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Lord Redesdale: I am glad to note that the noble Lord, Lord Judd, agrees with me on that. The area of the world that has failed so badly to attract private investment is the sub-Saharan African region. Therefore I welcome the Commonwealth African Fund most wholeheartedly. It is good to note that the CDC is investing 47 per cent. of its new investment in sub-Saharan Africa. It is worth noting that the headquarters of that fund will be situated in Zimbabwe. It is a brave move to site the headquarters there rather than in South Africa, which might have been considered by some as the logical choice. Zimbabwe is one of the countries which is trying hard at the moment to attract private investment.
Obviously the CDC will act as seed capital to try to attract private investment. After the recent democratisation in many countries in sub-Saharan Africa and the subsequent changes in economic practice, the financial conditions are now right for private investment. The conditions were not right a few years back. There has been mention that the CDC acts in a range of countries, some more prosperous than others. I have to support that for a number of reasons. Countries which are not particularly prosperous can act as a benchmark for the CDC because they have poorer and richer areas. I believe that the CDC needs a range of countries in which to spread its risk base so that it is seen as a credible organisation.
I was interested to note from briefing that Cuba is one of the countries in which the CDC operates at present. Does the ill thought out Helms-Burton legislation affect the CDC in any way? In recent briefing on the CDC it was put across with some strength that this is a necessary and worthwhile piece of legislation that needs enactment as soon as possible. I had the impression that there should be no hindrance; indeed, that the length of the speeches should be cut down so that the Bill can be enacted as soon as possible. We on these Benches hope that it will be.
I have a strong sense of dejo vu because the Government did not have a proper CDC Bill last year but only an inadequate half sort of a Bill followed by an afterthought. As the two preceding speakers said, my friends in another place felt that that was the wrong way to introduce legislation and, not being certain why it had been done in that way, knocked the afterthought emanating from this House down with a feather. Usually it is the Government who do that with Private Members' Bills which go through all their stages in your
In a few sentences perhaps I may emphasise my noble friends' questions to the Minister and add one or two of my own. For instance, how central does the CDC remain to the Government's overall overseas development strategy? Will the CDC definitely remain in the public sector? What operations beyond playing a full role in the Commonwealth private investment initiative and the Commonwealth Africa Investment Fund--both of which we greatly welcome--does the Bill facilitate? How extensively will the new powers conferred by the Bill be used? There is a fear, for example--it was mentioned by my noble friend--that the CDC may be turning into a merchant bank rather than a hands-on development agency. Does the Bill confer all the powers needed in the foreseeable future to enable CDC to borrow on the private market?
Will surpluses earned by CDC enterprises be reinvested in the countries that generate them; or, as some people fear, will they be syphoned off to more profitable countries, leaving poorer and probably less profitable countries less well endowed? Does the Bill change the emphasis of CDC from a development agency operating in a unique way, helping to spearhead investment in difficult territory, into a financial agency? Will the current staff, for example, be supplanted by staff with financial rather than development expertise?
Will the organisation, in other words, still be a pioneer group opening the way for further investment, as is needed in today's conditions, where bilateral and multilateral official development assistance is becoming hard to come by? This really is the supplementary question that I put to the noble Lord at Question Time yesterday. As my noble friend has implied, the lack of infrastructure, both material in the form of power, communications and transport and social or human in the form of education, water supply, housing and health facilities, has been a factor discouraging investment in sub-Saharan Africa, not to mention the terrible conflict and lack of political stability in many countries over the past decade or two. Things look a little better now, with peace coming to Angola, Mozambique, Ethiopia and Eritrea, but there is still trouble afoot in the Sudan, Sierra Leone and Liberia; and Nigeria is certainly in need of a great deal of reform and change.
Can the noble Lord amplify his Answer to me yesterday by saying how private finance in, for instance, the Commonwealth private finance initiative can be attracted to assist in human development as well as in the material aspects of infrastructure building in which the CDC has been involved up to now? Those are also important in attracting inward investment, as the tiger economies have shown so well.
In conclusion, I wish to echo the all-party praise that has been given to the work of the CDC over 48 years and welcome the Bill, as long as it allows the CDC to expand in the excellent way that it has done. We wish the Bill well, but we shall be watching carefully.
Lord Chesham: My Lords, I am grateful to those who have spoken today on this short but important Bill. A number of points have been raised which I shall endeavour to answer. I thank the noble Lord, Lord Judd, for providing a copy of his questions just before the start of the debate, and the noble Lord, Lord Redesdale, for advising me of his intended question on Cuba. I am in a perfect position to answer that, thanks to his talking to me last night.
I am not sure that I can take everything in exactly the same order as the noble Lord, Lord Judd, asked the questions. However, I believe that I can cover virtually every point he raised. If I miss anything, I shall write to him. However, I hope that I shall be able to satisfy him.
One of the major themes undoubtedly was the continuing public ownership of the CDC. Following the last quinquennial review, it was confirmed to the House in May 1994 that the CDC was being retained in the public sector. This remains the Government's intention. The present position--the public corporation run by the board within a framework of targets agreed with Ministers--is the right one. The characteristics which have contributed to the CDC's success--the ability to attract co-investors, freedom to work in the poorest countries, freedom to work at the margins of risk ventures--owe much to the security of being in the public sector.
The CDC has a distinctive role within the UK aid development programme and as such is obviously very important with the ODA. The suggestions that there was a rift between the ODA and the CDC are certainly untrue. There is continuing co-operation between the two bodies.
The CDC acts as a catalyst to private sector investment and shows others how to invest profitably in poor countries. This will be the great role in sub-Saharan Africa where it can show, through the Africa Fund, that investments can genuinely and sensibly be made in sub-Saharan Africa. It has an enormously important role in that, which will be supported by the Commonwealth. It will not just be CDC funds; other Commonwealth funds will go into it as well. It is an exciting initiative and we, and I am sure the whole House, wish it well.
The CDC has a mandate to pursue those investments which the private sector regards as on the margin of acceptable risk. Public sector status is valuable to the CDC in its dealings with the governments of the counties in which it operates. There is no hidden agenda behind the Bill; it does not affect the reasons for retaining CDC in the public sector. The Bill is simply intended to allow the CDC to better play its role as the main instrument of the aid programme assisting the private sector in developing countries.
The noble Lord, Lord Judd, asked how extensively the new powers would be used. We have agreed with the CDC that there should be limits to the use made of the new powers, both to reorganise and rehabilitate businesses and to promote capital in financial markets. These limits will be considered in the context of CDC's existing strategic targets, which will continue to apply. We have no wish to be too prescriptive at this stage as
We do not believe that there is a need for a White Paper on aid, as the noble Lord, Lord Judd, will be surprised to hear. Our aid policy is regularly debated in detail in both Houses. The fundamental expenditure review set out clearly the future direction of British aid policy.
The fundamental operating principle of the CDC is additionality. It is not investing where no value is added by the CDC. That will continue to apply to investments facilitated by the new powers. So the fear that it could just become a quasi-merchant bank are groundless. The targets and aims are exactly the same. This is to make it more able effectively to carry out its traditional aims and targets.
There was mention of the composition of the board of the CDC. The chairman and members have wide experience of service in finance and development. We believe that they are well qualified to lead the CDC. A sub-committee on development issues has been established, comprising the chairman, Sir William Ryrie and Professor Faber. The late Professor Carruthers was also a member. We recognise the importance of maintaining a balanced board. Following the untimely death of Professor Carruthers, we agree that it will be important to bring in new members with experience in the development field.
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