Examination of Witnesses (Questions 40
- 60)
TUESDAY 30 MARCH 2004
BRITISH CONSULTANTS
AND CONSTRUCTION
BUREAU
Q40 Chairman: It might be the case
for taking the moral low ground here. Obviously there are two
aspects to this. One is the financial one which we have just been
discussing. The other one is the administration, in the sense
of how fast our applications turn round. Is this a problem as
well? I do not think we have really touched on that today.
Mr Adams: It is not an area I
have specialised in but I have had anecdotal comments from my
membership that things have slowed down and we should try to get
this speeded up. (Instructions received) I am sorry, I need to
correct that. I had that entirely wrong. Actually ECGD now is
giving a good response. I do beg your pardon.
Q41 Chairman: So the problem is not
one of administration or speed but a sense in which, at the international
agreements, Britain tends to be, as it were, a little further
from the edge of the envelope than some countries.
Mr Adams: Exactly, and less brave
as well in the markets into which it is prepared to go.
Q42 Mr Evans: Which countries are
better at it, in that they are less risk averse and help the small-
to medium-sized enterprises?
Mr Adams: Ex-Im in the United
States. Coface certainly in France. And I think Hermes in Germany
as well. Those three would appear to stand out.
Q43 Mr Evans: Is it the same throughout
all the sectors in which you operate, that they operate roughly
the same?
Mr Adams: Let me emphasise that
in giving you that answer I am talking about my sectors of professional
services and, more especially, the construction side. I cannot
speak for the manufacturing side at all and, please let me emphasise,
I am not.
Mr Evans: Thank you.
Q44 Sir Robert Smith: That would
mean the bulk of your support would be non-defence as well, then?
Mr Adams: Absolutely. The nearest
we have to defence in BCCB is mine clearance and security and
that sort of thing.
Q45 Sir Robert Smith: In part of
your submission you state, ". . . there remains a great deal
of frustration and economic theorists rule at the expense of export
practicalities: `The Treasury Nanny knows best,' and we believe
firmly that `Nanny has got it wrong'!" Does that mean that
where nanny knew best in the past, we got rid of that problem
by privatising the institutions that nanny was interfering in?
Would you therefore support the privatisation of the Export Credits
Guarantee Department?
Mr Adams: In the dealings I have
had with Treasury they have made it very clear indeed, with such
items as I have talked about over the identification of how many
jobs things create, that productivity is important. Indeed, in
one particular meeting that I attended and asked questions and
said nothing had been said about export, I was told, "With
a strong economy exports will automatically follow." This
left me slightly aghast at this sort of theory, because our view
is, certainly from the exporters, that we are the ones who are
wealth creating as vigorously as we possibly can.
Q46 Sir Robert Smith: So you think
it should not be privatised.
Mr Adams: We would like to see
ECGD stay in government because of the support that that gives
us to newly emerging countries: "Our government is behind
us in a particular project." That is why. If it is privatised,
it will be like anything else. We will lose that leverage that
HMG gives us. No amount of assurance from an ambassador is as
good as going to a country and saying, "We have ECGD cover
for this project, our government is behind us."
Q47 Sir Robert Smith: When you are
saying it should take more risks and be braver, you are arguing
that the taxpayer should be exposed to more downside.
Mr Adams: I am arguing for the
taxpayer to invest in people who almost certainly are going to
make a very good return.
Q48 Sir Robert Smith: If they are
going to make a good return, why not invest in it themselves?
Mr Adams: I am sorry, I mean a
return for UK plc. Typically our construction and consulting firms
have a margin of about 5%. It is not high on this international
work at all. It is a very, very tight business.
Q49 Sir Robert Smith: But throughout
the eighties and nineties, sector after sector said, "It
will be a disaster if we are privatised. We will not be competitive.
If we break away from the support of the state, we will not be
able to survive." In a sense, there were people saying, as
you have said, that if we remove the tie between aid and trade
we are going to damage ourselves. In a sense, if we take the lead
will we not have the most efficient businesses, that will be able
to compete globally when the others have to?
Mr Adams: That might work extremely
well in established markets for manufacturing. But where you are
talking about these leading-edge markets that we try to go to,
we do need the sort of support, which has been demonstrated in
Iraq already. Where you are looking for commercial cover, that
commercial cover in a privatised ECGD will probably be unobtainable.
Q50 Sir Robert Smith: Which does
mean there is a government subsidy, in effect, to the trade.
Mr Adams: It is a government .
