Orders of the Day — European Bank for Reconstruction and Development

Part of the debate – in the House of Commons at 10:35 pm on 24 July 1990.

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Photo of Ann Clwyd Ann Clwyd Shadow Secretary of State for International Development 10:35, 24 July 1990

If there is any expert on prattling in this House, it is the hon. Member for Stafford (Mr. Cash). If he had allowed me to develop my speech, he would have had answers to his questions. However, I suspect that he does not want to stay to make his own contribution to the debate.

In May, the Czechoslovak Government produced a report on the country's environment which made clear the devastating effect of decades of uncontrolled production. As the Minister knows, almost one third of that country is ecologically devastated, according to the report. More than 70 per cent. of pregnancies in northern Bohemia result in miscarriages. Water supplies are contaminated with radioactivity from land fills and with phosphates, with nitrates and with a host of other chemicals which make it unfit to drink.

In Poland, 70 per cent. of the drinking water is polluted and an estimated 100 million trees have been destroyed, mainly by acid rain due to sulphur emissions from industry. Modern technology is desperately needed. Decades of third-rate technology have wreaked havoc on the health of the environment and on the people who live in it. We must ensure that that technology is replaced, but not with second-rate technology from the west which is sold cheaply to the east because it is too dirty for the west.

Although the development of the private sector is clearly an essential part of the reform process in eastern Europe, BERD must recognise that this will take time. It may prove difficult to meet the condition that 60 per cent. of all loans go the private sector in the first year. The BERD must avoid over-emphasising the free market simply for ideology's sake, if the practical situation calls for continued state involvement. That is particularly true of achieving environmental aims.

The private sector, based on western experience, does not deliver green, clean goods. Nor does the private sector worry much about social costs. As the Deutschebank stated in its special report on eastern Europe: Now that virtually all Eastern European countries are dismantling the system of planned economy, we need to ensure that the social costs accompanying such a major transition will not be aggravated by some of the less desirable features of market economies. It has taken a decade to learn the bitter lesson of developing countries, that economic adjustment must be combined with special attention being paid to the needs of the most vulnerable, and that ignoring investment in people carries long-term costs as well as short-term suffering. That lesson must be applied in our work in eastern Europe.

In its publication "Economic Outlook," the OECD warns that eastern Europe risks being asset-stripped by western investors. In promoting private sector participation, we must ensure that ventures are truly joint ventures and not just a way of subsidising western countries into buying up the best assets of eastern countries.

The bank's emphasis appears to be on large companies rather than on small firms, but the development of a range of small companies is equally important to their economic development, and I hope that we may have an assurance from the Government that small firms will not be ignored. In particular, we must be assured that when BERD assists in the development of capital markets, the capital needs of the smallest firms, as well as those of large companies, are taken into account.

Hon. Members in all parts of the House will join me in hoping that the bank's location in London will encourage British firms to widen their horizons to eastern Europe. So far, the Germans, Italians and French are there, but where are the Brits? In his evidence to the Treasury Select Committee, Mr. Crockett of the Bank of England—an institution hardly known for its recklessness—stated: British companies are erring too much on the side of caution in their approach to Eastern Europe. We know the markets are there, so where are the Brits?