Am I to understand that if one government enters into what many people would have interpreted as, for instance in the case of the multinational oil companies with the Middle Eastern countries, an unfair arrangement about the valuation and exploitation of a country's natural resources that we have now guaranteed to them that if a subsequent regime refuses to expropriate those resources they will be compensated and that this is what is called funding international development? In other words, if we have a regime like the one in Chile at present, which is well disposed to international companies and they get involved in the coppermining industry in Chile, and then if a future government decides to take it back, are we actually going to pay off the international corporations who do that? It seems that expropriation is a case for compensation. If find that rather peculiar.
Multilateral Investment Guarantee Agency Bill, 1988: Committee Stage (Resumed) and Final Stages.
The first thing I want to clarify, as I did last week in my Second Stage speech, is that no investment can be made in any country without that country agreeing to it. It must have the agreement of the host country. That is the only way it can be made. There will be no investment or agreement with MIGA unless agreement is reached on the investment proposed for that host country by the host country. The Senator has talked about a situation where an investment is made and the government of that country at that time agrees to it and a subsequent government does not agree to it. I cannot visualise a situation where it would be possible to renege in that situation. MIGA is there to secure the investment that is made. If a new government in a particular country reneges or wants to change or opt out of an agreement already made by a previous government then, of course, MIGA would have to be called in to act and pay off the investor affected.
The Senator also talked about the expropriation risks and the involvement. Article 11 (a), Chapter III defines the expropriation risk. It would encompass measures attributable to the host government, such as nationalisation, confiscation, sequestration, seizure, attachment and freezing of assets. The phrase "any legislative or administrative action" in the provision includes measures by the executive but not measures taken by judicial bodies in the exercise of their functions. Measures normally taken by governments to regulate their economic activities, such as taxation, environmental and labour legislation as well as normal measures for the maintenance of public safety are not intended to be covered by this provision unless they discriminate against the holder of the guarantee. That is very important.
In defining these measures the Agency's practice would not be meant to prejudice the rights of a member country or of investors under bilateral investment treaties, other treaties and international law.
Chapter II, Article 4 (a) says:
Membership in the Agency shall be open to all members of the Bank and to Switzerland.
I would be very interested in knowing the status of Switzerland vis-à-vis the Bank and any detail and information the Minister can give on that would be appreciated.
Sorry, I did not hear the Senator's question.
My question related to Switzerland. From what it says in Article 4 (a) Switzerland does not appear to be a member of the Bank but some sort of supernumerary or addition. I would like some kind of fleshing out of that by way of response from the Minister.
Switzerland is not a member of the World Bank or of the IMF, so far as I am aware, but it gets involved in co-financing. This is where it has the opportunity to be involved here.
Article 12 came up on Second Stage but the Minister's answer, while it was a response, was hardly adequate. Article 12 is about eligible investments and it says, under paragraph (d):
In guaranteeing an investment, the Agency shall satisfy itself as to:
(i) the economic soundness of the investment and its contribution to the development of the host country;
(ii) compliance of the investment with the host country's laws and regulations;
(iii) consistency of the investment with the declared development objectives a priority of the host country; and
(iv) the investment conditions in the host country, including the availability of fair and equitable treatment and legal protection for the investment.
Paragraph (iv) makes considerable sense and (iii) is reasonable. I want to know where, in the Agency's assessment of a project, is there any reference to the ecological effect of a project, any reference to the impact on local indigenous populations of, for instance, a major infrastructural investment, as in the case of the building of dams which have resulted in significant expulsions of indigenous tribes in many developing countries and any effect on the world ecology by the destruction of rain forests — which is a form of development — any impact on indigenous food suplies by multinational investment in say cash crop farming. I am well aware that the World Bank has begun to be concerned about those things but I understood that the Agency was independent and took its own decisions independently. There is nothing in this Schedule which obliges the Agency to be concerned about ecological, social and other consequences of what might appear to be, in global terms, an economically attractive investment. I must say I find it quite surprising.
I think the Senator will agree that the Schedule itself could not have all the technical details that one would like in order to cover every aspect but all projects, under the supervision of the World Bank, have an environmental assessment impact built into them. Any subsidiary bodies would carry the same type of emphasis on their assessment of a project. Of course the normal environmental and labour legislation and other legislation of the host country would have to be taken into account and negotiations, discussions and dialogue would have to ensue between the host country, the developer and MIGA before MIGA would be satisfied that the investment was justified and did not have any detrimental effect.
