I welcome the opportunity to speak on this Bill. Its purpose is to enable the Government to make a payment of £20 million as a Twelfth Replenishment of the International Development Association, known as IDA12. The Bill amends the International Development Association Acts, 1960 to 1997, to allow the above payment to be made to the association.
Ireland joined the association on its foundation in 1960 and made its first contribution in 1962. The Bill is a technical measure and many people will be interested to know what the International Development Association is. The International Development Association, or IDA, is the World Bank's group concessionary lending window. It provides long-term loans at zero interest rates to the poorest developing countries. The mission of IDA is to support efficient and effective programmes to reduce poverty and improve the quality of life in its poorest member countries. IDA helps build the human capital policies, institutions and physical infrastructure needed to bring about equitable and sustainable growth. Its goals are to reduce the disparities across and within countries, to bring more people into the mainstream and to promote equitable access to the benefits of development.
IDA lends only to countries with aper capita income in 1998 of less than $895 per annum and which lack the financial ability to borrow from other World Bank institutions. At present, 78 countries are eligible to borrow from the IDA. Together these countries are home to 2.3 billion people, a substantial proportion of the total population of the earth. In fact, it is 53% of the world's population. Today, 1.5 billion of these people survive on incomes of less than $2 per day. When discussing our own circumstances we should bear these countries and their serious levels of poverty in mind.
IDA lending has a maturity of 35 to 40 years, with a ten year grace period on repayment of principal. When a country receives a loan through the IDA it is not obliged to make repayments on the capital for the first ten years. There is no interest charged but credits do carry a small service charge which is currently three-quarters of 1% on undistributed balances. This percentage effectively covers the administration costs involved in managing overall IDA activities.
Since 1960, IDA has lent almost $115 billion to over 100 countries. It spends, on average, $5 billion to $6 billion per annum for different development projects, especially those that address basic needs such as primary education, basic health services, clean water and sanitation. It also funds projects that protect the environment, improve conditions for private businesses, build necessary infrastructure and support reforms aimed at liberalising countries' economies. These projects pave the way towards economic growth, job creation, higher income levels and a better quality of life.
Ireland is currently a member of the World Bank and its four affiliates, the International Development Association, the International Finance Corporation, the Multilateral Investment Guarantee Agency and the International Centre for Settlement of Investment Disputes. Ireland joined the World Bank in 1957 and the IDA in 1960. Our total capital subscription to the bank to date amounts to approximately $636 million or 0.35% of total subscriptions. About 6% or $37 million of the subscription has been paid and is usable by the World Bank for lending. The remaining 94% of the subscription is non-paid in or callable capital which constitutes a general guarantee on the bank's obligation. Ireland's subscriptions and contributions to the International Development Association since 1960 have amounted to $114 million or £70 million.
How does the IDA allocate its funds to the various countries? The reason this organisation is part of the World Bank is that it operates like a bank. There is a commercial discipline attached to its lending even though it is interest free and subject only to the small administration fee of three-quarters of 1%. Rather than give non-repayable grants, it imposes a discipline on the receiving countries to use the funds wisely because the money will have to be repaid 30 to 40 years hence. The benefit of this policy is that many countries which received funds 20 or 30 years ago are repaying them now and the moneys are coming back into the IDA. It means there is effectively a revolving fund. From that point of view, it is better than grant-in-aid.
The moneys we advanced to the IDA in the 1960s and 1970s and which was loaned to various countries is now coming back into the system and is being loaned again to other countries which need it at present. In due course those funds will return to be loaned to further countries in need in the next generation. There is a banking approach but it is a lenient approach given that the funds are effectively interest free.
