The purpose of the Bill is to give effect to the Government's decision to contribute 4 million US dollars to the current international programme to provide additional funds for the International Development Association. The funds are required so that the association may be able to continue and expand its work of promoting the economic development of the less developed countries.
The International Development Association was set up in 1960, to provide aid on easy terms, as a subsidiary of the International Bank for Reconstruction and Development. At present it has 107 member countries, including Ireland. It makes interest-free or low interest loans repayable over periods up to 50 years. Usually there is an initial grace period of ten years during which no repayments are required. The need for this type of organisation arose from the fact that many developing countries were finding it increasingly difficult to finance their development programmes by borrowing on normal market terms. Market borrowing was straining their credit-worthiness and was creating a serious debt-servicing problem for them, a problem which has tended to become more acute in recent years.
The association is closely linked with the World Bank in its management, staffing and general operations. Many projects in developing countries are financed by a combination of bank and association loans, the bank funds being provided on more conventional terms. The overall effect is to reduce substantially the cost to the borrower.
At an early stage the association decided to concentrate its activities on developing countries whose per capita income did not exceed £300, about £120, a year. From its inception in 1960 to June, 1971, it made available a total of £3,340 million. This comprised 274 loans to 58 countries. There has been a steady increase in operations, particularly since 1967, according as the association has had access to greater financial resources.
Loans are usually provided to finance specific projects and are normally intended to cover the foreign exchange costs involved. Sometimes funds are given to assist a general development programme or reconstruction measures. For example, a loan to assist reconstruction in Nigeria was made earlier this year. Every project is carefully evaluated and the association must be satisfied that it will contribute to the economic advancement of the country concerned. A large proportion of lending has been for agricultural purposes but transport and communications, irrigation, power supplies, education and technical assistance have also benefited. An important feature of the association's aid is that recipients are not tied to any particular suppliers for the purchase of machinery and equipment needed for their projects but can "shop around" to get the best value.
The organisation depends largely on the 19 richer member countries for funds. In 1960, when it was set up, those countries, which are known as Part I members, subscribed £751 million in convertible currencies. The other members, called Part II members, comprising the less industrialised countries, like ourselves, and the developing countries, paid £265 million but only 10 per cent of this sum had to be paid in convertible form. In 1964 the association found it necessary to replenish its resources and the Part I members contributed a further £741 million. A second replenishment in 1968, also provided by the Part I members, brought in a further £1,200 million. Earlier this year agreement was reached on a third replenishment to provide a total of £2,450 million over the next three years. This replenishment has not yet become effective as the necessary procedures have not been completed by sufficient members. It is hoped that the formalities will be completed shortly.
Ireland has been a Part II member of the association since its inception in 1960. Our initial subscription was £3.03 million. Although the conditions required that only 10 per cent of this sum be paid in convertible currency, we paid the subscription in full in foreign exchange as an indication of our support for the association's work. In common with the other Part II members, we did not participate in the replenishments in 1964 or 1968. On the present occasion, however, approaches were made by the Association to the more advanced Part II members, including this country, asking that they share in the latest financing arrangements.
The demand for concessionary aid is almost insatiable, as more and more of the poorer countries find themselves unable to finance their development programmes by conventional means and meet rapidly rising burdens of debt repayment. "Soft" aid is one of the most important means at present of ensuring a real transfer of resources from the developed to the developing world. The Commission of International Development, set up by the World Bank under the Chairmanship of Mr. Lester Pearson, former Prime Minister of Canada, in its Report published in September, 1969, called for a massive increase in this type of aid. We are committed to increasing our development aid according as our economic circumstances improve. The Government have decided, therefore, that it would be reasonable to increase our contribution to the International Development Association, subject to the passage of this Bill. As already mentioned, the additional contribution proposed is £4 million. I might mention that Spain, Switzerland, New Zealand and Yugoslavia have also agreed to contribute.
It is proposed in the Bill to authorise payment of our further contribution out of the Central Fund. This is necessary because a firm arrangement must be made at the beginning to commit the sum in three annual instalments, so that the association will have some assurance that funds will be available to enable it to meet its commitments to developing country borrowers. Actual disbursements may be apread over a longer period and will be a matter for agreement with the Association.
It has been said that our aid effort is too small and that we are not keeping up with the efforts of other countries. The great bulk of the aid we provide officially is made available through international bodies, such as the various United Nations agencies, the World Bank and the International Development Association. This helps to ensure that it is applied to the best advantage of the recipient countries. International statistics indicate that our performance in such multilateral aid-giving is not unreasonable in comparison with other countries. Other countries, however, also give a large proportion of their aid bilaterally. Much of this kind of aid is between the major powers and their former colonial territories, and a high proportion is tied in one way or another to the purchase of goods, perhaps machinery and equipment, from the donor countries. Thus, the donor countries may be doing little more than extending credits from which they will get valuable benefits in production and exports.
Our case is quite different. We do not benefit to any extent in trade and a definite sacrifice of resources is, therefore, involved. It must be remembered, too, that we have to import capital in sizeable amount to finance our development programme. As long as this is so and as long as we have a serious balance of payments problem, our ability to provide capital for overseas countries must necessarily be limited. Nevertheless, the amount of our aid has been increasing. It has grown from £673,000 in 1964/65 to £1¾ million in 1970/71 and the increase of £4 million now proposed will provide a further boost. This is an earnest of the Government's wish to do our best by the Third World.
I need hardly remind the House that Ireland has for many years been making significant contributions also through the missionary effort, which includes contributions in such fields as education, medicine and nursing. We have also made personnel available to international agencies for technical assistance missions and educational and training facilities have been provided in our universities for students from the less developed countries as well as training facilities in the Army and other public services. When these contributions are taken into account, our record is not, perhaps, as small as the bald comparison of statistics might suggest.
The Bill is a practical expression of our willingness to share in the international development effort. As such I have no doubt that it will be readily welcomed by the House.