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I beg to move, That the Bill be now read a Second time.
The Commonwealth Development Corporation, or the CDC as we all know it, is a success story. The purpose of the Bill is to build on that success and to give it the powers that it needs to continue its work in promoting sustainable development. The CDC's fundamental objective, as established by statute, is to contribute to the economic development of poorer countries. Everything that it does, and will do in future, must contribute to that single purpose. In so doing, it makes a valuable and distinctive contribution to Britain's overseas development effort. In particular, it is our main instrument in promoting private sector development in support of economic reform and in enhancing productive capacity—two of the key aims of the United Kingdom aid programme.
The CDC's achievements are familiar to right hon. and hon. Members and it has won many friends and supporters by its excellent record since it was established in 1948. It has won many more friends overseas in countries where its investments have made a tangible difference to the lives of local people.
The CDC's annual report and accounts for 1995 were recently laid before the House. They confirmed the growing contribution that the corporation is making to poor countries. It has comfortably beaten the strategic targets that were set in the 1993 quinquennial review. It was agreed with Ministers that 70 per cent. of board approvals for new investments should be in the poorest countries. In 1995, the CDC achieved 90 per cent. Of those, 47 per cent.—representing about £153 million— were in sub-Saharan Africa and 47 per cent. of approvals were in the form of equity or quasi-equity against a target of 25 per cent. The CDC was asked to make an 8 per cent. return on capital employed and in 1995 it achieved 9 per cent. Overall, new investments were at a record high of £276 million—an increase of 15 per cent. It may also interest the House to know that around 30 per cent. of the total portfolio is currently invested in the public sector and 40 per cent. of that is invested in power and water.
As I have said, the CDC continues to achieve its return on capital employed targets. The returns provide resources that the CDC recycles into new investments. Just last month, the CDC announced the sale of the BAL plantation in east Malaysia for about £98 million equivalent—an example of selling mature investments to local interests to raise funds for reinvestment in other development projects worldwide. At the end of 1995, the CDC had investments—before provisions—totalling £1.487 billion in a global spread of 50 countries.
I am sure that right hon. and hon. Members will agree that those statistics are impressive, although they do not guarantee the developmental effectiveness of the CDC's operations. To gauge that, I shall explain briefly how the CDC achieves development impact and adds value to its investments.
The CDC promotes growth by investing in, and supporting, the operations of commercially viable and developmentally sound business enterprises. First and foremost, the CDC creates economic value in developing countries. That is tested not only by its profitability, but by measuring the economic rate of return of its projects.
In undertaking those activities, the CDC is committed to ensuring that the environmental policies of the businesses that it supports accord with internationally accepted standards. In its own managed projects, which directly employ some 44,000 people, a range of education and health benefits are also provided for the local community.
The CDC is a hands-on investor. It exists to add value to an enterprise, typically by providing longer-term finance than is available on the commercial markets, improving the design and structuring of investment proposals, contributing management expertise and moderating risk in countries that normally attract only a small proportion of private flows. By such means, the CDC has a powerful catalytic effect. In 1995, a total of £1.7 billion was committed alongside the CDC's commitment to produce a ratio of 1:6 of CDC funds to those of other investors.
That brings me to the proposals in the Bill. The most recent review of the CDC highlighted a number of constraints preventing more active participation by the CDC in sustainable development overseas. The Bill is particularly relevant to ensuring the success of the Commonwealth private investment initiative, in which the CDC has agreed to take a leading role. That initiative by the Secretary-General of the Commonwealth was warmly welcomed at the Commonwealth Heads of Government conference at Auckland last year. The CPU has the potential to benefit many poorer Commonwealth countries by mobilising investment from within member states.
The first phase of the initiative—the Commonwealth Africa investment fund—will focus on sub-Saharan Africa. It is expected that it will formally be launched in July and should be ready to start at the time of the meeting of the Commonwealth Finance Ministers later this year. The initial capital target for the fund will be $75 million, of which the CDC will provide $25 million.
I am delighted to say that the fund has attracted a particularly positive response from Governments and Government agencies in south-east Asia and southern Africa. Prominent representatives from the international business and financial sectors have agreed to serve as independent directors. Following the launch, it will be the CDC's intention to bring in other institutional investors from the major financial centres of the world, thus mobilising long-term, private-sector funds that are not otherwise available to sub-Saharan Africa.
The CDC will be the fund manager—a role that it is uniquely well placed to perform, with its long experience and network of offices in sub-Saharan Africa. If it is to play a full part in the funds investment activities, however, it will need enlarged powers. The focus of the fund will be on finance for the start-up, expansion and restructuring of business in a wide range of sectors and there is expected to be particular emphasis on rehabilitation and restructuring. Without new powers, the CDC would be placed in the invidious position of being unable fully to participate in the activities of the fund. That could seriously undermine the long-term development of that important Commonwealth initiative, as I shall explain in a moment.
Hon. Members may find it helpful if I outline briefly what are inevitably somewhat technical provisions, the substance of which is within clause 1. At present, the CDC is empowered to promote or expand new or existing enterprises. Accordingly, the CDC's funds are applied primarily to creating new or additional assets or capacity. That is, and will remain, central to the CDC's work, but it undoubtedly significantly limits the CDC in assisting host Governments and major businesses which wish to divest themselves of, or rehabilitate, enterprises where change of ownership is a necessary preliminary step to regeneration.
Frequently, the change of ownership and the consequential changes of management are vital to transforming the enterprise for the benefit of the economy. Increasing numbers of Governments recognise the need to reorganise and rationalise existing enterprises that are usually under-performing and that they perceive would have a more successful future in the private sector. The Bill addresses that need in developing countries and would allow the CDC to play its full part in the development process.
The limitations imposed by the CDC's existing powers have been evident for some time. For example, the CDC has been unable to participate in a number of worthwhile projects in southern Africa because they would involve reorganisation rather than immediate expansion.
