Draft Caribbean Development Bank (Further Payments) Order and Draft African Development Fund (Additional Subscriptions) Order 2002

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Mr. Mark Field (Cities of London and Westminster): I was interested to hear what the Minister had to say on focus. Will she give us some historical background? I appreciate that we are going back almost 30 years, but the focus has presumably changed given the amount of disease, especially HIV and AIDS, in much of sub-Saharan Africa during the past 15 years. Will the Minister give us some idea about the historical analysis of where the money went from 1973 onwards, and say how thinking has changed and how she envisages that it will change during the next decade?

Ms Keeble: The focus has tended to be on infrastructure and agricultural projects, although transport projects have also been important. I think that I am right in saying that there have tended to be more projects in Africa than in the Caribbean, perhaps not surprisingly because of the focus on economic activity in Africa. I can certainly provide the hon. Gentleman with a breakdown by sector of loans in existence, if that would help.

Mr. Field: That may be helpful. I accept that long-term projects to develop infrastructure are important, but the radical depopulation, especially of the younger working population, in parts of Africa is obviously of great concern. I was looking for some guidance on whether the Government had that in mind in targeting projects in particular countries in Africa, or whether their approach to giving money was more general.

Ms Keeble: If I may say a little about the profile, during the mid-1990s the number of loans decreased dramatically, to about 10 or 20 at the lowest point, largely as a result of problems in the fund. We need to consider the profile of spend since a new president was appointed about five years ago—in 1995, I think. Looking at the approvals given last year, health is not specifically mentioned, but would be affected by water supply and sanitation projects. The sort of issues mentioned by the hon. Gentleman relating to the provision of health services would be more influenced by the other sources of spend, in particular, direct support for HIV-AIDS work and the development of health services that we and the EU provide. I can give the hon. Gentleman a profile of the spend or the pattern of loans, but if one considers the historical development, what strikes one the most is the dramatic reduction in the number of loans and the amount of activity during the mid-1990s because of the difficulties in the fund's organisation.

Norman Lamb: Will the Minister comment on the Department's overall strategy? She referred to investment in the agricultural sector. We have also heard in recent months about the decline in investment in agriculture in Africa by the Commonwealth Development Corporation. There are two chunks of money going in different directions, both within the Department's overall responsibility. What is the overall strategy on where the money should go?

Ms Keeble: The loans are for projects, not grant aid, so although there are operational priorities, where the money goes will depend to a certain extent on where the projects are. It is agreed that agriculture remains the most important sector for the African fund, and that is largely a reflection of the economic activities in

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the countries involved. This is not a grant-giving exercise; loans are granted for specific projects. In many countries, economic growth is stifled because, for obvious reasons, they do not have access to finance for development projects. The emphasis that is to be given to enhancing the fund's effectiveness with measurable effects on the ground will be a single action plan to improve development effectiveness, which the fund must report against annually.

Miss Julie Kirkbride (Bromsgrove): I applaud the Government's aim in giving more money to the banks, but will the Under-Secretary help the Committee by explaining how collateral works in such situations? When the land has no owner, do Government guarantees provide backing? Private property is an issue in some of the countries that we are discussing, and it may not exist as collateral when someone is borrowing money for a private project. How does the bank deal with collateral?

Ms Keeble: There are two distinct schemes, both of which could be regarded as soft loans. One of those schemes is interest free, so the assessment of payments and risks will be different from those made by commercial banks, which is why we need the type of activity that we are debating. On occasions, past assessments have been wrong, which has resulted in the large arrears that countries such as the Congo have built up. For obvious reasons, it would be wrong to assess that type of lending using the same criteria that apply to loans in the developed world.

Donors have asked management to undertake independent evaluation of the fund's performance in implementing the seventh and eighth replenishment, which is to report before the end of the current negotiating period. Donors have also called for improved links between lending and performance, including a stronger linkage among country-owned poverty-reduction strategies and the bank's country strategy papers. Subject to parliamentary approval, the United Kingdom contribution of £40 million will be payable through deposit of a single promissory note, drawn down over 10 years on the basis of an agreed encashment schedule.

Later this year, Department officials will start work on a new institutional strategy paper for the African Development Bank. The current strategy paper was published in November 1999 and set out the United Kingdom's objectives for working with the bank and the fund for a period of three years. Copies of the paper are available from the House of Commons Library and from the Department. In preparing the new strategy paper, we will specifically focus on how the Department can support and help strengthen the African Development Bank and African development fund so that they can play their part in implementing the New Partnership for Africa's Development, NEPAD.

In conclusion, we are pleased to continue the support of successive British Governments for these important institutions, dedicated to working for the elimination of poverty and for sustainable development. I commend these orders to the Committee.

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4.52 pm

Dr. Julian Lewis (New Forest, East): There is an obvious and great attraction in serving on a Committee under your chairmanship, Mr. Griffiths. I am deeply sorry that my hon. Friend the Member for Meriden (Mrs. Spelman) cannot be here today, but by long prearrangement she is hosting the visit of former President Gorbachev to a room not far from this one. I hope that my best efforts will not be too poor a substitute for her encyclopaedic knowledge of these matters.

The spirit of our approach is as it was in 1999 or 2000, when similar measures were considered in relation to the African Development Bank. Successive Governments of different political persuasions have supported those bodies and the making of contributions to them. However, our debate on sustainable development and aid for poverty diseases of two days ago, with the same Minister, showed a great level of concern about the situation in Africa in the context of the AIDS pandemic. That concern was expressed on both sides of the House. I am sure that the Under-Secretary will understand that, in those circumstances, we have sought to frame some rather more rigorous questions and searching points in relation to the African development fund than might have been the case in less harrowing circumstances. In a spirit of co-operation, I gave her the opportunity to have a brief prior look—too brief for her opening remarks, but perhaps not too brief for those that she will make later—at the 12 points that I wish to raise in relation to the African development fund. I have fewer points to make about the Caribbean Development Bank; they are more discursive and she will find that absence of advance notice of them is no handicap.

Another point about the African development fund is that we are being asked to approve the substantial sum of £40 million not as part of a final replenishment settlement, but as something to tide us over because the ninth replenishment settlement has not been reached. That is a different situation from that appertaining to the Caribbean Development Bank, in which at least we know the outcome of the fifth replenishment negotiations.

The UK contribution to the eighth replenishment of the African development fund, covering the period 1999–2001, was just over £98.6 million. The proposed £40 million is an interim contribution to the ninth replenishment. When are the negotiations for that likely to be concluded? What indication can the Under-Secretary can give us of the scale of the UK's likely final contribution?

I appreciate that the Under-Secretary touched on some of these points in her opening remarks, but what methods does DFID employ to monitor the application of funds donated to the ADF? That point was raised by my hon. Friend the Member for Billericay (Mr. Baron). Thirdly, are DFID officials or other agents on hand directly to evaluate the success or otherwise of funded projects in Africa?

If these initial questions seem too intrusive, I would refer to the First Standing Committee on Delegated

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Legislation on 25 January 2000, when the then Under-Secretary, the right hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) commented that

    ''The African development fund is the concessional lending arm of the African Development Bank. It provides about 1 billion a year of development assistance to 39 of the poorest countries that are not creditworthy enough for African Development Bank loans. The fund is largely financed by donor contributions.''

He then pointed out that replenishment negotiations for the fund provided an important opportunity for donors to set priorities and the policy and operational agenda for fund activities over the next three years. In the light of what he said then, it seems fair to ask how that monitoring process, and that ability to set priorities and to assess whether or not goals have been achieved, has worked out during the last period during which the fund has been in operation.

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