The
Committee consisted of the following
Members:Barrett,
John (Edinburgh, West)
(LD) †
Blackman,
Liz (Erewash) (Lab) †
Brown,
Mr. Russell (Dumfries and Galloway)
(Lab) †
Corbyn,
Jeremy (Islington, North)
(Lab) †
Donohoe,
Mr. Brian H. (Central Ayrshire)
(Lab) †
Kramer,
Susan (Richmond Park)
(LD) †
Levitt,
Tom (High Peak)
(Lab) †
Prosser,
Gwyn (Dover) (Lab) †
Randall,
Mr. John (Uxbridge)
(Con) †
Simmonds,
Mark (Boston and Skegness)
(Con) †
Smith,
Mr. Andrew (Oxford, East)
(Lab) Streeter,
Mr. Gary (South-West Devon)
(Con) Stuart,
Mr. Graham (Beverley and Holderness)
(Con) †
Thomas,
Mr. Gareth (Parliamentary Under-Secretary of State for International
Development)Wallace,
Mr. Ben (Lancaster and Wyre)
(Con) †
Wareing,
Mr. Robert N. (Liverpool, West Derby)
(Lab) †
Winnick,
Mr. David (Walsall, North)
(Lab) Mark Egan, Committee
Clerk † attended the
Committee Third
Standing Committee on Delegated
LegislationWednesday
24 May
2006[Hugh
Bayley in the
Chair]Draft African Development Bank (Tenth Replenishment of the African Development Fund) Order 20062.30
pm
The
Parliamentary Under-Secretary of State for International Development
(Mr. Gareth Thomas): I beg to
move, That the
Committee has considered the draft African Development Bank (Tenth
Replenishment of the African Development Fund) Order
2006.
The
Chairman: With this it will be convenient to consider the
draft Asian Development Bank (Eighth Replenishment of the Asian
Development Fund) Order 2006 and the draft Caribbean Development Bank
(Sixth Replenishment of the United Special Development Fund) Order
2006.
Mr.
Thomas: It is a pleasure to serve under your chairmanship,
Mr. Bayley, not least because of your interest in many of the issues
that the Committee will no doubt discuss this afternoon.
The African
development fund, the Asian development fund and the Caribbean
Development Bank’s special development fund are the concessional
lending arms of the three regional banks with which we work. The funds
were established in the 1970s to contribute to the economic and social
development of the banks’ low-income and least developed
members. The replenishments willinject $12.5 billion of
highly concessional development assistance into the three regions where
the banks operate. Our total contribution to those replenishments
is£343.79 million.
In 2005, the three banks
between them provided a total of $9.2 billion of support to their
borrowing member countries, of which $3.4 billion was on concessional
or grant terms. The banks address key regional issues, such as
infrastructure and, especially, water and sanitation. They often
develop cross-border programmes of investment, improving access to
energy and tackling the spread of diseases.
There are
many examples of the differences that the three banks make. The Asian
Development Bank, for example, was able to respond swiftly, following
last October’s disastrous earthquake in Pakistan. It immediately
established a Pakistan earthquake fund to channel grant funding, and it
put together a package of $1 billion for the reconstruction and
recovery work in Pakistan. In December 2005, the fund’s first
allocation of $300 million was approved, and that money is helping to
finance the import of materials that are urgently needed for the
recovery process, the rehabilitation of major roads and key bridges,
the repair of hydropower generating stations and the reconstruction of
health clinics and schools.
The African Development Bank is
supporting the Niger Government with an $11 million loan towards a
successful water-harnessing project in one district of the country. For
the population of that area, health coverage drinking-water facilities
have improved significantly. Farmers’ income has risen
significantly, feeder roads in the area have opened up production
areas, and the rehabilitation of 5,000 hectares of deteriorated land
will have a significant beneficial impact on the environment
there.
The third
example that I shall bring to the Committee’s attention is from
the Caribbean Development Bank, which committed about $46.5 million to
support the Government of Belize to develop an environmentally friendly
power project. The project will reduce CO2 emissions by
about 65,000 tonnes a year, and eliminate annually about 13,000 tonnes
to 15,000 tonnes of fly ash.