The development of effective money and capital markets in developing countries is imperative if business is to have access to finance and savers to investment opportunities. They are important for the efficient allocation of funds into productive investment, but the CDC is just as constrained here as in the other activities to which I have referred by the statutory requirement to assist only in creating new or additional capacity. For example, the CDC should be able to provide the initial investment in country or sector funds leading to larger private sector investment in due course, to manage such funds and to encourage the formation of stock or securities exchanges or dealings mechanisms. By those means, the CDC could become more involved in improving financial services that are important to economic growth.
Under existing powers, the CDC is already setting up and frequently managing investment funds to assist small and medium enterprises, particularly in Africa, but the new power will give it greater ability to invest in a wider range of funds.
In case there is any doubt in anyone's mind, I stress that the CDC has no ambitions to become a bank; nor is it looking for quick and easy returns on its investments. The CDC will continue to focus on poorer countries. As I have said, the CDC is a hands-on investor and it wishes to promote successful funds that will attract private capital. The powers that I have described are part of the normal armoury of the International Finance Corporation and other development institutions. It is right that they should also be available to the CDC, as its overriding purpose is to assist the development of the economies of host countries.
The third change proposed in clause 1 relates to so-called "dry" consultancies that are not linked to the provision of CDC finance or management services. The corporation's ability to share its considerable knowledge and expertise through consultancy services is currently limited to those projects where it has an interest, or in which it is expected to participate. However, the expertise that the CDC has gained from its core activities should occasionally be made available without that link. That is a logical extension of the CDC's current activities: the CDC would not compete for contracts with the private sector or develop an extensive consultancy capacity, but merely use its specialist skills for the benefit of others on a full cost-recovery basis.
I repeat that we do not intend to change the character or the fundamental purpose of the CDC. It will remain a public sector body which will continue to operate within the strategic framework of controls agreed with Ministers. Key operational targets were set in the context of the 1993 quinquennial review and the CDC's performance against those targets is regularly monitored and reviewed. As I have said, the CDC enjoyed a most successful year in 1995. It achieved that success by directing its efforts squarely at poorer recipient countries in regions of the world where it has acquired much expertise over the years and where it is a widely respected partner.
Those fundamentals will not change if the Bill passes into law. There will be no radical, overwhelming departure from present practice. We shall see instead a careful and logical extension of the corporation's existing role, which will allow the CDC to take advantage of new and better ways of solving the old problems of poverty and deprivation. The Bill will assist the CDC to continue its fine work, which I know commands support among all parties. I commend the Bill to the House.
This is the third Commonwealth Development Corporation Bill to come before the House in 14 months and, on each occasion, we have enjoyed the unusual experience of agreeing about something—at least initially. As the Minister said, the CDC should be congratulated on its successes: its financial performance, its attainment of agreed targets and, above all, its continuing important contribution to the strengthening of economies in some of the world's poorest countries.
However, we part company over the question of future plans for the CDC. The Labour party believes firmly that the CDC has a distinct and expanding future role to play within a Government-directed overseas aid programme. I am not sure that the Government hold a similar view— sometimes I am not convinced that they have thought about the CDC in the longer term, although the Minister's comments have reassured me a little. I look forward to further illumination in the winding-up speech regarding several issues that I shall raise during the debate.
The CDC makes a vital contribution to the United Kingdom's development programme. It pump primes private investment in some of the world's poorest countries, reaching the countries that other investment organisations will not even consider. Its activities are complementary to the Overseas Development Administration's efforts to provide bilateral and multilateral development assistance through Governments and non-governmental organisations and in partnership with international institutions such as the World bank, the International Monetary Fund and the European Union.
Against the background of a steadily declining aid budget, Ministers may point to increasing flows of private investment to the developing world; but where are those market-driven private funds headed? They flow not to south Asia or to sub-Saharan Africa but mainly to a very narrow band of middle-income countries in east Asia and in Latin America.
In 1994, 90 per cent. of private investment went to just 10 developing countries. Private capital flows to sub-Saharan Africa have amounted to less than 2 per cent. of the developing total since 1993. According to World bank figures, in 1992 to 1994, only 1 per cent. of private capital flows went to the most severely indebted countries. In 1993–94, 19 per cent. of the CDC's investments were in projects based in those severely indebted countries. Not only does the CDC target some of the poorest countries, but its investments are medium to long term and offer much needed economic stability.
The globalisation of the economy poses yet another threat to poor nations, widening still further the gap between the debt-ridden and the middle-income countries. That is why the CDC is, and will continue to be, an important tool in the delivery of development assistance in partnership with the private sector. We believe that properly managed, directed and focused private investment will play a key part in future development programmes under a Labour Government.
The CDC has carefully carved out its own market over the years. A CDC board member, Sir William Ryrie, writing in his organisation's magazine in December 1995, said:
It is not our role to finance companies which do not need our help and can raise the funding they need themselves—that is a waste of our resources. This would seem to leave only a narrow area for us to operate in, avoiding on the one hand unwise investments, which no-one should undertake, and on the other those which the markets will finance without our help".
However, the channel is not narrow. Sir William went on to recognise that most developing countries have a long way to go in cultivating their own capital markets. The CDC's role is assured well into the future.
Against that background, I welcome the Minister's assurances this evening that the CDC will remain in the public sector and that the widening of the CDC's powers as proposed in the Bill is not a prelude to privatisation. I ask him to reiterate the statement made by the then Foreign Secretary, the right hon. Member for Witney (Mr. Hurd), on 3 May 1994 that the CDC would stay in the public sector because it was generally felt that privatisation of the CDC would result in a financial structure, aims and objectives that were inconsistent with its development role. I share that view.
In my opening remarks, I referred to previous Bills that had come before the House. Concern about the Government's plans for the CDC undermined Labour Members' confidence that proposed new powers would not signal either a CDC sell-off or a noticeable shift in market focus away from the poorest countries and towards emerging markets in eastern Europe and in the former Soviet Union. The way in which the Government chose to present the Bills did nothing either to speed or to smooth their passage.
