Draft Asian Infrastructure Investment Bank (Immunities and Privileges) Order 2015

Gareth Thomas Excerpts

Monday 2nd November 2015 General Committees

[James Duddridge]

I could not agree more. Before coming to this place, my hon. Friend established a great tradition of working in that area, and he continues to leverage his expertise as a member of all-party parliamentary groups. I urge him to continue to do that, through his involvement with the fledgling development bank.

The order is part of the UK’s ratification process, and provides the privileges and immunities that will enable the bank to function as an international organisation in this country. It is part of the requirements laid out in the articles of agreement signed by the UK Treasury’s Commercial Secretary in June and is in line with the requirements of other international organisations of which we are a member.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

I apologise for the discourtesy of missing the Minister’s opening remarks. He mentioned other multilateral development banks. How does he see the new bank operating with the Asian Development Bank? One would think, instinctively, that there was some overlap or, if not, that there would be some sort of memorandum of understanding between the two. Does the Minister envisage that?

[James Duddridge]

I certainly envisage their working closely together, but equally closely with other international development banks, such as the European Bank for Reconstruction and Development, the African Development Bank and, to a lesser degree, the World Bank, which has a slightly different context and structure in relation to the order. There are plenty of development opportunities in the region and beyond, and I encourage all development banks and all Development Ministers across the world to work together. That is where the greatest rewards are, rather than in operating solely individually. Fundamentally, it is about operating collectively.

[Mr Thomas]

The Minister is aware that Mr Jin Liqun was appointed as the secretary-general of the multilateral interim secretariat of the new bank. Was Britain consulted on the appointment? Is it a genuinely interim one and, if so, will Britain be involved in the interviews for the permanent head of the bank?

[James Duddridge]

I cannot speak for the appointment process as part of the draft order. I am just setting out the basis on which those people will be employed. However, I am more than happy to look at the matter, if it is exercising the hon. Gentleman—as it appears to be doing. In relation to the draft order, I have made the comments that I wish to make and I therefore commend it to the Committee.

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[Mr Graham Allen (Nottingham North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Gapes, as always.

I am delighted to see colleagues with vast experience of international development in Committee—my right hon. Friend the Member for Cynon Valley, my hon. Friend the Member for Harrow West and the right hon. Member for Sutton Coldfield, who was a distinguished Secretary of State. I hope that they will take the chance to talk about the important question of immunities and privileges as far as it extends to the broader remit of what China is trying to achieve in its foreign policy goals, which we appear to be swallowing, sometimes without taking too much time to see what it is that we are swallowing.

Immunities and privileges are important in that regard. I do not want us to become the Chancellor’s version of an eastern powerhouse. We will be putting about £2 billion into the bank. Will there be a return domestically, in the countries that will benefit from the projects, and in our own UK economy? Will we get representation? Will the immunities and privileges in the draft statutory instrument be sufficient to safeguard the British interest? That is my anxiety about the helter-skelter speed at which some things are being done politically—though we all wish the Chancellor well, because we all wish Britain well when we enter such engagements—and at the parliamentary level. You know better than anyone, Mr Gapes, that such things need proper, careful, steady scrutiny. We ought sometimes perhaps to take a leaf out of the Chinese book. If things took several years to come to fruition, we would be able to understand them in much more depth. Many people, even in the House, are totally unaware of what the bank will do and how it will fit with existing institutions. If we asked the man and the woman in the street about the Asian Infrastructure Investment Bank, they would not have a clue what we were talking about, yet we are going to cast £2 billion into that bank.

One of the good things, and one reason why I am interested in hearing the former Secretary of State’s comments, is that the institution is still a moveable feast. We have seen a number of changes, even in the past six months, in the Chinese position, in respect of, for example, the representation and stakeholding, and what the functions of such an investment bank might be. I wonder whether the former Secretary of State in his private moments, or perhaps even in a pubic moment today, might ask about the impact of the bank, and of Chinese economic and foreign policy, on our overall strategy for international development and for helping people in difficulties—abroad, of course, but also in our own country. I will not stray into nuclear power or the demise of the steel industry because you would rightly call me to order, Mr Gapes.

