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

[back to previous text]

Mr. Dennis Turner (Wolverhampton, South-East): I wonder whether the hon. Gentleman can tell us whether he and his party will support the two draft orders?

Dr. Lewis: I thought that I had made it clear in my opening remarks that there has always been consensus over the funding of these organisations. Given what has been happening in Africa, however, we believe that in order to justify spending so much money—the hon. Gentleman should compare the amount that has been spent in the past with what we are proposing to approve today—we would be failing in our duty if we did not subject the proposals, as well as the operations of the organisations involved, to the closest scrutiny. We have no intention of opposing the granting of the awards today, but we hope to put down a strong and comprehensive series of markers, which will enable those who come after us and look back at today's debate, in perhaps three years' time—just as we look back at the debate held over the African development fund in January 2000—to see to what extent these organisations deserve the support that they will continue to receive today.

I am sorry that my list of questions is so lengthy, but I am sure that the Minister will appreciate, particularly following the expressions of concern made in European Standing Committee B, only two days ago, about the terrible crisis—indeed, the holocaust of the AIDS pandemic—in Africa, that there is strong feeling that the necessarily limited aid that is given by the wealthy countries to the poorest should not be frittered away through inefficiency, incompetence or corruption.

5.24 pm

Norman Lamb: I think that I can be brief, but I have a number of questions. First, I did not entirely understand the reasons for the delay in negotiations for the ninth replenishment. The hon. Gentleman immediately behind the Minister was coughing as she was giving her explanation, and I missed half of it. He is now outside having a cigarette—a way of continuing the problem. Will the hon. Lady explain a little further the reasons for the delay?

Secondly, in an intervention that the Minister kindly allowed me, I mentioned the repayment record in respect of the African development fund, and she mentioned the poor record of the Congo. I am interested to know the overall record of repayment. The Minister indicated that she might be able to come up with an answer later in the debate. I should be pleased if she can tell us about it, and compare it with previous years. I appreciate that she might not have all the information, but an indication of whether there is an improvement in repayment would be helpful.

Column Number: 17

The third point relates to the overall strategy of the Department and how the various pieces of the jigsaw fit together. I have already mentioned the CDC, an operation that is investing in development through making loans. I want to understand better how that and the fund fit together and how they fit with New Partnership for Africa's Development. The Government, rightly in my view, are putting great store by that new approach to development, which seeks to empower African nations and allow them to come up with solutions based on good governance and improving economic performance. How does the investment strategy of that body fit with NEPAD? Will there be a close relationship between the fund and those responsible for developing NEPAD?

The next point relates to an earlier question. The hon. Member for New Forest, East (Dr. Lewis) spoke about the fund's troubled past and the introduction of a new fund chairman in 1995. How has the fund performed in the seven years since then? Is there any evidence of improvement? I appreciate that there are problem areas, including the Congo, and I appreciate that the fund is operating in a difficult environment, but is there any sign that things have started moving in the right direction? Can we be confident that further investment will be worth while? All who are committed to development assistance need to know that the money is being spent wisely and that it will be effective in the core aim of the Department, which is the alleviation of poverty and the creation of sustainable development. What confidence can we have that its future performance will be effective?

My final point is about the Caribbean Development Bank. The Minister said that it had been quite effective in raising the necessary funds, particularly as a number of European countries had pulled out of the bank. Why was that? Could it be because several European countries have reduced their spending on development assistance, or was it because of real concerns about how the bank was performing? I should be grateful if the Minister could answer my questions.

5.29 pm

Miss Julie Kirkbride (Bromsgrove) rose—

The Chairman: Order. The Minister has many questions to answer, as I hope hon. Members will bear in mind.

Miss Kirkbride: Certainly, Mr. Griffiths. I support the speeches made by the spokesmen for both Opposition parties. The debate has been informative and interesting, but the case still needs to be made as to why we spend the money in such a way.

No one suggests that we should spend less than we do on developing countries or that there is not more to be done. The Government's work in the past few years in helping to alleviate poverty in the third world is a credit to them. However, my hon. Friend the Member for New Forest, East raises a significant question, which is that if the African Development Bank acts as a bank and gives countries loans, why are we pursuing the policy of giving soft loans—at some point, such loans technically need to be repaid—to countries that have no hope of ever repaying them? The countries will become further overburdened by such debt.

Column Number: 18

In this Room, we share the aim of alleviating the problems of the many across the world who live in gross and dire poverty. As many as 1.2 billion people live on less than $1 a day. To give their countries a loan of any description seems a rather curious way to offer aid, given that the British Exchequer has no expectation of getting any of the money back. I am sure that the Minister has good reason for it, but the case still needs to be made if there is no collateral. If there is no obvious repayment method, why do we offer loans instead of grants? That is the principal question that needs to be answered. It applies especially to Africa, where the problems are great, but it can also apply to Caribbean countries. Although they are not as poor in most respects, they are extremely poor compared with the western world.