. . Semantics, yes, it is a government subsidy—
Q51 Sir Robert Smith: It is not semantics,
is it?
Mr Adams: No, I am going to give
you the semantics, if I may. I would call it a government investment.
When I take the Kazakhstan situation, if you get a good return
for UK plc that is money well invested.
Q52 Sir Robert Smith: An important
thing is maybe to pin down this calculation of jobs. I suppose
the difficulty is to attribute the jobs that are achieved by that
subsidy against the jobs that would have been obtained without
the subsidy. It is the difference that has to be established.
Mr Adams: Absolutely.
Q53 Sir Robert Smith: It is the difference
that has to be established. There will be contracts won without
the subsidy.
Mr Adams: In the Sectors Committee,
which is a Committee under the board of UK Trade and Investment,
I have fought a sort of lone battle for four to five years saying,
"Please can government identify the statistics for jobs created?"
I think it will be an eye-opener to everyone. I really do.
Q54 Mr Evans: Are we losing out in
Iraq at the moment, do you think?
Mr Adams: No. I think we have
done surprisingly well, actually. The ECGD context, in fairness,
does not come into it at the moment. We have done very well in
Iraq in two ways. One, I think we have done very well from the
US side, as well as we could have expected. Despite the media
banging on about we are missing out, we are not missing out. It
is what was US tied aid, and, indeed, we have taken a good proportion
of that, either in joint ventures or in sub-contracting and that
sort of thing. We are not missing out at all. We have something
I think in the order of nearly 2,000 people there. All right,
about 1,000 of those are doing security, but they are still UK
firms providing that security. Where we are working very hard
indeed now is on the other side, on the World Bank related projects.
Indeed, only two or three weeks ago we had a briefing from the
World Bank in BCCB, by the Iraq desk, by the IFC, and that is
the area in which we are trying to get British exporters to concentrate.
Q55 Chairman: You have mentioned
the issue of privatisation. Of course there has been a substantial
amount of privatisation of the ECGD activities in the recent past
anyway, has there not?
Mr Adams: There has.
Q56 Chairman: We are now down to
the bits that the markets have been very reluctant to embrace.
Would that be correct?
Mr Adams: I think that is absolutely
right. I think what I said to Sir Robert about those difficult
markets needing government support to be able to get into them
at an economic rate is the reason why perhaps the markets are
not prepared to take them up.
Q57 Chairman: You say that the Iraq
situation is moving well. If your members wanted to go into Libya—which
the events of last week might suggest as an obvious one, given
that there are a lot of infrastructural improvements and expertise
which they have been denied access to—do you think ECGD
would be up to that challenge, in the sense that if the resource
to go into Libya has to be made available it would probably be
at the expense of other parts of the world, given that they have
only a limited budget?
Mr Adams: Gosh! It is extremely
difficult to say this. Yes. If you take Libya, we would like to
see Libya really coming on-stream tomorrow. I would have to say
that several of our members are in a situation where they have
debts from Libya based on infrastructural projects that went on
before, but that in no way is inhibiting the enthusiasm to go
back there. We would like to see cover tomorrow.
Q58 Sir Robert Smith: Your sector
is not defence related. Given that about half of the Export Credits
Guarantee goes on defence projects and yet it is going to countries
at risk and so on, maybe that is one of the drags on the bureaucracy
in terms of the goals of the government. If half the money that
is underwritten by the taxpayer is in effect supporting defence,
exports into troubled areas, is it not bound to have a lot of
red tape tied round it to try to—
Mr Adams: Absolutely and I do
think the two should be treated entirely differently. Most of
what we are doing tends to be development related. I would like
to see either what we do, and perhaps the manufacturers do, non
defence or defence, one or the other, ring-fenced and kept totally
separately.
Q59 Mr Berry: Would you go so far
as to say that export credit cover should not be provided for
arms exports for that reason?
Mr Adams: Coming from my background,
I find it very difficult to say that actually. No. I repeat what
I have just said: I would prefer to see them treated as entirely
separate entities. The one thing we do feel is that the general
pot, the reservoir of funds available for ECGD could actually
be greater, and, again, I would make a plea that if we could see
how much job creation this was giving I think there would be a
justification for doing it.
Q60 Chairman: I think there are one
or two points at the end which we may have to take up with other
people apart from yourself. I think you have been very frank and
very helpful with us this morning. If there is anything else that
we need to get back to you on, we will do, Mr Adams, but thank
you very much for the time and the trouble.
Mr Adams: I was told you were
going to be gentle!
Mr Berry: Who told you that!
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