The other people who have raised warning flags are our good allies across the water, in the United States. They have asked a number of questions and we have consequently seen movement on the Chinese side. The Chinese have not said, “No, we’re not going to listen. It’s this or nothing else.” In such a negotiation, it is wise to play it long and keep a number of other things on the table. We have to develop international institutions, particularly with our friends and partners in China and India, but we need to ensure, rather like the Prime Minister is trying to do in Brussels, that the shopping list is not a closed one but one that can benefit from interaction and negotiation.

Over several months, the United States has, in an unusual way, flagged up rather clearly—in terms of our international friendship—some of its anxieties about our being a little too eager to chase after the Chinese dragon and accommodate its demands rather than to hold out and strike a tougher dealer. It is not good enough to say, “We’re going to let China come in. We’re going to trade with China.” We need to be clear about what that means. It has implications for the immunities and privileges we are talking about. For example, are the privileges and immunities granted to staff members of the World Bank identical to those granted by the order? Are we duplicating the facilities of the World Bank and many other international institutions? Was the establishment of the institution an attempt to create a counterpart to the World Bank? Perhaps we have seen that one off for the moment, but I do not get the sense that the Government are particularly clear about what they wish to do in that regard.

Regarding the immunities granted to people who will serve the institution, we also need to be clear that they do not give carte blanche to operate exploitative relationships, particularly with people who endure difficult working conditions. There is a lobby today about the Trade Union Bill. There may well be places where there are no trade unions and where workers are exploited, and we need to ensure that the people who run the institution take that into account. Who are those people? Are they representative? Will they give infrastructure resource to other countries to help them to develop with one hand, while encouraging practices that we would all condemn with the other hand? The people at the top of the organisation need to be aware of and clear about the need to develop these institutions on a much fairer basis.

[Mr Thomas]

My hon. Friend makes an important point, not least because the history of Chinese infrastructure aid to many developing countries, important as it has undoubtedly been, has often involved Chinese labourers effectively being imported into the country where the infrastructure is being built as a quid pro quo for the investment. Surely we need to ensure that that cannot be achieved as part of the investment we are potentially committing to this bank.

[Mr Allen]

That is why this particular statutory instrument is very important. The shareholders, stakeholders and staff of this institution who are going to enjoy the immunities and privileges being granted to them by this statutory instrument need to be on full alert that this is not an attempt to just co-operate and to maximise the exploitation of the people working in various parts of Asia covered by the institution.

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[Mr Thomas]

The people of Harrow West have always been interested in multilateral development banks, and they will certainly be interested in this new addition to the family. I want to pick up where my hon. Friend the Member for Nottingham North left off. One recognises the global Realpolitik that has clearly influenced the Prime Minister’s enthusiasm for contributing to this new bank, but one hopes that the Minister and his colleagues in the Department for International Development will, as my hon. Friend suggested, start to ask much tougher questions than those that the Minister suggested in the part of his opening remarks that I was able to hear are being asked.

Multilateral development banks have always been a cosy club. The Americans always get to pick the head of the World Bank; the Europeans always get to pick the head of the European Bank for Reconstruction and Development; and it is usually a Japanese national who gets chosen to be the head of the Asian Development Bank. There is therefore a sense that this new multilateral development bank is on the horizon partly because the Chinese want their own bank that they can control. That suspicion is fed by the appointment of Mr Jin Liqun, who seems to be the de facto chief executive of the new bank. I look to the Minister to give a fuller answer on whether he is there for a short or a long period, whether there will be interviews and whether Britain will be on the interview panel.

There is usually a series of vice-presidents to handle particular parts of a multilateral development bank’s portfolio. It would be good to hear a bit more about the structure of the proposed bank. Will there be a series of vice-presidents? Which countries does the Minister expect will provide the heads of the bank? Is this perhaps an opportunity for another Member from Nottingham to take up a position in the international development world? Is there a chance for Britain to hold one of the vice-presidencies of the new bank, given our significant contribution?

