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Westminster Hall

Wednesday 14 May 2008

[Mr. Mike Weir in the Chair]

Commonwealth Development Corporation

Motion made, and Question proposed, That the sitting be now adjourned.—[Ms. Diana R. Johnson.]

9.30 am

Mr. Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): I very much welcome this opportunity to open a debate celebrating the 60th anniversary of the Commonwealth Development Corporation. The CDC came into being by way of evolution. Its genesis arose from a determination to assist in challenging poverty in developing countries. To achieve that development and to encourage enterprise, it was essential that those countries should be seen to make progress in sectors ranging from agriculture to health care, as well as energy and the provision of infrastructure.

The CDC was pivotal, and remains so, in giving assistance and encouragement in some of the most deprived areas throughout the world. Why? Because the very purpose of the CDC is to be a pioneering organisation that ventures into areas where other companies would not dare to invest. In doing so, it acts as a beacon, by setting a clear example and sending a confident message to the investment community that those areas positively invite business investment.

The CDC was a product of the Attlee Government and reflected the ethos of those post-war years. At home, we sought to introduce the NHS but, notwithstanding the colossal problems of that period, we also recognised our responsibilities to many others who, even then, were less fortunate than ourselves. It was Nye Bevan, the Secretary of State for Health, who introduced the NHS, and it was Creech Jones, who was Secretary of State for the Colonies, who presented the Colonial Development and Welfare Bill, which confirmed the role of the CDC.

Creech Jones said then:

Today, I pay tribute to an organisation that has rightly moved with the times, addressing the problems of a modern world and working with its shareholder, the Department for International Development. Together, they play a significant role in achieving the millennium development goals. That was recognised by the statement of the Secretary of State for Environment, Food and Rural Affairs, my right hon. Friend the Member for
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Leeds, Central (Hilary Benn), the former Secretary of State for International Development, when he told the House:

It was that foresight that led the Government to recognise that the CDC’s role had to change. In the ever-evolving world of business and investment, such change was necessary to reflect and keep pace with the challenges of globalisation. The CDC inevitably needed to be restructured and brought up to date; indeed, it has been restructured six times since its inception in 1948. Those changes were not simply meddling with the CDC’s role; they were about facing the fundamental new reality of changing times—a reality that any successful business needs to face.

The House recognises that the CDC, the private sector, the Government, non-governmental organisations and international institutions cannot themselves solve the problems of the developing world; Africa, in particular, has its own issues to address. The imperative for the CDC is to focus on where poverty and destitution resides across the globe and to offer a positive response.

Hon. Members will no doubt recall the International Development (Reporting and Transparency) Act 2006, which I had the privilege of piloting through the House two years ago, with wonderful support from the Under-Secretary of State for International Development, my hon. Friend the Member for Harrow, West (Mr. Thomas), who is here this morning. The main principles of that Act are reflected in what we expect from the CDC and from DFID itself. Those principles are poverty reduction—indeed, in time, the complete eradication of poverty; good governance; transparency; accountability; fair trade; a functioning civil service free of political control; and adequate infrastructures necessary to build and grow developing economies.

Jim Sheridan (Paisley and Renfrewshire, North) (Lab): I would like to put on record my sincere thanks to my right hon. Friend for the work that he did on the International Development (Reporting and Transparency) Act 2006. However, since the Act has been introduced, can he tell us what evaluation has been carried out by parliamentarians on how effectively the Act is working?

Mr. Clarke: I am grateful to my hon. Friend for his intervention. Perhaps the most significant development since the Act was introduced was that, last year, we had the first report to Parliament and, following that report, we had a debate in the House. That is the kind of accountability and response to parliamentarians that I hope to refer to further later on. I am grateful to my hon. Friend for the point that he made.

The Parliamentary Under-Secretary of State for International Development (Mr. Gareth Thomas): Will my right hon. Friend also acknowledge that one of the broader strategic impacts of the discussions that took place on the introduction of the 2006 Act, which he championed, is a demonstration of the continuing support
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of parliamentarians—particularly Labour Members, but hon. Members in other parties, too, and more generally outside the House—for continued progress to meet the 0.7 per cent. UN target on national incomes being spent abroad? Indeed, will he also acknowledge the continuing progress that the Government have been making to that end?