The first Commonwealth Development Corporation Bill, which was presented last March, was quite straightforward. However, it was swiftly followed by a private Member's Bill originating in another place which we were assured was absolutely essential to the continuing success of the CDC. In that case, why was it not a Government Bill? If the new powers in the Commonwealth Development Corporation (No. 2) Bill— which are largely presented again in the current legislation—were so significant, why were they not in the first Bill? I have never understood that.
The key to CDC activity is the triggering of genuine additional investment. However, the proposed new powers to purchase equity funds did not meet that criteria automatically. We did not see why the CDC should get involved in asset trading relating to buy-out if such activity did not lead directly to new investment.
We were also worried about the reference in last year's corporate plan to a strategy aimed at targeting
turning-point countries … with their higher growth potential".
No one would quarrel with the idea that it is sensible to concentrate scarce resources where the best effect can be obtained, but we were concerned that the concentration on pump-priming privatisation programmes might shunt the CDC away from the Commonwealth countries and towards emerging democracies in eastern Europe.
That is why I commented last year that the debate that we had was unfinished business. I recognise that there are immense commercial and financial opportunities with which the CDC would like to involve itself—even a cursory reading through its annual report and current corporate plan reveals that it is straining at the leash—but there is one major hitch. I quote the CDC:
The volumes of new business forecast by Representatives are at a higher level than can be funded".
The Bill does not address that fundamental dilemma.
The CDC is therefore seeking ways to churn its assets to raise funds for new projects, and I note its intention to hasten equity realisations. The Commonwealth private investment initiative, which triggered the request for a change in legislation, is another mechanism to raise funds against a background of financial restraint by Government.
The Commonwealth private investment initiative was welcomed by the heads of Commonwealth Governments last November, and we join them in that support. They recognised, as we do, the dearth of private investment in Africa and the need for rehabilitation and rejuvenation of businesses in the continent that has suffered wars, chronic indebtedness and natural disasters for so long. In the African continent, private investment has concentrated on oil-producing countries, with Nigeria taking 30 per cent. of total flows. Obviously, market forces do not serve the poorest at all well.
The CDC was the obvious candidate to act as an investment catalyst, with its established reputation throughout the Commonwealth. I was delighted to note that the CDC's new business investments in sub-Saharan Africa increased from £41 million in 1994 to £154 million in 1995. We all welcome that. Against that background, we are asked to consider the Bill, which we are told is essential if the CDC is to participate fully in the operations of that new Commonwealth initiative and its first African investment fund.
Given our enthusiasm for that project, we would have liked to put our full weight behind the legislation, had it been more project specific. Why was legislation tailor made to the needs of the CDC in relation to the Commonwealth initiative not forthcoming, and why has the Overseas Development Administration fallen back on resurrecting much of the Commonwealth Development Corporation (No. 2) Bill from last year? Surely it cannot be for lack of drafting time. Such a move would have resulted in the enthusiastic cross-party endorsement that it warrants.
The new powers proposed in the Bill will impact on all the CDC's activities, not only within the limits of the new initiative. Once again, the privatisation fear is raised.
I know that the Minister has said—he shakes his head again—that there is no such fear, and I welcome that. Will he assure the House that the new powers will be applied to the CDC's activities only in the operation of the Commonwealth initiative? An alternative interpretation is that the Government have no plan for the future of the CDC—an organisation operating in a commercial environment, under Government constraints, yet remaining in the private sector. There is some confusion in that regard.
In Government, the Labour party will look forward to a long and successful relationship with the CDC—similar to that which a previous Government had. I welcome the emphasis in its current annual report on the development impact of its projects and on the need for assessments of their impact on the environment and of health and safety. I hope that the CDC will add workers' rights to that list. I also want stronger development input at board level. Would the CDC really miss one of the many bankers in situ if he were replaced by a development expert?
Earlier, I mentioned the Government's failure in the Bill to address the crucial issue of how the CDC is funded. There should be a review of the orthodox policy towards the CDC funding, and specifically a re-examination of the policies that prevent the CDC having access to private sector funding.
The CDC's current main method of funding new investments is to generate financial surpluses. The French attitude is different. Electricité de France, the state-owned power company, derives all its borrowing from the private sector. Perhaps the Bill, too, is unfinished business. Only time will tell.
In conclusion, the Opposition wish the CDC and the CPU regional development fund initiative well, although we deeply regret the rather shoddy way in which the initiative and the CDC have been treated by the Government, and we look forward to a not-too-distant time when a more transparent, constructive and supportive partnership can be established.
I shall be brief.
We are great admirers of the Commonwealth Development Corporation and I pay tribute to it. For many years—ever since my ministerial days—I have been deeply impressed by its work.
Like my hon. Friend the Member for Eccles (Miss Lestor), I shall pose a question arising from the fact that, for the third time in 14 months, we are discussing a piece of legislation relating to the CDC. We seek from the Minister, when he replies, at least an assurance that the CDC now has all the powers that it needs to fulfil the tasks that it wishes to undertake. We had the Commonwealth Development Corporation Act 1995, and now we have this Bill. Like my hon. Friend, I do not understand why those two Bills could not have been brought together as one package. Having accepted that those additional powers are needed, I ask the Minister: are the two Bills the final instalment of the CDC's legislative requirements to carry out its work, or has it made outstanding requests for legislation? We should at least be told that.
I ask the Minister and my hon. Friends to consider the CDC's role in the context of a much more imaginative view of our relationships with the Commonwealth and of relationships within it. I draw attention to the report on the future role of the Commonwealth which I, as a member of the Foreign Affairs Select Committee, helped to prepare and write. One of the most astonishing aspects of our work in preparing the report was that all the members of the Select Committee were struck by the changing character and potential of the Commonwealth—and no more so than in commercial and economic relations. Contrary to the image that many people may have of the Commonwealth as an organisation living on sentiment and past attachments, we discovered that the Commonwealth had a very important modern role in economic, commercial and aid terms.