The IDA uses certain criteria to determine which countries are eligible to borrow IDA resources. The first is relative poverty which is defined as GNPper capita below an established threshold. The current threshold is $895 per annum. The next is lack of credit worthiness to borrow on market terms and, therefore, a need for concessional resources to finance the country's development programme. Many countries would not meet commercial World Bank criteria for advancing loans and the IDA is the lender of last resort to those countries. They cannot get funding from other sources. It is also important that the recipient countries have good policy performance, defined as the implementation of economic and social policies that promote growth and poverty reduction. Each year the World Bank and IDA carry out performance ratings of the various countries because it is important they do not give money out willy-nilly. There must be certain criteria.
They look at a variety of areas, including the economic management of those countries, their structural policies, policies for social inclusion and equity and public sector management and institutions. It is important the funds are given to countries where they will be of real benefit and where the countries meet certain criteria.
These are all the macro-economic issues about which we, in the western world, might be concerned, but we must ask ourselves what is done by the International Development Association. The IDA addresses poverty through a broad range of projects, including projects targeted at human resource development such as education, health, safety nets, water supply and sanitation, the provision of infrastructure, and agriculture and rural development. The IDA also contributes to poverty reduction by advising governments on the best policies for attaining broad-based economic growth and reducing the vulnerability of the poor to economic shocks.
The IDA is now the single largest donor of funds for basic social services in the poorest countries. Children, 1 billion of whom live in IDA recipient countries, are the main beneficiaries of the resulting investment in basic health, primary literacy education and clear water. To put it simply, thanks to the IDA, some 45,000 primary school classrooms have been constructed or rehabilitated in African countries which enabled 1.8 million children to benefit from access to primary education; in Asia, more than 6,700 health care facilities were constructed or upgraded and then equipped and staffed to provide basic health care for a rural population; the social investment fund in Latin America reached some 9.5 million beneficiaries and activities supported by these projects generated almost 1 million person months of employment; in Africa, some 5 million textbooks, mostly produced and developed locally in Africa, were supplied to the primary schools; and in India, the national AIDS control project supported training of 52,500 physicians and has 60% of the nursing staff in the HIV/AIDS management topics. When one looks at the result of the donations from the western countries, one sees the real impact of the delivery of funds on ordinary people.
Many of these situations are addressed by the Heavily Indebted Poor Countries Initiative, the first international response to provide compre hensive debt relief to the Third World's most heavily indebted poor countries. This initiative was launched by the World Bank and the IMF in 1996. It is a matter which we discussed here at length over the past year in the context of the legislation relating to the Bretton Woods Agreement and as part of Ireland's contribution to the poorer nations. The HIPC initiative broke new ground by removing the debt overhang for countries which pursue economic and social reform targeted at measurable poverty reduction and reducing multilateral debt, and it also helps countries exit from endless debt restructuring into lasting debt relief. In summary, the World Bank has worked pro-actively towards rapid implementation of the HIPC initiative. Some 14 countries have qualified at least partially for debt relief packages amounting to some $23 billion. Some nine countries have formally qualified for more than $14 billion in debt relief and five have qualified preliminarily for an additional $9 billion. The HIPC initiative is well under way and it is having a real and practical impact in these heavily indebted countries.
I am pleased with the general support which the Bill has received from the Opposition parties during the debate to date. It is a sign that Ireland is a mature nation which has come a long way in 70 years. Having been the recipient of funds after the Second World War, Ireland is proud to be in a position to contribute to such funds.
Ireland contributed £13 million to the last tranche under the legislation and the Bill makes provision for a contribution of £20 million to be paid over a six year period. It is not that Ireland will pay just approximately £3 million per annum because the last tranche is still ongoing and within the next few years the thirteenth round will be up and running. Therefore, Ireland will be contributing to perhaps three different tranches of this fund in any one year. Since 1960, Ireland has contributed £70 million to the fund and this year we will contribute £7 million. I look forward to the legislation to enable Ireland to provide funds in due course for the next round, which will deal with the thirteenth replenishment of the IDA's funds, which is due to commence next month.