Mr. Clarke: My hon. Friend the Minister is absolutely right, and he is entitled to say what he said, because he gave so much support to the 2006 Act. One of the main objectives of the Act was that the Government—indeed, all future Governments—should report on how they are achieving the 0.7 per cent. gross national income target. The truth of the matter is that, for a very long time and particularly during the last Government—I am not making a political point by saying that—we fell well behind what we were told should be the target, which is 0.7 per cent. of GNI. Therefore, it is perfectly reasonable and right for my hon. Friend to draw that to our attention, given DFID’s commitment to increasing international development aid and its endorsement of the other objectives of the Act, such as the millennium development goals and the transparency for which we called.

As a result of weak governance in developing countries, the private sector is often accused of being too avaricious. However, to their credit, diligent NGOs have provided numerous documents exposing such corporate abuses. Regrettably, that in turn has led to an increasingly common perception that those who invest in Africa or other emerging markets have done so at the expense of sustainable economic investment, environmental standards and good labour practices, including those on health and safety, and that, broadly, they have taken much from those countries and given very little in return. Thanks to organisations such as the CDC, that perception is slowly changing, but change needs to happen faster, and the CDC is one of our best instruments for bringing it about. Its status under Government ownership and its focus on profitability with best employment practice give it a unique opportunity to be a beacon.

A trend is emerging, in that how companies behave abroad has an impact on how they are perceived at home. People are asking whether they are responsible, reputable investors, and whether they engage in meaningful corporate social responsibility and sustainable ethical investment. Such questions are inevitably posed about the CDC itself.

We have seen a rise of single-issue campaign and consumer groups over the years. That is a sign that the consumer and, indeed, the investor have become more sophisticated about the choices that they make. Consumers weigh up a range of different aspects, whether choosing what they buy in their local supermarket or what companies to invest in on the stock market. Additionally, the power of institutional shareholders, such as trade unions, can bring much influence to bear on global markets and can effect behavioural change within companies. Doing business in a constructive, responsible manner is now considered a central tenet of increasing a company’s bottom line.

Mr. Thomas: I hesitate to interrupt my right hon. Friend again, but as he is making a point about how ethical trading helps a company’s bottom line, will he
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join me in praising the work of the ethical trading initiative? As we approach the 10th anniversary of the initiative, will he join me in encouraging businesses that have not yet signed up to it—businesses that have large stores in our high streets—to take the opportunity in the run-up to the ETI’s conference in September to sign up to it?

Mr. Clarke: Again, my hon. Friend the Minister is on the ball. We warmly welcome the ETI and observe that DFID is doing its very best to ensure that it is fully implemented and understood. I wish him and the conference well.

I now want to address the attitude to business. I understand where the Government are coming from with their ethical approach, and I know that my earlier comments about public perceptions are true. In common with other hon. Members, my postbag and inbox are full of mail on the issues that we are discussing, including fair trade. It is clear that a twin-track approach—not a choice between aid and trade but both—is required to encourage developing countries. That is acknowledged by the CDC.

In a recent newspaper interview, the current chief executive saw no contradiction between the demands of profit and social development. He stated:

That last point is where parliamentarians necessarily become involved, because it is our job to hold the Executive to account. Indeed, that was the inspiration for the 2006 Act, as I know my hon. Friend the Minister will agree. It is all the more important when we recognise that the CDC is DFID’s largest asset, with net investments worth around £2.8 billion.

The CDC’s annual review entitled, “Generating wealth in emerging markets”, shows the diversity of investments across the whole range of geographies. Although Africa rightly remains a priority for DFID in delivering appropriate policy, there must be a recognition that extreme poverty exists in many areas of the globe, as the report states.

There are many examples of best practice in the CDC’s activities. When I visited Rwanda, I was introduced to the work of the Banque Commerciale du Rwanda. It was the CDC’s first entry into the country, which was still struggling after the genocide of 1994. As the second largest commercial bank in Rwanda, it can act as a catalyst in that resurgent sector. The CDC’s expertise helped to increase the bank’s market share from 20 to 25 per cent., and the bank has even started a leasing finance business for small companies. Thus we can see how the CDC’s investment in that area has far-reaching benefits for the whole of Rwanda’s economy.

We have to refer to Tatepa. It produces Chai Bora tea, which is Tanzania’s biggest selling brand, with a 55 per cent. domestic market share. The CDC’s involvement with Tatepa from its inception has had a significant development impact on the company, particularly on
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the working conditions of its staff, especially on the Kibena and Wakulima estates. Tanzania presents a particularly challenging trade environment for business. Despite that, the economy has enjoyed growth rates of close to 7 per cent. in recent years, and Tatepa has grown steadily, winning fair trade status.