The difficulty then is that we do not know what we are ratifying because we do not know what other areas of regulation by the World Bank are applicable to the Agency because they are not written down. I assumed — which was reasonable — that the Schedule described what they were supposed to do and it would not have been impossible to talk about the economic soundness and the ecological soundness of a particular investment or the social and cultural consequences of a particular investment, if that was intended. I have to say that I suspect that neither the ecological impact nor the environmental impact nor the impact on the indigenous population were thought about because this was drafted by the Minister for Finance and by the financially clever people rather than those with an expertise in the area of development. That I suspect is why it was left out.
Of course we had an imput at the start in framing this, accepting this and getting agreement on it before there was an international agreement on the convention and we still will have an input into the programme. We will be represented. We will have an opportunity through the executive director to make our input into every project and proposal and we will be able to take into account the views of the Senators here, the views of Ireland in any situation. We will be able to say that we want certain conditions in to protect the environment and its people and to help countries in a broad, human way rather than in a totally commercial, avaricious way and that will be done.
I am very interested in this aspect of the debate. I have listened carefully to what has been said but I would have thought that some comfort could be found in some of the clauses here in Article 12 in that the development must always be consistent with the development objectives and priorities of the host country. In other words, the host country — it would appear from this — has a very strong say in what it considers to be acceptable, suitable and consistent with its own objectives. I see in this convention something of a partnership and a co-operation between the investing country and host country. I feel less doubtful than Senator Ryan and I am reasonably hopeful that with that kind of co-operation and joint approach, the mistakes we have all seen being made and which have been made will be averted in this instance.
I am sorry to say I do not share Senator Bulbulia's optimism in this matter. I say this because Senator Ryan has very valuably raised matters such as the destruction of the rain forests and the record is perfectly clear on this. The Amazon Basin has been raped, with the active participation and co-operation of the government in that region. Nobody who is aware of the situation could take the slightest comfort from the fact that there will be discussions and negotiations involved in the host country. The authorities in many of these countries, particularly with regard to the destruction of natural resources, are the guilty parties and I share strongly in what Senator Ryan has said with regard to the necessity to protect these resources and to ensure that money from funds such as this are not applied in a way which would damage the interests of the majority of the citizens of any of these countries. That has happened in the past and it must not be allowed to happen again. I agree 100 per cent with Senator Ryan. It should not be beyond the wit of man to include at least some gesture in this regard in the terms of the framework of the Bill.
This is one of the dangers of letting international agreements go through without the benefit of either a foreign policy committee or a committee on Official Development Aid where these matters could be discussed in considerable detail. The reality is that most developing countries are so heavily indebted at this stage that they can no longer operate autonomously in putting together a development plan or identifying development objectives. Most of them are under considerable pressure from the International Monetary Fund to adopt a form of development or plan and that usually involves considerable disengagement of the State from the process of development and involves reductions in things like labour protection and in all sorts of the much-vaunted deregulation philosophy which is fairly widespread in the world today.
There is no guarantee here, given the pressures that are on developing countries, given the nature of the régimes in some of them and given the active collusion of the governments of many of these countries in the destruction of their environment. It was not western predators who deforested large parts of Africa; it was decisions by governments in those countries. It would appear to me that private investment — this is what we are talking about here; we are not talking about international aid by international agencies — will be judged by very narrow criteria.
There is no guarantee that any environmental issue or any ecological issue will be considered in this because we are not talking about money from the World Bank. We are talking about guarantees to private investment. There is nothing in this; there is no point in us deceiving ourselves but there is no guarantee in this. The World Bank would not directly be involved because the World Bank will not be providing any funds. This is a guarantee against commercial loss. The emphasis it appears will be on minimising risk and cost and one of the areas will be an assumption that because countries are poorly developed, a higher level of environmental damage can be tolerated.
It is almost too late to straighten out the world's environment before irreprable and irreversible damage is done. That irreparable and irreversible damage is as likely to be done in the attempts at wrong kinds of development in developing countries as by anything that will be done in the so-called developed world. A classic and simple example of the sort of decision that will be judged on quite excessively narrow terms will be the decision of international or multinationals to set up cigarette factories to manufacture tobacco products to sell to citizens in the Third World.
It is well documented at this stage that the tobacco industry has launched an enormous advertising campaign, as western countries become agitated about the dangers of cigarette smoking, to develop a new demand in developing countries. There is nothing in these criteria — if a developed country is desperately seeking investment — to suggest they would refuse to allow in a company which wanted to generate industrial employment manufacturing cigarettes. Similarly, it could be a proposal to manufacture baby food as a substitute for breast feeding which is a major matter of controversy between many international agencies and the multinationals.
