Draft Caribbean Development Bank (Further Payments) Order and Draft African Development Fund (Additional Subscriptions) Order 2002

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Norman Lamb: The Minister has given examples of arrears figures for Congo, Liberia and one other country. Is there any statistic that shows overall performance and whether the arrears figures improve year on year?

Ms Keeble: As I said, the policy for new arrears was introduced in 1995, and arrangements are being made to deal with the old ones. The hon. Gentleman is welcome to have the full list of arrears figures, which appears in the bank's annual report and covers 14 or 15 countries. It is freely available.

I shall go through the points that were raised by the hon. Member for New Forest, East and hope that I cover all of them. He asked when the process was likely to be concluded. It is likely to be in September or October, as I mentioned. The figure is still to be decided, but we would expect it to be about £120 million. In terms of the monitoring, there is supposed to be a mid-term review. There will also be one for the Caribbean Development Bank. Quite a number of mechanisms are being considered for improving performance, such as the use of a number of country offices that can keep a close watch on what happens. Day to day monitoring is done by the executive board, on which we have a governor, and that has an annual meeting.

The hon. Gentleman also asked about the quality of staffing. Reorganisation has ensured that skilled staff are recruited, and that the staffing structure is reassessed. He picked up on questions asked by other hon. Members about the roles of grants and of loans. The most obvious answer regarding the loans is that if the money is repaid, it can be recycled. The hon. Member for Bromsgrove said that there was no point in providing loans to countries that cannot manage them. I would point out that in the cases of both the African Development Bank and the Caribbean Development Bank careful consideration is given to lending policy in order to ensure that it is appropriate to the state of each country's economy.

The African bank is specifically precluded from receiving loans that attract interest, albeit at reasonable rates. Of 52 African countries are in real financial difficulty, 39 are denied access to that kind of loan. Care is taken to look at the state of each country so that it does not get into a pattern of unsustainable debt. If countries do get into arrears, the bank has strict policies to ensure that those are dealt with, so that they do not simply build up debt upon debt.

There is a wider issue to address. The hon. Member for Bromsgrove said that Africa could not help itself, but some African countries can help themselves. Some, even if they are in some financial difficulty by our

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standards, have functioning economies and can take on loan commitments. That is an important part of building up the financial systems of countries to ensure that they have access to loans for the type of projects that they want to carry out. It is important that they have that facility. Several hon. Members have asked about that.

That reply may deal with the point that the hon. Member for New Forest, East made about good governance. The performance of countries is taken into account, and if they start to default on their debts they are not given access to new loans. That may be the toughest sanction of them all. I dealt with the hon. Gentleman's point about Zimbabwe. He asked about drought-related problems in southern Africa. The assistance required there is longer term and given in aid. We have programmes that address those problems. In addition, the ADF has helped agricultural projects, which over the years have accounted for the vast bulk of the loans provided. I can give the hon. Gentleman an exact breakdown, if he wants it.

The hon. Gentleman and a number of others asked on several occasions about AIDS, especially in Africa where the figures are horrendous. The bank's annual report recognises the impact that AIDS is having on the economy of African countries. In a previous debate, it was mentioned that the impact of AIDS would hold back the growth rate in some African countries by 8 or 9 percentage points. The illness is taking out some of the economically active in the community—especially the professionals, such as teachers and health workers—with a knock-on effect on all other economic indicators.

The bank recognises that the issue is what should be done. The strategy document recognises that, but states also that the bank does not have the expertise to work in that area. It recognises the need for close working, but also refers to the lead that must be given to other specialised institutions. The countries involved called on the fund to work closely with other institutions to ensure that the problems were tackled, including the United Nations agencies and the global fund to fight AIDS, tuberculosis and malaria, for which we recently discussed funding. The other agencies need to take the lead because they have the expertise in the health sector.

The hon. Gentleman asked several questions about the functioning of the regional banks. Banks have an expertise because they operate in specific areas. There are four of them, although we have discussed only two this afternoon; there are also banks in Asia and Latin America. The banks can develop a level of expertise, local knowledge and scrutiny that would not be possible if they were further afield.

The hon. Gentleman raised a few issues about the objectives of the Caribbean Development Bank. I agree that if one pulls a line out of a strategy document, it can look somewhat banal on its own, but the strategy document from which he was quoting sets out in considerable detail the thinking behind the individual headlines. It is important that loans should focus on measures to reduce poverty, not measures that might build up an elitist economy. That is

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precisely the debate that lies behind much of the criticism of how the EU works, which has been repeated by some Opposition Members. It is important for the British Government to focus not only on poverty reduction, but on ensuring that all the partner organisations with which we work, including the development banks and the EU, also focus on that objective. We must try to ensure that they do not provide funds to middle-range countries and do not get ''projectitis''; funding individual projects that have no link to a coherent strategy. We must ensure that the strategies of both the African and Caribbean banks focus on poverty reduction.

