Examination of Witnesses (Questions 300
- 306)
TUESDAY 9 MAY 2006
MR BOB
FITCH AND
MS ANN
GRANT
Q300 Joan Ruddock: The condemnation
of the IMF and the World Bank about these forms of loans is not
sufficient.
Ms Grant: Those past loans?
Q301 Joan Ruddock: Do you expect
some change?
Ms Grant: All I am saying is that
I would rather rely as a motor for change on the kind of commercial
pressures, public awareness and so on than on what you were suggesting,
that something must be done in a mechanism or regulatory way.
Q302 Joan Ruddock: Are you familiar
with the Wolfsberg Principles?
Ms Grant: No.
Joan Ruddock: Then I will not ask you
about them.
Q303 Chairman: The point there is
that a number of NGOs and Transparency International have said
they are concerned about what Joan is talking about and that they
do not sit comfortably with international standards, and they
tried to set up some sort of objective criteria. According to
our brief, 12 leading banks and Transparency International established
these in 2000 and the real question that we are driving at is,
is it not really important, and probably slightly at odds with
what you are saying—we are not questioning the view that
the bank says we have a commercial judgment and we are applying
those standards—that there is a lack of external accountability
or transparency and, as Joan has suggested, indications that in
some cases the Chinese are prepared to come in and provide finance
which does not bear the same comparison. That completely undermines
what the IMF or the international community are trying to do in
terms of improving governance and getting rid of corruption, so
at the very least you stand somewhat tainted by association if
you do not have any independent accountability.
Ms Grant: We signed up for the
Equator Principles, the Global Compact and everything else. I
am sorry, but this particular group is a new one to me and I am
not aware of our participating in it. Maybe I could get back to
you on the Wolfsberg Principles.
Q304 Chairman: What we would like
to know is whether there should be some kind of external comparator,
which would get you off the hook to some extent as well as make
the international community feel that there was a standard that
everybody was applying, because there is a danger that you are
competing for finance and you are up against perhaps Chinese financial
institutions that do not follow the same criteria. Albeit you
have a reputation, these are big sums of money—3.5 billion
dollars secured by oil revenues I guess is quite an attractive
investment but may undermine other objectives.
Ms Grant: It is a very important
discussion and a very important dialogue and it is worth thinking
about how best to involve China in a regulatory framework instead
of assuming it is going to drive everything to the bottom. My
own view is that there is a big challenge, for NGOs as well as
for business and for governments, to actually engage with China
on the basis on which it might provide the kind of finance and
kind of investment that we are talking about. Again, we need to
make sure that they are part of a discussion and not spoken about
rather than spoken to.
Q305 Chairman: It would be helpful
if you are willing to reflect on that and perhaps give us a considered
note[6],
because it is unfair to pursue it in the present context but we
are anxious to see if we can make some constructive suggestions.
Ms Grant: That is that external
validation.
Q306 Chairman: Could I just round
this off by asking you both the same question. We have a lot of
initiatives and you have said, yes, we think we can deliver. The
question first of all is do you think that private sector driven
growth is beginning to deliver, do you have some firm evidence
of that, and would you be willing to say in five years time, given
that you are fairly upbeat about some of these initiatives, the
extent to which sustainable growth in the private sector will
have delivered—I cannot ask you to measure the results—significant
results? Bob, would you like to start?
Mr Fitch: I do not have hard evidence
to back up a claim that the growth is happening now. I guess my
instinct, and I would not claim it is much more than that, to
be honest, is that we have an opportunity at the moment in the
marketplace where a lot of the private sector in the developed
world is constrained, it is fighting within saturated markets
and it needs to look for its future opportunities. Of course,
there may be more immediate opportunities in many parts of Asia,
but there is evidence albeit it circumstantial that many businesses
are now looking at how they can participate in the private sector
in Africa as well as in Asia, so my expectation in the five year
period you have talked about is, yes, there will be clear signs
of that happening, but I would not expect it to translate into
a massive economic transformation in a five year period, but there
is evidence that it is beginning to happen. In the interaction
I have with businesses in the UK and elsewhere in the developed
countries there is more sign of people talking about new commercial
activity, not something driven from a social development angle,
and I think that is a big difference.
Ms Grant: I would cite what is
happening in South Africa and Botswana where there is real evidence
of the growth of a middle class, and I have some very interesting
figures I saw yesterday from the bank on the size of our small
business and the growth of the middle class there, so maybe I
could send you a note on that too. There is no area of the world
which is so easy to generalise about than Africa, and if we were
to say that the 54 countries of Africa were all going to rise
up over the next five years I think not, but there will be really
significant evidence and examples of what works. One of the really
big challenges for Africa is just the size of the market, as South
Africa found that by doing everything right, ticking most of the
boxes, doing all the stuff they were asked to do, the fact is
they are still quite a small market in global terms. The question
is whether some of the lessons on private sector development in
India and China can possibly be applied to some of these very
small markets and, if not, which I guess is the answer when we
are talking about scale, what more can be done to reduce the barriers
of individual countries, what more could be done about breaking
down the barriers between countries so that you have regions that
make sense, customs unions and so on. One of the problems that
Africa has is the competition, obviously, from other parts of
the world where it is easier and quicker to make money on a bigger
scale, without the need to make all the investments that we are
talking about, so it is the relative difficulty of making money
in small markets or people entering new markets. What is happening,
we are finding as a bank, is obviously huge interest from the
Middle East, from India and from China in Africa, and we are accompanying
that business on both sides; that is if you like a bright spot,
but in terms of the traditional growth that we are talking about
it is going to be very patchy across the board and some parts
of Africa would do very well if they get it right, but if they
do not, the price of being left behind is going up all the time.
Chairman: Thank you very much indeed,
both of you. We can perhaps now talk to companies that are active
in the field and see what they think. Thank you very much for
coming in and giving us your views.
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