Have we any indication that an issue such as that will affect the decision to give guarantees? They are all issues that are equally important in terms of development to any spuriously aggregated growth and gross national product. Growth and gross national product which does not involve meeting the needs of people on the ground can often do more harm than good. It took us a long time to realise that in the western world but people are beginning to realise it now. There is nothing in this to guarantee that the environment and the culture of developing countries will be respected.
I am satisfied that the World Bank's record in its contribution to the environment and its evaluation of projects pertaining to the environment has been very good. I am confident that MIGA which will have basically similar staff particularly from the member countries, will continue the same policy in its assessment of the various projects.
Senator Ryan has outlined a number of industries. It would not be possible to name every specific industry in a convention Schedule and say "This can be done but that cannot be done." I do not think — I cannot say — that the processing of tobacco products would be taken as productive investment or making a productive contribution to the Third World. Each project will be analysed and assessed. The environmental impact I am confident will be taken into account because the World Bank is involved. I do not think we need to worry on that score. The thinking in modern times is that the importance of people, their environment, and heritage must be taken into account in overall investment. I am confident that the World Bank, as the supervisory authority, will ensure that will be the way, particularly with MIGA.
Good intentions are admirable but the truth is that large areas of the developing world are ecological, wastelands at this stage because of local governmental policy and also the activity of multinationals. As Senator Norris said, the rain forests of the Amazon Basin, which are critical to our survival as much as to anybody else because of their role in maintaining the proper levels of carbon dioxide and oxygen in the atmosphere, are being destroyed with the collusion of a domestic government. Further international investment in such an appalling act of destruction will not be prevented by this but may well be encouraged by it because a future government in Brazil which decided to halt such activities in the interests of the environment would presumably enable an agency or a company to claim guarantees under this fund.
The Minister can say all he likes about good intentions but from what I have read of this Bill I did not think that the World Bank has any supervisory role. I understood that there was an agency with a directorate which operated under the terms of this convention. If the convention is only part of a greater convention then perhaps we should have been told that on Second Stage but, as it stands, the economic soundness of the investment is the major criterion; otherwise we trust the host countries which are severely in debt and under severe pressure. I do not think it is right that we allow private investment to be judged on the criteria of a domestic country which may be under pressure and in such narrow economistic terms. There is more to development than economic growth. There is no point in developing a country at the expense of its own people. This may well happen. The history of multinational investment in Third World countries is not a pretty one. It is not the sort of highminded ecologically concerned investment that the Minister is dreaming about. It is a record of exploitation, destabilisation and ecological destruction.
Acting Chairman
Is the Schedule agreed?
No, there are a couple of other things that need to be stressed. I wish to ask the Minister about Article 44 on legal processes which states:
Actions other than those within the scope of Articles 57 and 58 may be brought against the Agency only in a court of competent jurisdiction in the territories of a member in which the Agency has an office or has appointed an agent ... No such action against the Agency shall be brought (i) by members or persons acting for or deriving claims from members or (ii) in respect of personnel matters ...
I would like the Minister to explain what that means. It appears to me that an Irish citizen working for the agency in this country would not be protected either by the Irish Constitution or by Irish laws in any personnel matter because of this exemption. I found the reference to personnel matters quite intriguing. We have a range of protections for employees with regard to equality, maternity leave, holidays and so on which I would have understood to be personnel matters. What we are saying is that Irish citizens who perhaps are working here for the Agency cannot take legal action against the Agency. I might have misunderstood it as I am not a lawyer but I would like to know what it means.
An Order under the Diplomatic Relations and Immunities Act, 1957, will have to be made by the Department of Foreign Affairs to give the relevant Chapter legal effect. That will encompass the effect of this Article on Ireland and the personnel who are involved representing the country in any of the activities or projects that come under MIGA's control.
I have doubts as to whether in the light of the Supreme Court decision on the Single European Act an international treaty which potentially infringes on the rights of citizens in this country is constitutional at all.
MIGA will not be employing anybody in this country as such. They may employ people from this country but they will not have staff in this country as such. If people from the Departments of Foreign Affairs or Finance or wherever were going out to work for MIGA on any particular project or were under the control of MIGA or were in an official position with MIGA an order would have to be made to take this Article into account. MIGA will not be employing people directly here.
We might be.
No.
Will the Minister explain to me why the employees of the Agency should be exempted from taxes?
Under which Article?
Article 47 — taxes, salaries, pensions, allowances or other emoluments paid by the Agency to the chairman of the board, directors, their alternates, the president or staff of the Agency. No tax shall be levied.