We felt, as we said in our report, that the CDC had a vital role in developing what we considered to be the new networking possibilities of the modern Commonwealth, as opposed to old and sentimental attachments and ties. I hope that the Minister will ponder on our observations about the role that the CDC might play in bringing to fruition some of our ideas and our vision.
I draw the attention of the Minister and of the House to paragraphs 56 to 58 of our report where, in the context of the Commonwealth as an economic forum, we drew attention to the fact that contacts between that enormous network of countries are facilitated by the fact that a common heritage has resulted in the development of similar legal systems, accountancy procedures and business practice—and, of course, a widespread understanding of the English language.
The traditional relationships within the Commonwealth have enormous economic and commercial potential. While we have turned our backs on Commonwealth and imperial preferences in the context of our membership of the European Union, new opportunities, new connections and new networking can be achieved in developing economic and commercial relationships between Commonwealth countries. Paragraph 58 points out that
there is scope for the Commonwealth to act as a broking house for mutual interaction, both on a multilateral and bilateral basis.
The CDC has a crucial and central role in the development of new ties within the Commonwealth, as opposed to the traditional Commonwealth ties. The Foreign and Commonwealth Office presented evidence to the Committee, but we believe that it does not realise the new potential. Some of the richest and fastest growing countries are in the Commonwealth, as are some of the poorest countries. In terms of gross national product per
capita, Singapore is at the top of the list and Mozambique—the most recent country to join the Commonwealth—is at the bottom.
There has been a fantastic level of growth in many of the Asian Commonwealth countries. We believe that that experience could be utilised, through the Commonwealth network, to assist the poorer countries, particularly those in sub-Saharan Africa. The Committee therefore made a series of recommendations in relation to bridging the gap between the richest and poorest Commonwealth countries. We decided that we should not have a United Kingdom-centred view of the Commonwealth, but that we should look at the network of relationships that exist between other Commonwealth countries.
I ask the Minister and the CDC to look at the role of the CDC. It may be able to play an even greater part in the criss-cross of relationships that exist, or could exist, in the Commonwealth within an economic and commercial forum. I draw the Minister's attention to paragraphs 93 and 94 of the report as they are directly related to the role of the CDC. In paragraph 94 the Committee draws attention to the fact that the CDC told us that it was being under-utilised and expressed concern about future pressure on the bilateral aid budget which might cause it to reduce its activities.
On this occasion, I do not want to raise the relationship between the CDC's programme and our aid programme. Changes have occurred in our aid programme, particularly in our bilateral aid programme, and it appears that in the next year or so our bilateral aid programme will be smaller than the contributions that we make to the European Union aid budget, which will have considerable rippling effects on the operation of the CDC. As I have said, the CDC believes that it is being under-utilised. The recommendation contained in paragraph 94 states:
We commend the work and potential of the CDC. We recommend that the Government examines the case for it to play a greater role in investment in developing Commonwealth countries, thus giving greater weight to the investment component of the bilateral aid programme.
I ask the Minister whether, in the context of the Bill, the CDC will be able to play a greater role in the Commonwealth, as the Select Committee envisaged. We believe that economic and commercial networking has tremendous potential within the Commonwealth. For example, we could link the incredible experiences of the growth economies of Singapore and Malaysia with the experiences of the poorer, sub-Saharan economies. It is sad that while some developing countries in the Commonwealth have taken off in a variety of ways, others have been left behind. Sub-Saharan Africa stands out as a classic illustration of this—in terms of GNP per capita and every other form of assessment of poverty and need.
Is it not possible somehow to bridge the gap? The experiences and know-how of the growing Asian economies could help sub-Saharan Africa. The CDC could play an important bridging role in passing on that experience. It could borrow and utilise the knowledge and understanding of the successful developing economies in the Commonwealth and link them with the countries that are least successful. That was one of the great themes of the Committee's report—that there are new and novel ways in which the Commonwealth could be networked. A Eurocentric view of society and the world misses these other visions and opportunities. There are also market opportunities for the United Kingdom and the Commonwealth.
I hope that the Minister will reassure me as to the type of role that the Commonwealth can play at the end of the century—which would be different from the role that it played in the first part of the century. The CDC could be an important bridge and link in relation to these new experiences. It could cross-fertilise the experiences between the economies within the Commonwealth. The United Kingdom does not necessarily have the experience of some of the growing Asian economies. That experience would be of enormous value for the sub-Saharan economies and could help to lift the economies, welfare and prosperity of some of the poorest countries within the Commonwealth.
It is a pleasure to welcome the Commonwealth Development Corporation Bill.
It was sad last year when the Bill fell due to Government lack of time—indeed, the minuscule debate on the CDC gave no indication of the extent of its work. The Government appeared to be ignoring the CDC. I am glad that the Minister of State has put that right today. The Bill is particularly interesting because it focuses on the title of the organisation, and the words "development" and "Commonwealth". Commonwealth Development Corporation investment has been expanded to accommodate the widening boundaries of the Commonwealth of nations and to invest in countries which are not part of that grouping.
The definition of "development" was also constrained. In the past, the CDC was constrained by its stated object of development, which was rightly interpreted as new physical assets. This has been a hindrance to real development in the sense of investing in privatisation and in management rehabilitation projects. Without new assets, that would have been against the letter of the law.
The Bill replaces the words "promotion and expansion" with the words "creation, promotion, expansion, reorganisation or rationalisation", which widens the definition of "development" and allows the CDC to invest in the Africa fund. For all the commendations that the fund has received in the debate, it seems to be somewhat modest.
This is a welcome beginning, which gives us the chance to congratulate the CDC's staff and governors on achieving sound economic development in many countries. This is a model of how to approach the development challenge. It improves management expertise and it improves and creates capital flows to make valuable sustainable businesses in the countries involved. The CDC offers a highly professional valued-added and results-based approach.
