§ Order for Second Reading read.
§ 4.28 p.m.
§ The Economic Secretary to the Treasury (Mr. Anthony Barber)
I beg to move, That the Bill be now read a Second time.
The purpose of the Bill is to enable the United Kingdom to accept the Articles of Agreement of the proposed International Development Association. Its main provisions concern the payment of the United Kingdom's subscription to the Association, which will amount to nearly £47 million in convertible sterling over a period of years. The text of the Articles of Agreement was recently published in a White Paper (Cmnd. 965) and hon. Members will have noted that these articles have been approved for submission to Governments by the executive directors of the International Bank for Reconstruction and Development. This connection between the International Bank and the new Association arises from the fact that the Bank is the parent organisation and the new Association is to be an affiliate of the Bank.
The need for the International Development Association is a matter about which I should like to speak first. It is not much more than a year since my right hon. Friend the Chancellor of the Exchequer moved the Second Reading of a Bill to enable the United Kingdom to take part in an increase in the resources of the International Bank. Along with the United States, we were the first to effect our increased subscription on that occasion. Now, along with the United States, we are again in the forefront in the measures being taken to set up this new International Development Association.
I know that hon. Members, on both sides of the House, are conscious of the tremendous importance of the question of development assistance for the poorer countries of the world. It must have been said many times, but it is none the less true on that account, that this problem presents the West with one of the greatest challenges of our time. If the House will permit me a personal reflection. I would like to say that of all my 1164 duties at the Treasury there is no aspect which I find more fascinating, or which gives me more satisfaction, than the help which we are giving to the hundreds of millions of men, women and children who live in the less-developed countries and territories of the world.
There is, I believe, general agreement that a substantial part of this development assistance should be channelled through multilateral associations. There are, however, two questions which obviously arise: first, why do we need a new Association; and, secondly, why should it be an affiliate of the International Bank?
A good deal of the explanation is embodied in the statement of the Association's purposes which is contained in the first of its articles, which appears on page 9 of the White Paper. The purposes are described as beingto promote economic development … in the less-developed areas of the world … in particular by providing finance … on terms which are more flexible and bear less heavily on the balance of payments than those of conventional loans, thereby furthering the developmental objectives of the International Bank … and supplementing its activities.From time to time, there will inevitably be countries with sound and important development projects which they are unable to finance simply because of the weakness of their balance of payments. The projects may, for instance, hold out good prospects of being commercially profitable but the country in which they are situated may already have borrowed too much to make it eligible for further loans from overseas on normal terms. In such a case, the new Association will be empowered to lend on special terms. The terms may. for instance, include a long period of repayment or, perhaps, a period of grace before repayment has to commence, or even, in some cases, waiver of interest for an initial period.
The International Bank itself is not designed to meet the particular need to which I have referred. Indeed, it could not, in practice, operate in that way. Although it started its operations by using the subscriptions of member countries, the International Bank replenishes its funds by borrowing from the world's capital markets. The House will remember that only last December, for instance, it raised £10 million on the London market.
1165 With the backing of the uncalled part of the subscriptions of the United States, the United Kingdom and the other countries, the Bank is able to borrow and to relend at rates more favourable than the less developed countries would normally be able to obtain. At the same time—this is very important to realise—loans financed in this way have to be repaid on terms and over periods enabling the Bank to meet its own obligations.
It would, nevertheless, be quite wrong to give the impression that, after all the important development which has so far been very successfully financed by the Bank, the scope for further Bank lending on its traditional terms, or its scope for bilateral lending on normal terms, has been suddenly exhausted. There are still many of the less developed countries whose situation and prospects will continue to make them perfectly creditworthy for further Bank loans, and whose needs for foreign development capital can still be met, either in whole or in part, from that source. It is a question not of replacing the existing operations of the Bank, but of supplementing them. It is, in the main, because of the activities of the International Development Association are to be complementary to those of the Bank that the Association is to be an affiliate of the Bank.
Indeed, there is a further and compelling reason why this is to be so, and that is it will result in a highly economical arrangement. Although the Association is to be a separate entity with separate funds, the Bank's governors, the executive directors and the President will discharge for the new Association functions similar to those which they perform for the Bank itself, and as far as possible one and the same staff will serve the two institutions.
Finally, there is the important matter of confidence. Here in the United Kingdom, as everywhere throughout the free world, great confidence is reposed in the existing management and staff of the International Bank. This has been a most important factor in securing support for the proposal to establish this further fund, because it is known in advance that it will be well used and that the Association will be a going concern from the outset.
1166 The House will agree, I think, that this relationship between the new Association and the International Bank is an important one. Indeed, it has formed part of the concept of the new Association ever since it was first proposed in the United States Senate in 1958. I do not think that I need go into any great detail about the subsequent development of the proposal, but I think it right to remind the House that the original initiative came from the United States.
As soon as we in this country had an opportunity of considering the issues involved, we expressed our willingness to join in working out plans for an Association of this sort. The House will remember that in July last year my predecessor, now the Minister of State, Board of Trade, informed the House about this. Then, last September, a further important step was taken. At the annual meeting of the Bank, in Washington, the board of governors instructed the executive directors to prepare Articles of Agreement for submission to Governments, and the result is the Articles of Agreement contained in this White Paper.
The executive directors, under the chairmanship of the Bank's president, completed this work by 26th January this year. I am sure that the House will be with me when I say that they deserve our congratulations on this achievement, and on their success in reaching an accommodation of the various standpoints taken by the many countries involved. I hope that the House will allow me to say that anyone who has met Lord Cromer. the United Kingdom executive director, will not be surprised to know that he played a most notable part in all these discussions.
At any rate, we are satisfied that the resulting articles provide a good basis on which the Association will be able to start its work. There is a sufficient element of flexibility to enable sound operational policies to be evolved as the work of the Association proceeds. In particular, as I said a few minutes ago, the Association is given great flexibility as to the terms of its lending. It is also given greater scope than the International Bank as to the type of project it may finance. It will be able to lend for such purposes as housing schemes, water works, and sanitation, although it is 1167 expected that the major part of its lending will be for economic development of a type at present being financed by the International Bank.
I should now like to turn to those provisions of the articles which govern the size of its resources and the subscriptions of individual countries. Membership will be open to all members of the International Bank. If all those are prepared to subscribe and to join, the Association's total initial resources will be 1,000 million dollars, the figure shown in Schedule A of the White Paper, although, as I shall explain, this does not mean that the whole of that amount is to be paid in at once.
At the end of the articles in Schedule A, to which I have referred, there is set out all the potential original members, and against each is set out what its initial subscription will be if it joins, expressed in terms of dollars. These subscriptions are roughly proportionate to the various countries' subscriptions to the International Bank, and, just as in the case of the Bank, voting rights in the Association will be roughly proportionate to subscriptions.
Out of the total of 1,000 million dollars, the United States is to make the largest subscription, 320 million dollars, and the United Kingdom the next largest, 131 million dollars, or nearly £47 million. All member countries, even the less developed, which may be recipients of aid are to make some contribution, and I hope that hon. Members will think that this is a good principle. It follows the example of the International Bank and it reflects the joint responsibility which all members, the more advanced and the less developed countries alike, will share in the work of the Association.
We do not want this requirement to bear heavily on the less developed countries themselves, who will have to join to be eligible for finance from the Association. We have taken account of this in two ways. In the first place, the International Bank's subscriptions on which subscriptions to this now Association are based are related to the economic position of each country. Secondly, the schedule of potential members is divided into two parts, as hon. Members will see from Schedule A.
1168 Those in Part I are the industrialised or more advanced or better-placed countries. The other countries set out in Part II are in a different position, and the articles make different provisions for the payment of the subscription of the Part I countries and the Part II countries respectively As I say, those in Part II are broadly the less developed countries and, under Article II, pay only 10 per cent. of their initial subscription in gold or freely convertible currency. Half will be paid at the outset in the first year and the remainder by instalments over the next four years.
The rest of the subscription, the other 90 per cent., will be payable—I am still speaking of the less developed countries —in their national currencies which the Association will not be free either to convert into other currencies or to use to finance purchases of exports without the consent of the country concerned. I think that the House will agree that the burden imposed by subscriptions on the less developed countries will be relatively small unless and until their economic positions improve sufficiently to enable them to pay a greater proportion of subscriptions in convertible currencies. The Bank's executive directors have expressed the hope that those countries in Part II which have made more progress in their development will soon be able effectively to release some part of the 90 per cent. proportion of their subscriptions.
On the other hand, the industrialised countries, those included in Part I of Schedule A, are to pay the whole of their subscriptions in gold or freely convertible currencies. These subscriptions also are broken down into a 10 per cent. portion and a 90 per cent. portion. Each portion is payable by instalments over five years. The only effective difference between the two portions is that the first, the 10 per cent., is payable simply either in gold or convertible currency while the payment of the second may, in the first place, be made in the form of non-interest-bearing notes and cashable at par on demand by the new Association. The Association would cash these notes and take the proceeds in fully convertible form as and when it was entitled to do so and needed the funds for its operations. As hon. Members will know, this is an arrangement which has already 1169 been adopted in the case of the International Bank.
Perhaps I can now say briefly how the United Kingdom subscription of about £47 million is to be paid. About £11 million of it will be payable in the first year and about £9 million in each of the following years. The whole of it will be made available in sterling which will be fully convertible, but, in practice, part of each year's payment may, in the first instance, take the form of the non-interest-bearing notes, cashable on demand, to which I have referred.
The articles also provide for a situation in which, after a country has paid its currency to the Association but before it has been used or converted by the Association, a change takes place in the exchange value of that currency either upwards or downwards. In that event, an additional amount of that currency would be due from the member country to the Association or, alternatively, from the Association to the member country in order to restore its original value in terms of dollars.
§ Mr. A. E. Cooper (Ilford, South)
Can my hon. Friend say whether the rate of our subscription is roughly the rate which other contributors will pay? In other words, will there be an annual capital of about 200 million dollars a year?
§ Mr. Barber
The rate of exchange on which the calculation of approximately £47 million was based was made by reference, if my hon. Friend will look at the small note at the bottom of Schedule A—
§ Mr. Cooper
I do not think that my hon. Friend has grasped my point. He said that our contribution would be roughly £47 million payable over five years at a certain rate. I wanted to know whether the rate which we pay will be the rate at which other contributors will make their contribution.
§ Mr. Barber
Yes, certainly. All the countries in Part I, which are, generally speaking, industrialised countries and better-off countries, including the United States, France, Germany, Denmark, and Canada, will be making their payments at the same rate and on the basis at which we are making our payments.
1170 I think that I was referring to the fact that in the event of a change in the par value of a currency this might mean either a payment from the Association to the country concerned or from the country concerned to the Association. However, we do not anticipate that we shall find ourselves in such a situation.
There are two other situations in which we might be entitled to receive money back from the Association. The first is this. There is a provision in the articles for a distribution of the Association's assets if it were to be wound up. Secondly, provision is made for disposal of the Association's net income, which could include a distribution to member countries.
All the points that I have mentioned affect the Clauses of the Bill, but I think that I ought to mention some situations envisaged by the Articles of Agreement for which quite deliberately no provision has been made in the Bill. First, the articles provide that the Association shall keep the adequacy of its resources under regular review. We expect that the first review will take place some time during the first five years of the Association's life. It is permissive for the governors to approve a general increase in subscriptions at any time, although no individual country could be obliged to take part in such a general increase.
In addition, an increase in the subscription of an individual country could be authorised at any time at that country's own request. The Government have taken the view that any question of an increase in the United Kingdom subscription should be a matter for further legislation. I hope that the House will agree that this is the right course.
The second matter which I should mention is this. The articles enable the Association to receive from any member country, in addition to its initial subscription, supplementary resources in the currency of another member provided the other member agrees. It makes it permissive for the Association, for example, to use with the agreement of the countries concerned rupee deposits to which the United States has title as a result of dollar aid provided to India in cash or in kind and repaid by India in her own currency. The United States is in a rather special position in this 1171 respect, and, again, I should inform the House that we do not expect the United Kingdom to make any supplementary contribution of this kind.
I now turn to the Clauses of the Bill. Clause 1 simply defines the Agreement and the Association. Clause 2 makes the necessary provision concerning the United Kingdom subscription, and I have already explained what is involved in this. I need, therefore, refer only briefly to the several subsections. Clause 2 (1) provides for the required payments to the Association. Subsection (2) provides for the raising of money for this purpose. Subsection (3) provides for the payment into the Exchequer of any sums which may be received from the Association in the sort of situation which I have already described, and subsection (4) provides for the creation and the issue to the Association of the non-interest-bearing notes about which I spoke earlier.
Clause 3 is concerned with matters to which I have not yet referred. The Clause enables the necessary steps to be taken to give effect in all territories in which Her Majesty has jurisdiction, other than the independent members of the Commonwealth, to Article VIII of the Articles of Agreement. That article prescribes the status, the privileges and the immunities which are to be enjoyed by the Association and its officers and staff.
I know that the House is always very watchful when it comes to granting privileges and immunities of this kind. I am, therefore, glad to be able to assure the House that the article in question follows exactly the corresponding provisions of the Bank's Articles of Agreement. Since the Association is to be an affiliate of the International Bank, and will be largely manned by the same officers and staff as the Bank itself, I think that the House will agree that it is obviously desirable that the Association should enjoy the same immunities and privileges and that the individuals concerned should enjoy the same treatment when acting in one capacity as when acting in another capacity.
When the Bill has been enacted, the provisions of the Agreement relating to immunities and privileges will be carried into effect by an Order in Council and 1172 that Order will be an essential prerequisite to the acceptance by the United Kingdom of the Articles of Agreement. The House will note that in Clause 3 (4) it is laid down that any such Order is subject to approval, in other words, to an affirmative Resolution by both Houses of Parliament. I hope that we shall be able to complete this process before the Summer Recess.
I should like to say a few words about the implementation of the Bill. The Articles of Agreement will come into effect when they have been accepted by the Governments subscribing in total not less than 65 per cent. of the total initial resources of 1,000 million dollars, but in any event not earlier than 15th September this year. It is hoped that the Association will be inaugurated between that date and the end of the year.
We know, and I know that there will be no dispute about this, that in these matters other countries watch the lead given by the United States and the United Kingdom. In particular, Commonwealth countries look to the lead given by the United Kingdom. After the Bill has gone through all its stages and the House has approved the Order in Council concerning privileges and immunities, the United Kingdom Government, in company with the other important subscribing Governments, will deposit the instrument of acceptance of the Agreement.
This country is now playing a considerably enlarged rô1e in providing assistance for overseas development. As the House will know from the White Paper published earlier this month, we are doing a great deal. On the other hand, we have to face the fact that our capacity to go further is inevitably limited. But this commitment to contribute to the International Development Association is one which we have foreseen for some time and I think that the House will agree that the Government are right to give priority to this Measure to supplement the existing operations of the International Bank and to increase the untied funds available for development. The idea behind the Association is an imaginative one and I hope that it will commend itself to right hon. and hon. Members on both sides of the House.
§ 4.55 p.m.
§ Mr. H. A. Marquand (Middlesbrough, East)
We are grateful to the Economic Secretary to the Treasury for the clear explanation he has given of the origin and purposes of the Bill and the details of its arrangements. Indeed, I am sure that he, like me, finds that we are very much more in agreement this Tuesday than we were last Tuesday.
§ Mr. Marquand
I particularly welcome, while thinking of last Tuesday, the assurance which the hon. Gentleman gave that if the Government need more money for this purpose they will ask the House for it. I am grateful also that he drew attention to the provision in the Bill which requires that if any Order in Council is made it shall be brought to the House for affirmative Resolution.
There is no disagreement between the hon. Gentleman and myself on the proposition that more aid, and aid on easier terms than hitherto, is required to tackle this problem of the underdeveloped areas of the world. During the last months we have been reminded again and again of the problems of Africa. We have been dealing with the emergence of African nationalism, with the desire of African people for self-government, and with topics of that kind.
This has reminded us very vividly of the acute problems which exist in the continent of Africa. But if all these problems are solved, if all the territories which wish to secure independence secure it, and if all successfully establish new constitutions and advance far on the road to self-government—if all these things are done—the economic problems will still remain. There will still be in Africa vast areas of land which should be cultivated but which will lack water and, therefore, cannot be cultivated. Where water is available it will still fall in terrific torrents at widely separated intervals so that much of it is quickly evaporated by the hot sunshine, and the rest of the water may rush across the land sweeping away the top soil and running the fertility of Africa down the rivers into the sea.
1174 One experience of under-developed areas which I had and which I shall never forget was flying along the East coast of Africa about ten years ago and seeing how there lies between the coast and the deep purple waters of the Indian Ocean a band of land about five miles wide which is yellow in colour with the top soil of Africa, with the fertility that could have been producing food for the Africans. These problems still remain, though I know that the problem of soil erosion is not as great as it was ten years ago. The tsetse fly still remains unconquered king over wide areas of Africa rendering hundreds of thousands of acres of land uninhabitable. Endemic diseases and illiteracy still remain, and so does the lack of sufficient tools and equipment to cultivate even that soil which can be cultivated.
