§ Motion made, and Question proposed,
§ That the Asian Development Bank (Additional Contributions) Order 1972, a draft of which was laid before this House on 17th May, be approved.—[Mr. Wood.]
§ Mr. Speaker
It would be for the convenience of the House to take at the same time the following:That the Asian Development Bank (Extension of Limit on Guarantees) Order 1972, a draft of which was laid before this House on 17th May, be approved.
§ 9.59 p.m.
§ Mr. George Cunningham (Islington, South-West)
Neither of the orders which we are considering together is likely to be regarded as controversial, except conceivably by hon. Gentlemen opposite who always oppose any increase in aid funds. They certainly will not be regarded as controversial by the Opposition.
We do not have many opportunities to discuss aid matters and we should make the maximum possible use of this opportunity. I hope that the Minister in winding up the debate will give us more of the background to the orders than is available in the explanatory notes. May I take the opportunity to plead with him to maximise the background information which is provided by the Government when they bring forward orders on other legislative instruments before the House?
It is important that we should be given the maximum background information before the discussion of an order because there is not involved in an order the sort of to-ing and fro-ing that takes place when the House discusses legislation proper. It is difficult on the basis of explanatory notes to make out what is the case for the provisions. It would be helpful if it were a Government practice when bringing an order before the House to table a much fuller explanation than is normal or to volunteer background notes to the House informally. I do not intend this as a criticism of the Minister since what I am suggesting is not common practice. However, I believe that it would be a good thing if it were to become common practice.
I can pass briefly over the order relating to guarantees. The rise in the scale 1140 of guarantees for which the Minister is asking is certainly large—from £5 million to £25 million. I understand that this is due to the necessity to cover both the increase in the contribution by Hong Kong and any other dependent territory which might make a contribution to the Bank and also any loans—there is already at least one—from the Asian Development Bank to the Government of a dependent territory.
It is unlikely in present circumstances that the British guarantee would have to operate. However, I hope the Minister will not forget that the British connection with Hong Kong can hardly be regarded as assured for all times. Private investors in Hong Kong recognise the peculiar nature of the risk and make sure that they get out their profits fat and fast. I should not like to think that private investors were being assisted in private maximisation payments by ADB lending which, in the end, might have to be paid back by the British taxpayer if the Chinese, with or without our consent, ever moved into Hong Kong.
Could we be told tonight what the ADB loan to Hong Kong will be used for—whether it is to be used for the benefit of well-off investors in Hong Kong or for the millions of our subjects in Hong Kong who over the years have had a raw deal compared with the citizens of most British colonies? Secondly, will he assure the House that Hong Kong's dangerous position will be borne in mind whenever he takes on a guarantee of contributions either by Hong Kong to the Bank or loans from the Bank to the Government of Hong Kong?
The other order is the main order. It will allow us to participate in an increase in the capital stock of the Bank to the tune of 150 per cent. of our present contribution.
I have a number of relatively detailed points to put to the Minister to which I should like replies, either tonight or later. The first is that when Britain first undertook to make a contribution to the Bank it was at first intended to be very low. I believe that the figure was 10 million dollars instead of the ultimate figure of 30 million dollars. It was the Americans who pushed us up from the lower figure. They twisted our arms. My recollection 1141 is there was a quid pro quo. We tried to get the Americans to agree to chip in some of their money to the IDC. I do not know whether that ever materialised or whether it was in the nature of a formal commitment. It was thought at the time to be reasonable that, since we were making a larger contribution in an area where the primary interest was that of the United States, in return they should make a contribution to our equivalent organisation operating in West Africa. Perhaps the Minister will be able to say whether anything came of that.
Secondly, perhaps the right hon. Gentleman can say just how clear it is that the Americans will come up with their money. If Congress is going through a sufficiently deep fit of the blues about aid at the moment it is possible that the Americans will not come up with their 300 million dollars. If they do not and if one or two other significant contributors do not, I understand that our obligation will not be activated since it is subject to a billion dollar minimum "trigger". Nevertheless, since we are agreeing to this order, the Minister ought to tell us whether the two major donors, Japan and the United States, are fairly certain to agree to make their contributions.
Thirdly, I take this opportunity to ask the Minister about an item which appears under the heading of the Asian Development Bank in the Estimates which the right hon. Gentleman presented to the House recently. We are proposing to spend £1,000 on a gift to the new building of the ADB in Manila. That item is classified as overseas aid. It is not overseas aid. I do not know what we have it in mind to give. It may be some crystal ashtrays for the new building. Nevertheless, such a gift is not overseas aid.