The Minister has talked about the magnificent way in which the CDC works in so many different countries. I should like to pay tribute to the staff, who work in some very difficult situations. It is so easy, with this excellent annual report, to expect the CDC's achievements, but let us not forget that its staff work in very difficult and sometimes dangerous situations. I was in Papua New Guinea with a regional director, for example, watching some of the work that is being done across that country. A couple of days after I left, the manager, Carl Edwards, was killed by one of the local people, who had mistaken something that had been done. We perhaps understate, in a typically old-fashioned British manner, the dangers, difficulties and strains that CDC staff face every day in so many places internationally.
It is welcome to be able to comment positively on the targeting of resources in developing countries in the sub-Saharan countries of the Commonwealth, which are particularly poor. The importance of that region has already been recognised and commented on in this debate. The fact is that 47 per cent. of the CDC's worldwide investment approvals made last year relate to that area. It is good to know that business has increased from £41 million, in 1994, to £157 million, in 1995, and that new offices have opened in Mozambique and Uganda.
It is excellent that this Bill will enable the CDC to continue such good work in the more needy countries of sub-Saharan Africa. I particularly welcome—I questioned the Minister about it a week ago—the opening up of the possibility of investment in South Africa, where funds to enable franchise operations for disadvantaged groups will assist nation building.
It has been very interesting to find how well the CDC can perform with such various investments. Figures with which we have been provided show that Zambia Sugar now has a 34 per cent. input from the CDC. Contrast that with the CDC's 2 per cent. investment holding in Sakthi Sugar, which I perceived in operation in southern India. It was a very interesting exercise to have the opportunity to see some of the CDC's work in a number of different countries.
I welcome the Bill from the Liberal Bench. The Bill will allow the CDC to fulfil its role in assisting development even more than it has already done. Perhaps the only downside to the Bill is that it reminds the House that, for the past eight years, the CDC wanted to facilitate better management and investment—not only in the new or expanded projects that it has been able to undertake, but also of existing assets, such as selling off state-owned agricultural assets in sub-Saharan Africa. Such projects offers great potential.
It is good to know that the CDC no longer turns aside from activities that it has wished to do for so long, when it needed to concentrate solely on new development. It can now assist in the reconstruction and rehabilitation of such promising sectors. I welcome the Bill.
I am glad to have the opportunity to speak on the importance of the Commonwealth and on the creative role that the Commonwealth Development Corporation has played and can potentially play.
My first comment on the Commonwealth should be to say that my family originate from a Commonwealth country, Jamaica, and that my constituency of Hackney has quite a sizeable community of people who originate from across the Commonwealth.
I notice that in many ways, as we approach the millennium, people in the Commonwealth countries value the Commonwealth link rather more than do the British people. I would not miss an opportunity to speak in the House about the Commonwealth and to stress the fact, for the benefit of hon. Members and of those who read the record of our proceedings, that the Commonwealth link and its potential are very much undervalued by public opinion.
The Commonwealth fell into disrepute in the 1980s because of some of the tussles that Britain had with other Commonwealth countries, on issues such as South Africa, when it became commonplace to read rather disparaging comments and articles about the Commonwealth in the tabloid press.
The Commonwealth is a great underused asset in Britain's relationship with the world. The first reason why it is an underused asset was mentioned earlier in this debate: some of the strongest and fastest developing economies in the world, such as the Asian tiger countries, are in the Commonwealth. It would be foolish for the British public and British politicians to ignore the tremendous economic and development potential of Commonwealth links with some of the strongest economies, such as Singapore, because of tussles and struggles in the 1980s over certain matters.
The Commonwealth's other merit is that it is unique. In an increasingly divided world—with the rise of refugees and migration, where people are increasingly fearful of each other—it is a club in which black, white, Asian and Muslim nations join in a genuine family of nations. International politics are too often ruled by fear and by threat, and an international club in which nations that vary widely in cultural and religious origins can come together is a tremendous force for good.
I can remember how, in the Commonwealth of the 1980s, the most unlikely alliances sprang up—
Of course, Mr. Deputy Speaker.
One of the reasons why the Bill is so important is that it will strengthen the Commonwealth. The Commonwealth has been responsible for the emergence of many creative international alliances, such as that in the 1980s between Canada, under Pierre Trudeau, and Jamaica, under Michael Manley. Those alliances would never have emerged without the context of the Commonwealth.
The Commonwealth is an underused resource, and the CDC will help this country to maximise and strengthen its links within the Commonwealth. Another important aspect of the Commonwealth, which touches centrally on the Bill, is that we have seen, sadly, in many of the international financial institutions—such as the International Monetary Fund and the World bank—a redirection of monetary flows away from Africa and from some of the poorest countries towards eastern Europe and Russia. I believe that the CDC has the potential to ensure that some of the poorest countries, which happen also to be Commonwealth countries, receive their share of investment and attention.
Once again, I am glad to have the opportunity to speak about the importance of the Commonwealth link. To the extent that the CDC will help to build and develop those links, much of the Bill's contents is very much to be welcomed.
This has been a short, but very well-informed and good-natured, debate. I hope that Conservative Members do not now say, "Up till now." I must say that I found the Minister's speech almost statesmanlike—
Well, almost statesmanlike. As he was speaking, I think that he was almost revelling in the fact that he is the Minister of State, Foreign and Commonwealth Office and no longer the chairman of the Conservative party, given today's scandal over the financing of the Conservative party by friends of Radovan Karadzic. I can see that he is on much safer ground with the Second Reading of the Commonwealth Development Corporation Bill.
The debate has been graced by the presence of hon. Members who know a great deal about the Commonwealth—not least my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands), who was for a long time a very distinguished Minister of State for Commonwealth and Foreign Affairs. Indeed, when I was a shadow foreign affairs Minister and visited countries in the Caribbean and central America, the first question I was asked was, "How is Ted Rowlands keeping?" I was able to reassure them. Even though my hon. Friend's distinguished service took place some years ago, he is still a relatively young man in the context of the House. Indeed, my hon. Friend has a great deal to give the House in future. He has a special role now in the work of the Select Committee on Foreign Affairs, and I was glad that he brought the discussions and debates of that Committee to the notice of the House. My hon. Friend talked about the new role of the Commonwealth, which is an essential part of the developing role of the Commonwealth Development Corporation.