The African development fund
provides $2 billion of development assistance to 39 of the very poorest
African countries. Its 10th replenishment was set at $5.4 billion to
cover the period from 2005 to 2007. It represents an increase of more
than 42 per cent. on the previous replenishment. We have pledged a
total of £206 million, which increases our share of the fund
from 5.5 per cent. to 7.5 per cent. However, we have agreed that part
of the increase should be provided as a £27.5 million additional
incentive contribution. Provision will be contingent on the bank making
progress on improving the effectiveness of its aid programmes, and a
decision about whether to grant the full amount or part of the
incentive contribution will be made at the mid-term review that is due
by the end of this year.
Our intention
is that no resources from the fund will have to be diverted to meet
debt cancellation payments. As some members of the Committee will know,
the House last week agreed to the UK’s participation in the
International Development Association component of the multilateral
debt relief initiative, and African Development Bank governors are
currently undertaking the approval process for the African development
fund component. Next month, we hope to seek the approval of the House
for the additional contributions that will be required for the
fund. The
Asian development fund provides about$1.37 billion a year in
development assistance to the least developed Asian and Pacific
countries. The replenishment was set at $7 billion and covers the
period from 2005 to 2008. That represents about a 25 per cent. increase
over the previous replenishment. The UK has pledged a total of
£114.1 million, increasing our share from 4.8 per cent. to 6 per
cent. The Asian Development Bank, too, has undertaken to improve its
development effectiveness and impact and will report on progress at the
mid-term review, which will take place by the end of 2006.
Lastly, let
me give more detail about the Caribbean Development Bank’s
special development fund, which is the smallest of the regional
banks’ funds. Replenishment negotiations set a sum of $184
million, of which our share is $44 million, or £23.49 million.
That represents just under 24 per cent. of the total replenishment. The
CDB is planning and beginning to implement an expansion of its
membership to cover Haiti and Suriname. The
implementation of the replenishment will be reviewedat the
mid-term review in 2007, which will give us an opportunity to look
further at the development effectiveness of the Caribbean Development
Bank. Jeremy
Corbyn (Islington, North) (Lab): Can my hon. Friend give
us an indication of the conditions that will be applied to submissions
of funds for Haiti?
Mr.
Thomas: My hon. Friend has often been concerned about the
conditionality that we, and indeed the multilateral development banks,
attach to loans. Let me reassure him that no special conditions will be
attached to the loans that might be given to Haiti, although we will,
of course, look for safeguards to ensure that the money is spent
properly on poverty reduction. We will also want to be confident that
the Government are making progress on their human rights record and
that there is progress on good public financial management.
In conclusion, we are pleased
to continue the support that successive British Governments have given
these important institutions, which work to eliminate poverty and
promote sustainable development in their regions. On that basis, I
commend the orders to the
Committee. 2.38
pm Mark
Simmonds (Boston and Skegness) (Con): I, too, am pleased
to serve under your guidance and chairmanship this afternoon, Mr.
Bayley, particularly given your interest in and knowledge of these
issues.
As the
Minister rightly said, the Opposition support the regional development
banks’ work—we did so when we were in government and we
will do so when we are in government again. We welcome the opportunity
to debate these orders on replenishing the three development
banks’ funds. The banks do valuable work in some of the poorest
countries in Africa, Asia and the Caribbean, and their focus on health,
education, agriculture, sanitation and infrastructure is necessary for
poverty reduction and poverty alleviation.
As the Minister said, we are
discussing significant sums. We are providing approximately £206
million for the African development fund, £114 million for the
Asian development fund and £23 million for the Caribbean
development fund. That leads me to my first question for the Minister.
The UK’s contribution to the three banks is clearly
significantly in excess of its shareholdings in them. We have a 1.68
per cent. shareholding in the African Development Bank, but we make a
7.5 per cent. contribution to it. We also have a 1.97 per cent.
shareholding in the Asian Development Bank, but make a 6 per cent.
contribution to it. Finally, we have a 9.63 per cent. shareholding in
the Caribbean Development Bank, but make a 23.9 per cent. contribution
to it. It would be helpful if he explained why the disparity is so
large, particularly as the small shareholdings give the Department for
International Development and the UK Government limited influence and
control over how that money is spent. That is important if the
UK’s contribution in those areas is significant.