The Minister has a difficult job defending his funds against the ravages of other Departments which want to dip their hands into his pocket. The right hon. Gentleman does not always succeed. Only today I have come across an example where he appears not to have succeeded to the tune of £400,000 in respect of rent for accommodation in this country provided for institutions of an aid character. This was classified improperly as overseas aid, as was admitted in an answer that I received from the Secretary 1142 of State for the Environment. That is a much larger item than that about which I ask asking, but I impress upon the right hon. Gentleman the necessity to defend the frontiers of the aid programme from the attempts of other Departments to get their hands on what they regard as the easiest money going in Whitehall at the moment.
Turning to more substantial matters about the Bank in general, there is the point about China's relationship to it. As long as Taiwan was in the United Nations, the position of the two Chinas in the Bank in Manila followed from the position in New York. Now that Taiwan is in the United Nations no longer, it is time to reconsider the position. China is not likely to want to join the ADB, given its strongly capitalist nature. But the presence of Taiwan, especially if Taiwan continues to be treated as China in the Bank, will be a needless irritant to good relations in the area. I hope that Britain will take the view that Taiwan in the Bank is only Taiwan and is not the Republic of China.
I come to general policy matters and the philosophy of the Bank. As I said, we shall not have many opportunities of discussing aid. In particular, we shall not have an opportunity, presumably for some years, of a further replenishment of the funds of the Asian Development Bank. Therefore, this is the occasion when the Minister should give to us an account of the policy that the Bank has been pursuing over the last five years and the policies which the British representatives within the board of directors have been pressing upon the Bank, if any.
From its inception, the Bank has laid great stress on banking principles. It has not considered its soft loan operations as a large or significant part of its work. That has meant that it has been backing bankable projects, and these in an area where a great deal of infrastructure work still needs to be done. What the British representatives in the Bank should be doing is pushing the Bank towards social development, without which the societies of Asia will not face up to the challenge of modern conditions. Secondly, we should press the Bank to go for projects with a regional significance. When I say "regional" I do not take as a region the whole of the area covered by the 1143 Bank, because that is not a natural region. But we should press for the Bank to back projects which at least cover more than one country. Purely national operations can quite easily be financed by bilateral devices.
Then there is the matter of Japanese tying. On several occasions the Japanese have attempted to tie not only their contribution to the Bank but also the recycling of their contribution to the Bank. The Japanese economy is perfectly strong enough for them not to have to insist on that kind of thing. I hope that within the Bank institutions we are pressing against that kind of device in line with the fairly progressive policy which we pursued on tying elsewhere.
Britain is not a big contributor to Asian Development Bank funds. Our contribution works out at only about 3 per cent, of total resources. But, just because of that, it might be possible for us to play the rôle of a provocative advocate of new ideas in the Bank, to challenge the now rather staid ways of an established institution. We on the Opposition side of the House are glad to support the enlargement of the Bank's resources, but we hope that the Overseas Development Administration will review its policies for the Bank to get it to lay greater stress on the alleviation of the worst poverty rather than on the further development of the already prosperous sectors of the countries of member States.
§ 10.13 p.m.
§ The Minister for Overseas Development (Mr. Richard Wood)
I am grateful to the hon. Member for Islington, South-West (Mr. George Cunningham) for what he said. I agree with his first remarks about the need for as much information as possible. My objective in so ordering affairs that the hon. Gentleman led in the debate was in order that I should have the opportunity, if possible, to try to answer any questions that he might have and give any information he might require.
Taking the two orders in the same order as the hon. Gentleman did, the second one, as he knows, is intended to increase the limit on the guarantees which Her Majesty's Government may provide under Section 3(2) of the Overseas Aid Act, 1968. The necessity to 1144 provide these guarantees to the Bank arises from the Articles of Agreement.
These require that the United Kingdom should give an undertaking of responsibility for all obligations which may be incurred by a member country for whose external relations we are responsible. The legal necessity is concerned with the status of member countries of the Bank which are dependencies. Although it is quite impossible for either him or me to look into the crystal ball and always to make sure what the future holds—it would be very convenient if we could—Ibelieve in practical terms that the second order is a formality because the Government have made no payments under the provisions of the 1968 Act and, although the hon. Member envisaged certain circumstances in which we should do so, I find it very difficult to envisage the likelihood of our having to honour this obligation.
The increase from £5 million to £25 million is quite considerable and it is necessary first to cover a bank loan of 21½ million dollars to the Government of Hong Kong for a water desalination plant. The loan was approved by the board of directors in April but it cannot become effective until the necessary undertaking of responsibility by Her Majesty's Government has been given. That is the purpose of the order. The hon. Gentleman was asking who would benefit from the project. He will know better than most people that water supply is a very serious problem for Hong Kong. The plant is expected to be completed by the end of 1975 and it will provide 40 million gallons a day which will be of great value to the colony as a whole. The Government of Hong Kong have said they intend to subscribe to 1,200 additional shares at a value of 12 million dollars and there is Hong Kong's initial subscription of 8 million dollars, both also subject to a guarantee by Her Majesty's Government.