Not only in Africa do these things obtain, but in Asia. As we know, there are still thousands who have nowhere to sleep but the pavements; indeed nowhere to live at all but the pavements of great cities like Calcutta, Madras and Bombay. That, again, is one of the unforgettable sights of under-development.
We know that in Asia literally millions of persons go hungry every day, that all they have to consume by way of protein is less than half of what we customarily eat every day before we regard ourselves as fed. No magic could put this right and our best efforts often fail. It is only two months ago that I travelled down the Grand Trunk Road from Peshawar to Lahore. On both sides of that great road, as far as my eye could see, I saw nothing but one white sea of salt. All that land had been brought under irrigation, sometimes hundreds of years ago by means of canals, built first by the Mogul emperors and later by the British rulers. It had become the wheat bowl of Asia, the lunch-basket of the Indian Army for many years. Now it is waste because of the leakage of the irrigated waters through the canals which have reached down below and brought salt to the surface.
It would not be right to quote what the President of Pakistan said to me about this ghastly problem, but he is well aware of it and tremendously worried about it, wondering how it is possible, in a country which has only managed to draw level at the end of its first five-year plan with where it was 1175 when it started that plan, to go further forward and conquer the problem of hunger which confronts it. Every day 200 acres of land are going out of cultivation in Pakistan due to salination alone.
So an enormous task has still to be carried out, and I do not believe that its size or nature is fully understood by our people. The White Paper Cmd. 974, has been issued by the Government in order to explain to our people what the British Government have so far done to deal with the problem of world poverty. We see in Table I on page 6 an account of the growth of United Kingdom Government assistance. It shows that in the year 1951–52, which incidentally was the last year of the Labour Government, £61 million were provided by way of United Kingdom Government assistance, mainly to the under-developed areas of the British Commonwealth. It shows that by 1952–53 this assistance had fallen to £49 million. Then it crept up to £52 million, then to £77 million, and to £83 million by 1955–56. However, in 1956–57 the assistance was down again to £76 million and up only to £81 million in 1957–58—still behind the level achieved in 1955–56.
In the last two years this assistance has mounted somewhat above those levels, to £110 million and £138 million. Allowing for the change in the value of money which has indisputably taken place between those various dates, we can see that the overall increase in the real aid provided has been very small. Perhaps the most outstanding feature revealed by a study of the Table is the fluctuation in the volume of aid which takes place.
When we consider the problem of investment, which is the main business before us this afternoon, we must remember that another problem exists, that of fluctuation in the terms of trade between ourselves and the underdeveloped countries. I believe that this is the most serious problem of all. If we could only eliminate those fluctuations, or greatly reduce the size of the fluctuations in the terms of trade, by stabilising the prices of the primary products produced in the under-developed areas, we should be able to give more real aid by investment all the time, and the underdeveloped areas would not be periodically subjected to a severe balance of pay- 1176 ments problem or even a national income problem arising from fluctuations in the prices of their primary products.
I spoke about this at some length in one of our debates on this subject not long ago. I pointed to the difficulties which Kenya was then undergoing, when the whole of her economic plans—which had been made very skilfully by well-qualified, well-informed people, and with aid from this country by the experts available in the Colonial Office—for reducing illiteracy, for improving health and for generally developing agriculture had to be cut, simply because the price of coffee, the price of sisal, the price of pyrethrum, the prices of her exports, had fallen so catastrophically that the size of her national income was seriously reduced.
I regard it as the most urgent need of the under-developed areas of the world to get, if possible, stabilisation in prices and trade with the developed parts of the world on fair terms. However, I will say no more about it now, because we are principally concerned this afternoon with investment, although it undoubtedly affects investment. These alternate reductions and expansions in British aid arise directly from the fluctuations in the terms of trade which, as everybody knows, affects our own balance of payments. When we look at Table II on page 7 of the White Paper and read it in association with the qualifications set out in the second part of paragraph 9, we see that direct bilateral assistance to the under-developed countries is unlikely in the current year to be much more than £100 million, or about one-half of 1 per cent. of our national income.
Of course, I appreciate that much of the other contributions which are left outside this calculation—our subscriptions to organisations such as the International Bank for Reconstruction and Development—come back to the Commonwealth. Nor do I want to ignore altogether the contribution made by private investment. Yet, even making allowances for some amount of private investment which may be of directly productive effect in raising the standard of living of the peoples of the underdeveloped areas, and taking account of sterling contributions to the International Bank, which may have come back and are not included in that Table, it must 1177 remain clear that the total aid is still well within our reach and is not involving any severe sacrifice by our people.
A contribution which, at best, may be only a fraction above 1 per cent. of our national income is not one which we can regard with complacency. Certainly we cannot take refuge in complacency about the volume of our private investment. In calculating how much we can afford, in discussing and arguing how far we are making a sacrifice to help the poverty stricken nations of the. world, we have no right to take into account a large part of that private investment. Much of it is in oil mining, gold mining and diamond mining, and much of it goes to already prosperous nations, like Australia and Canada.
Of course, I do not object to that in principle, nor am I suggesting that private investment in Australia and Canada should cease. What we are considering today is aid to the under-developed countries, and in regard to that matter I say, for heaven's sake let us get our priorities right. Let us not exaggerate the value of that sort of contribution towards helping the under-developed countries to do the things they need to do. Do not let us exaggerate or over-assess the value of private investment in that contribution.
The Government White Paper of 1957 said:Her Majesty's Government consider that it is through the investment of privately-owned funds in the Commonwealth that the United Kingdom has made in the past and should continue to make its most valuable contribution to Commonwealth economic development.That is nonsense. Certainly on this side of the House we do not regard the value of that contribution—though we have no objection to it, as I have been careful to make clear—as having been very substantial in helping to tackle the kind of problems I have described when I referred to Africa and Asia. From what we have heard today, I am hopeful that the Government have abandoned that declaration of policy. It would mean that directors of private companies would be the judges of the nature and location of the very scarce surpluses which we are able to make available for investment overseas, and that a yardstick of money profit would determine priorities. It should not do so.
If £1 million were invested in building hotels and flats in South Africa, or a 1178 departmental store in Sydney, and that investment was calculated to yield an annual dividend of £100,000, whereas the same £1 million invested in a miniature Gezira scheme in Uganda, Kenya or Tanganyika, giving employment to thousands of African cultivators and helping them, by their own efforts, to raise their standard of living, would yield only £10,000 in profits, then under the yardstick of private enterprise it would be the departmental store or the flats and hotels that would be built.
We need a different scale of priorities, a different measure of advantage than that which—and I do not necessarily complain about this—is inevitably used by private enterprise in making its judgments. Though there is still room for private enterprise, we should make a grave mistake if we were to concur in this theory put forward in the White Paper that it must still be our main contribution. It cannot be and should not be. This Bill is an advance in the right direction. It is getting away from that philosophy. It is providing more Government aid through the right sort of agency, an agency which will not be required to take this sort of judgment, this narrow profit-making judgment.
The first of the three major merits of the proposition before us is that it increases the total of our aid. We want that total to be increased. We regard it as still inadequate. Though I know that we have done better than some other nations, we still have not done as well as we could. Secondly, it is to operate through a United Nations institution, with 69 nations participating. We welcome that. We have said for a long time that we think that aid should, as far as possible, be channelled through United Nations Agencies. Thirdly, this proposition recognises the need for investment in the sort of projects which cannot yield immediate dividends in cash but which will stimulate that self-generating investment within under-developed countries which, in the long run, will enable them to become independent of outside aid.
This Bill is designed to provide some of what we call the infrastructure of development—housing, schools, hospitals, minor roads—the minor but essential projects of community development. Our development overseas began centuries ago, particularly 150 years ago. 1179 with investment in profit-yielding mines and plantations. The theory was that this would in time yield surpluses out of which the necessary social advance could be paid for. A somewhat similar idea inspired the creation of the International Bank for Reconstruction and Development after the war.
Experience has shown in both cases that that idea was unsound. It is unsound to say, "Let us have industry and expansion by those industries and eventually we shall find the sums we want in order to pay for hospitals, schools and roads in the under-developed territories." These two things have to go hand in hand. There must be a phased timetable worked out whereby the infrastructure and the superstructure of development come at a planned rate and at the same time.
Lord Reith, after some time in charge of our Colonial Development Corporation, came to this conclusion and said so in one of his Annual Reports. Mr. Eugene Black, of the International Bank, said the same thing—I believe it was in his Report of 1953. He found—as did Lord Reith—that the task with which they were charged, of carrying out development by the method of economic loans which had to pay their way and to yield not only a rate of interest but eventually the repayment of the capital, gave them insufficient scope for experiment, and in any case came to a dead end after a time because the infrastructure of development was not ready to support and sustain major projects which they were able to finance. That is what they both said.
In passing, one would like to pay tribute both to Lord Reith for his conduct of the C.D.C. and to Mr. Black for the vigour, energy and great skill he has shown in the discharge of his extremely important task. We all know what he has done towards the solution of the problem of the Indus waters and also towards the solution of Egypt's economic problems. They are the outstanding things he has done as Chairman of the Bank. He has also been called in again and again as mediator between nations —between India and Pakistan, for instance.
The actual conduct of the Bank has been exemplary, and its success within its 1180 terms of reference has been admirable. Whatever we say today about the need for other kinds and forms of investment is no reflection on the Bank. It is a pity that the recommendations and conclusions come to by Lord Reith and Mr. Black, that there must be a big expansion in the provision of infrastructure in development, were not listened to earlier. This is what Mr. Paul Hoffman recently said about that:There is no doubt that the high income countries and the world economy in general would be a lot further ahead today if a greater emphasis had been put on pre-investtnent activities during the 1950's.There has been neglect. The call of Lord Reith went unheeded. Insufficient attention was paid to the statements of Mr. Black. It is a great pity that the Government did not advance earlier this argument at the United Nations, instead of producing a White Paper with its completely trite ideological statement about the advantages of private enterprise, which had already been proved to be quite insufficient for this job. It is also a pity that the Foreign Secretary adhered so closely and for so long to his argument that nothing adequate, nothing on a sufficiently large scale, could be done until disarmament had been achieved.
Mr. Hoffman is no starry-eyed idealist; he is an American tycoon—a man who started from comparatively lowly circumstances and made himself into a powerful industrialist. Yet it is he who has suggested to the world a vast expansion of help to the under-developed countries. It is he who has calculated that for the next ten years we should have as our goal the aim of increasing the income per head by 2 per cent. a year in 100 countries. Allowing for the population increases which continually take place in those countries, this means an average increase in their total national incomes of between 3 per cent. and 4 per cent. a year.
Just now I referred to Pakistan and said that at the end of its first five-year plan it had done no more than remain where it started. It had maintained its average annual income, but no more. It is now setting up a new five-year plan, at the end of which it hopes to raise its national income by 10 per cent.—by about 2 per cent. a year. To do that—and this is a startling measure of the job which we have to approve—Pakistan will 1181 need £90 million of foreign aid each year in order to fill its investment gap.
Are these goals too ambitious? Is Mr. Hoffman's recommendation, that in ten years we should strive to increase the average per capita income by 2 per cent. a year, too ambitious? Pakistan has adopted exactly the same goal. Is that too ambitious? Mr. Hoffman has told us that in those 100 countries it would mean a per capita increase from 125 dollars to 160 dollars a year in their average national income. If this great, imaginative plan of Mr. Hoffman's were seized upon by the whole world, and if every rich nation dedicated itself to the task, at the end of a successful ten-year plan the average per capita national income in those countries would still be only £57 a year. In this country it is about £350 a year. That is a measure of the difference between those countries and ourselves.
Mr. Hoffman calculated that to do all this would need an investment of 55 billion dollars, of which 35 billion could be "bankable" and from 15 to 20 billion "non-bankable." By "bankable" investment he means the kind of investment which can be carried out by the Bank itself, under its present charter, and by "non-bankable" he means the kind which could be carried out by the Bank's new affiliate, the I.D.A., which we are seeking to endorse this afternoon.
Yet although Mr. Hoffman has estimated that between 15 billion and 20 billion dollars is required over the next ten years, the I.D.A. is to start out with only 1 billion dollars. No wonder Mr. Hoffman said that its capital should be much larger. We are in agreement with the proposal contained in the Bill, but we believe that the capital should be much larger. We believe that it would be possible to make it larger and that we could considerably increase the United Kingdom contribution, provided other countries did the same, without hurting our own people.
We had hoped that there might be established one world development authority for this whole stupendous task —doing for the whole world what our Colonial Development Corporation and CD. and W. funds have sought to do for the Commonwealth. We argued for this in a debate which took place almost exactly six years ago. I have looked up the 1182 reports of the speeches made in March, 1954. Unfortunately, the Government did not accept our view that there should be a world development authority. They refused to accept in total the proposals made at the United Nations for the establishment of S.U.N.F.E.D.—the Special United Nations Fund for Economic Development. They dragged their feet. The result is that at last, six years after the S.U.N.F.E.D. proposal was first put forward at the United Nations, we are to have three agencies at work in this field.
I know that there are dozens of other agencies—I wish there were not—such as the Development Loan Fund of the United Nations and I.C.A. It is not necessary for me to enumerate them all. I sometimes wonder whether they do not lead to an unnecessary overlapping and demand for the scarce labour of skilled planners and economists.
But there it is; we are now concentrating upon the consideration of three agencies—the Bank itself, the I.D.A., and what remains of the S.U.N.F.E.D. project —the United Nations Special Fund. As far as I am aware, there is no rivalry between them. In a speech made in New York not long ago Mr. Hoffman welcomed the establishement of the I.D.A., and I have already quoted his statement that he thought its capital insufficient. He welcomed its esitablishment, and so do I. I hope that people like Mr. Eugene Black and Mr. Hoffman, who have both done so much, can work together. I believe they will, and I think they intend to. I have paid tribute to Mr. Black, and I now pay tribute to Mr. Hoffman, as the first administrator of Marshall Aid, a magnificently successful work, to which we owe a great deal.
Above all, I hope that Mr. Hoffman can convince the world that the proposed I.D.A. fund is not large enough, and that the Government will ask us for more money before five years have passed. I hope that Mr. Hoffman can also convince the world that the Special Fund itself is inadequate for its great task of pre-investment surveys, research, training and expanded technical assistance.
I know that Mr. Hoffman thinks the money is insufficient, because he has said BO. He has said that both the I.D.A. and the Special Fund moneys are insufficient. But these projects will start, and I wish them well. I hope that their 1183 success in the early years will prove that they could effectively be expanded without waste of money. We could then envisage a three-pronged attack upon the problem—an attack by the Bank, with its hard loans, the I.D.A., with its soft loans, and the Special Fund, with its pre-investment preparations by way of surveys, training, pilot schemes and the rest.
But there is still a gap. When we have passed the pre-investment stage; when the surveys of natural resources have been made and the planning techniques and levels of science existing in underdeveloped countries are known; when we have conducted new pilot projects and endorsed certain schemes as reasonable ones to go ahead with, we may still find that there is a need for something more. I believe that we shall.
I believe that we shall find the funds of the I.D.A., soft loans though they will be, loans on easy terms, loans with possible postponement of interest, and loans perhaps with no interest at all, will not be enough to provide the necessary infrastructure for rapid development in tilling and preparing the ground so that it can support large undertakings with which the Bank itself has been so prominently concerned. For things like the Owen Falls and the Kariba Dam, which require considerable preparation, we need an infrastructure which I think we shall find in the end can be made not by loans of any kind but by outright gifts.
We have to look forward to the necessity for having in the international world not only the equivalent of the C.D.C. which we have in our Commonwealth, but a CD. and W. as well. It is because we envisage the necessity for this that we say there ought to be a world development authority. I should like to see the Special Fund given more money and encouraged to enter the CD. and W. sphere. How, for example, could we have provided university colleges in the West Indies and in Uganda and the Rhodesia and Nyasaland college if we had not given the money for building them? We could not have carried out those projects by loans. Both Conservative and Labour Governments provided the money. It will be impossible to expand the new university college in the West Indies, as the Cato Committee has recommended, unless we 1184 give the money. We recognise and practise the principles of giving money inside the Commonwealth. We must urge on the outside world the principles which we accept.
I hope that when the Prime Minister goes to the Summit Conference he will ask his fellow members who represent all the mighty nations of the world to give half a day, or a couple of hours, to consider the problem, to consider the possibility of accelerating what is now to be provided by the various agencies, and to agree on the need for all nations in the world to join together irrespective of ideology.
Why not propose that every nation undertakes to contribute a fixed proportion of its present armament budget to this purpose? Is it impossible to think of this being agreed at the Summit? There would be no need for a lot of technical arguments about whether one could detect underground tests or things of that kind. One would have to recognise only that the need existed, that the skills and techniques to do the job existed in Russia as well as in China, the United States of America, and Great Britain. If such a contribution were made proportionate to the arms budget, it would in itself be an act of disarmament, because the resources which were devoted in this way to the world war on want would be taken away and not be available for the preparation of weapons of mass destruction, or for waging war.