I liked the way in which my hon. Friend spoke about networking and a broking house for Commonwealth countries, with multilateral and bilateral contacts. No longer is the United Kingdom the spider at the centre of the web; it is an equal partner.
I am glad to see that the Government Whip is wearing his Commonwealth Parliamentary Association United Kingdom branch tie. As treasurer of the UK branch of the CPA, I, like him, am keen to encourage the Commonwealth's role in Parliament. I am glad that that has been achieved through the CPA. I should like there to be greater co-operation between all the Commonwealth organisations, including the CPA and its sister organisations.
I am sure that my hon. Friend the Member for Merthyr Tydfil and Rhymney will agree that the new relationship with our fellow members of the Commonwealth must not be patronising or neo-colonial in any way. There must be an equal partnership. I am glad to see the Minister nod in agreement.
Nothing that is said today should detract from the good work that is carried out by the corporation. The Minister's remarks were positive and the hon. Member for Torridge and West Devon (Miss Nicholson) praised the corporation's work, about which my hon. Friend the Member for Eccles (Miss Lestor) said a great deal. The Opposition are supportive of the corporation's contribution. It is a public corporation and it will remain even more so under the next Labour Government.
I agree with what the hon. Member for Torridge and West Devon said about the corporation's staff. Events over the past year have shown us that those who are involved in development overseas can find themselves in extremely dangerous situations. People who are not on military operations have faced kidnappings and other problems. They are on missions of mercy, not on holiday; often, they are providing help, aid and assistance, but they sometimes find themselves in extreme difficulties. I pay tribute to the work that is carried out by the corporation's staff and to the work of all those who are overseas and engaged in development work.
The purpose of the corporation is to promote economic development in the countries in which it operates. We have seen its work develop in other countries, and we must be cautious about further development. We do not want to dilute the corporation's effectiveness. I am glad to see my hon. Friend the Member for Merthyr Tydfil and Rhymney nod in agreement.
The corporation's primary role is to provide equity and long-term loans on concessional terms to promote productive investment in the private sector. It invests about £200 million a year in developing countries. It is work that we agree with, support and encourage.
My hon. Friend the Member for Eccles, in her usual, kind way, spoke gently about the way in which we have dealt with legislation for the corporation in this place. Other hon. Members have alluded to that. I am rather more direct about such matters. The approach has been something of a dog's breakfast, culminating in today's reintroduction of a Bill that was introduced by Lord Trefgarne last year. There has been chaos and confusion, which underlines the need for a Cabinet sub-committee to deal with development and to liaise between Departments to discuss issues that have a bearing on the Foreign Office, the Treasury, the Overseas Development Administration and other Departments.
I congratulate my hon. Friend the Member for Eccles on successfully steering through our policy forum at Manchester over the weekend. It is now the Labour party's policy to establish a development sub-committee so that, under a Labour Government, after the next general election, we shall not have confusion over the legislation that involves the corporation.
Why were the Government unable to insert all the measures that are before us into the original Bill, which was discussed in the House and in Committee, and which could have been amended? There could have been an overall, rather than a piecemeal examination of its operations.
The Government's record in other areas makes us suspicious. That is why we have been worried about their real intentions. I understand that there has been some in-fighting between the Treasury and the Foreign Office over the original Bill. I know also that that created some problems. Bearing in mind, however, what has crept in, we have a right to be suspicious.
We are still suspicious of the rationale and the implications that lie behind the Bill, but we have no hesitation in welcoming the introduction of the Commonwealth private investment initiative. During the Government's dying months, however, we want to be kept fully informed of developments. When the Labour Government take office after the next election, the House will receive an annual report. It is—[Interruption.] Some Conservative Members laugh. I am glad to give them some amusement.
Conservative Members should have been with me this morning in Dunfermline to witness the pathetic performance of the Secretary of State for Social Security at the Scottish Grand Committee. They would have seen the Government on their last legs. Indeed, some Ministers are on the chicken run because their majorities are smaller than 10,000. They know that they are on the way out. I am not indulging in fantasy, and none of my right hon. and hon. Friends is complacent.
My hon. Friend understands the hysteria of Conservative Members. It is—[Interruption.] I thought that I might stir up some Conservative Members.
We are worried about "unshackled", a word that has been used by Ministers. It has been used in the context of the corporation. In other contexts, it is a euphemism for the removal from the state sector of an effective tranche of public sector finance, which finds its way instead into the hands of financial vultures who make a quick killing at other people's expense.
I reiterate the words of my hon. Friend the Member for Eccles. We want the Minister to give us some assurances that the financial vultures will not benefit in this instance. The Minister has told us that the Government do not want the corporation to be yet another bank, but, as my hon. Friend the Member for Eccles said, the membership of the corporation's board is similar to the membership of a bank's board. Will the Minister tell us something about the board's membership? We have had some discussion with the present board members and with Baroness Chalker about getting on the board people who are especially interested in development. I would appreciate some assurance from the Minister this evening.
I want also to emphasise something my hon. Friend the Member for Eccles said. We firmly believe that the CDC has a distinct and expanding role to play in a Government-directed overseas aid programme. That is why we have had some discussions with the CDC about the role that it will play under the next Labour Government. As my hon. Friend said, we will continue those discussions to see how we can develop the role of the CDC positively to help the development of the countries concerned.
From our discussions with CDC members, we have gathered that it will continue to build on the good work that it has undertaken over the years. However, the need for the Government to retain a close interest in the way in which public bodies operate must always remain. I hope that the Minister can give an assurance when he replies this evening that the Government and the ODA will work closely with the CDC and continue to take an active part in the future. The passage of the Bill should not be a signal for any kind of disengagement by the ODA from the oversight of and co-operation with the work of the CDC.