An important part of this initiative is that this will be the first time the International Development Association will contribute to the HIPC initiative, to which I referred already. To date, most of that was done specifically through the World Bank, but now the IDA will make direct contributions towards alleviating the debt in these Third World countries. That brings me to the question of debt cancellation and what is called breaking the chain of debt. Many Deputies, and especially members of the Joint Committee on Finance and the Public Service, would have received many representations on this topic since we discussed the Bretton Woods Agreement legislation some time ago. We must join the people who are involved in the campaign of the Jubilee 2000 committee and support them in their work, and also recognise the outstanding world leadership on debt cancellation provided by the Pope, President Clinton and Bono and various other high profile media stars which has been a tremendous help.
I urge the Government to look at European level at an initiative which is known as the Clarke proposal, which is named after the former Chancellor of the Exchequer in the UK, whenever it is appropriate. Mr. Clarke mentioned the possibility of putting a levy on all foreign exchange transactions to provide an international fund to relieve debt in Third World countries. Many institutions and banks in the western world are making substantial profits purely on foreign exchange transactions and a small levy could alleviate the substantial debt in some of those countries. One must bear in mind that most of these poor countries have weak currencies and suffer as a result of these foreign exchange transactions. Normally these currencies are most disadvantaged by devaluations and they need help in this regard. I recognise that there are practical difficulties in implementing such a levy. It would need to be done almost on a world-wide basis because if a country or a particular exchange was not involved in implementing this levy, a great deal of business would be attracted to that country to avoid paying it. However, the principle is correct. The mechanics of it will be difficult to arrange, but it is something we should look at to provide a fund which could be used to cancel the debt of the poorest countries in the future.
There has been much discussion about how much Ireland is contributing to overseas development aid. I want to highlight that in 1992, Ireland contributed £40 million to ODA and in 1999, we contributed £178 million. That is a four-fold increase during the course of the 1990s. Ireland's GNP in 1992 was £25 billion and now it is £56 billion, which is a two-fold increase. Therefore, Ireland's contribution to ODA has increased four-fold during a period when the GNP increased two-fold. Ireland has effectively doubled the contribution to ODA as a proportion of GNP from a figure of 0.16% in 1992 to a figure of 0.31% this year. We all realise that 0.31% is not sufficient, but we must recognise that we have made a considerable improvement from the position in the early 1990s. The Government, as part of its review of its programme for Government, is looking at the total contribution to ODA to see the measures it can implement to increase it even further. While I must acknowledge that significant progress has been made, I recognise that more progress can be made in this area.
Ireland's track record of contributions to development in Third World countries is good when we take account of the voluntary sector, whether it is through organisations like Concern, GOAL or other non-governmental agencies. In general, the NGOs will be happy with the Bill in that Ireland is making a direct contribution to a fund which does not charge any interest to the receiving countries. In contrast to the legislation on the Bretton Woods Agreement, on which we were contacted by a large number of people in the constituencies who were concerned about Ireland's contribution to the fund under that legislation, I received no representations on the Bill. People must be satisfied that we are making a contribution to this fund. If that was not so, we would have heard about it outside this House before now.
Ireland has a keen interest in contributing to ODA. Some 150 years ago Ireland experienced famine, which was immortalised in song ever since. At that time Ireland was exporting corn and other edible products while people were dying of starvation. In years to come the poorer countries will feel they were ravaged in the same way, considering people are dying of starvation in their countries and vast amounts of their resources are going towards paying interest and contributing to the profit of western banks. I believe this is the modern day version of what happened during the Irish Famine 150 years ago when products rather than financial resources were leaving the country. However, it amounts to the same thing at the end of the day.
We must consider the basic human rights of people in these heavily indebted poorer countries. We must recognise that we in the west are the haves whereas people in the poorer countries are the have nots. Our duty is to improve the living standards of everyone, not just in the western world but on the planet. We all live in a global village and this Bill is a positive step towards improving the living standards of people in poorer countries. I support fully the proposals in the Bill and commend the Bill to the House.