Such an act would be one of disarmament in itself, and it would enable us to go forward faster and more practically in the war against want. It would be a war which would redound to the advantage of everyone who took part in it, the only kind of war that can benefit everyone who takes part, for prosperity, like peace, is indivisible.
§ 5.34 p.m.
§ Mr. John Tilney (Liverpool, Wavertree)
Like the right hon. Member for Middlesbrough, East (Mr. Marquand), I commend the Bill to the House. I find myself largely in agreement with what he said. I too have flown over the East coast of South Africa, over Natal and elsewhere, and seen the rivers churning good soil into the Indian Ocean. The right hon. Gentleman may have flown over parts of the Enugu Hills in the 1185 Eastern Region of Nigeria and seen soil erosion there, too.
I often wonder whether the prophets of the dangers of over-population throughout the world are right when one sees vast areas in parts of Malaya, or places in Africa like Mokwa in Nigeria, and Gonja in the Gold Coast, as it used to be, where admittedly a lot of money has been lost, but which have shown that certain territories can produce good crops if the labour is available and the soil is properly cultivated. If mankind could find a solution to changing salt water into fresh, what immense hope there would be for a vast area of Africa.
The right hon. Gentleman and I have a mutual friend, the Premier of the Northern Region of Nigeria, who wrote to me not long ago. He was worried about what was to happen in that country which was about to become the most important purely black African state in the Commonwealth, and which has a national average income of only £22 per annum, and in the North an average income of only £18. What will that country do when C.D.C. and CD. and W. come to an end?
There is much that we can do and, indeed, are doing to help. I thought that when the right hon. Gentleman was talking about the aid which we had given he was a little ungenerous. If he refers to Command 974, he will see that with private enterprise, which he rather decries, £2,500 million, or 1¼ per cent. of our national income, has been sent to less developed countries since the end of the war.
I failed to follow him when he spoke about hotels. There is as much a need for hotels in places like West Africa as there is in Australia. I went to West Africa with one of the right hon. Gentleman's friends, Mr. Iain Winterbottom, when he was a Member of this House. On our return we suggested that there was a need for hotels in the Gold Coast, as it was then, in Sierra Leone, and elsewhere. I am glad to see that some of those suggestions have now been put into effect, oddly enough by private enterprise.
§ Mr. Marquand
Will the hon. Gentleman agree that this is not a question of black and white? It is a question of priorities. An hotel in the British 1186 Honduras might do a lot of good by bringing in the tourist trade and adding to the income of that under-developed country, or in similar countries which he mentioned, but it is not much use using scarce resources to build hotels in already fully developed countries.
§ Mr. Tilney
I think the right hon. Gentleman will agree that one will not get industry to go into partnership with these under-developed countries unless one provides an occasional hotel. Many of these under-developed countries want cement industries, textile mills and iron and steel mills. They want to play their part in the industrial world, but it is impossible for them to do so unless they have some of the amenities of so-called Western civilisation.
I think that the right hon. Gentleman was a little ungenerous to private enterprise when he spoke about the need for Gezira schemes, suggesting that the Gezira scheme was originally a State scheme. It was produced by the Sudan Plantations Syndicate, though admittedly it was later taken over by the Sudan Government. Private enterprise plantations have made Malaya more prosperous than any other country in Asia. Who produced the plantations? Even in the Cameroons it was German private enterprise which did it, and not the State. The State has made many mistakes in undertaking the plantations and other undertakings in Africa since the war, of which we are all aware. But I agree with the right hon. Gentleman that if only we could produce a balance in the rise and fall of commodity prices the world over it would probably help more than anything else. I therefore commend the Grondona scheme to my hon. Friend the Minister of State. By itself this country cannot possibly tackle that scheme, but it might well be looked at by a body like the new I.D.A. I hope that it will be passed on to the I.D.A. and the World Bank.
Like other hon. Members, I welcome this Bill, which, following the doubling of the World Bank capital, has produced a much broader economic infrastructure on which we can build increasing prosperity, and, I believe, increasing world trade. There is nothing wrong in doing the right thing and also gaining from it. It is a British interest that world trade should expand to the 1187 full. I wish to pay my tribute to one of the creators of the I.D.A., an American, Senator Monroney, whom I met at the Warsaw Conference of the Inter-Parliamentary Union only last year. It was largely his efforts in his own country which brought the I.D.A. into action.
No doubt the late Lord Keynes, were he alive today, would believe that we were doing the right thing in providing this money, though, like the right hon. Member for Middlesbrough, East, he might well think that it was not enough. Of course, it is only a very small step towards solving our world problems. We have now what is called an affluent society, but we are apt to forget that the investments of so-called affluent countries—including those on the other side of the Iron Curtain—into underdeveloped countries is only about 5½ billion, or possibly 6 billion dollars per annum. I think that was the figure arrived at by the Committee, sitting under the chairmanship of the right hon. Member for Wakefield (Mr. Creech Jones), which produced the document "A World Investment Convention".
Were that to be trebled, all that would happen would be that the so-called underdeveloped countries would double their standards of living by 1970. They would not go very far and not until the end of the century would they attain anything like the standard of living enjoyed by this country today. One forgets that about 5,400 babies are born every hour, just to add to the problem. Yet this contribution, 1 billion dollars over five years, is a start. It is a start towards the goal of 2.3 per cent. of the national income of the West which might achieve the doubling of the standard of living in about fifteen years. How little is 2.3 per cent. of the national income compared with the 8 per cent. which is spent on armaments today. So I agree strongly with the right hon. Gentleman that there is great scope if only the nations of the world could forget their jealousies and get down to improving their own standards of living as well as the standards of living of their neighbours.
Yet it represents a great step forward and is in line with the election pledges of the Conservative Party. I think it well to remember that 131 million dollars is 1188 not a small sum. We are providing 8 per cent. of the new capital of this Association. I particularly welcome paragraph 13 of the Association's Articles of Agreement, which states:Under this provision, the Association's financing is to be for less-developed member countries and less-developed dependent and associated territories included within the membership of member countries.That means that not only the emerged, but the emerging territories of the Commonwealth may be helped. They have many difficulties because, as we know, they are to lose the Colonial Development Welfare Fund and the help of the Colonial Development Corporation in a large measure. They are told that they have to show themselves to be credit-worthy. It is not all that easy for a country to show in a year or two that it is credit-worthy. It takes many decades for a country to secure that reputation in the eyes of the capitalists of the world, although Mr. Gbedemah, in Ghana, and Chief Festus, in Nigeria, have gone a long way to show that they are following sound financial principles and have indeed a very good record.
But the average owner of capital is extremely ignorant of conditions in Ghana and Nigeria, and events elsewhere have not been helpful. Anything that happens in Africa or Asia which disturbs the body politic does not help investment by private enterprise in the under-developed countries. I cannot believe that if Sierre Leone came into the market at the same time, say, as Australia, many people would invest in Sierre Leone rather than in Australia. Because of that I welcome the recent decision to allow Government-to Government loans. Probably that is the only way in which territories like Sierro Leone can be helped.
I also welcome the elasticity of paragraph 14 of the Articles of Agreement, which says:For example, the Association is authorised to finance any project which is of high developmental priority, that is, which will make an important contribution to the development of the area or areas concerned, whether or not the project is revenue-producing or directly productive".That must have been looked at by the directors of the Colonial Development Corporation with some envy. Even though the C.D.C. has been so much improved of recent years. I think it must 1189 hope that the Sinclair Report will soon be implemented.
I am hoping that the I.D.A. will be able to help these emerging and emerged territories. I am thinking particularly of great projects like the dam across the Niger River and across the Kaduna River which not only will make it possible to navigate the great Niger River, but will also produce cheap power and quite a lot of irrigation. I hope that the Ghana Government and private enterprise may, at long last, be able to help the Volta Scheme, about which so much has been said and on the whole so little done. I am hoping that the I.D.A. will help other territories which are still a long way from independence.
I am thinking particularly of Kenya. In Kenya, we have to finance education if the African is to establish himself as a really big revenue earner. Kenya is a very poor country. To pay for education and its development it must expand its agricultural production. Much of its land is not fully used, and it should be profitably used. If the Africans are settled on it, it is no good putting them on land unless they are to produce profitably and the right crops. To do so they must have enough capital and the former owners of that property must be properly compensated.
I hope that some form of land bank or fund can be supported by a body such as I.D.A. in Kenya, thereby not only stopping the possible flood of capital from Kenya, but bringing outside capital back into Kenya. I believe that the I.D.A. has a great chance in this field. There is great merit in this these un-colonial days in having a international rather than a national body. An international body helps both sides. An ex-colonial territory will object far less to taking funds from an international body than from one which could be considered still to be imperialist. It would have no qualms about international aid.
From the other side, it is possibly easier to turn down a project by an international body than by a national one if by any chance the economic arguments are strongly against it. I hope, too, that we can let the countries which are to benefit from I.D.A. know that we are contributing in large measure to I.D.A. My experience in many parts of the 1190 world has been that very few people among the rank and file know of the great help that has been given by these national and international funds.
I turn to the private enterprise part of the help which I believe could be given. I am doubtful whether Government-to-Government loans are always the right means of giving aid. It is so much easier for a country to default on a Government loan than it is to take action against private enterprise. There is a political risk and capital is a very shy animal. If the political risk is to be exorcised something must be done and I believe that it could be done by Her Majesty's Government. I must declare an interest, being a director of a firm which trades throughout West Africa.
I wish to quote from a letter I received only this morning about insurance against strikes, riots and civil commotions. One paragraph said:The main trouble is that the present policies exclude the risk of any loss or damage arising out of the act of any person acting for or on behalf of or in connection with any organisation with activities directed towards the overthrow by force of the Government or to the influencing of it by terrorism or violence.It is very easy in, say, the Cameroons to find some excuse for some damage there and that it should be political.
If that is the case over ordinary trading, how much more so must it be over capital investment? I regret very much what the Government of Ghana did about freezing the French assets in that territory. I hold no brief at all for the French Government and what they did in exploding a bomb in the Sahara. As The Times pointed out many months ago, there was a perfectly good French island, uninhabited, in the Antarctic Ocean where the experiment could have been carried out. The effect, however, not only on Ghana, but on other territories in Africa, of freezing the assets of the French companies must be very considerable and I regret greatly the damage to her credit.
It is as well to remember that capital today is not merely of the rich. What is capital? It is what we save out of current earnings. It is held by trade union funds, by widows and orphans, pensions schemes and great insurance companies. If that capital is to be invested in under-developed countries 1191 rather than in this country, the United States or other well-developed countries, those who receive that capital must be very careful not to damage their credit. The Committee which sat under the chairmanship of the right hon. Member for Wakefield has put forward a suggestion for a world investment convention. I hope that a leading Commonwealth statesman like Mr. Awolowo or Sir Abubakar Tafewa Balewa could lead the Commonwealth in acknowledging that convention.
I wish to quote the comments on it by the ambassador-at-large of the World Bank, the Bank's Special Representative in Europe, Mr. J. D. Miller, who said, after he had read it:This seems to me to be a sensible and balanced document and one that gives sufficient weight to the fears of the borrowers. It seems to me that the real task now for those interested in seeing some kind of Code accepted is to do a lot of missionary work among the underdeveloped countries. If … the Commonwealth as a whole (developed and underdeveloped) could be persuaded to accept something it would have a great effect on the rest of the world.At the Annual Conference in Warsaw of the Inter-Parliamentary Union, last autumn, a resolution was passed saying thatthe economically underdeveloped countries and the more developed ones should be prepared to negotiate a World Investment Code in order to create greater confidence conducive to investment on the basis that both investors and recipients, whether they represent Government finance or private enterprise, will benefit from their rights and obligations being mutually assured.If the investment climate could be improved in that way for private enterprise, private enterprise could raise much more capital than it is doing at present and either more development be assured or less money provided by the taxpayer.
I wish to commend to the House the scheme of the United States of America, and now of Western Germany for guaranteeing private investment in under-developed countries against either non-convertibility of profits or of expropriation. As the House will know, the American Government have treaty obligations with a great many countries, including the United Kingdom. Since the start of the scheme, 448 million dollars, up to the middle of 1959, has been invested. The rate is ½ per cent. premium per annum against non-conver- 1192 tibility and ½ per cent. per annum against expropriation. The cost is remarkably little.
I commend to my hon. Friend the Minister of State a very good booklet produced by the Princeton Studies in International Finance. He will see from page 70 that so far 3½ million dollars have been paid in premiums, there have been no losses and the expenses have amounted, in all, to 142,000 dollars.
If some such scheme could be introduced for the Commonwealth, much private capital might flow in the direction in which we would like to see it, provided that this new investment was made on a partnershp basis. In all these territories with new industries it is so much better to be in partnership fifty-fifty, or fifty-one-forty-nine, or even more for the particular African or Asian country, than for that industry to be solely owned by a company overseas.
My hon. Friend the Minister of State may say that it is better that the new emerged territories should show credit-worthiness, but that takes many years. I have heard it said, also, that overseas Governments, once the scheme was introduced, would be less responsible than they are at the moment. Is the United Kingdom less responsible because we have entered into treaty relationship with America and, incidentally, have benefited by the investment of 49 million dollars in this country against non-convertibility?
It may be said, also, that we cannot guarantee all the risks; we cannot insure against Asianisation or Africanisation. No insurance company says to a person wanting to insure, "We would not advise you to insure against burglary or fire, because we cannot insure you against an act of God." It is much better to leave private enterprise to make use of an insurance scheme or not as the case may be, but we must have an insurance scheme of that kind if private enterprise is to invest in many of these underdeveloped countries.
I hope that the underdeveloped countries themselves will be prepared to pay a portion of the premiums so that, as each year is succeeded by the next, so the fund will grow, and the amount of money that an underdeveloped country has in the fund will grow, too. Then, if anything goes wrong, that country will 1193 lose not only its good will but much of its own money. I therefore commend it once again to the Minister of State.
This is a great start to a development which we have all wanted to see—an economic development which can bring political results as well, as in the case of the Indus waters, as has been already mentioned. The scheme has great possibilities in territories such as Kenya. It is a most imaginative scheme, and I have no doubt that it is not lost on the uncommitted countries that no one behind the Iron Curtain is participating in it.
Finally, whether the taxpayers' money will be lost or frozen, as it may be in a small number of cases, the bulk of the money will, I believe, produce a dividend of good will for our so-called Western civilisation which will exceed our wilder hopes.
§ 6.5 p.m.
Mr. A. Gram (East Ham, South)
The hon. Member for Liverpool, Wavertree (Mr. Tilney) said so many things with which I agree that, on reflection, I am glad that I did not interrupt him during his rather provocative opening remarks when he was, I thought, rather less than fair to my right hon. Friend the Member for Middlesbrough, East (Mr. Marquand). If I understood aright what my right hon. Friend was saying about hotels, he was criticising the possibility of private investment erecting hotels in places like Sydney, and not so much the erecting of hotels in under-developed territories.
The hon. Gentleman laid much more emphasis in his concluding remarks than I do on the part which private enterprise can play in under-developed countries by comparison with Government-to-Government grants, but nevertheless I felt that his speech in that respect was most interesting and that he put forward quite a number of points containing considerable common sense. His speech emphasised, as I have no doubt that all speeches on both sides will emphasise, the importance of finding ways and means of getting vastly increased amounts of aid from the West to Africa and South-East Asia, and I feel sure that we are agreed on all sides, with perhaps different degrees of warmth, about the value of the instrument which we are endorsing this afternoon.
Although, amongst the present company in the House we may all be very 1194 convinced about the importance of this subject, we must admit that it is not yet a subject which has caught the imagination of the public mind. A great deal has to be done not only in devising the right policies and the right instruments, as I hope that we are doing this afternoon, but also in making a much more vivid impact upon the public mind about the importance and extent of world poverty and how to overcome it. If something dramatic happens, if a typhoon hits Mauritius or an earthquake hits Agadir, quite swiftly and quite rightly the conscience of the world is roused; but the vastly greater disaster of continuing world poverty goes on year after year. People's minds are not so much in touch with the problem and are not so closely brought to realise it. I think that we in the House and public people everywhere have a duty to try to bring home to the public the tremendous importance of this subject.
The difficulty is that world poverty is not local, but is widespread. It is not sudden, but is enduring. It is not dramatic; it does not catch the imagination instantly, but is relentlessly humdrum. Because it has those features, it does not receive the attention it deserves. Unless one has had personal experience of these things, as previous speakers obviously have in their travels, it is not easy to get the vivid picture which one needs to get before one has the right thoughts on these subjects. Since I have recently had the opportunity of some direct experience, in that I was a member of a Parliamentary delegation to South-East Asia in the autumn, I want to use that experience and bring it to bear on this afternoon's discussion. In particular, I want to bring it to bear upon the very point which the hon. Member for Wavertree made on paragraph 14 of the White Paper which talks about the intention of the Association to finance projects,whether or not the project is revenue-producing or directly productive.I remember from my visit with three other hon. Members to the island of Borneo that there were within that territory two vividly contrasting communities. One, in Sarawak, was a very primitive community living the long-house life; the other, on the coast, was a sophisticated, highly-developed community on the oilfield at Seria. They 1195 were within a comparatively short distance of one another.