On staffing, given the scale of the spending that this multilateral development bank will presumably be able to make—very large sums of money will be committed to very large infrastructure projects—what will be the governance arrangements for those projects? Will Britain have a dedicated official and a team to support them, as we do at the World Bank and the Asian Development Bank, who will be able to go through the fine print of each proposed investment and pick through whether the environmental and social safeguards that the bank eventually signs up to are met in full?

Will there be a process by which Britain and others can raise human rights concerns, if there are any, about particular infrastructure projects? I ask that in the context of Sri Lanka, a country that certainly needs significant multilateral investment—the Chinese have been showing considerable interest in providing that—but where significant human rights concerns remain, particularly in the north and the east. It would be a tragedy if British investment in the new bank was inadvertently to reinforce through infrastructure spending the denial of human rights to particular groups in Sri Lanka.

[Mr Allen]

I am not sure whether my hon. Friend was seeking to nominate me for some sort of position in the bank when he mentioned a Member for Nottingham who could keep an eye on things, but modesty would forbid me from accepting such a role. There is a Member of Parliament for Nottinghamshire—the right hon. Member for Sutton Coldfield—who is eminently qualified to defend the interests of working people, as he ably did when he was the Secretary of State for International Development. He is too modest to get to his feet and acknowledge that, but he is in the Committee. Perhaps the Minister might think carefully about how we safeguard people in that position, because we have seen recently—

[Mr Allen]

We do not want to repeat what has happened with the Saudi Arabian republic looking after human rights and getting a soft job, when there are able people who can do that work on our behalf.

[Mr Thomas]

I am grateful for my hon. Friend pointing out to me that Sutton Coldfield is slightly further away from Nottingham than I had initially realised. Being from London, we are sometimes a bit hazy about the distances between constituencies north of Watford. Indeed, the right hon. Member for Sutton Coldfield might be an excellent potential vice-president if the Foreign Office was willing to fight for him to get such a post. Perhaps the first thing would be to know whether Britain will have a chance of nominating one of the deputies or vice-presidents to that role.

As I was alluding to, some of the commentary about the new bank has pointed out that its byelaws require a 75% super-majority for major decisions. That will effectively give China a de facto veto on personnel and policy decisions. It would be helpful to know whether that commentary, which was issued at the end of June this year, is still accurate, or whether there have been changes to the byelaws. It would be a concern if we were simply to pump money into the organisation with the Chinese having a veto over all the big decisions, particularly if we had significant concerns about spending going forward.

The previous Labour Government were pushing for reform of the processes for appointing the heads of multilateral development banks. I do not know whether the right hon. Gentleman carried on that work, but it would be good to hear from him on that subject.

The Committee and the whole House are entitled to hear what reassurance the Minister can give us on this crucial matter. Sadly, there was often little opportunity in the House to debate the work of the multilateral development banks. All too often, debate took place only when major funding decisions were being announced. Can the Minister set out whether there will be a change in that regard? Given that it is a new institution, early scrutiny on the Floor of the House might be important.

Finally, the AIIB released draft environmental and social safeguards. A series of NGOs have expressed concern about those safeguards, and it would be useful to hear from the Minister whether Britain has taken any of them up and whether there have been any reforms of and improvements to the draft guidelines.

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[James Duddridge]

I am terribly sorry to have insulted my right hon. Friend so early in my speech. I apologise profusely. He suggested that I should be working closely with the Department for International Development, which I certainly am. Today I stand here as a Foreign Office Minister with responsibility for protocol. However, I would like to work much more closely across a number of subjects with my right hon. Friend the Member for Welwyn Hatfield (Grant Shapps), who kindly deputised for me when I was ill for much of the last year.

