the Government 13.6 billion baht, the new site will cost 23.7 billion baht—almost double. Who benefits from that, particularly as it makes the project much more expensive, not only from the point of view of land acquisition, but from the additional piping necessary? Was there a need for the project?

Other than its costs, the project is also criticised on grounds of need. A recent survey by the Thai Environmental Engineering Association has found that 90 per cent. of the 3,600 factories in Samut Prakarn already have their own waste water treatment system. Likewise, based on existing reports, it was estimated that joining in the collective waste water treatment system would cost a firm more than operating its own waste water treatment facility. Furthermore, based on the ADB report, with the impact of the financial crisis, the estimated economic rate of return of the project has already decreased from 23.4 per cent. to only 15.1 per cent.

I will not go into much more detail, except to say that there are obvious implications for allegations of corruption and anomalies in bidding and land speculation. The Klong Daan land site was purchased at an artificially high price. Records show that the pollution control department bought the land at 1.03 billion baht—$26,780—per rai, which is measurement of area in Thailand like an acre. That is more than twice the official rate of the land development office, which is 480,000 baht—$12,480—per rai. With the treatment plant moved further away from the factory, more pipes will be used and more money will allegedly go to the pockets of unscrupulous officials. If what is alleged in the document is remotely true, the Asian development bank is participating in the endemic corruption in Thailand. We cannot justify giving it even the contribution proposed today unless its procedures and the management of such projects are vastly improved and insulated and can design out corruption in the process. It is a classic method of corruption to rip off construction projects, but it cannot be justified on any grounds.

We must take a detailed interest in each of the investments and projects in which the Asian development bank decides to invest. We then need a mechanism for those projects to be accurately reported back to DFID so that, if necessary, it can send out a team to nip that kind of thing in the bud. We must take this extremely seriously, because if damaging accusations are made against the Asian development bank, its much better work in other areas will be undermined. That is an example of the problems of corruption. Although it is in the objectives of the Asian development bank to counter corruption, it must make much greater efforts in that area.

Another issue that the Asian development bank has not taken seriously is good governance. Sadly, there is a serious lack of good governance in Cambodia, for understandable reasons. The Pol Pot regime systematically killed over 2 million people, most of them the most educated in the country. Many others fled from Cambodia and now live here or elsewhere. Although, with the help of donors, excellent programmes and projects and even poverty reduction strategy papers can be produced by a few people who have returned to Cambodia to help and work in government, there is no civil service to implement those projects and even to implement justice.

There are no recognisable courts of law in Cambodia with the independence to produce reports and judgments on which anybody in civil society, particularly the business community, can rely. The most recent example is the prosecution of a Malay company that was exporting timber from Cambodia illegally and illegally logging the beautiful and wonderful forests of Cambodia. Although the Government won in the initial courts and the company was fined heavily and deprived of some of its licenses, the judgment was set aside on appeal and it has been given more licences to exploit the forests of Cambodia.

Because of the lack of a reliable judicial system in Cambodia, the 5 per cent. of the remaining unexploited forests will not be saved. They will be worked out within five years simply because there is no governance capacity within Cambodia to implement the laws that would save them. Those are the sort of governance problems in the civil service and the judiciary that the Asian development bank must help to rectify. There is also the problem of the accountability of the Executive to the electorate, something that is very tenuous indeed in Cambodia and many other places throughout the Asia-Pacific area.

The Asian development bank has a huge task to do. It is a huge task for DFID to ensure that it does it. I hope that the aspirations and ambitions set out in the document on the Asian development bank will be systematically pursued throughout the period of the additional loan, and pursued in poverty-focused areas and in health, education, governance, corruption and human rights, so that it will be co-ordinated in tackling the huge problem of the 500 million people living in abject poverty in that area.

10.35 am

Previous Contents Continue

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2001
Prepared 26 April 2001