APPENDIX
Memoranda from the Department for International
Development
DRAFT CARIBBEAN
DEVELOPMENT BANK
(FURTHER PAYMENTS)
ORDER 2002
Introduction
1. This Order is laid pursuant to Section 11 of the
International Development Act 2002. Section 11 of the International
Development Act 2002 (which repeals and re-enacts similar provisions
in the Overseas Development and Co-operation Act 1980) provides
that where the Government of the United Kingdom is, at the time
the section comes into force, or at a later time becomes, bound
to make a relevant payment to a multilateral development bank,
the Secretary of State may make the relevant payment (and other
associated payments specified in section 11(3)). However she may
only make the payment if it has been approved for the purposes
of the section by order made by her with the approval of the Treasury
after a draft of the Order has been laid before and approved by
the House of Commons. Under section 11(2), "multilateral
development bank" is defined as an international financial
institution having as one of its objects economic development,
either generally or in any region of the world. The Caribbean
Development Bank is one such institution.
Policy Objective
2. The Department for International Development (DFID)
is responsible for leading the United Kingdom's contribution to
promoting development and the reduction of poverty. The overall
objective of DFID is the elimination of world poverty. This objective
was set out in the 1997 White Paper "Eliminating World Poverty:
A Challenge for the 21st Century", and reaffirmed in the
2000 White Paper "Eliminating World Poverty: Making Globalisation
Work for the Poor". DFID delivers its international development
funds through a combination of bilateral programmes, and contributions
to various international financial institutions, such as the Caribbean
Development Bank.
3. The Caribbean Development Bank (CDB) is a regional
development bank established in 1969. Its purpose is to contribute
to the economic growth and development of the member countries
in the Caribbean, and to promote economic co-operation and integration
among them, having special regard to the less developed members
of the region. The major regional shareholders are Jamaica and
Trinidad & Tobago (both 16.98% shares and 16.62% votes). The
major non-regional shareholders are the United Kingdom and Canada
(both 9.13% shares and 9.00% votes).
4. The CDB is structured along similar lines to the
World Bank, with two main lending windows: Ordinary Capital Resources
(OCR) which lends at market rates of interest; and the Special
Development Fund (SDF) which lends on concessional terms to the
poorest member countries. The SDF is primarily donor funded and
is replenished usually every three years. Negotiations on the
fifth replenishment of the SDF (SDF-V) were concluded in late
2001. Copies of the SDF-V Contributor's Report have been placed
in the House of Commons Library.
5. Since its establishment there have been four replenishments
of the SDF. The United Kingdom has contributed a total of just
over £37 million to these replenishments as follows:
1st Replenishment: £ 6,640,300
2nd Replenishment: £ 9,252,510
3rd Replenishment: £10,578,000
4th Replenishment: £10,600,000
Purpose of the Order
6. The purpose of the present Order, the draft of
which is now laid before the House of Commons, is to enable Her
Majesty's Government:
(i) to make a further contribution to the Special
Development Fund of a sum not exceeding £17,496,000. This
is the equivalent to US$ 25,200,000 converted to sterling on the
basis of daily exchange rates averaged monthly for the six months
ending 30 June 2001 as supplied by the International Monetary
Fund. The United Kingdom contribution will become effective following
the deposit with the Bank of an appropriate Instrument of Subscription.
In accordance with the Resolution, the United Kingdom's payments
will be made in four annual instalments, either in cash, or in
the form of non-negotiable, non-interest-bearing promissory notes
expressed in pounds sterling encashable on demand, or in a combination
of the two. Subject to the provisions of section 6 of the Resolution,
the first instalment shall be paid not later than 30 days after
the date of deposit with the Bank of the Instrument of Contribution.
Drawdown against promissory notes shall take place semi-annually
based on the Bank's projected disbursement requirements.
(ii) to redeem non-interest-bearing and non-negotiable
notes or other obligations issued by the Government in payment
of the contribution.
The Need for a Section 11 Order
7. In connection with the payment envisaged in Article
2(a) of the Order, no obligation will arise until an Instrument
of Subscription is deposited by the United Kingdom. The deposit
of such an Instrument binds the United Kingdom to make the payment
foreseen in Article 2(a). The payment envisaged in Article 2(b)
of the Order is linked to the payment envisaged in Article 2(a)
of the Order and would occur only on the basis that Article 2(a)
had become effective and payment had been made under it.