The question of why we should provide loans to desperately poor Caribbean countries underpinned many of the hon. Gentleman's remarks. I know that it might seem incongruous, but the Caribbean countries are not ranked among those with the lowest income, although it is recognised that they have some particular difficulties and areas of weakness. The thinking behind the provision of loans to Caribbean countries reflects the very different position of those countries and the fact that their economies are at different stages. I think that there are about four categories of loans, so that loans of differing lengths, levels of interest and interest-free periods are made to different countries. The thinking behind that is to focus on areas of poverty in countries that, to some extent, are pulling themselves out of the situation that exists in Africa.

I am unsure whether it was the hon. Member for New Forest, East or the hon. Member for Bromsgrove who talked about unsustainable debts. The HIPC initiative focuses on that problem but, to a certain extent, all countries have loans because that is part of a functioning economy. The relevant issue is the relationship between debt and gross domestic product. That analysis has fuelled our debt relief programme. It is not wrong per se to provide loans to poor Governments. Loans can help to recycle funds and to ensure that poor countries have access to loan facilities that they would not otherwise have, enabling them to improve their economies. The hon. Member for Bromsgrove said, ''All they need is water'', but to provide water, countries must have the necessary infrastructure, which many loans help to provide.

Several issues were raised about the effectiveness of monitoring. Again, I point hon. Members to the wide range of measures that have been taken by both the banks to ensure that proper systems are in place and correctly applied.

The hon. Member for North Norfolk (Norman Lamb) asked about several issues, including the repayment record, which I hope that I have dealt with. The delays to which he referred resulted from the need to resolve the issues surrounding grants and loans. He also asked about NEPAD's involvement and its attitude to the bank. I do not know about that; I shall have to write to him. I have flicked through the papers on NEPAD, but I have not seen its comments on the African bank. A number of them are clearly involved and have an active part in the bank, and a great number also receive loans from it.

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The hon. Gentleman asked about performance and repayment. I dealt with that when I spoke about the problems of organising debt repayments. He also said that some countries had pulled out, and asked whether it was because the fund was not working properly or because they had other priorities. It was indeed that they had other priorities; they decided to spend their money in other ways.

The hon. Member for Bromsgrove asked about the rationale for making loans rather than giving grants. I hope that I have set that out fully. One country that is rated as being among the very poor but is still more than capable of coping with a loan is Kenya. That country's economy has a substantial private sector that is projected to grow, but it does not fit the pattern that the hon. Lady described. That country shows that we need to get away from aid dependency.

I have before me a note on the bank's role in NEPAD. The NEPAD heads of state implementation committee has given the development bank the lead agency role, so it is recognised by African leaders as having an important role to play in the development of the various countries of the continent.

I hope that I have answered most if not all the questions that I have been asked today. I hope also that hon. Members recognise that it is extremely important not only that we help countries in the Caribbean and in Africa but that we enable those

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countries to help themselves. That is why we provide them not only with aid but give them the chance to take out loans to fund projects. Indeed, one of the necessities in building up the economies of African and Caribbean countries is that they should have access to finance, and the regional development banks provide an important way of doing that. The banks also provide a level of expertise and commitment that might not be available from general lending institutions.

I recognise that we might have to look again at the final allocations to the African development fund but I hope that, in recognition of the serious difficulties in Africa, hon. Members will agree to the replenishment of the Caribbean fund and to the interim payment for the African development fund. I commend the orders to the Committee.

Question put and agreed to.


    That the Committee has considered the draft Caribbean Development Bank (Further Payments) Order 2002.

Draft African Development Fund
(Additional Subscriptions) Order 2002


    That the Committee has considered the draft African Development Fund (Additional Subscriptions) Order 2002.—[Ms Keeble.]

Committee rose at one minute to Six o'clock.

The following Members attended the Committee:
Griffiths, Mr. Win (Chairman)
Dobson, Mr.
Johnson, Mr. Boris
Keeble, Ms
Khabra, Mr.
Kirkbride, Miss
Lamb, Norman
Lewis, Dr. Julian
Lewis, Mr. Terry
Marshall-Andrews, Mr.
Organ, Diana
Smith, Angela
Smyth, Rev. Martin
Turner, Mr. Dennis
Vis, Dr.
Woodward, Mr.

The following also attended, pursuant to Standing Order No. 118(2):
Baron, Mr. John (Billericay)
Field, Mr. Mark (Cities of London and Westminster)

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