In Kenya, Brookside Dairy produces superior quality milk, sourcing it from 80,000 suppliers. Seven per cent. of them are commercial farmers and the remainder are small-scale producers. The company’s sales depots now stretch from Mombasa on the east coast to Kisumu on the shores of Lake Victoria on the west coast. As well as selling to the domestic market, Brookside now exports to Tanzania, Uganda, Rwanda, Burundi and Mauritius. That is an example of development co-operation improving the lives of people not just in the country in which the investment is made, but those of people in the surrounding countries. Work is going on in central America, including Nicaragua, where there are many projects, and in Bangladesh and Fiji. I could go on, but time does not allow me to go into too much detail.

As well as celebrating the achievements of the CDC over the past 60 years, one of the main impulses for calling for this important debate is the uncertainty and speculation in the press about the future of the CDC. I feel that it is necessary to refer to that. The current investment policy expires at the end of this year and some sections of the media have reported that the Government are of a mind to sell the CDC. Plainly, I would not welcome that; nor would many hon. Members. In his closing statement, will the Minister reassure hon. Members in this Chamber about what exactly the Secretary of State has in mind for the CDC?

I said earlier that parliamentarians have the right to hold the Executive to account. That point was endorsed by my hon. Friend the Member for Paisley and Renfrewshire, North (Jim Sheridan). This is all the more relevant as the Government are the only shareholder in the CDC, so we parliamentarians have a responsibility and a vested interest on behalf of the taxpayer in respect of how the Government proceed with the development of the CDC.

Jim Sheridan: Surely, the speculation surrounding the CDC must have an impact on investment, particularly in African countries. If parliamentarians are to have a role in overseeing whether the CDC will be sold off, surely that role would be ideally fulfilled by the Select Committee on International Development, which could consider the matter. As a member of that Committee, I would welcome the opportunity to speak to CDC representatives as well as the Government.

Mr. Clarke: I welcome my hon. Friend’s intervention. I would encourage a close relationship between the Select Committee and the CDC. However, in respect of the specific point that I am raising, I urge a little caution on his part and invite him to wait for the reply from my hon. Friend the Minister, because we have been round this course before and I have a feeling that we might be reassured before the end of the debate.

I would not be doing a service to the CDC if I did not acknowledge that it has, from time to time, been the subject of criticism, as we have seen in some press comment. The excellent Library paper prepared for the debate gives a flavour of some of those criticisms.
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Today, it is important that the question of privatisation has been debated and, rightly, rejected. In common with the vast majority of non-governmental organisations, I and members of my party and others in the House, as well as those who have made a considerable input to development policy formulation, hope that the matter has now formally been put to bed.

I hope that my hon. Friend the Minister will join me in congratulating the CDC on its success. A sign of that success is that in recent years it has not received any funding from Government—actually, it has had no funding at all since 1996—yet has significantly expanded its business, which is welcome. That is a sure sign that the CDC has been meeting its commitments in terms of attracting third-party investors in developing countries and expanding the company at large. I hope that officials, Ministers, parliamentarians and the CDC will work together and support the organisation as it progresses and inevitably faces new challenges.

The CDC is not a unique organisation among European countries, although the people of Britain should be very proud of what it has achieved, not least because of its focus on the poor countries of the world. By European financial institution standards, the CDC leads the International Finance Corporation, the World Bank’s investment arm in poor countries, in terms of investment. Some 12 per cent. of the IFC’s capital investment is focused on Africa, the Caribbean and the Pacific, with the figure at 26 per cent. for all the European development investment institutions. However, 60 per cent. of the CDC’s investment is in Africa alone.

The CDC is delivering Government policy now and remains at the forefront of responsible private investment development. However, if we are to achieve the holy grail of complete poverty eradication, much more has to be done. The CDC has a good reputation in emerging markets. None the less, I urge Ministers and officials to work ever closer with the CDC in future. If the Select Committee wants to take a lead, I would encourage that. A focused, working, constructive relationship will ensure that the institution and its shareholder can go forward in tandem, so that the CDC plays a major role in meeting the Government’s poverty reduction goals.

I conclude by inviting my hon. Friend the Minister, and all my hon. and right hon. Friends in the Chamber this morning, to join me in congratulating the CDC in its 60th anniversary year. I am sure that my hon. Friend will support the organisation in its objectives. In doing so, he will reflect the enduring legacy of those Labour greats, Clement Attlee, Aneurin Bevan and Creech Jones and be true to their spirit and aspirations.

9.57 am

Mr. Eric Joyce (Falkirk) (Lab): I had not intended to speak, but I saw my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) speaking on the monitor earlier and it struck me that I should congratulate him on making such a good speech on an important subject.

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