I should also like to hear more about the priority given to the various projects. The two Front-Bench spokesmen for the Opposition parties raised significant concerns about the operation of the African development fund and its past problems, so to offer another £40 million as an interim payment to such an organisation raises significant questions. It would help if the Minister explained her confidence in the ADF.

Will the Minister say more about how the British Government would seek to influence the prioritisation of the ADF's projects? The problems of Africa seem simple in terms of obvious ways forward. It needs more infrastructure, more clean water and more products to be sold abroad. Then more health and education are required, so that the improvement can be self-sustaining. It is simply not possible for Africa to help itself, given the great gap between rich and poor nations and the need to pay back capital and loans. It needs money, and sometimes help in strategic directions so that whatever we do can be self-sustaining and self-financing for the future.

I welcome the Government's aim of not loaning but giving more money to developing countries. The money has to be properly targeted, but I would be interested in further clarification as to the manner in which we propose to achieve that aim through the order.

5.34 pm

Ms Keeble: I should like to answer all the questions that have been raised. If I do not, I shall follow them up in writing. It might be helpful at the start to make clear the scale of what has been done at the African Development Bank, as that will put into context quite a number of the questions. Following the decline that I mentioned in the mid-1990s, only 14 approvals were given across the whole of Africa. The figure rose to 20 in 1995, 33 in 1996 and 112 in 1997, and it has now reached 144.

One problem earlier was that the bank was in such a state that it was not lending money. It might not have escaped Opposition Members that the first year in which activity really started to pick up was also the first full year of the Labour Government. I hope that Conservative Members who are concerned about ensuring that there is aid for Africa were as persistent in pressing their own Government to ensure that it received direct aid and loans.

Column Number: 19

Mr. Field: Over and above the issues raised by both Opposition Front-Bench spokesmen, there is the issue of whether loans and grants are made sensibly. There is clearly a due diligence process, and although there were great concerns in the early to mid-1990s, many have been rectified. Beyond the number of loans, however, there is surely the issue of the amount of money involved, and the Minister may be able to give us some guidance on that. She has referred to the number of loans, but not to the amounts. Different sorts of project may be funded at different times.

Ms Keeble: I will indeed give hon. Members the guidance that the hon. Gentleman seeks. At the low point in 1995, the amount of the loans was $802 million; in 2001, however, it was $2.9 billion. The size of the spend has therefore roughly followed the same pattern as the number of loans. That puts in context some of the concerns that have been expressed about the bank's operations.

I confess that I was quite concerned about arrears, and I have asked a lot of questions about that subject, so I share Opposition Members' concerns. The figures that I have were all published, so there is nothing dramatic about them. The figure for the Democratic Republic of Congo is $633 million, while the next highest figure, for Liberia, is $139.66 million. Those are very large amounts, but they are historic, and action has been taken to deal with them. It might help hon. Members if I described what has been done, although I shall try to be reasonably quick because we have a lot of questions to deal with.

In three countries—Liberia, the Democratic Republic of Congo and Sudan—most of the arrears date from the late 1980s and early 1990s. Since 1995, the bank has had in place a strict credit policy, which restricts access to non-concessional lending to only 13 creditworthy African countries. I cannot remember offhand which they are, but they are obviously at the wealthier end of spectrum and include Morocco, Tunisia and South Africa. All the other countries are eligible only for lending from the African development fund's concessional window, which is interest-free.

The ADB has the most stringent arrears sanctions policy of all the regional development banks. All disbursements and new loan approvals are suspended for borrowers whose debt service repayments are more than 30 days overdue. I understand that Zimbabwe is in arrears and would not qualify for new loans. I hope that that answers the question that the hon. Member for New Forest, East asked about Zimbabwe.

DRC arrears to the African Development Bank are substantially larger than those to the IMF or the World Bank. Following some progress on a political settlement in the Congo, a plan was agreed in June to clear the arrears to all those institutions. Some $42 million from the African development fund's interim facility will be used to clear the ADF arrears, and contributions are being sought to clear part of the much larger bank arrears. The arrears in the Congo are owed in part to the bank and in part to the development fund, so that the rest can be consolidated and managed.

Column Number: 20

The UK fully supports the bank's plans for clearing arrears of the DRC and has pledged that $5 million be made available once further progress had been made in the peace process. We also hope that the Congo will become eligible in early 2003 for debt relief under the HIPC initiative. The debt arrears of the Congo is a major issue, but it is difficult to make progress so long as there is conflict in the country. I have covered a number of hon. Members' questions, and I hope to go through the remainder as quickly as possible.

Previous Contents Continue

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2002
Prepared 10 July 2002