8. This raises a technical issue regarding the use
of the order making power, one which the Committee has addressed
already under similar provisions in the 1980 Act. The issue arises
from the fact that the section applies (and therefore, it would
appear, the power to make the order arises) where the Government
is bound to make the payment. The Government will be bound when
the Instrument of subscription is deposited.
9. The seeking of Parliamentary approval of the draft
of the Order however does not appear to be ruled out, and therefore
the approach the Committee has taken in the past (such a procedure
was considered in the context of the draft Inter-American Development
Bank (Seventh General Increase) Order 1989 by the Select Committee
on Statutory Instruments in its Sixth Report (HC 48-vi 1988-89))
has been that there was no technical reason for the House not
to approve the draft Order but that it should merely be aware
that it is acting, as on occasions in the past, on a ministerial
undertaking that no order will be made until the Government is
bound. Accordingly the Secretary of State gives her undertaking
that no order will be made in terms of the draft until, on deposition
of an Instrument of Subscription, the Government is bound to make
the payment.
10. The purpose of the presentation of the draft
Order is therefore, as under the 1980 Act, in order to secure
the approval of the House of Commons before the deposit of an
Instrument of Subscription.
11. The powers under the IDA are slightly different
from those under the 1980 Act, in that the order is expressly
the means by which approval is given to the making of a payment
by the Secretary of State; whereas under the former powers the
order made provision for the making of the payment itself. The
new provisions therefore render more clearly the purposes of the
order as a pre-requisite for the act of payment. Nevertheless,
as under the 1980 Act, the strict legal position appears to be
that only when the obligation to pay has come into existence does
the Secretary of State have power to make an order in terms of
the draft.
12. The Department respectfully submits that the
new powers in section 11 of the IDA do not require any departure
from the Committee's established approach to the exercise of the
powers under section 4 of the 1980 Act.
June 2002
DRAFT AFRICAN
DEVELOPMENT FUND
(ADDITIONAL SUBSCRIPTIONS)
ORDER 2002
Introduction
1. This Order is laid pursuant to Section 11 of the
International Development Act 2002. Section 11 of the International
Development Act 2002 (which repeals and re-enacts similar provisions
in the Overseas Development and Co-operation Act 1980) provides
that where the Government of the United Kingdom is at the time
the section comes into force, or at a later time becomes, bound
to make a relevant payment to a multilateral development bank,
the Secretary of State may make the relevant payment (and other
associated payments specified in section 11(3)). However she may
only make the payment if it is approved for the purposes of the
section by order made by her with the approval of the Treasury
after a draft of the Order has been laid before and approved by
the House of Commons. Under section 11(2), "multilateral
development bank" is defined as an international financial
institution having as one of its objects economic development,
either generally or in any region of the world. The African Development
Fund is one such institution.
Policy Objective
2. The Department for International Development (DFID)
is responsible for leading the United Kingdom's contribution to
promoting development and the reduction of poverty. The overall
objective of DFID is the elimination of world poverty. This objective
was set out in the 1997 White Paper "Eliminating World Poverty:
A Challenge for the 21st Century", and reaffirmed in the
2000 White Paper "Eliminating World Poverty: Making Globalisation
Work for the Poor". DFID delivers its international development
funds through a combination of bilateral programmes, and contributions
to various international financial institutions, such as the African
Development Bank Group.
3. The African Development Bank Group is a regional
development bank established in 1964. Its purpose is to contribute
to the economic development and social progress of its regional
members, both individually and jointly. The major regional shareholders
are Nigeria, Egypt, Algeria and South Africa. The major non-regional
shareholders are the USA, Japan and Germany. The United Kingdom
joined the Bank in 1983 and is a relatively junior partner with
a 1.6% shareholding.
4. The African Development Bank Group is structured
along similar lines to the World Bank, with two main lending windows:
the African Development Bank (ADB) which lends at market rates
of interest; and the African Development Fund (ADF) which lends
on highly concessional terms to the poorest member countries.
The ADF was established in 1972 and is primarily donor funded.
It is replenished usually every three years. Negotiations on the
ninth replenishment of the ADF (ADF-IX) commenced in June 2001
and are expected to be concluded later this year.