These obligations would diminish as the paid-in portions of Hong Kong's subscriptions are made over to the Bank and the maximum obligation on Her Majesty's Government in all these respects is about £16½ million. The draft order seeks approval for a rather higher upper limit and we believe that the margin should enable us to guarantee 1145 any further Bank lending to Hong Kong and the subscription of any eligible British dependency which might apply for membership of the Bank.
If the House approves the order my right hon. Friend would make it immediately so that with the guarantee by the Government the Bank would be able to execute the loan documents with the Government of Hong Kong for the financing of the project. We shall be able also to give the necessary undertaking in respect of Hong Kong's additional subscription.
The hon. Gentleman also raised a number of other questions about what is perhaps the more important of the two orders, that allowing us to increase the subscription to the Asian Development Bank. He began by asking certain questions about the Bank. As he knows it was established in 1965–66 in order to lend funds to promote investment and to provide technical assistance to its developing member countries. We believe—and I know the hon. Member shares the view—that these are two important objectives. We also believe—and I know he shares this view, too—that its development function is extremely important and the need to develop in the part of the world which it covers is very great. We are anxious that the Bank should pursue policies which will allow that development function to expand as fully as possible to the benefit of the countries which are in great need of development in that part of the world. The first order will ensure that Britain plays her part in the general replenishment of the Bank's resources.
The hon. Gentleman naturally asked to what extent I was confident that the United States and other members would play their part as well. There is one member Government, and only one, who have notified the Bank that they do not intend to take up the additional shares allocated to them, but I am confident that all the others, including the United States and Japan, intend to subscribe the additional capital which will be necessary and to make sure that the Bank will achieve its initial objective of having 100,000 of the 150,000-odd additional shares subscribed for, and therefore make effective the contribution that each individual country makes.
§ Mr. George Cunningham
Who are the one member Government to whom the right hon. Gentleman referred?
§ Mr. Wood
The country to which I was referring was Sweden, but not, obviously, the countries with which the hon. Gentleman and I are most concerned—the United States, Japan, West Germany, and the other major donors.
At the fourth annual meeting last year the board of governors instructed the board of directors to report on the resources position. The board of directors took into account the Bank's operations, the desirable scale of expansion in the period up to 1975, and the availability of resources from the initial subscriptions that have been made. The projected cumulative loan commitments up to the end of 1975 on ordinary operations were set at over 1,500 million dollars. That represents nearly twice the committable resources now available to the Bank. Therefore, the directors recommended an increase in the Bank's authorised capital of 150 percent., from 1,100 million dollars to 2,750 million dollars. At the same time they recommended that only one-fifth of the increase should be in the form of paid-in shares, the remaining four-fifths being callable capital. Of the paid-in portion, 40 per cent. is payable in gold or convertible currency and 60 per cent. in national currency.
Last year the board of governors adopted a resolution, on which the draft order is based. The United Kingdom will subscribe to 4,500 additional shares, 150 per cent. of our original holding, at a value of 45 million US dollars. The paid-in proportion of our subscription, for 900 shares, one-fifth of the total, will be equivalent to 9 million dollars, of which 3.6 million dollars will be in cash and the rest, 5.4 million dollars, in promissory notes. These cash payments will be spread over the three years 1973–75. Therefore, we shall not make our first commitment until after 1975. I have already mentioned that the increase will not become effective until100,000 of the shares have been subscribed for. The Bank hopes that that will have happened by 30th September next.
If the House approves the orders, as I hope it will, we shall be able to notify the Bank that we are ready to make the additional subscription. The order which 1147 provides for the necessary payments will not be made by my right hon. Friend until the Government become bound by the coming into effect of the capital increase.
The hon. Gentleman raised two further points. One was the question of the United States contributing to the operations of the Commonwealth Development Corporation. There was some discussion earlier about that as a kind of quid pro quo. I shall examine the matter and write to the hon. Gentleman about it.
The other matter which the hon. Gentleman mentioned was my obligation, which I readily recognise, to see that aid funds are used in the proper direction and for the proper purposes, which he and I share. I should like to look into any alleged improper use of funds and will communicate with him on that subject.
I hope that with that explanation the House will feel able to approve these two draft orders, the Hong Kong order being urgent in the sense of the need to make arrangements for increasing the water salination plant and the other being less urgent but urgent in the sense that the Bank is anxious to know what the position will be and that Her Majesty's Government will be ready when the time comes to make the order, dependent on the draft order before the House.
§ Question put and agreed to.
That the Asian Development Bank (Additional Contributions) Order 1972, a draft of which was laid before this House on 17th May, be approved.
That the Asian Development Bank (Extension of Limit on Guarantees) Order 1972, a draft of which was laid before this House on 17th May, be approved.—[Mr. Wood.]