The Minister outlined the
purpose of the regional development banks, and I have no wish to repeat
what
he said. However, I would like to highlight that the original purpose of
the regional development banks was to foster economic growth and
co-operation in their respective regions and to contribute to the
acceleration of their regional members’ economic development. It
could be argued that the Asian Development Bank has had some success,
but it appears that the African Development Bank has not. It would be
helpful if he outlined what changes will be made to the African
Development Bank so that it meets its original
purpose. The
replenishment consultation periods are not just about sums of money and
the contributions that are to be made. They are also important
opportunities for forging policy alterations, setting the regional
development banks’ boundaries for further activities and
establishing the guidelines for the banks’ work in the poorest
nations. In our view,
the banks’ roles need to be enhanced, particularly in debt
relief, specific project planning—there have been some problems
with this in the past—and cross-border activities and
structures. A critical factor for success is decentralisation,
particularly of the African Development Bank. Can the Minister outline
the plans, particularly of the African Development Bank, to
decentralise decision-making processes and monitor the effectiveness of
bank programmes and funds put into specific countries? What role does
the UK Government intend to take in ensuring that improvement is
recognised as necessary by the African Development Bank in its joint
strategic framework, so that improvement of project planning and
implementation are delivered on the
ground? The Minister
rightly mentioned the importance of debt. All Members of the House
would accept that responsible lending and borrowing are vital if
developing nations are to improve their economic well-being and
alleviate poverty. Concerns have been raised about the fact that many
developing nations take short-sighted policy decisions. There are
several examples: controlling interest rates below the rate of
inflation, keeping exchange rates artificially low and granting
subsidised credits to favoured supporters. Such nations need to be
monitored carefully by their respective banks to ensure that they meet
millennium development goals and the banks’ original
purpose. As the
Minister said—I think that I heard him correctly, but I would be
grateful if he clarified it in his winding-up speech—none of
those moneys is going to replenish debt relief. As the replenishment
moneys are going to the banks’ funds rather than to the banks
themselves, which provide concessional loans, will he say whether any
of those moneys will be used to give concessional loans to countries
that have benefited from HIPC—heavily indebted poor
countries—debt write-offs? Will they be used purely for those
who have not yet done
so? What
mechanisms are the UK Government ensuring that the banks put in place
for loans and debt write-offs to be given responsibly, so that
recipient countries’ international credit standing is not
compromised? How will the loans be monitored to prevent a cycle of
borrowing and debt cancellation? What are the regional development
banks doing to find new, innovative financing mechanisms to provide the
resources that developing countries need
without incurring additional debt? What are they doing to enhance
developing nations’ trade capacity and build their supply-side
capacity, so as to facilitate greater trade internationally as well as
in the countries and regions? An enormous amount of additional
pan-African trade, for example, could be taking
place. The African
Development Bank has specific criteria for determining whether a
country is already deeply indebted. Will the Minister inform the
Committee whether the other regional development banks that we are
discussing have similar policies? Specifically, will the African
Development Bank use that information to ensure that countries with
large debts receive grants rather than further loans? At what point is
a country regarded as too deeply indebted to receive further loans?
What is the correlation between receiving further loans and re-gearing
the existing loans and the qualifications for future HIPC
initiatives? The
Minister and I constantly debate in Committee and elsewhere the issue
of accountability and transparency. Opposition Members acknowledge that
it is difficult to monitor the transparency and effectiveness of aid
that goes into multilateral institutions. To date, however, in some
circumstances there is limited knowledge of whether DFID knows exactly
where the money is going. Are there any thoughts in the Department
about transparency? Does the Minister have any proposals about how to
follow the money from when it leaves the British taxpayer to its being
received on the ground? We must ensure the maximum possible alleviation
of
poverty. 2.46
pm Sitting
suspended for Divisions in the
House. 3.11
pm On
resuming—
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