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

Debate between Shailesh Vara and Rory Stewart

Monday 20th November 2017 General Committees

[Rory Stewart]

It is a great pleasure to serve under your chairmanship, Mr Evans. The orders address two separate matters: a replenishment for the IDA—the International Development Association, which is part of the World Bank—and ensuring we deal with debt. With your permission, I shall deal with the two separately.

On the first matter, the draft International Development Association (Eighteenth Replenishment) Order 2017 will put £3.865 billion into the IDA. As right hon. and hon. Members will be aware, the World Bank is effectively divided into four parts. It was begun in the 1940s as an institution for lending to places such as France after the second world war, but different sections of it developed over time. The IDA was established to make concessional loans and grants to poorer countries, after it was discovered in the 1950s that the old instruments of the International Bank for Reconstruction and Development, which gave loans at commercial rates, were not suitable for the poorest countries in the world.

It is the IDA that the draft order will replenish. The World Bank Group includes two other institutions that the Committee is not debating today: the Multilateral Investment Guarantee Agency, which helps to make loans in the private sector; and the International Finance Corporation, a development bank that lends money, much as CDC does, and makes debt and equity investments in the private sector.

Why are we proposing an IDA replenishment, and why have we specified this sum of money? We believe strongly—I hope there is cross-party consensus on this—that the World Bank is a very serious and impressive institution. We are proud to have been a founder member of it, and to have partnered with it over the past 70 years. It is not a perfect institution—it has flaws, like any other—but anyone looking for an organisation with a critical mass of technical expertise and real understanding of some of the toughest development challenges in the world, particularly relating to infrastructure, public financial management and tax receipts, cannot do better than the World Bank. That is not just a claim; it is sustained by my Department’s multilateral development review, which marked the IDA very highly.

Let me give some examples of what the IDA does, and what we hope it will do, with the money. A single investment in public financial management in Burma increased the Burmese Government’s tax take by 2%, bringing in nearly £1.5 billion more a year for the Burmese Exchequer. That dwarfs what we put in through development aid, and is a really good example of how technical assistance can transform things.

We have specified this sum of money because it equates to approximately 13% of the IDA replenishment. That is roughly the same proportion that we have contributed over the past 15 years; almost every replenishment is at that level. That is the replenishment that we feel is appropriate, given the size of the British economy, and it is the amount of money we feel we should put in, as a founder member of the IDA. That does not mean, however, that we are not asking tough questions and using our money, leverage and position on the board to demand improvements. Recently, we have particularly focused on improvements and on encouraging the IDA to go to fragile, conflict-affected states that it has been reluctant to get into. We have encouraged it to focus on refugees and migrants.

[Mr Shailesh Vara (North West Cambridgeshire) (Con)]

My hon. Friend has raised an important point, but I want some clarification. I accept that the money has to be given, and is used for good purposes, but to what extent is there monitoring of funds once they have left the bank? That is ever more important for us, given our local funding challenges, and media scrutiny of where the money ends up. If we are to increase our contribution, it is important that how the money is used is monitored much more carefully as well. What assurances can the Minister give me that that is being done?

[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?