Draft International Development Association (Multilateral Debt Relief Initiative) (Amendment) Order 2017 Draft African Development Fund (Multilateral Debt Relief Initiative) (Amendment) Order 2017 Draft International Development Association (Eighteenth Replenishment) Order 2017

Fiona Bruce Excerpts

Monday 20th November 2017 General Committees

[Rory Stewart]

The answer is that we focus very hard on this and improve all the time. As my hon. Friend points out, every year we realise more and more the complexities and risks in such investment. In the case of the IDA and the World Bank, there is often a very complex chain of intermediaries before the investment hits the ground. That means we need to look at everything: the tenders; the way that contracts are let; and implementation on the ground. We need to go beyond the numbers to look at the quality on the ground. The figures that the IDA and the World Bank have achieved on the ground are absolutely staggering. They are responsible for providing a water supply to nearly 100 million people, and for providing education to nearly 200 million children. The numbers that they are able to achieve are absolutely astonishing.

Where we need to get better, and what we are working on much more closely with the bank, is making sure that we focus on quality. What are the children actually learning in school? Do they emerge fully literate? Do they have the skills we want, rather than us just getting somebody into a seat? Secondly, can we get the bank to be more innovative? Can we get it to think more about economic development, or how to work for the private sector? Getting the right relationship between public risk capital and the private sector is critical, because it is the private sector that is likely to know whether the business that is being invested in is genuinely sustainable. Will those jobs be there in five or 10 years’ time? Are people being trained in a skill for which there is a market, as opposed to what has often happened in the past, whereby vocational training programmes and investments have been directed towards an idea of where the market is, without a real understanding of the business environment?

[Fiona Bruce (Congleton) (Con)]

Encouragingly, the Minister has talked about investing more funds in fragile and conflict-affected states. Can he tell us the five top countries in which the most funds are invested, if not the specific amount?

[Rory Stewart]

I cannot promise to do that off the top of my head. The broad answer is that the World Bank divides into two halves. With regard to the IBRD and non-concessional loans, which are not what we are talking about today, some of those go to middle-income countries; we would expect them to be the larger middle-income countries. The IDA, which we are talking about, and which is the concessional arm, will focus on the lower-income countries. We would expect large amounts of that money to go to Nigeria, Ethiopia and Pakistan; they are very large examples of non-middle income country recipients. That is where we want to direct increasing amounts of the IDA’s funds.

The other two statutory instruments are about multilateral debt relief. I remind everybody that many of the poorest countries in the world ended up in huge amounts of debt—very heavily indebted. By the 1990s, many of the poorest countries of the world were spending most of their taxation revenue on trying to pay off debts accumulated by previous Governments. By the late 1990s, we realised that probably the most useful thing the developed world could do was forgive that debt, giving countries the chance to get off the ground again and to start to spend money on the provision of services—education and heath in particular. It was the former right hon. Member for Kirkcaldy and Cowdenbeath who drove that process through, and at the Gleneagles summit in 2005 we, along with other countries, committed to playing our role in debt relief.

The Committee will not be surprised to hear that the amount we have put into debt relief in the international community is again around the 13% to 14% margin; that represents both our commitment to aid and the size of our economy. These statutory instruments are part of ongoing obligations determined by a previous Government in 2005, but continued by that Labour Government and by the coalition Government. Now, our Government continue to fulfil these long-standing obligations that a British Government took on, with the rest of the international community, to forgive the debt of these states.

That is not enough in and of itself. We have also put new processes in place to ensure that as those countries get money again, it is invested back in education and health, rather than going to building up more debts. We need to be particularly careful, because since the 1970s and 1980s when they accumulated the debts, the nature of international finance has changed. Increasing numbers of private sector actors in China, India and the City of London could be lending large amounts of money—there could be eurobond offers, for example, from the City of London—without the kind of conditionality that would have come with the previous debts. That could lead to countries again accumulating a large debt burden that it would be difficult for us to deal with.