The Opposition are worried about the dangers of progress towards privatisation, because we have seen that happen to other organisations. Indeed, the water quangos have not been privatised yet in Scotland but if, heaven forbid, another Tory Government were elected, they would be ripe for privatisation. I notice that the hon. Member for Hexham (Mr. Atkinson) is nodding. He obviously agrees that if another Tory Government were elected, that is exactly what would happen. We are worried that the Government might be testing the waters for fattening the company and selling it off, so it would be helpful and reassuring for all those involved in development if the Minister were to give an assurance that the Government do not intend to move in that direction. If I am more sceptical than some of my hon. Friends, it is through experience.
As my hon. Friend the Member for Eccles said, the Labour party accepts that the private sector has an important part to play in development. We have never denied that. We want a genuinely indigenous private sector, not a dependent private sector. We must ensure that capital flows remain in the developing world and are not siphoned away from the developing world so that it becomes increasingly dependent on foreign investment. Such a scenario can be envisaged if the financial managers and City fly-boys prevail over the genuine managers and those involved in development who have experience of running businesses in the developing world. We expressed that concern last year in similar debates on the CDC. The CDC has been very thorough in its briefings to us and it has assured us that the hands-on element that has served it well over the years will not be lost to the excesses of privatisation and the financial markets.
The CDC has, carefully, found a niche for itself in promoting investment over the years. Both the Opposition and the Government have acknowledged that this evening. Attempts to move into areas run by bigger fish—other organisations that are doing a good job—would be a dereliction of the CDC's duty to its original purpose and its current role. I hope that that role will be assured into the future. Any change would inevitably result in the CDC having to compete on terms that are not favourable to the enhancement of the developing world.
I cannot understand why, despite repeated requests by the Labour party, a Bill that would allow projects such as the Commonwealth private investment initiative, but would not give the CDC powers as wide as are proposed today, could not have been drafted quickly to avoid wasting parliamentary time. The Labour party is going along with the extension of powers today, but we need assurances from the Minister. We are going along with the Bill because of the enthusiastic support given by Commonwealth countries, through their high commissioners and directly, to'the CPII.
I hope that the Minister can reassure us on the points that have been raised in today's debate. While we have reservations about the extent to which the CDC will be given freedoms by the Bill and the fact that the Government have lessened its role in the future, we wish it every success in the CPII.
Development for countries, especially in Africa, must be appropriate to their needs, and should be without exploitation. It is important, as my hon. Friend the Member for Merthyr Tydfil and Rhymney said, to recognise the new role of the Commonwealth. We do not accept that the physical colonialism of the past should be replaced by financial colonialism. With those reservations, we are prepared to go along with the Second Reading of the Bill this evening.
We have had a useful and interesting debate on the Bill. I expected there to be support from both sides of the House for the work of the CDC and I was not disappointed. Hon. Members have raised a number of points and I wish to deal with them.
The hon. Member for Eccles (Miss Lestor) mentioned that few resources go to the poorest countries. I have to admit that private sector flows are low, but they have increased significantly recently. The flows concentrate on a small number of middle-income countries, mostly Latin America and east Asia. Sub-Saharan Africa and south Asia account for 30 per cent. of the world's population, but attracted only 2 per cent. and 4 per cent. respectively of private sector money in 1992–94. During that period, however, the CDC invested 50 per cent. of its investments in those areas, which augments the private flows.
The hon. Members for Eccles and for Carrick, Cumnock and Doon Valley (Mr. Foulkes) mentioned privatisation of the CDC. Following the last quinquennial review, it was confirmed to the House in May 1994 that the CDC was being retained in the public sector, and that remains the Government's belief. I am happy to confirm that the present position—in which the CDC is a public corporation run by the board in a framework of targets agreed with Ministers—is the right one.
Much has been said about why the new powers were not included in the original Bill. After what became the Commonwealth Development Corporation Act 1995 had been introduced last year, we concluded that we could not add measures to it within the long title. That is why Lord Trefgarne introduced a private Member's Bill in the other place. Two hon. Members stated that that Bill failed because of lack of Government time, but it failed because of a mistake by Labour Front Benchers. It is amazing how they will not apologise for having killed the Bill off and instead try to make some high-minded excuse about a matter of principle. It was not a matter of principle: it was a mistake.
It was not that the Government wanted no one to speak in favour of the CDC; quite the reverse. The hon. Lady might not remember, or her memory is selective. The deputy chief Whip of the Labour party objected to the Bill, rather as the Opposition objected to the Hong Kong (War Wives and Widows) Bill just 10 days ago. They did so by mistake, and I am pleased that, today, both sides of the House have recognised the wisdom of the Bill and that we have been able to put the matter straight.
There has been a feeling of agreement for much of the evening, but we did not make a mistake; it was quite deliberate. The Bill was not killed off, but opposed, because we were not receiving the assurances that we sought about the future of the Bill and the CDC. We are receiving those assurances tonight.
I have heard that one before. Here, at least, we have a Bill that has now worked, and we have shown that progress can be made when two or more people who are friendly towards a Bill's objective act together sensibly in the interests of those whom we are all trying to serve. I pay tribute to the hon. Lady for the fact that we are now discussing this Bill, and I believe that, God willing, it will be given its Third Reading as well. Let us leave the other issues to history, which is where they ought to be buried.
The hon. Lady mentioned the "poor country" target. We need to allow the CDC to play a role in countries where it usefully can, but we should also remember that the target for poor countries relates to countries eligible for International Development Association funding. The definition of a poor country involves a per capita income below $1,300 in 1992. We must allow the CDC to play a role wherever it can, but some countries may fall outside that limit.
South Africa, in particular, is not defined as a poor country for our present purposes. Other countries, such as Namibia, Botswana, Jamaica, Fiji, Belize and some small Caribbean Commonwealth islands do not fit the definition of a poor country, either, but are helped by the CDC. In all cases, the CDC targets areas and sectors that may have difficulty gaining access to other sources of finance, or helps to diversify economies. That allows some diversification of risk in the portfolio.