5. Since the creation of the ADF, there have been
eight replenishments, generally at two and a half to three year
intervals. The United Kingdom has contributed to these replenishments
as follows:
1st Replenishment (1976-1978): £10,000,000
2nd Replenishment (1979-1981): £18,499,554
3rd Replenishment (1982-1984): £24,170,300
4th Replenishment (1985-1987): £30,934,961
5th Replenishment (1988-1990): £57,833,971
6th Replenishment (1991-1993): £71,915,912
7th Replenishment (1996-1998): £70,225,661
8th Replenishment (1999-2001): £98,639,079
Purpose of the Order
6. The purpose of the present Order, the draft of
which is now laid before the House of Commons, is to enable Her
Majesty's Government:
(i) to make an additional contribution to the African
Development Fund of a sum not exceeding £40,000,000. This
is the equivalent to UA 45,158,450 converted to sterling on the
basis of daily exchange rates averaged monthly for the six months
ending 30 November 2001 as supplied by the International Monetary
Fund. The purpose of this additional contribution, together with
the contributions pledged by other donors, is to provide the Fund
with sufficient commitment capacity to help tide it over until
negotiations on the Ninth Replenishment of the Fund can be concluded.
All additional contributions will score as contributions to the
Ninth Replenishment. The United Kingdom contribution will represent
around 11 per cent of the total donor pledges to the interim financing
arrangement of some UA 416,084,958 (approx £ 368.52 million).
Resolution F/BG/2002/03 will come into effect when Instruments
of Subscription have been deposited by five donor countries. In
accordance with Resolution F/BG/2002/03 the United Kingdom's contribution
will be made in one instalment in the form of a non-negotiable,
non-interest-bearing promissory note expressed in pounds sterling
encashable on demand. A copy of Resolution F/BG/2002/03 has been
laid in the House of Commons library.
(ii) to redeem non-interest-bearing and non-negotiable
notes or other obligations issued by the Government in payment
of the contribution.
The Need for a Section 11 Order
7. In connection with the payment envisaged in Article
2(a) of the Order, no obligation will arise until an Instrument
of Subscription is deposited by the United Kingdom. The deposit
of such an Instrument binds the United Kingdom to make the payment
foreseen in Article 2(a). The payment envisaged in Article 2(b)
of the Order is linked to the payment envisaged in Article 2(a)
of the Order and would occur only on the basis that Article 2(a)
had become effective and payment had been made under it.
8. This raises a technical issue regarding the use
of the order making power, one which the Committee has addressed
already under similar provisions in the 1980 Act. The issue arises
from the fact that the section applies (and therefore, it would
appear, the power to make the order arises) where the Government
is bound to make the payment. The Government will be bound when
the Instrument of Subscription is deposited.
9. The seeking of Parliamentary approval of the draft
of the Order however does not appear to be ruled out, and therefore
the approach the Committee has taken in the past (such a procedure
was considered in the context of the draft Inter-American Development
Bank (Seventh General Increase) Order 1989 by the Select Committee
on Statutory Instruments in its Sixth Report (HC 48-vi 1988-89))
has been that there was no technical reason for the House not
to approve the draft Order but that it should merely be aware
that it is acting, as on occasions in the past, on a ministerial
undertaking that no order will be made until the Government is
bound. Accordingly the Secretary of State gives her undertaking
that no order will be made in terms of the draft until, on deposition
of an Instrument of Subscription, the Government is bound to make
the payment.
10. The purpose of the presentation of the draft
Order is therefore, as under the 1980 Act, in order to secure
the approval of the House of Commons before the deposit of an
Instrument of Subscription.
11. The powers under the IDA are slightly different
from those under the 1980 Act, in that the order is expressly
the means by which approval is given to the making of a payment
by the Secretary of State; whereas under the former powers the
order made provision for the making of the payment itself. The
new provisions therefore render more clearly the purposes of the
order as a pre-requisite for the act of payment. Nevertheless,
as under the 1980 Act, the strict legal position appears to be
that only when the obligation to pay has come into existence does
the Secretary of State have power to make an order in terms of
the draft.
12. The Department respectfully submits that the
new powers in section 11 of the IDA do not require any departure
from the Committee's established approach to the exercise of the
powers under section 4 of the 1980 Act.
June 2002
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