The one, living in a stage of development comparable, I suppose, with that of the ancient Britons, had attracted no investment from the West, while the other, because there was oil under the ground, had obviously attracted quite adequate investment. There, within the same island, were two groups of human beings, the one living mean and poverty-stricken lives and the other living life at material standards that obviously bore comparison with anything in the Western world.
It is a contrast of that kind that poses a problem with which one hopes the International Development Association will in a large measure deal. Where there are resources like oil or copper, or some raw material that is needed by western civilisation, there has been no difficulty in getting the requisite investment. Where a disaster has occurred, there has been no difficulty either, because human beings are not ungenerous when their fellows suffer. The problem that we are trying to tackle by this instrument lies in the vast territory in between—the vast stretches of the earth's surface that are not very rich, but are not deserts.
There are many millions of people there who are not suddenly dying in some disaster but who, because of their poverty, are due to die all too early. I saw such areas in my visit to South-East Asia, and others will have seen them elsewhere. They are not profit-making areas. Their resources are not likely easily to produce profit; yet, in those areas, human beings are living unsatisfactory lives.
If their lives are to be made more satisfactory, they need roads, houses, sanitation, simple tools, organisation, and simple instruction in the ways of more modern life. Whatever is done in those ways, it is highly unlikely that those territories—because there is no mineral wealth—will be profitable in a monetary sense. They will certainly not be profitable in the sense of the 4 per cent. or 5 per cent. interest that the World Bank charges on its loans.
It is not only that certain territories are unsuited for development by the 1196 loans which the World Bank provides. There are certain kinds of enterprise, not just social institutions like universities and hospitals but certain kinds of commercial enterprise, that are very necessary and desirable in certain under-developed areas but which are not suitable for the type of loan provided under World Bank auspices as we have known them hitherto.
All four members of the delegation— two from the Government side and two from this—were agreed that the rubber planting in Sarawak was very inefficient and ill-organised. We were all agreed that co-operative rubber factories were at least an important part of the solution for the reorganisation of rubber growing there. An organisation such as a co-operative society would need capital, but it would certainly not be able to pay the 4 per cent. or 5 per cent. required by the World Bank.
When I say that there are certain kinds of institutions that are not in themselves suitable for finance by orthodox methods, I would point out that one of the most important principles of cooperation is a limitation on return on capital. Therefore, loans made at comparatively high interest rates are unsuitable for the encouragement of that sort of enterprise.
Hon. Members will know that these points have often been raised within the United Nations by the delegates from the under-developed countries themselves. They have pointed out that the capital from the West goes, to a very large extent, into extractive industries, particularly the petroleum industry. They have pointed out, as has my right hon. Friend the Member for Middlesbrough, East that so much private enterprise goes, not to underdeveloped countries but to developed and semi-developed countries.
If one examines the places to which the World Bank loans have gone—and particularly if we make comparisons on a per capita basis—while no one denies that the World Bank has done a valuable job in increasing liquidity of capital in an age when international capital has been far from liquid, we find that the capital has not been in proportion to the needs of the recipient countries. To a very large extent, it has gone to the wrong countries.
1197 In this Bill, and particularly in the Articles of Agreement published in Comnd. 965, there are a number of features that I especially welcome. In particular, I welcome the first article, to which the hon. Member for Waver-tree called attention, by which it is proposed to make loans on much more lenient terms than have been possible under World Bank auspices. That has been one of the defects of the World Bank from the point of view of meeting the needs of under-developed countries, and I believe that this article will be one of the most valuable features of the new Association if it can make capital available at much more lenient rates of interest.
Again, Article V (f) says:The Association shall impose no conditions that the proceeds of its financing shall be spent in the territories of any particular member or membersI welcome that flexibility. One hopes that there will be no tying of a certain amount of money to be spent in a certain direction. A few months ago, we read a report that the United States was to introduce such a condition in respect of its direct aid to other countries. I felt then that it was a retrograde step, and I hope that the British Government, in relation to its aid, will not enter into that sort of restriction. I am glad, so far as the International Development Association is concerned, that that is written into the articles.
Section 4 of Article V is important, because it states that this Association is to co-operate with other agencies interested in providing assistance for development. My right hon. Friend has been referring to the S.U.N.F.E.D. scheme, and there are other schemes which have been mentioned. It is highly important that in establishing this new instrument of international aid, it should not in any way be regarded as a rival to the S.U.F.E.D. scheme, or as a rival to any other scheme which has been set up, but should be an ally. By this means, we could, as my right hon. Friend said, make a three-pronged attack upon this problem of world poverty, and not let this development lead to any argument between one institution and another as to which is the better form of approach.
Section 6 is headed "Political Activity Prohibited." I hope that that means 1198 what it says, and that it is not just a pious hope. I hope that it will be true that only economic considerations shall be relevant to the decisions of the officers concerned, because if we start trying to tie up these loans with political strings, it will, in my judgment, be a psychological and diplomatic disaster, and will largely undo the sort of good which we are hoping to do in the economic sense.
Those are the features of the proposed Association which I have particularly welcomed, but, in closing, I should like to call attention to two ways in which I wish it had been different—two ways in which I think it could have been strengthened. In the first place, the membership of the Association is confined to members of the Bank. Other speakers have pointed out that a virtue of this organisation, as of the World Bank, is that it will be linked with the United Nations. I, too, welcome that, but we have, I suggest, both in the constitution of the World Bank and, therefore, of this Association, a one-sided organisation. I am not here saying whose fault it is, but, in fact, the World Bank, and therefore this Association, will be a one-sided institution.
I very much hope that the door will be left open, and will be seen to be left open, to bringing in countries from both sides of the Iron Curtain, rather than confining it to countries on this side of the Iron Curtain. Otherwise, the charge will be made and the seeds of doubt will be sown in the minds of the leaders of the under-developed countries whether this is not an anti-Communist instrument rather than an instrument genuinely for their own benefit.
The other matter which I think could have been dealt with far better is this. Instead of having a five-yearly review of the resources of the Association, and the provision that the subscriptions should be increased at the end of five years, if it were seen fit to do so, I should have liked an automatic increase in the resources of the Association, pari passu with the increasing national incomes of the contributing countries. We have to find an immense amount of resources from the industrial countries of the West, 1199 and, frankly, it is not easy in democracies to get people to make real sacrifices in their standards of living. What is more possible is to get them to forgo increases in their standards of living, and, therefore, a provision could have been written into the articles that as national incomes go up in the contributing countries, the contributions which they would make to the Fund would go up at the same time.
The reason why I attach a great deal of importance to this is that the gap between the standard of living of the Western nations and that of the nations of the under-developed countries is increasing at the present time, and has been in recent years, rather than narrowing. It is true that increases in the standards of living in the under-developed countries are taking place now, but the gap between the West and the East, between the West and Africa, is widening rather than narrowing. It must be a main objective of statesmen to see that, rather than have that gap widening, it should be narrowing.
If I may quote one or two figures to prove that point, taking the national income figures for 1953 as representing 100, in 1957—the latest figures I have-France had reached 121, Japan 127, Germany 128, Austria 136 and the United Kingdom 110. These are industrially developed countries with increases over that period of that order. In the under-developed countries, there are Ceylon with 107, India 105, the Belgian Congo 104, the Argentine 103 and Brazil 108. It is true that they have made advances, but they have made advances only one-third or a quarter of the advances made in the Western countries. Therefore, it seems to me that the gap between the standards of living in different kinds of territories is increasing all too rapidly. It should be our task to narrow rather than to widen that gap. If we do not, the economic contrast between the developed and the underdeveloped countries will build up into psychological contrasts. There will be psychological, racial and political tensions of very dangerous potentiality.
The argument for aiding people who are living in poverty is so often put forward in moral and humanitarian terms, because it is in the interests of 1200 the people who are suffering that something should be done for them. I want to conclude by suggesting that it is just as much, if not almost more, one might be tempted to say, in our own interests, because unless we do succeed in overcoming this tremendous problem of world poverty, it will not be just those who are already suffering who will continue to suffer, but the whole world will be involved in a tremendous disaster in which those who regard themselves as living in affluent societies suffer as well.
§ 6.29 p.m.
§ Mr. Alan Hopkins (Bristol, North-East)
I am glad to be able to follow the hon. Member for East Ham, South (Mr. Oram) and to agree with the points he made, as indeed with those made by other hon. Members in welcoming the Bill, which will serve a very useful and important need in the world today. I follow him, also, in attaching great importance to Article V Section 1 (f) and Section 6 of the Articles of Agreement, which seem to go together. They are the provisions which lay down that no political influence is to be used in reaching any decision by the officials of the International Development Association.
At the same time, however, I hope that that will not mean that the funds which are provided by the member countries subscribing to the Association will be used by the under-developed countries in countries which have not themselves subscribed to the fund. I hope that my hon. Friend will be able to say something about that later.
I agree, also, with the hon. Member for East Ham, South when he says that there is some danger of rivalry among the international organisations which are set up. It appears that the members of the International Bank and its officials will wear two hats from now on, the hat of the International Bank itself and the tat of the International Development Association. Also, there are among others the Export-Import Bank in America, the C.D.C. in this country and the European Bank set up by the Western European Powers, all of them striving to do exactly the same thing— to develop the potential of the underdeveloped countries of the world.
One particular difficulty may rise. If a country is not to receive a loan from the International Bank, unless the reason for 1201 rejection be that the project is not one which the Bank itself normally deals with, will there not be a danger that the country may be tempted so to arrange its finances that it will qualify for a soft loan under the International Development Association? I should regard that as a great drawback. However, in so far as the officials and members of the International Development Association will be members and officials of the International Bank also, this is a danger which they will have to face and, I have no doubt, they will succeed in overcoming it.
I very much welcome the Bill. I am sure that all hon. Members share a genuine and sincere desire that all the peoples of the world should have a high standard of living. It is incumbent upon us, one of the more industrialised countries of the world, so to secure, and to use. a certain percentage of our resources and the product of our own prosperity that people less fortunate today will soon be able to share with us in such a higher standard of life.
At the same time, we must recognise that the pattern of trade between countries is changing. Before the war, it was accepted that the exchange of goods lay primarily between countries with complementary economies, primary producers and industrialised countries. Today, on the other hand, it seems that the balance of trade has shifted and trade is increasing between countries which have highly industrialised economies. On this ground, too, I welcome the Bill, for it will provide a means whereby the present under-developed countries will be able to take their place with those already more developed.
I endorse the plea made by the right hon. Member for Middlesbrough, East (Mr. Marquand) that the leaders of the Western countries and of Russia and the countries behind the Iron Curtain should come together so that a certain percentage of their national wealth should be given to an international organisation for the development of the rest of the world. If such a thing could be achieved, I would welcome it greatly. On the other hand, if it cannot be achieved, we must not forget that economic competition with Russia is something we must face, and this International Development Association and similar 1202 associations in the West give us the means for engaging in such competition.
It is important to decide how much of the resources of this country we wish to place for investment abroad. The figure quoted in the White Paper, Cmnd. 974, is approximately £300 million per annum, of which about one-third is directly derived from private enterprise. The amount to which we are now committed by the Bill is about £46 million spread over five years. I hope that my hon. Friend will be able to tell us tonight about the picture of investment provided by private enterprise abroad that the Government have in mind in relation not only to the International Bank and the International Development Association, but in relation to other bilateral organisations and assistance to which we subscribe.
I take the point made by my hon. Friend the Member for Liverpool, Wavertree (Mr. Tilney). A great deal has been done in the past by private enterprise abroad, and there is still a great deal more which needs to be done. To do it, however, private enterprise needs some of the protection now being afforded to it in the United States of America. Only last week, the Export-Import Bank announced a new change of policy which means, in effect, that manufacturers and investors in America will be able to have an insurance, a guarantee against expropriation of assets in a foreign country and the devaluation of local currency. These are two of many possible steps which might assist private enterprise in this country to play an even greater part abroad. I hope that my hon. Friend will tell us tonight whether he feels that these and similar means might be or should be adopted to assist private enterprise in this respect.
I am sure that the Bill will be accepted by all hon. Members in the spirit in which it is conceived. Its aim is to enable countries to join together to do god and to help people less fortunate than themselves in the world today.
§ 6.38 p.m.
§ Mr. William Warbey (Ashfield)
Next to the problem of preventing the world from being destroyed by nuclear war, there is probably no greater problem than that of ending the division of the world into "have" and "have not" 1203 nations. It is a division which ought to appal the conscience of mankind.
As my hon. Friend the Member for East Ham, South (Mr. Oram) pointed out, we should always have it present in our minds but, unfortunately, we are not often reminded of it because it is so continuous, so endemic and so ordinary in the lives of hundreds of millions of people. The size of the task has been variously estimated, but no estimate has been less than an annual investment of about 10 billion dollars to achieve a rise in the standard of living of the under-developed countries, two-thirds of the peoples of the world, within the course of twenty-five years.
I think that the type of aid required is clearly understood. It is technical assistance, capital investment in basic utilities and services and investment in the building up of industry and agriculture to develop progressive self-sustaining economies which can be beneficial primarily to the people in the area concerned rather than the return of profit to those who invest it. Judged against these criteria, what has been achieved up to now has been small and pitifully inadequate, although we in this country can feel that perhaps we have done more than others.
As a background to this debate, the Government produced a Whiter Paper purporting to show that under the auspices of the Government a substantial contribution has been made by this country towards investment in the underdeveloped areas. The total amount of that investment in 1959–60 is given as £240 million, which represents 1¼ per cent. of the national income. This has been contrasted—it was contrasted during the General Election—with the Labour Party's delared aim of an investment of 1 per cent. of the national economy in under-developed countries.
But the Labour Party has also advocated that this 1 per cent. should be supplementary to investment of private capital, and should not include it. The figures in the White Paper include £100 million for private investment and £138 million for Governmental assistance. The amount of private investment, therefore, is less than ½ per cent. of the national income.
1204 This private investment is only one-third of the total estimated amount of overseas private investment on the average throughout the last seven years. It appears, therefore, that the bulk of private investment, as we know from experience, goes into the more developed countries, such as Australia and Canada. Of the remaining estimated amount of £100 million, a very large proportion goes into oil, mining and other extractive industries. In other words, as we know from experience and as we might expect, private investment has gone and continues to go to places where it can find substantial profits. Where it cannot do so, the amount of private investment is very small indeed.
The effect is that certain areas of the world benefit indirectly by the fact that they have natural resources which are easily exploitable, whereas other vast areas of the world gain no or very little benefit other than what can be received through direct Governmental and international aid. If we contrast the standard of living in Kuwait with that in the Nile Valley, or in an Indian village, we can see the difference between the fate of a people who happen to live where there are resources which can return large profits on private investment and that of a people who do not. In a few fortunate areas of the world, the local people are able to enjoy the crumbs of cake which fall from the rich man's table, while in vast areas millions are lacking bread. That is why, if the problem of aid to under-developed areas is to be tackled seriously, we must rely in the main on Governmental and international aid.
What this country has done in recent years has been far less than what we ought to be able to do. Table I in the White Paper Cmnd. 974 shows that throughout 1950–59 the average amount of Government assistance was less than half of 1 per cent. of the national income. Only in the last two years has there been a substantial increase. The breakdown of assistance in Table II shows that the greater part of this increase is accounted for by loans rather than by grants and technical assistance. Out of the total of £138.4 million, only £60 million is accounted for by grants, gifts and technical assistance, and £78.4 million by loan capital either directly through bilateral assistance or through 1205 international organisations, such as the International Bank.
A loan has to be repaid, and it is normally repayable with interest. In the case of the loans being made bilaterally during 1959–60, the total amount repayable by the recipient territories on the loan of £60.4 million will be £95 million, according to the estimate given to me the other day by the Chancellor of the Exchequer. In other words, the amount of the loan will be repaid with an addition of 57 per cent.
What applies to British Government loans to British territories applies equally to loans made by the International Bank and the International Finance Corporation. The International Bank loans have been made at rates of interest varying between 3¾ per cent. and 5 per cent. and 6 per cent. In recent years there has been a tendency for the rate of interest to increase. In May last year, the rate was increased to 6 per cent., and it has remained 6 per cent. ever since.
Loans such as the £50 million for the Indian railways have been made on a 20-year basis at 6 per cent. interest. The loan of 56½ million dollars to the United Arab Republic for the Suez Canal development is being made on a 15-year basis, again at 6 per cent. interest. All the other loans made during the past nine months have been at that extremely high rate of interest. The total outstanding loans made by the International Bank are something over 4,400 million dollars, and on 30th June last year they stood at 4,426 million dollars.