I will try to deal with all the points that have been raised in this debate in broad themes. I will touch on individual points, mentioning individual Members, as and when. A number of Members brought up social and environmental issues, and the UK has been involved in discussions on those subjects from an early stage. The UK has encouraged the bank, and members of the bank, to consult widely, and Her Majesty’s Government have specifically had discussions with NGOs—those discussions will continue—on how the bank will operate and on the bank’s standards on social and environmental issues. There have not been specific discussions on the projects that the right hon. Member for Cynon Valley mentioned, but there are wide-ranging discussions encompassing all the issues, including human rights.

The hon. Member for Harrow West asked about the interim appointment. I confirm that Britain was consulted on that, and an election is expected for the full-time appointment. He probed me further on governance more generally, and I confirm that there will be 12 non- resident board members. How they will fit geographically, and the areas they will cover, are still being negotiated. Additionally, there will be a number of vice-presidents, but I remind him that a lot of these development banks have many members—in this case, there are already 57 members. However, Britain is well placed, given the Chancellor of the Exchequer’s early entry.

The policy lead will be through Her Majesty’s Treasury—this issue has been raised by a number of Members—and we will maintain a strong influence, but the exact positions both of the non-executive board and of the vice-presidents are still to be negotiated. However, I note that both in the time of the hon. Member for Harrow West and in current times we have strong experience of multilateral development, and we are well placed to assist the bank.

[Mr Thomas]

Is the Minister aware of any non-Chinese candidates for the permanent position heading the bank? Why does the Treasury have the policy lead? Given that DFID has responsibility for multilateral development banks, why has this particular bank been taken out of its control?

[James Duddridge]

The bank has not been taken out of anyone’s control. The Chancellor has been close to this work, which is perhaps why it is a Treasury lead. I have not been involved, so I am not aware of specific candidates in the longer term. As Minister with responsibility for protocol, I have looked at the governance issue in relation to immunities, privileges, reliefs and exemptions and what that might mean for different individuals.

The question of shareholding gives me an opportunity to address the super-majority. China will have the largest share capital, which translates to a voter shareholding of 26.1%, so the hon. Gentleman is right in his assertion that there is a blocking super-majority. However, the combined shareholding of non-regional members is higher than the Chinese holding, at 26.7%. In relation to the Asian Development Bank, I understand that there is an ongoing discussion about a memorandum of understanding between the two banks.

The hon. Member for East Lothian raised some concerns about the Japanese, and subsequently the hon. Member for Nottingham North raised similar issues about the US position in relation to this bank. The US was initially sceptical but it would be fair to say that its tone has softened over recent months, particularly after the recent Chinese state visit. The US acknowledged the contribution that this new bank could make. It is very much not a zero-sum arrangement. This will be a beneficial addition to the piece.

[James Duddridge]

The point of the order is to lay the foundations for the bank to operate across our jurisdiction in the UK, rather than to draw reference to where it might have other headquarters or regional headquarters.

[Mr Thomas]

With respect, the question of the hon. Member for Gloucester is perfectly reasonable. Where will the bank be headquartered? The Minister must know that. The Chancellor of the Exchequer must have agreed that as part of the agreement on our contribution.

[James Duddridge]

I cannot immediately confirm the location. However, if I am inspired later in my speech, I will clarify that point for the hon. Gentleman. Other hon. Members raised the issue of trade unions and the exploitation of workers. Specifically, labour rights have been and continue to be considered as part of the environmental and social standards that are being negotiated.

In relation to questions from the hon. Member for Nottingham North about the man in the street—clearly the people of west Harrow are better educated on multilaterals than those elsewhere—I gently suggest that perhaps the man on the street or the man on the Clapham omnibus would not know about the intricate workings of the European Bank for Reconstruction and Development or the African Development Bank, which are two similar institutions that do great work.

I said that I would return to the hon. Member for Harrow West on the location of the headquarters. Evidently, the location has already been decided to be Beijing.

The hon. Member for Nottingham North asked about the speed at which we should move. We have moved quickly and we did that deliberately to co-ordinate with an opportunity. The Chancellor has been a visionary in that regard, which will be good for the region and for the UK.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Asian Infrastructure Investment Bank (Immunities and Privileges) Order 2015.