Yes—and I will repeat that later, when I deal with the points made by the hon. Gentleman.
The current coverage of the CDC's activities is pretty comprehensive. We are now doing significant business in India and Pakistan; more recent additions include South Africa and Vietnam. The main driver of the CDC's country coverage is the 70 per cent. target for poor countries—as it should be, given the corporation's developmental role. That target has not changed. The CDC is not planning to divert activity to middle-income countries; on the contrary, it is no longer making new investments in countries such as Malaysia, Singapore and Hong Kong, but is extending its activities into pre-emerging countries.
The hon. Member for Hackney, North and Stoke Newington (Ms Abbott) popped into the Chamber for a few minutes. I am sorry that she missed the opening speeches from the Front Benches, and that she is now missing the answers to her questions, but I hope that her hon. Friends will point her towards the answers. She mentioned the Commmonwealth countries. The Government no longer set a formal target for investment in traditional Commonwealth countries.
Up to 1993, the target was to make two thirds of new investments in Commonwealth countries. That target was comfortably exceeded. In practice, the CDC still makes a large proportion of its new investments in Commonwealth countries—in 1995, the proportion was 71 per cent.—and it has an internal target of making not less than 30 per cent. of its new investments in sub-Saharan Africa, where there is a concentration of Commonwealth countries. In fact, it achieved 47 per cent. in 1995.
Eastern Europe and the former Soviet Union have been mentioned. The hon. Member for Hackney, North and Stoke Newington said that too much was going to eastern Europe. The CDC does not currently invest in eastern Europe or in the former Soviet Union, and there are no plans to ask Ministers' permission to do so. A number of other bodies, such as the European bank for reconstruction and development, already exist and have a remit to promote investment in eastern Europe and the former Soviet Union. The CDC and the Government would need to consider carefully whether the CDC had any comparative advantage. Resourcing implications would also need to be considered.
The CDC is not currently working in Nigeria, or planning any new investment. Old projects are there on a care and maintenance basis only.
The hon. Member for Eccles suggested that there should be more development experts on the CDC board. There are currently four vacancies on the board, but I believe that the chairman and members have considerable experience of service in finance and development in various capacities. Indeed, that can be seen from the annual report. We are very grateful for the public service that they have given. The chairman recently established a sub-committee of the board specifically to review development issues, comprising the chairman himself, Professor Carruthers, Professor Faber and, I believe, Sir William Ryrie.
The board contains people with a wide range of experience, as does the proposed board of directors of the Commonwealth Africa Investment Fund, the first fund that I said would be invested in. The chairman, Mr. Pillay, is a former managing director of the Government of Singapore Investment Agency; Sam Jonah is the chief executive of Ashanti Gold Fields in Ghana; David Gill is a former senior director of IFC in Washington; David Phiri is a leading Zambian business man; Pen Kent is the executive director of the Bank of England and a banker, but a non-executive director of the CDC; and Nicholas Selbie is the managing director of CDC Investments. I am grateful to those people, and, despite what was said by the hon. Member for Carrick, Cumnock and Doon Valley, no one could describe Sir William Ryrie, Ian Carruthers, Carolyn Hayman, Michael McWilliam, Michael Faber, Pen Kent and Russell Seal as investment fat cats.
The hon. Member for Eccles asked whether the new powers would apply only to the CPII. The powers will assist the CDC in taking part in the CPII, but there is no reason not to allow the CDC to invest directly in projects involving reconstruction that are covered by the Bill.
I pay tribute to the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) and the Select Committee on Foreign Affairs for its report, and we welcome the Committee's support for the CDC. We expect the corporation to continue to play a major part in the UK development effort, both in the Commonwealth and in poorer countries. It is very successful in generating its own resources for new investments on the basis of accumulated funding from Government, and it is able to lever in substantial private sector finance. We have already discussed that. By widening the CDC's power, the Bill will allow the corporation to enhance and extend its investment activities in future.
The hon. Member for Merthyr Tydfil and Rhymney also asked whether the CDC had all the powers that it needed. I said that I would return to his question. The corporation has naturally been fully involved in discussions on the Bill. I was very pleased to meet Lord Cairns and the rest of the staff when I visited the corporation, and I believe that they are fully content with the range of powers that they will have, as are we. Indeed, they urged us to be speedy; what frightened them most was the possibility that the Bill might not be passed during this Session. Both they and the Secretary-General of the Commonwealth have spoken of the importance of the Bill.
The hon. Gentleman also mentioned the scope of Commonwealth co-operation. The CPII is an instrument that will involve countries such as Singapore in the development of sub-Saharan Africa, and it is therefore greatly to be welcomed.
The CDC is a well-respected organisation that deserves our support. Its services are much sought after in the developing world, where there is widespread appreciation of the quality of its investment and the real contribution that it makes to economic growth. The Bill provides for a logical extension of the CDC's existing powers, which it has used prudently and responsibly over the years. It will continue along its established path, but it is right to enable it to join its partners so that it can respond flexibly to the changing needs of poor countries. I commend the Bill to the House.
I beg to move, That the Bill be now read the Third time.
I thank hon. Members who have taken part in the debates and who have contributed their wisdom and experience to our consideration of this short but important Bill. I am also grateful to the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) for his knockabout pantomime act on Second Reading. We expected such from the hon. Gentleman: other contributions were more thoughtful.
We examined some key issues relating the role and achievements of the Commonwealth Development Corporation in promoting sustainable development in poor countries and, in particular, in supporting the development of the private sector. The Government presented the Bill to update and clarify the CDC's powers so that it may join its co-investors in the future and encourage the development of effective money and capital markets.
The Overseas Development Administration and the Commonwealth Development Corporation will continue to work closely together to ensure that the CDC's new powers are used to complement its existing activities within the strategic framework that has been agreed with the Government.