If one takes an average rate of interest on those loans at about 5 per cent., one will find that, although no exact figures are available, the total amount repayable by the recipient countries is about 7,000 million dollars. That is to say, about £2,500 million will, in the course of the next fifteen or twenty years, be returned by these poverty-striken under-developed countries of the world to the world's bankers, financiers, investors and moneylenders. This is a measure of the kind of aid which has up to now formed the bulk of the aid given internationally through institutions with which this country is associated.
Three years ago, we had a new international institution formed, the International Finance Corporation. It was 1206 said that the purpose of this body was to assist in the development of private enterprise in the under-developed countries by providing investment which would be partly in the form of risk-taking capital. The International Finance Corporation has a capital of only 100 million dollars, of which 94 million dollars is paid up, and its total investments so far amount to only 23 million dollars, on which it draws a rate of interest which is normally 6 per cent. to 7 per cent. plus a contingent share of profits in most cases.
Now we come to a further institution, the International Development Association. We on this side of the House certainly welcome the development of this institution and hope that it will go some way towards closing the immense gap which still exists between what is required and what is actually being done to help the under-developed countries.
We are glad to note that the I.D.A. will be in a position to make loans on less onerous terms and, in certain cases, for non-revenue producing purposes. I note, however, the reference made in the directors' report, paragraph 14, to the effect that loans will be able to be made for projects which are not revenue producing or directly productive; but this statement is not firmly reflected in the Articles of Agreement. I have not been able to find a form of words in Article V which explicitly authorises the directors to make non-revenue-producing loans.
I must confess to a little alarm at the statement of the Economic Secretary that, on the whole, the bulk of the loans made would probably be of a similar type, and for a similar type of project, to those which the International Bank makes, and also that the condition of commercial profitability would be applied in the majority of cases. If that is so, then this Association will still go only a very small way indeed towards doing what is required.
It has, moreover, the political limitation, to which my hon. Friend has already referred, that because its membership is limited to that of the International Bank the Communist countries are excluded and, being excluded from it, are also excluded from benefit. We should remember that about a quarter of the population of the under-developed 1207 countries of the world—probably nearer one-third—happen to live in Communist countries, and if we are thinking in terms of international aid of a non. political character we ought to be thinking in terms of aid which could go partly to those countries as well as to the non-Communist world.
That is Why, in the last resort, I support very strongly the pleas made by my right hon. Friend the Member for Middlesborough, East (Mr. Marquand), and others, that this form of aid still needs to be supplemented by a real international development authority from which funds come from all countries able to provide them, which is able to assist all countries which are in need of assistance, and Which is able to do so in the form of outright grants or loans, bearing either no interest at all or extremely low rates of interest.
This kind of organisation still needs to come into existence—an organisation of the type of S.U.N.F.E.D., which would have come into existence but for the opposition of this Government, among one or two others. We must continue to press for the recognition that effective aid can and must be given in this way. Not only savings on disarmament, when disarmament becomes effective, but other savings which can be made from the existing national income and resources of this and other countries can and should be devoted to such a purpose. In that way we could see that the aid is not only substantial in quantity, but motivated solely by humanitarian considerations without political, economic or other self-interested motives.
§ 7.0 p.m.
§ Sir Henry d'Avigdor-Goldsmid (Walsall, South)
It is a pleasure to take part in a debate of this nature, in which the feelings of hon. Members, on both sides, are so closely allied. If we differ, we differ rather upon shades of emphasis than meaning. Some of the points made by the hon. Member for Ashfield (Mr. Warbey) towards the end of his speech were, however, a little less than fair, because while membership of the Association and its benefits are limited to members of the Bank, there is nothing, as far as I know, to prevent the Communist countries from becoming members of the Bank if they so desire.
§ Mr. Hugh Gaitskell (Leeds, South) indicated assent.
§ Sir H. d'Avigdor-Goldsmid
I am glad to have the confirmation of the right hon. Gentleman. I suspect that if some of the smaller Communist countries wished to apply for membership, it is not likely that their "big brother" would allow them to do so. Incidentally, the biggest brother of all, Communist China, is a member, so I do not think there is much validity—
§ Mr. Warbey
Surely, one of the difficulties is that so long as Formosa China is a member we are not likely to get Communist China in.
§ Sir H. d'Avigdor-Goldsmid
I am obliged; that was my mistake.
The hon. Member spoke about finances being provided by the world's bankers, investors, financiers and moneylenders. Whatever form of words we use, any money that is provided is a drain upon the productive resources of the country which puts up the money. It is not the financiers, the moneylenders, the bankers or the investors who produce the resources; it is the workpeople and the industry of the country. Therefore, a description such as the hon. Member used is inapt in a debate in which both sides of the House are united in trying to serve the same end.
We are talking now of ends. That is why we are so much in agreement. Where we differ is usually on the means. The end of reducing world poverty is one with which we are all completely in agreement. As to means, the Bill is a modest Measure. The amount of money available—1,000 million dollars over five years—will not of its own account make any real inroad into the problem which we are discussing. We should, however, devote ourselves to the Bill and I should like to make a few points about it.
The modest means at the disposal of the International Development Association may be increased, not only by calling for fresh subscriptions from members, but by the provision in Article V, Section 2, that the Association has power to guarantee securities in which it has invested in order to facilitate their sale. When the Association does that, two things will come about. First, it will receive fresh resources with which 1209 to operate anew. Secondly, it will set its seal of approval on the work it has done and on what might be called its viability.
The hon. Member for Ashfield was very scathing about the rates of interest which are customary on loans, and he described them as tribute. The object of all these loans is to increase the productive power of the under-developed countries. I do not consider it unfair that when that result is achieved and production is obtained, some return should be made to the lender of the money so that it can again be lent for the same purpose to other people.
The preamble to the Agreement speaks of the establishment of mutual cooperation and the desire for acceleration of the economic development of the under-developed world and suggests that an increased flow of capital will help to achieve this end. This is slightly on the platitudinous side, although I realise that in international documents platitudes cannot always be avoided.
The fact is that international aid is not a new thing. Thanks to the overwhelming generosity of the United States and also to the lesser, but nevertheless real, generosity of other countries, very great amounts have been given in international aid in the past ten years. The real question is how well it has been applied and to what extent, if at all, it has been wasted. On the view we take of the use which has been made of the money which has been given free, we can base our ideas as to how the funds which are now being put up for what I may describe as purposes which have a business background can best be used.
There is no question that to the newly-emancipated countries and to the under-developed countries, industrialisation makes a glamorous appeal. Many countries have embarked upon it successfully and some less successfully, and in some countries there is a danger that it will not succeed. There is, however, no question that if we think in terms of the cold war, there is no greater breeding ground for the principles of Communism than an urbanised proletariat which is working in conditions where the people do not see any real improvement in their living standards and yet cannot escape therefrom. Therefore, before the Association considers industrialisation, it must strongly consider agriculture. It is 1210 much less glamorous but, at the same time, it is the crying need of Asia and Africa.
One of my colleagues described Africa as a giant but a flabby one. That is a pregnant saying, because Africa does not carry the population that it should carry in comparison with other continents. More than that, it does not nourish its population properly. The grave danger in Africa is the danger which appears as having developed in Guinea, where, I understand, the Prime Minister, Mr. Sekou Touré, has invoked the aid of Russian advisers and has found that to implement the plans of those advisers, he has had to introduce forced labour. This is a fact which we cannot regard as contributing to the object of raising the living standards of the under-developed countries.
We cannot, however, avoid the fact that to many Africans who are brought up on a low subsistence level, the object of work is to earn their subsistence and that when their subsistence has been obtained, not only does their enthusiasm for work disappear, but they become positively antagonistic towards it. I do not wish to be regarded as making an imputation against the inhabitants of that continent, but it is an observed fact that in some cases—I do not want to generalise—high wages in Africa do not bring the amount of work that they would attract in Europe, where wages can be properly spent.
I therefore welcome the provision in the Bill for technical assistance because —and one need only refer to paragraph 19 of the White Paper—if there is one thing that is clear, it is that between the coloured peoples and Europeans there is a real interdependence and the rôle of Europeans as technical advisers in all the developments of Africa is just as high in the countries which are emancipated or are shortly to be emancipated as ever it was before. Where there is a proper understanding of this position it seems to me that there is a chance of making the sort of progress for which the Bill seeks to provide.
In considering this Measure, my attention was drawn by my hon. Friend the member for Harwich (Mr. Ridsdale) to a most remarkable document—the annual report of Mr. Grantham, the Chairman of the Chartered Bank. It deals with 1211 developments over the whole of Asia. I should like to draw the attention of hon. Members to it because Mr. Grantham writes with experience of many of the countries which come within the purview of this legislation—India, Pakistan, Ceylon, Burma, Malaya, North Borneo, Sarawak, Indonesia, Cambodia, Vietnam and many more, and the speech is of great interest.
I should like to draw the attention of the House particularly to his conclusion, which I think contains a lesson for us all. He says:The tremendous national pride of the young countries will not allow them to accept aid with terms attached and yet, as some of these countries are run today, aid will not put them on their feet and give them viable economies. The problem then is to find a formula which gives to these countries, with their consent, a control-free administration which will eliminate opportunities for bribery and corruption and a unit of currency having the same internal and external value, thus eliminating the rewards of smuggling and the other forms of currency evasion which run down the country's external assets—possibly in far greater sums than the aid received.The sting of that applies to India, and it seems very good sense.
I do not know Mr. Grantham's politics, but I suspect that he supports our side of the House. He seems to me to take a dispassionate view of the problem. He adds:It is not uncommon these days for leaders of new nations to state that democracy does not work with them but what is not said is that their inexperienced politicians and civil servants often find it beyond their powers to run restricted and controlled economies. Cannot, therefore, those advisers of the World Bank and the International Monetary Fund, and those negotiating direct loans with these countries, advocate with more persuasiveness the freeing of rates of exchange, the concentration of trade in private hands, with the elimination of that increasing economic menace, state trading, and the ceasing of discrimination against the nationals and the trading of those highly-taxed countries whose peoples are bearing the cost of the aid?It seems to me that the Bill is a contribution to this point and, as I said at the beginning of my remarks, the better the I.D.A. husbands its resources the more often it will be able to use them and the greater the areas to which it will be able to apply its assistance.
This is a phase in the cold war. It is part of the struggle for men's minds in which we are engaged. I believe that 1212 the Bill could be an extraordinarily valuable instrument in that struggle as long as we realise that aid must be used with sense and not squandered. I am not altogether happy about the composition of the Board or necessarily of the management. My own feeling is that we should do more good, probably, in the places where the aid is needed if we had regional plans of the nature of the Colombo Plan. A former right hon. Member opposite, Mr. Kenneth Younger, advocated recently a Colombo Plan for Africa. That would seem to me a plan which would have the financial aid of the major producing Powers who are most interested and who would administer, with the new and emerging territories, the funds which they might have at their disposal.
We remember that the Colombo Plan began very modestly, but its success attracted further support. I know that we should be aiming too high if we thought that we could cure world poverty by this I.D.A. plan. It would be an illusion to think so, and if we do not have that illusion ourselves it is important that we should not give it to other people. The Bill is a useful instrument. We should support it, but it is by no means the only thing we can do. Something in the nature of a Colombo Plan for Africa, under which those interested could meet round the table, would prove in the long run an even more effective weapon in the cold war.
§ 7.16 p.m.
§ Mr. Bruce Millan (Glasgow, Craigton)
I agree with a great deal of what the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) said and, in particular, with the point he made that some organisation should be set up similar to the Colombo Plan for South-East Asia. That is a suggestion which is very much worth considering. I would also agree with the hon. Member that, however much we may be able to do under this new International Development Association, we shall not solve the problem of world poverty.
I shall revert to that subject, but first I should like to say something about the rôle which will have to be played by private capital in aid to the underdeveloped countries, as distinct from the rô1e which will have to be played by 1213 Governments, by bilateral or multilateral assistance. This is something which has been considered a great deal in the course of the debate. It has been pointed out from this side of the House that only about a third of private British capital goes to the under-developed countries in the first place and, secondly, of that third of £100 million a year— although we have no exact information on this—a good deal must go to the extractive industries such as oil, tin and copper. Most of the capital also goes to projects which have a high degree of profitability.
It is certainly true that these often have a high degree of profitability, but there is another aspect of that to which I should like to draw attention. It is that the investment in these extractive industries is largely investment in industries in which the West or the developed countries of the world have a direct economic interest. In other words, the products of these under-developed countries are largely used not in the underdeveloped countries but in the developed countries of the West and elsewhere.
One of the objections to and one of the inadequacies of private capital in the under-developed countries is that it tends to go to industries in which the West has a direct economic interest. It becomes impossible, for example, to get private capital invested in agriculture, with an emphasis on internal consumption in the under-developed countries themselves. It seems to me, therefore, that the emphasis has been and will have to continue to be on governmental assistance by bilateral or multilateral arrangements through the International Bank or the International Development Association. It has already been pointed out that the amount of assistance which the British Government are supplying at present by no means represents an intolerable burden on the British economy. The figures have gone up substantially, and we are glad to see that for 1959–60 there is an estimate of £138 million.
I was very glad, however, that my hon. Friend the Member for Ashfield (Mr. Warbey) pointed out that a great deal of that assistance was in the form of loans rather than grants, because there is an impression created that any assistance which is given abroad is necessarily in the form of grants, whereas in fact a 1214 bigger percentage of assistance is actually in the form of loans on which interest accrues, and which ultimately are repaid. So the net amount of assistance, when we exclude the loans, does not represent an intolerable burden on the production of this country, and the gross amount does not, or should not, represent an intolerable burden on our balance of payments.
However much we may do in the way of bilateral arrangements, it seems to me that the importance of multilateral arrangements, when we are considering particularly countries which are neither Colonies nor in the Commonwealth, is likely to increase, not only from an economic point of view but also from a political point of view. It is difficult sometimes to negotiate bilateral assistance if there is not the special relationship which we have with our Colonies and with our Commonwealth countries, because of the political difficulties.
The House as a whole is by no means sentimental on this question. The general feeling is that if aid is to be given it should be given to worth-while projects, that it should be applied in a direct and reasonable way and, in particular, that none of it should be subject to corruption or go into the pockets of private individuals instead of for the benefit of the countries concerned.
It is easier really for an international authority such as the International Bank to stipulate conditions about all these factors than it is for one individual country, which may incur the charge of interfering in the internal affairs of the recipient country. That is why I think it is important that an increasing amount of our assistance should be channelled through the international agencies.
As has been said today, the International Bank has been extremely successful in the aid it has given since its inception in 1946. It is also true that the terms on which the aid is given are fairly onerous, particularly now that it is charging an interest rate of 6 per cent. After an under-developed country has a series of loans from the International Bank, the repayments of capital and interest in themselves become a burden, and it is obviously difficult to give all the aid we want to give to underdeveloped territories if the individual projects have to meet the stringent 1215 criteria that the International Bank lays down, and also if the interest rates are to be as high as the 6 per cent. which that Bank now charges. Therefore, all of us are pleased that the International Development Association will be able to give loans on considerably less stringent terms than the International Bank is giving at the present time.
There may be a certain amount of confusion as to what kind of developments the International Development Association will finance, because I notice in the White Paper containing the Articles of Agreement of the International Development Association the following statement:Thus projects such as water supply, sanitation, pilot housing, and the like are eligible for financing, although it is expected that a major part of the Association's financing is likely to be for projects of the type financed by the Bank.I hope that this will be interpreted rather liberally and that some of the stringent conditions which have been laid down by the Bank as to the kind of projects which it is willing to finance will be slackened somewhat in the actual working of the International Development Association.
Now I want to say something about the sums involved, and here I am taking up a point made by the hon. Gentleman the Member for Walsall, South. The sum involved in the International Development Association will be 1,000 million dollars over five years. That is approximately £350 million, or roughly £70 million a year. At the end of the five years there is to be a question of further subscriptions, and in the nature of things all of us would hope that the subsequent subscriptions to the Association will be substantially higher than the initial subscriptions which are to be contributed over the first five years.
If we take the first period we find that there will be an annual level of investment of about £70 million a year. This is assuming that all the subscriptions are invested or loaned as they are paid in. If we add to that the present level of investment by the International Bank itself, which is running at about 700 million dollars a year, or £250 million a year, we get a total amount of around £320 million a year.
I want to draw some parallels here with the amount of money we are spend- 1216 ing on rearmament and defence. The £320 million would still represent only one-fifth of the United Kingdom's annual defence budget. What is more, the total gross investment of the International Bank to the present date is about 4,500 million dollars, which is approximately equal to only one year's expenditure by the United Kingdom on defence. This is the expenditure by the International Bank over the years since its inception in 1946.
If we were to compare the total expenditure by the International Bank and by other international organisations not just with Britain's rearmament expenditure but with the armament expenditure of the whole world, we would appreciate how insignificant a contribution the various schemes of the International Bank and of this Association will make to the solution of the tremendous problem of world poverty.
In fact, it is extremely difficult to get a balance between our direct expenditure on defence and the amount we spend, which has indirectly a defence aspect—or a cold war aspect if we put it at its most brutal—on investment in under-developed territories. I suggest, however, that there is something wrong with the balance at the present time. It certainly would be useful if simultaneously with disarmament, as has been suggested, we were to have the establishment of some world development authority which would take some of the money at present spent on arms for economic development.
I hope, too, that when we are considering the tremendous sums which are being spent on armaments and the comparatively small sums which are being spent on capital investment, we shall also look at the very small sums which are being spent through the various United Nations Agencies on technical assistance. I know that the figures of the various agencies of the United Nations are not necessarily complete, because there is a certain amount of technical assistance through the International Bank which is included in the total International Bank investment. However, when we look at some of the small budgets of the United Nations Agencies, such as the Food and Agriculture Organisation, the World Health 1217 Organisation, U.N.E.S.C.O., the International Labour Organisation, the expanded Technical Assistance Programme and the rest, we must all be profoundly dissatisfied with the sums of money that are being spent on these various forms of technical assistance.
There is a real difficulty here, in that the amount of technically qualified personnel available to carry out the assistance is limited, so it is not just a question of money. I hope that this is something to which we shall continue to give emphasis and that we do not get too obsessed with or bemused by the dramatic projects in which the World Bank or the I.D.A. very often indulge. I hope we shall remember that there is a great deal of back-breaking day-to-day work in advice and technical "know-how" which may be done without the expenditure of considerable sums of money, and which can give advantage both to the under-developed countries and to the rest of us quite disproportionate to the cost.
There is often an impression that any money we give to under-developed countries is, in some way, money poured down the drain. In particular, there is usually an inadequate realisation of the amount of work which the underdeveloped countries are doing for themselves—the amount of development which they are financing from their own internal resources. One of the most heartening features of the last few years has been the extent to which terribly poor countries have been willing to forgo some current consumption in order to help to finance current development programmes.
One of the great difficulties we have in this country is striking a balance between current consumption and capital investment—and like many other hon. Members I am not sure that we come to the right answer about it. It is very much more difficult for some of these very poor countries, with average incomes per head per annum of £25 to £50, to deny themselves any sort of current consumption at all in order to help in the financing of capital development programmes.
The great difficulty in all these territories is getting any sort of impetus to improvement in the standard of living. The money which is being spent, has 1218 been spent and is projected very often has no other effect than that of merely keeping them in exactly the same position as they were at the start of the programme. They have great difficulty in preventing themselves from sliding backwards.
When we compare what is happening in under-developed areas with what is happening in the West and in developed areas generally, we find that this gap between rich and poor nations is increasing to an alarming extent. The general feeling of the House, I believe, is that the I.D.A. represents a step forward. We all welcome it from that point of view, but taking it in the context of the problem with which we are dealing, and in the context of the vast sums of money we are spending on other things, particularly on armaments, we realise that this is a very small first step, perhaps even a timid one. and something on which we must build in the years to come.
§ 7.33 p.m.
§ Mr. T. H. H. Skeet (Willesden, East)
The hon. Member for Glasgow, Craigton (Mr. Millan) spoke about the inadequacy of private capital. I am sure that he is aware of the C.D.F.C. of the United Kingdom which has a very significant contribution from private industry. There is also M.I.D.E.C.—an enormous organisation of private companies operating in the Middle East. He will also be aware of consortia operating all over the world, for instance, for building steel works in India, and projects in Africa.
It will not have escaped the attention of the Government that of the total commitments of the World Bank since its inception, 56 per cent. are invested in Western Europe, which is not an underdeveloped area. It is true to say, however, that much more money has been devoted in recent years to Asia, though I would like to see greater funds diverted to what I might term the "New Continent" of Africa.
I should like to pursue the line thrown out by the right hon. Member for South Shields (Mr. Ede), who indicated that the capacity of the United Kingdom was such that it could devote a greater sum to under-developed countries. The enormous contribution by the United States since the war has totalled 76 billion dollars. As a percentage of the 1219 national income of the United States, it works out at 1.4 per cent. An equivalent figure for the United Kingdom would work out at something like £250 million, but we find that the actual contribution from the United Kingdom is only £130 million, which is falling a little short of the figure I have in mind.
The contribution of France, on the basis of 1.4 per cent. of the national income, is £212 million. France is, however, contributing about £300 million, largely because of vast expenditure on war potential in Algeria. This money has not been spread evenly through African territories.
Another potential contributor is West Germany, where 14 per cent. of the national income would be equivalent to £200 million. But West Germany is only contributing between £35 million and £40 million—which is 02 per cent. of the national income.
We must regard this investment, in the terms of Mr. Black, as a first step. Mr. Adlai Stevenson, however, indicated that a survey of under-developed countries would show that something like 5 billion dollars per annum is required. That is quite beyond the capacity of the world. There is another rather interesting comparison. Over the past five years the State aid which has emanated from the United Kingdom works out at £488 million, and the State aid from the United States at £3,866 million. The interesting comparison is the amount of State aid to underdeveloped territories from the Soviet Union over that period. It was £800 million, of which only between £250 million and £300 million has been actually disbursed. As we know from past experience, it has political strings attached.
According to the last report of the World Bank, its commitments were approximately 703 million dollars. Added to that is a contribution from the I.F.C. of 94 million dollars. Suppose the I.D.A. contributes between 150 million dollars and 200 million dollars, Annually the total of all three is a small contribution compared with world needs. It is simply a drop in the ocean.
I ask hon. Members to tot up one or two simple figures. The Aswan Dam will cost about £300 million, the Snowy 1220 River Project in Australia about £338 million, the Volta Aluminium Scheme in Ghana about £343 million, and the Indus Waters Project in Pakistan about £357 million. I am seeking to indicate the enormous responsibility which the rest of the world has to shoulder for our brethren overseas in under-developed territories. The premium we are prepared to pay to ward off poverty in some of these countries is very small when measured alongside the percentage contribution of our national income.
In considering the White Paper I was rather disquieted when the Economic Secretary, in dealing with supplementary resources, mentioned that they would be supplied by the United States and that it was unlikely that a contribution would come from the United Kingdom. I now ask the Minister of State whether the supplementary resources provisions in Article III were written in at the behest of the United States. Was it the purpose that the resources accumulated abroad under Public Law No. 480—that is, enormous surpluses of soft currencies from the sale of its agricultural produce—would be dumped on the I.D.A.? Or has it been inscribed for some other purpose? Is it likely that any country apart from the United States will subscribe to these supplementary resources?
One other matter that I have noted with great satisfaction is dealt with in Article V of the Articles of Agreement. Section I (c) says:The Association shall not provide financing if in its opinion such financing is available from private sources on terms which are reasonable for the recipient or could be provided by a loan of the type made by the Bank.This implies that the operation of the I.D.A. is supplementary to the provision of private capital. We should have some law and order in this matter. There must be some security for investment.
Mention has been made of commercial treaties negotiated by the United States with at least seventeen countries. Why do not we negotiate some treaties? Guarantees have also been negotiated by the United States on behalf of investors in forty countries. This pattern is being followed by West Germany. Could it not be followed by the United Kingdom? Following a recent debate we had upon the formation of the E.F.T.A., it occurred to me that it would 1221 be a good thing if an E.F.T.A. development fund could be formed for the aid of member territories in Africa. This is simply an idea. It occurred to me that if we are to subscribe further sums in future we could have a development fund provided by the United Kingdom, made up of contributions from many people in Britain. They could make a contribution to the worthy cause of helping their brethen overseas.
I have spoken long enough about the disirability of our assisting our brethren overseas, and I turn now to a point that has escaped the attention of many hon. Members and which is indicated in Article V Section 1 (f and g), which refers to the prospect of "untied" capital. This is of immense importance to the United Kingdom. One has only to read the Radcliffe Report on this point. In paragraph 898 the Report says:We consider that the immediate approach to the problems of export finance should rather be, as we have suggested, to encourage by word and deed the international provision of capital untied to specific purchases of goods or construction contracts.When one remembers that the World Bank, the I.F.C., the I.D.A. and the Latin-American Development Bank all have untied purchases, we realise that British exporters will have an opportunity of being able to secure contracts as the years go by. If these loans were "tied" it would be different.
When we remember that of the funds allocated by the World Bank in 1958, no less than 39 per cent. were spent in the United States, 19 per cent. in the United Kingdom and 17 per cent. in West Germany on an "untied basis", we realise that it is a regrettable step that the Development Loan Fund, which has been providing so much money, has gone the other way, and that its loans are now "tied" instead of being untied. I return to the precepts of the Radcliffe Report, namely, that the way to make the fastest progress is by having "untied" capital. I am glad to find that provision written into the Articles of Agreement of the I.D.A.
To summarise, I feel that while this Agreement is a start, much work remains to be done in the under-developed areas, particularly on the Continent of Asia, Africa and Latin America. We must tighten our belts a little more and 1222 contribute more out of our national income. We must remember that long-term loans have the advantage of not being subject to the terms of the Berne Convention, but that export credits will remain subject to those terms and limitations. We must consider whether it is best to make loans or outright gifts.
We have now created a new unit, as an affiliate of the World Bank. The I.D.A. will do a great deal of work, but we should not expect too much of it in the next five years. The I.F.C., which was hailed with great enthusiasm several years ago, has not been very successful. It has had a very slow start. But many of us are confident that in the years to come these three great institutions will play their part, along with private capital.
§ 7.46 p.m.
§ Mr. Harold Davies (Leek)
I have listened with interest to the speeches which have been made. I must take up one or two mis-statements of fact made by the hon. Member for Willesden, East (Mr. Skeet), especially with regard to his-analysis of American aid.
First, however, the House should ask itself what it is talking about. We are discussing the International Development Association Bill, whose Preamble states that it is to enable the Government to enter into an international agreementfor the establishment and operation of an International Development Association, and for purposes connected therewith.Let us look at the "purposes connected therewith." We have the White Paper, which Members of the House and those members of the public who are interested have seen. Let us have no illusions about it; this is another agency which has been set up in this proliferation of pacts with international agencies, and this alphabetical list of agencies is now befogging and bewildering the Westerns world. Is there any need for this International Development Association? It can certainly serve a purpose, but let us have no illusions about it; it is whistling in the wind in world affairs.
The whole thing gives itself away by saying that it will enter into no agreements if private enterprise can do the work. We have heard eulogies of private enterprise in international investment, but let us take the American figures.
§ Mr. Davies
Let us consider the question of international investment. We have been trying to encourage private capital to invest in the backward areas of the world. Let us examine the facts —not facts made up by Conservative Members of Parliament, but facts with regard to the Mutual Security Programme which President Eisenhower has presented to the United States Congress. What was the new American investment all over the world? Petrol and oil—and a drop of oil is worth a drop of blood— accounted for 62 per cent. of the new investment of America in the year before last. It amounted to 1,138 million dollars. No less than 14 per cent. of new American investment last year—amounting to 26.4 million dollars—went to Canada. Fourteen per cent. of it went to Latin America, the majority of it into the oil areas. Six per cent. went to Europe, but the parts of the world with which we are concerned, the nations which live in the lands of Asia, South-East Asia and Africa, received only 4 per cent. of American new private capital, to a total of 79 million dollars.
§ Mr. Davies
I will give way later. I hope that the hon. Gentleman will allow me to develop my point. What encouragement will this give to private capital to go into these areas? What is the real truth? The hon. Gentleman is a business man. He is interested in finance, but he would not put his capital into Africa, Asia, or South-East Asia, or the backward areas, unless he had a guarantee of a good return on capital.
§ Mr. Davies
Not yet. The hon. Gentleman asked for this reply because of the slick way in which he dealt with the problem. I warn the hon. Gentleman that it was altogether too slick. I always give way, but I will do so when I want to and not when the hon. Gentleman wants me to.
We all support the purpose of the International Development Association, but we have no illusions. It would be worth while to look at the backward areas to see what aid was given. The 1224 impression was given to the House that American aid all over the world reached colossal proportions, but let us see what is the truth. There was a series of broadcasts on this, and articles appeared in the Listener, if the hon. Gentleman wants to read them, about Soviet and Sino-Soviet aid to the world. Before Mr. Foster Dulles died he said that Sino-Soviet aid was catching up with the aid given by the Western world.
§ Mr. Skeet indicated dissent.
§ Mr. Davies
The hon. Gentleman shakes his head in complete ignorance. He had better wait. Let us analyse the figures. It is no good the hon. Gentleman saying "No". Evidently that is the way he got 'his votes at the election, but this is a different place from the rostrum.
President Eisenhower's Report on the Mutual Security Programme said that approximately three-quarters of the money made available in the Mutual Security Programme was used for military assistance and defence support. I emphasise that. That is not foreign aid but an essential integral part of the national defence programme. My argument, and for this purpose I am borrowing the argument put before Congress, is that 75 per cent. of American expenditure overseas is not foreign aid but an essential part of the defence programme. International economists at the United Nations who have analysed the amount of direct Soviet aid have found that Soviet aid accounts for 25 per cent. of the aid provided for under-developed countries. The Soviet Union has come very near to catching up the United States of America.
Because I have slashed, cut and thrust at the hon. Gentleman, I now give way out of fairness to him.
§ Mr. Skeet
I am grateful to the hon. Gentleman. I hope that I can slash in return. The hon. Gentleman, when referring to the aid given by the Government of the United States, forgot to mention the aid granted by the Export-Import Bank which derives its funds from governmental sources. If one considers the period 1934 to 1959, which is a considerable period, 36 per cent. went to Latin America, 37 per cent. went to Europe, 20 per cent. went to Asia, and 7 per cent. to others. The hon. 1225 Gentleman mentioned the Mutual Security Agency, which is part of the I.C.A.—
I am sorry to intervene, but the hon. Member is not permitted to make more than one speech.
§ Mr. Davies
I think I have made my point clear enough, and I have used the United States Report to make that point.
Both sides of the House support this, but as one of my hon. Friends pointed out. and here I quote the American figures on page 120 of this year's Report to the American Congress on the Mutual Security Programme, we get this sad fact bought before the world. The United States Congress was told that rice production in Asia was 18 per cent. up on pre-war production but the population was up by 27 per cent. The result, as my hon. Friend said, is that, like Alice through the Looking Glass, at the end of all this business of the World Bank and everything else the standard of living is lower today than it was in 1938. If the hon. Gentleman does not believe me, he had better read the Report of the Economic Commission for Asia and the Far East.
The hon. Member will find that each year the Commission bewails the fact that the technical and economic aid that the United Nations wishes to give in Africa and South-East Asia is warped by the continuance of the cold war. This is shown by an analysis of the economy of Japan which is a friend of the free world. They were yellow rats without tails during the war, but under the system advocated by the hon. Gentleman and his Friends, friends of the last war are enemies for the next twenty years. Those who were yellow rats without tails are now our friends, although I never thought that that description applied to the Japanese.
Let us look at how Japan is suffering because of this business of keeping up the cold war. Japan is eager to get trade in Eastern Siberia. There is the possibility of a 20 million dollar contract in Eastern Siberia, but Japan is linked with Western policy. That is one of the difficulties of a link with Western policy. It is amazing that China is competing in the South-East Asia market for the supply of sewing machines, small tools, and goods like that.
1226 Pre-war China was Japan's first customer. In 1955 China was not in the first fifteen of Japan's customers. In 1956, she was not in the first twelve. In the mid-1930's China supplied Japan with 25 per cent. of her pig iron. Last year but one she supplied Japan with no pig iron, and that country had to buy dollar pig iron. In the mid-1930's China supplied Japan with 40 per cent. of her salt. Last year it was 30 per cent. At one time she supplied Japan with 40 per cent. of her hides and skins for shoes and clothing. Last year the figure was only 7 per cent. Before the war China supplied Japan with 75 per cent. to 85 per cent. of her soya beans for food. Last year she supplied only 25 per cent.
The Japanese economy has been channelled into the hard currency area, with the result that inside Japan one has difficulties and problems to maintain the standard of living. It is no good right hon. and hon. Gentlemen on the opposite side of the House arguing about this. Those facts are known to statisticians, economists, and men of the world who work in the United Nations and in South-East Asia.
My criticism is that there is one world organisation which the nations of the free world—they call themselves the free world—should support. The United Nations has an Economic Commission for Africa. Why not support that and build it up? Why not support the Economic Commission for Asia and South-East Asia? One hon. Member spoke as though aid was being provided for China and the 650 million people there. He made a slight mistake. This relates to the tail-end of Taiwan, and to pretend that Taiwan is one of the areas which will join in freely without political strings is simply to deceive ourselves. In November, 1957, speaking in America, Mr. Khrushchev said:We declare war upon you in the peaceful field of trade. We declare a war we will win over the United States. The threat to the United States is not the I.C.B.M. but in the field of peaceful production. We are relentless in this, and we will prove the superiority of our system.The Mutual Security men said last year that in 13 years American foreign trade has cost only half of the cost of one year of Word War II. The total cost of postwar programmes of aid and security to 1958 amounted to 60 billion dollars, Of this, less than 40 billion dollars had been 1227 spent under the Mutual Security Programme. The cost of one year of war was 80 billion dollars. The cost of the Mutual Security Programme to the United States is the price of an airmail stamp a day. But 50 per cent. of the goods taken to foreign countries must be taken in American ships. Will there be revelations like that connected with this authority? I hope not, and there should not be.
Will there be a mutual security programme to create jobs? Will there be sold 7 billion dollars worth of agriculture surplus? Will work be found for 600,000 American people, which is a good thing in its way? It is all linked with the agony of the cold war, and I am asking that the "powers that be," instead of setting up all these various little organisations, should allow private enterprise to set them up if it wishes outside the sphere of Government. If a group of financiers in London wanted to invest in one of the backward areas, they could form a company without the backing of the Government. There is too much of private enterprise coming to the Government and asking for subsidies and support for its projects. Hon. Members opposite scoff at public ownership, but they are the first to support private enterprise when it rushes to the Government for aid or for international support when it creates some international organisation which in the end is designed to benefit the investor first and foremost.
Let us put this matter on a straight basis. I am not saying that investment is evil. I am saying that we shall not get the investment about which the hon. Member for Willesden, East spoke, because people will not invest money in projects in these backward areas without some type of security. In the atmosphere of a cold war and a driving down of the standards of life those conditions cannot prevail, and economists know that to be true.
I made speeches in this House years ago on the subject. All this talk about aid is rubbish unless there is stability in commodity prices. If we pour £1 million worth of aid into Malaya, what good is that if tomorrow night on the London Stock Exchange and in Wall Street the price of rubber drops by 3d. a lb. in the play which takes place in commodity prices? Unless we can get stability in 1228 commodity prices, none of these aid schemes is of any use. That is the tragedy.
§ Mr. Skeet indicated dissent.
§ Mr. Davies
If the hon. Gentleman shakes his head as though this makes no sense, he does not understand the world in which he lives.
Professor MacMahon Ball wrote a whole book on this thesis. The point is that much more use than setting up this organisation would be the creation of an organisation to try to secure long-term contracts and bulk buying such as was done by the Labour Government when we were in power. We were scoffed at for doing it, but it gave greater security to the backward nations than anything of the kind we are now discussing.
During a period of capital investment there is always the danger that there will be roaring inflation if we are not careful. Recently I was in Indo-China in the Mekong area, and I know about the schemes which are going on there. In such areas the inhabitants are not so much backward—I do not like that expression—as under-privileged. They may be more cultured than Western men, but they are under-privileged regarding material things. If we drag thousands of workers from their villages and put them on a wage-earning economy and do not provide the products for them to purchase with those wages and if there is no planning, there will be no progress. Hon. Members opposite want a laisser faire economy, but without planning these areas will become more backward instead of making progress.
There are four main ways in which aid can be given to backward countries. Will this Association take advantage of all four? Will it encourage trade? Would it be prepared to enter into negotiations for buying for the small entrepeneur? May we know on what terms and to what extent it will provide loans and grants? We are not clear about that. Will it take up the training of manpower? If so, I say that the organisations created by Western man are overlapping in so many ways that he is defeating his own purpose. That is why the Soviet bloc and the Sino-Soviet bloc is defeating us—because of this craze for setting up organisations 1229 every three months for all sorts of purposes instead of directing the destiny of the world by agencies and organisations which will be under the umbrella of the United Nations.
I may have introduced a new note into the debate, but it is a note of reality. If we are not careful all this business will collapse in agony and misery. We must change the direction of the approach of Western man to the old questions of war and the future of mankind. I regret to say that this organisation is not the kind of dynamic thing which the United Kingdom should be supporting at this juncture. There is one place in which the United Kingdom should work—let us get back to the United Nations and support it.
§ 8.8 p.m.
§ Mr. Douglas Jay (Battersea, North)
I wholly agree with the Economic Secretary to the Treasury that this is one of the most important subjects that we can debate in this House. Apart, perhaps, from nuclear disarmament it is the most crucial issue at present facing the world. This problem of economic inequality between nations almost looks like—I do not say superseding—but, at any rate, dwarfing the problems of economic equality within nations which has been tormenting the industrial countries for the last hundred years.
We do not need to be told that two-thirds of the world population is hungry, or that India's average income per head today is only one-sixteenth of ours. Nevertheless, these figures show that whatever may be true of Great Britain, or of the United States, the world certainly is not an affluent society today. What we really need now is a little more international socialism.
We have heard many approaches to the economics of the problems during the debate, but, however we approach it, it comes back to this simple fact. Today, an Indian peasant, or, for that matter, a Chinese or a Russian peasant, living on the land, unemployed and earning no wages, cannot raise his standard of living or that of his family unless he can either leave the land and take a wage-earning job or improve his methods of cultivating the land. He cannot do either of those things without capital and he is too poor to save. That must be where we start. No progress can be made until a great 1230 deal of capital is brought in from outside.
Although I agree with a great deal of what my hon. Friend the Member for Leek (Mr. Harold Davies) said, as I shall show in a moment, I think we can at least congratulate ourselves on the general strategy with which the Western world has attacked this problem since the war. By the original formation of the International Fund and the International Bank, by the Colombo Plan and a great deal else that has followed, the effort has been directed to the right target. It has been, partly anyway, cooperative and planned and carried out under United Nations auspices. I think that we can say it has had some success, but—here I agree with my hon. Friend, even though I may not express myself quite so eloquently—the whole enterprise still suffers from two defects.
First, there is far too much tendency for aid to take the form of a competitive struggle between East and West rather than to appear to the underdeveloped countries as a joint enterprise by both Communist and non-Communist countries. It always seems to me that the story of the Aswan Dam was a solemn lesson and an example of how this kind of thing should not be done. No doubt in the world as it is today some competitive effort is inevitable, but I feel that the more the Government can contrive to bring the whole impulse under the United Nations and, therefore, present it, not as either a Communist or anti-Communist enterprise, but as a joint one, the better it will be for all of us.
Secondly, in spite of all that has been done, I think that the scale of the effort is still too puny compared either with the immensity of the need or with the resources of the richer countries. I cannot share the complacency of the Government White Paper on Assistance from the United Kingdom, which builds itself up smoothly, page by page, to the comfortable conclusion that the United Kingdom assistance—public and private—to less-developed countries already equals 1¼ per cent. of the British national income. The Minister of State for Commonwealth Relations will find that on page 16 of the White Paper.
If this is supposed to show that the Government have already reached the Labour Party's target of at least a 1 per 1231 cent. contribution, I am afraid it suffers from one major defect of logic straight away. We propose that the United Kingdom Government assistance by itself should reach at least 1 per cent., quite apart from private investment, while, of course, as the hon. Gentleman will agree, the 1¼ per cent. mentioned in the White Paper is public and private investment together.
The figures in the White Paper and the 1¼ per cent. are also gross figures. If we were to deduct all forms of loans, capital payments, return of profits by international companies, and so forth, from the less-developed countries to the United Kingdom, I am not at all sure how the balance would work out. I do not know whether the Government can tell us, but would it not cancel out probably something up to a third of the £240 million which is supposed to represent this 1¼ per cent.?
I see from the latest balance of payments figures, that the sterling balances held here by the sterling area—which are, of course, funds lent to us from them—rose by £146 million in 1959. That suggests that there is a considerable counter-payment going on. We are told in the White Paper that net private investment overseas year by year is not £300 million, but only £200 million. If the same ratio were to apply over the same field it would follow that the total would be £160 million, not £240 million.
If one looks rather more closely at how the £240 million is made up, other doubts arise. We are told—and this is remarkably interesting—that the private enterprise effort, even gross, not net, has been an investment of £300 million a year overseas and only about £100 million of that has gone to the less-developed areas. So only £65 million net has gone to the poorer areas. Therefore, if one takes these figures at their face value, the rather startling conclusion emerges that two-thirds of British private investment abroad is going to the already highly-developed rather than to the less-developed countries.
§ The Minister of State for Commonwealth Relations (Mr. C. J. M. Alport)
I am sorry to interrupt, but I was not quite clear where the right hon. Member got the figure of £65 million. Was he deducting from the £100 million £35 million which was the proportion he 1232 assumed was reinvested in this country by under-developed countries?
§ Mr. Jay
I was taking the figure of two-thirds, which appears to be the net figure applicable to the total of private investment, and applying it to the proportion which the White Paper tells us is spent in the less-developed countries. From that it would be about £65 million or £66 million in the less-developed countries.
I agree that those are suspiciously round figures, but they are all that the White Paper can give us. They show that if the whole thing were left to private enterprise apparently £2 would be invested in schemes like skyscraper offices in New York and Vancouver for every £1 invested in fertiliser factories giving work to Indian peasants.
We could not have a plainer proof than the White Paper—and the Economic Secretary did not dispute this—that private enterprise investment is not enough. Like my right hon. Friend the Member for Middlesbrough, East (Mr. Marquand), I am all for encouraging private investment in these areas. In many cases, a partnership between private and public investment is desirable and possible, but I think it overwhelmingly plain that private effort alone is only scratching the surface of the problem.
The White Paper fails to mention another point which was touched on by my hon. Friend. I suspect that a very high proportion of this £300 million gross private investment is in oil development. I suggest that more than 50 per cent. of the gross £300 million, and perhaps 80 per cent. of the £100 million in the poorer areas is in the oil industry. I do not know whether the Minister can give us the figures tonight. It follows that if we take net non-oil private investment in the poorer countries that must be running at something less than £50 million a year.
I do not despise the efforts of the great oil companies at international development in the last fifteen years. Ironically enough, and no doubt not for altruistic motives, the international oil companies have probably done quantitatively more to develop underdeveloped countries than any single agency, apart from the International Bank. Probably they have done it in a better planned fashion than they would have done it twenty or thirty years ago. 1233 The trouble is that, apart from refineries which admittedly are built in almost every type of country, this oil development takes place only in countries where oil is to be found. That means that the private effort in non-oil-bearing areas is necessarily very small indeed.
As to United Kingdom Government's assistance, the Government told us that £138 million—again gross—for 1958–59, apart from some small sums, went to the less-developed countries. I accept that that is broadly true, but the White Paper does not tell us what the definition of "less-developed countries" is for this purpose. We are not told that. Would it be possible to know before the debate ends what definition the Government are here using?
Nevertheless, even if the total net investment by the United Kingdom in less developed areas were 1 per cent. of the national income, it would not be, if viewed from the angle of the world as a whole, a very impressive effort. After all, a highly developed country like ourselves should be saving at least 10 per cent. of its national income every year. Is it adequate, either for the needs of the world, or even a sensible use of economic resources, to be investing nine-tenths of our savings in the already highly developed parts of the world? One is bound to ask oneself that question even if the total is 1 per cent.
The actual method of supplying the needed capital which the Government bring before us today—that is, through the new institution of the International Development Association—seems to us, on the whole, broadly the right one. It at least has the merit of being linked with the International Bank which is itself, if perhaps indirectly, under the auspices of the United Nations. I think that we must all agree that the Bank has proved an extremely successful institution. Indeed, perhaps in some ways it has been the most successful international institution started since 1945. I agree with those hon. Members who said that we should pay a tribute to it in the House this afternoon.
In spite of what my hon. Friend the Member for Leek said about the inadequacy of the total effort, the Bank alone has lent 4,000 million dollars since 1945, or a sum very close to it. Only last week it made two loans totalling 100 million 1234 dollars in themselves, which shows that the scale of its effort compared with other agencies is quite considerable. All the evidence is now building up that the Bank has lent wisely. Indeed, very little, if any, of the money has been either wasted or lost. It can claim, also, to have spread the funds fairly widely over both countries and projects of different kinds.
I think that one would be hypercritical if one sought to find a criticism of Mr. Black, but if there is any criticism which one can make of him, apart from the original terms of reference, which were not of his making, it is perhaps that ha carries his natural trans-Atlantic bias in favour of private enterprise and against public enterprise to rather excessive lengths for the conduct of this job. I believe that the truth is that here, as indeed elsewhere, we need more private enterprise and more public enterprise at the same time.
Nevertheless, I remember, as did my right hon. Friend the Member for Middlesbrough, East, that when, in July, 1955, the Government introduced in the House—it was the present Financial Secretary who did it then, in his capacity as Economic Secretary—the previous Bank's plan for an International Finance Corporation, about which the Economic Secretary today did not say anything, which was linked, like the I.D.A., with the Bank, we on this side strongly criticised the limitation in that scheme of the I.F.C. to supporting private investment alone. Indeed, I asked the hon. Gentleman's predecessor, on 1st July, 1955:Is it really necessary that the proposed Corporation … should be rigidly limited to operating through private enterprise alone? Secondly, why do the Government still refuse to subscribe to the far more imaginative, flexible and comprehensive Special United Nations Fund for Economic Development, or S.U.N.F.E.D., as it is generally called …".— [OFFICIAL REPORT, 1st July, 1955; Vol. 543. c. 698 and 699.]We now find, five years later, that the Bank and the Government—indeed, the Governments of both the United Kingdom and the United States—have come round to our point of view. Both in the S.U.N.F.E.D. debates to which my right hon. Friend the Member for Middles brough referred, and in the debates on the International Finance Corporation, we urged this more flexible and broadminded attack on the problem. I am delighted 1235 to see that, whereas the total initial capital of the I.F.C. was then put at 100 million dollars, that of the I.D.A. today is put at 1,000 million dollars, That, at any rate, is a step in the right direction.
We now at last have fully, and internationally, recognised that all these development loans cannot be revenue-earning and that housing, water supply, sanitation and other social amenities are just as essential as the mines and oil wells. The I.D.A. will not merely be following the pioneering work of the Colonial Development Corporation. It will also in some measure follow our own Distribution of Industry Act of 1945 and following years.
The House will remember that in the first Distribution of Industry Act, passed in 1945, in assisting our own underdeveloped areas Government finance as well as private finance was brought in very much on the same basis, strangely enough—perhaps I am not accurate in saying "strangely enough"—as the hon. Gentleman asks us to do today. Indeed, special help was provided there for these very same basic services of housing, water supply, roads, and so on. In that sense, it can be said that the I.D.A. will not be merely an international I.D.C., but is to be an international D.A.T.A.C. as well.
We found them, in dealing with our own underdeveloped areas, precisely what the Colonial Office found in the case of the Colonial Empire—this was the origin of the C.D. and W. as well— that, when dealing with these basic services, it is not merely loans, but grants also, which will be needed. Indeed, as a mere piece of finance or economics, that is just as true internationally as it is of our underdeveloped colonial areas or as it was of the less-developed districts of the United Kingdom.
Therefore, I hope that it will not be another five years before the Government and the International Bank realise this, too, and come along with a plan for an international C. D. and W., also. I hope that we shall have to wait for only two or three years before we reach the next stage.
There is one point about Schedule A, to which the hon. Gentleman referred, in the I.D.A. Articles of Agreement which seems to me to call for slight 1236 criticism. That is the absurdly small contribution by Germany to the joint enterprise: The Economic Secretary said —and these were his exact words—that the contributions shown in Schedule A in the last page of the White Paper "were relative to the various countries' economic positions." But if we look at the figures, we find that the United Kingdom's initial contribution is 131 million dollars and Germany's is only 53 million dollars. Surely, not by any test of population, of national income, of gold reserves, of savings, or of exports oan our ability to subscribe to this enterprise be regarded as two and a half times as great as Germany's is today.
It seems to be a perfectly ridiculous and indefensible ratio. I could compare the German quota with that of some other countries in Europe and, I think, sustain the same argument. I hope that the Economic Secretary or, perhaps, the Foreign Secretary will take whatever action is necessary to make clear to the German Government that it really is time that they made their due contribution to present international economic efforts.
With that qualification, I think that we can all generally bless the Bill and this scheme for an International Development Association—as far as they go. We on this side, however, still believe that the effort is not yet measuring up to the present colossal need there is in the world, and we regard this plan as only one more, partial step forward to the real world campaign against want that we desire to see.
§ 8.30 p.m.
§ The Minister of State for Commonwealth Relations (Mr. C. J. M. Alport)
My hon. Friend the Economic Secretary earlier gave the House a fairly detailed description of the objects and character of the International Development Association, for the United Kingdom contribution to which the Bill we are discussing makes provision. Since then, we have had a fairly wide-ranging debate, and I will do my best to answer at least some of the questions and points that have been put to me.
On the whole, this has been a warmhearted debate; the House feeling strongly the importance, not only from the political, but from the human point of view, of making progress in this field. 1237 There was much in the remarks of the right hon. Gentleman the Member for Middlesbrough, East (Mr. Marquand) with which I agreed, and I am sure that that was true of the House in general. But I thought that one remark of his fell below the general level of what he had to say.
The right hon. Gentleman was talking about his desire to see a much greater contribution made by the United Kingdom to this problem of development overseas, and said—and I think that I took down his words accurately—"We wish it was much larger." He added, "It could be, without really hurting our people at all." I do not think that it is right to pretend to our people, or to anyone else, that the provision of substantial sums of finance by loan or grant, or by other means of investment, public or private, can necessarily be achieved without making some sacrifices in current consumption in the United Kingdom.
For the right hon. Gentleman to pretend that we can very substantially increase the very large contribution we are already making without asking for some sacrifices from the people of the United Kingdom, is not treating them with the frankness they deserve.
§ Mr. Alport
I think that the House would feel that that was a play on words. In my own mind, at any rate, I was quite clear about what the right hon. Gentleman's right hon. Friend meant.
It is also important to remember that the United Kingdom's ability to make an effective contribution depends primarily upon the soundness of our own domestic policies in the realm of economics and finance, and upon the strength of our balance-of-payments position. Indeed, the right hon. Gentleman drew attention to the reduction in Government assistance overseas that took place in 1952–53 and 1953–54. I have no doubt that one factor that con- 1238 tributed to that reduction was the difficult financial situation with which we were faced when we came into power in 1951, after the Socialist Government left office at a time of crisis.
A number of important points have been made in this debate, and I shall certainly ask my right hon. Friend the Chancellor of the Exchequer to consider further the suggestions made by my hon. Friend the Member for Liverpool, Wavertree (Mr. Tilney) and my hon. Friend the Member for Bristol, North-East (Mr. Hopkins) about the provision of some system of guarantees for overseas private investment.
I should like to say, however, that there are difficulties in connection with this. The real difficulty, and I think it is borne out by the working of the American scheme, is that of providing guarantees against the real risks which are attendant upon investment overseas. Although it might be possible, I suppose, and indeed has been done in the case of the United States, to guarantee against such things as devaluation of the currency, in the majority of cases these are not the problems, difficulties and dangers which affect the judgment of privat investors in overseas countries.
The second thing—and I think that this is important to remember—is that no system of guarantees can take the place of sound and fair treatment of foreign investment by overseas Governments themselves. We would be making a grave mistake if we assumed that it was possible that some action taken by the United Kingdom Government, some risks borne at the expense of the United Kingdom Government, would make good the unwisdom or the unfairness of treatment of foreign investors by other Governments elsewhere.
The third thing, and this, also, should be remembered, is that we in this country, unlike the United States and unlike a great many other countries, have a long standing tradition of investment overseas in what are today called the underdeveloped parts of the world, with which we have been associated, politically and otherwise, for a very long time. Therefore, there is a much more natural flow of investment from this country to those parts of the world than there is with many of the other countries concerned.
1239 So far as the establishment of a code for the treatment of foreign investment is concerned, there are many arguments, I fully recognise, in favour of such a development. At present, the O.E.E.C. Is examining the various laws which apply to overseas investment in various countries, thereby providing the basic material which is necessary before progress can be fully undertaken in this field. Again, it is an important suggestion, and I know it is one which commends itself to certain of our friends in the Commonwealth, particularly the Government of Malaya.
The right hon. Member for Battersea, North (Mr. Jay) asked me if I would let him and the House know what was the basis of definition for under-developed countries in the White Paper which we issued with regard to Government assistance. The White Paper took the usual United Nations definition of underdeveloped countries, and added certain European countries to it for the purpose of this White Paper. I think that the definition is one which is genuinely recognised as a fair one in the circumstances.
§ Mr. Alport
Yugoslavia, Turkey, Malta and Cyprus were some of the countries added. The United Nations definition is North and South America, less the United States and Canada, Africa, less the Union of South Africa, Asia, less Japan, and Oceania, less Australia and New Zealand.
§ Mr. Alport
No, there is no difference.
The right hon. Gentleman also tried to make a special point of the fact that a certain proportion of private investment has taken place in the development of the oil industry. The right hon. Gentleman will know that, during the period when his own party was in power, there was substantial investment in that field 1240 at that time. What is more, he will recognise that investment in the development of oil is precisely the sort of investment which the Governments of the under-developed countries regard as being most important for their own economic development.
To suppose that we are undertaking this kind of investment without their wish merely in our own interests is quite wrong. It is, of course, a valuable investment for the United Kingdom, but it is also an extremely valuable investment for countries like India, Pakistan and countries of the Middle East in providing them with a rich new source of revenue and wealth for the development of their own resources.
§ Mr. Alport
The right hon. Gentleman will recognise that there is an increasing number of countries which are finding that oil resources are available to them to an extent greater than hitherto believed.
I am sure that, at any rate, my hon. Friends will have heard and will study with interest the speech of both right hon. Gentlemen opposite who have taken part in the debate. I found it a fascinating exercise to watch their application of the new testament of their party to overseas lending and investment. From the right hon. Member for Middlesbrough, East we had a slightly self-conscious doffing of the hat to private enterprise and then a perfunctory pouring of a libation or two upon the old altars of the gods of nationalisation and the public sector.
Things were going fairly well along those lines, and we felt that the "new look" of the party was gradually becoming established when, suddenly, the "old Adam" appeared in the person of the hon. Member for Leek (Mr. Harold Davies).
§ Mr. Harold Davies
The hon. Gentleman has referred to the "new testament" and the "old Adam". I must remind him that there is also the apocrypha. If he knows his Greek, he will know that 1241 "apocrypha" means "hidden meanings". It was the hidden meanings in all this that I was looking at.
§ Mr. Alport
Hon. Members who heard the hon. Gentleman's speech will fully recognise its apocryphal qualities, and no doubt, there were hidden meanings existing within it.
It is not fair for the right hon. Member for Battersea, North to suggest that private enterprise has made a relatively minor contribution during recent years to investment overseas. Let us take the example of India. Non-banking private investment from the United Kingdom in India has more than doubled since 1948 and, at the end of 1957, it represented over 70 per cent. of all the private non-banking investment in India. That is an extremely important contribution to the progress of a great country. We are, surely wrong, whatever our political point of view, to underestimate the importance of such a contribution in raising standards of living and developing the resources of the countries concerned.
If I may say so, I very much enjoyed the speech of the hon. Member for East Ham, South (Mr. Oram). I am sure that the House will agree when I say that we wish that more of our colleagues who have the opportunity of going overseas, particularly to Commonwealth countries, would use the knowledge and experience they gain on those occasions to enrich and inform our debates as the hon. Gentleman did, with particular reference to the small but nevertheless important territory which he had principally in mind. It is always very acceptable to the House, I think, to have such first-hand information given to it.
It is important for hon. Members on both sides of the House not unduly and unfairly to depreciate the contribution which the United Kingdom has made and is making today towards the improvement of the standards of living of the less-developed countries of the world. The figures have already been put before the House in earlier speeches and they are available in the Government's White Paper.
Take what is in some ways a key figure, namely, the increase between 1952–53 and 1959–60 of Government assistance from £49 million to £138 million. One of the main reasons for this increase was the introduction by my right 1242 hon. Friend the Chancellor of the Exchequer, after the Montreal Conference, 1958, of the new system of Commonwealth assistance loans. As I have said, we believe that private investment overseas has a continuing major role to play in development finance.
At the same time, we fully recognise the need for what I think the Prime Minister of India once called the purposeful direction of financial aid in the direction of those countries which, for one reason or another, have difficulty in attracting investment from private sources. Alternatively, they may, as is the case of India, be engaged in certain major projects of primary development which have long-term importance and produce, as a result, a relatively limited return.
The Commonwealth assistance loans have been of the greatest importance in connection with the United Kingdom's contribution to the financing of India's second five-year plan. Since they were instituted they have been made available to four other Commonwealth countries which are either full members of the Commonwealth or are on the threshold of independence. I should like to remind my hon. Friend the Member for Wavertree that, when Malayan independence was granted, we made a very substantial contribution over the ensuing years to assist the financial strength of Malaya.
We have already allocated to Nigeria, as a Commonwealth assistance loan after independence, the substantial sum of £12 million to help it through what we recognise may well be the difficult early days of independence. It is, therefore, not true to suppose that we have ceased to take a practical and effective interest in the financial problems of countries simply because they have become independent.
The House will realise that the moneys which are to be made available by the I.D.A. will be loans for which interest rates and repayment terms are to be as fair as possible and tempered to the particular circumstances of the borrowing government. But I think that it should be remembered that, of the £138 million provided by the United Kingdom for the year 1959–60, nearly £40 million took the form of grants to Commonwealth countries and foreign countries 1243 which required neither interest nor repayment.
I fully accept—and our practice shows that this is the case—the importance of the grant to ensure that we do not overburden a country which is struggling towards development, with large capital charges and a large obligation to repay the loan over a period of time. This £138 million was, as I say, provided by the United Kingdom Exchequer partly in the form of loans and partly in the form of grants. Private investment in less-developed countries overseas amounted to about £100 million during the last year.
The right hon. Member for Battersea, North, by some mathematical magic which I was not able entirely to follow, seemed to reduce that sum by 30 or 33 per cent., but I would remind him that paragraph 7 of the White Paper states:this "—that is, the £100 million—includes some reinvestment of locally earned profits but information about such reinvestment is incomplete and the figure of £100 million may be too low.We have given what we believe to be a conservative figure in relation to this investment, and I doubt whether the right hon. Gentleman is justified in trying to reduce it further.
§ Mr. Alport
I am not saying that it is the figure for net investment. It is the best figure that we can present. We fully recognise that the new investment which is taking place is not complete, because it does not include all the reinvestment of profits which have taken place during the year.
§ Mr. Jay
If the Minister wants to argue about the figures, may I say that I was merely quoting the footnote on page 6 of his own White Paper, Cmnd. 974, which tells us that the net figure for private investment overseas is £200 million compared with £300 million gross. I was simply arguing from that. There is no mystery about it.
§ Mr. Alport
I tried to deal with that in an intervention. The right hon. Gentleman may be trying to prove that it is a 1244 percentage—that it is two-thirds of £100 million—but all that I am saying is that the £100 million does not exhaust the total amount of private investment undertaken during the last year.
It is not my purpose to contrast our United Kingdom contribution to the development of overseas countries which are underdeveloped with those of other countries. I think that was done admirably by my hon. Friend the Member for Willesden, East (Mr. Skeet). We recognise—I think that it is fair that we should do so—that we have special responsibilities in territories overseas that are dependent on us, as well as for assistance to our friends in the Commonwealth. It should, however, not be forgotten that, quite apart from this substantial bilateral assistance which we are giving, we are making a contribution to countries outside the Commonwealth through the International Bank and the United Nations, as well as, in some cases, providing bilateral assistance to foreign countries, such as Jordan, the Sudan, Turkey and Libya with whom we have close and friendly relations.
We recognise that the obligation which falls on the shoulders of countries such as ours, which are heavily industrialised and enjoy a very high standard of living, is a particularly heavy one, and it is to try to share our advantages with those who are less well placed.
We do not regard ourselves as in competition with countries behind the Iron Curtain. It is sometimes argued that provision of aid of this kind is a major means of countering the expansion of Communism. I have no doubt that in some respects that is true, but I should be sorry to think that anyone should assume that our motive in undertaking this present programme of assistance is derived from such a narrow point of view.
Ideas on how the economic progress of less-developed countries can best be promoted have changed radically over the years. We in this country were playing a part in the development of new lands long before Communism appeared on the political horizon, and what we are doing today, we believe, is simply a continuation of earlier policies designed to create higher standards of living and the development of natural resources in diverse parts of the world. 1245 policies which we have pursued for at least one and a half centuries.
We do not always get much credit for our contribution. Very often we have been and are accused of exploitation. I was touched very much when I was in India, earlier this year, by something that a very distinguished Indian and a great figure in the Congress movement said to me. He said, "In the old days we always assumed that Britain's wealth was achieved by the exploitation of the resources and people of my country, but now we realise that thirteen years after the British left India the wealth and standard of living of your country is greater than it ever was when you were ruling us."
I am not claiming that we do not derive advantage from the increasing standard of living of countries overseas, but it is certain that we do not derive that benefit alone. Economic progress in the less-developed countries must be of advantage to the trading nations everywhere, and it is on the realisation of this truth that our policies in the past have to some extent depended.
I should like to turn to the question, which has been raised by some of my hon. Friends during the debate, of why we have agreed to become members of the I.D.A. rather than sought to promote a Commonwealth development association of its own. I have already reminded the House of the extent of the financial contribution made by this country on a Commonwealth basis. We have ready at hand the Commonwealth assistance loans, the colonial loans and grants, the colonial development and welfare funds, C.D.C., C.D.F.C. and the London Market and in them a large and varied number of instruments which, we believe, are particularly suited to the needs of Commonwealth development finance.
Although the Commonwealth contribution to the I.D.A. undoubtedly represents the provision of additional money for the purposes of development, the amount forthcoming from Commonwealth sources represents only about one-quarter of the total convertible currency which the I.D.A. will have at its disposal. Consequently, the total new investment resources which the I.D.A. will have available is considerably more than could be provided from Commonwealth sources alone. We hope and believe that the less-developed parts of 1246 the Commonwealth will receive a fair share of this assistance, but we also fully recognise the prestige and experience in development finance which the International Bank brings to this new organisation of the I.D.A.
As right hon. and hon. Members, on both sides, have fully acknowledged, over recent years the Bank has played an extremely important part in the development of the underdeveloped parts of the world. In recent months, it has helped to complete the negotiations to provide the finance for the Indus waters scheme. It helped with the creation of the financial consortium eighteen months ago to assist India with her second five-year plan and, on a smaller scale, we are indebted to the Bank for the help which was given in the recent Economic Survey of the High Commission Territories.
In these circumstances, the Bank's services can be of particular value and, perhaps, as some hon. Members have said, can achieve results which would not be nearly so easy in any other way. In the case of the I.D.A., it is proposed that Mr. Black and his colleagues and the staff of the Bank should be responsible for the administration of its funds, thereby ensuring that the I.D.A. is able to have at its disposal their experience and "know-how", at the same time frustrating, on this occasion at least, the normal operations of what I understand to be Parkinson's first law.
Reference has also been made to S.U.N.F.E.D. and the Special Fund. We recognise the value, which the right hon. Member for Middlesbrough, East pointed out, of the research and pilot work of the Special Fund. Concerning the Special United Nations Fund for Economic Development, however, there are certain strong arguments in favour of the decision which we have taken in relation to the I.D.A. I have referred to the importance of having available the services of Mr. Black and staff of the International Bank, but there are other considerations, too.
In the first place, it will be possible for us to ensure that the money that will be available for this development is in the form of convertible currency.
It has been the established practice of the Soviet bloc to make its contributions in this field in unconvertible currency. Those projects financed from Soviet bloc 1247 sources would be likely to be tied to Soviet production. This is not fair, because, on the one hand, Soviet production would have the benefit of Soviet bloc contributions to S.U.N.F.E.D. and, at the same time, it would be able to compete on equal terms with other contributors for the projects financed by their contributions. For these reasons, I think that the House would agree that it is valuable and right that we should give our support and contribution to the International Development Association. At the same time, we recognise the value of the work which is done by the United Nations in this field.
§ Mr. Marquand
Does the hon. Gentleman mean to say that the Soviet bloc has specifically stated that on no account whatsoever would it subscribe to S.U.N.F.E.D. in convertible currencies?
§ Mr. Alport
No. That has been its practice up to now.
There is one further point which has been touched upon by two of my hon. Friends. This is that any investment will be of value only in so far as it can be matched by technical assistance, by the provision of technical and skilled manpower to make sure that the money expended is expended in the most effective and up-to-date way, to achieve full value for the money in the interests of the development in the countries concerned. We must, therefore, always bear in mind that a contribution of this sort to any international organisation, or through our own resources, is not sufficient. We must also make a continuing effort to play our part in the provision of technical assistance on an increasing scale.
As I said earlier, we have had a wide-ranging debate. I hope and believe that the House will pass the Bill on Second 1248 Reading without a Division and will consequently facilitate its speedy passage. The United Kingdom is already playing a leading part in providing the resources which are necessary to combat the evils of hunger, poverty, ignorance and ill-health in many parts of the world. The Bill will add a further weapon to the armoury which the free nations have at their disposal.
I am quite clear that the House will wish us to take a leading part in this new initiative. At the same time, we must recognise that from the point of view of the Commonwealth, and indeed of our allies as a whole, we must not overstrain our resources and thus weaken sterling as a major trading currency in the world. We must, therefore, be continually balancing our policies or maintaining confidence in sterling with our continuing desire to have an active and increasing part in the improvement of the standards of living in Commonwealth countries and elsewhere by means of overseas lending and grants.
After careful consideration, Her Majesty's Government feel that they can and must make the contribution which membership of I.D.A. imposes upon us and we recognise—and it is right that we should say it—that this places on the people of our country a further obligation to sacrifice, in addition to the others which they have already undertaken in assisting in development overseas. Nevertheless, we believe that such sacrifices will be willingly undertaken as a contribution by our country to the increasing happiness and prosperity of peoples everywhere.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House—[Mr. J. E. B. Hill.]
§ Committee Tomorrow.