The reason for that is to create an incentive for the best brains in the world, if you like, serving in the public service in various countries to give of their time in international work and to make up for the fact that they would have to leave home, move to a foreign country, travel a lot, investigate projects, write reports and make recommendations and do the normal duties of any international public servant. It is normal standard practice and such people get special tax immunity.
It is a classic example of the case that in order to make the poor work harder you reduce their incomes and in order to make the rich work harder you increase their incomes. This is why you cut social welfare, this being the view of the International Monetary Fund. I am fascinated by the fact that the Agency and all the well off people who work for it get all these perks and at the same time the people who work in those countries, the ordinary citizens, must be paid less because of the appalling financial state of the countries. What the Minister has said is the greatest load of old cod-swallop I have heard in a long time. I do not mean the Minister in any personal sense but that argument is a load of rubbish. This is one of the perks of the international development industry and it should be seen as such.
I do not share the Senator's very narrow commercial attitude to this. If MIGA is set up as an international body no country has a right to have all the staff in that organisation and unless there is an incentive for staff to work in the organisation they will not do so. If professional people with expertise are available to make a contribution the experience they gain can be used when they return to their own home country. It is a double-edged investment. It is an investment in people to improve opportunities, to improve standards of living and to improve resources in developing countries. In return, the expertise that is acquired by people who go and work with those agencies and authorities in these Third World countries or with international organisations must stand to benefit the developed country when that person comes back to make a contribution in their home country. International co-operation and development demands that and it would be foolhardy of us if we were not prepared to create incentives that would allow the best brains to make their contribution. I do not think anybody can say that these people are going out to live off poor people or that poor people's standard of living will be lowered. These people will contribute towards improving the standard of living and opportunities for those in less well off countries and that is admirable.
Senator Ryan simply called a spade a spade. It is no harm sometimes to strip away some of the verbiage and mystique surrounding this aspect because clearly it is a perk. There are perks and it is a motivating factor for many people who will go abroad and contribute for three or four years. They come back very comfortably off and are well able to establish themselves at home. Senator Ryan is right to describe this simply for what it is. If, in the process, good work is done overseas, so be it and all to the good but I would not, on top of all of that, invest any great sense of virtue in people who make this great sacrifice.
I do not have any great quibble with people who work in developed countries, given the disruption to their careers at home and the discomfort that most of them suffer. I had the good fortune of visiting Irish workers working in developed countries and many of them were paid what they would not regard as excessively large salaries. None of them that I know of became very rich but it was adequate compensation for the disruption that was involved.
They were at least working in developed countries. We are not talking about that here. We are talking about people who will probably be located somewhere around the headquarters of the World Bank, in New York on Washington. In order to give Irish people an incentive to work in a country that we are told has the lowest taxes in the world we are going to tell them that they will have to pay no tax at all. Who in God's name are we fooling? This is an international perk to persuade international civil servants that life is really worth living. It is a joke.
The people who impressed me particularly when I visited Irish people were the volunteers from Concern — young Irish people of about 19, 20 and 21 years old who were working for virtually nothing. They did not need international perks and international tax breaks to persuade them to work for developed countries. We are turning this into another career for international civil servants which is even more rewarding than the last big international career for international civil servants which was our membership of the EC, out of which virtually every senior member of the Irish political establishment did well.
It is not a particularly pretty sight to see an agency being set up which will be based in Washington, in a country which already has very low taxes, and say that no taxes at all will have to be paid. That does not smell very well.
In Article 59 which refers to amendment of the convention, I could not find any reference to ratification of amendments to the convention by the Houses of the Orieachtas. We have ratified the convention as it stands. Article 59 states:
This Convention and its Annexes may be amended by vote of three-fifths of the Governors exercising four-fifths of the total voting power, provided that ...
As far as I am aware, any amendment so made does not require any further reference back to the member countries who ratified it. Are we being sold a pig in a poke?
No, we are not being sold a pig in a poke. We know exactly what we have entered into, we know where we are going and we know the obligations that are on us. This amendment is part of the structure and part of the Schedule of the convention. It is an enabling device whereby if a change is to be made, three-fifths of the governors exercising four-fifths of the total voting power may make the change under the various provisions therein. This ensures that if a situation occurs for any given reason and there is need for a change legislation does not have to go through the Houses of Parliament in every country that subscribes to this convention before the change can be made. It is to ensure that they can adapt to a situation that perhaps was not provided for in the legislation or adverted to at the time. It is this enabling device that we are asking to have ratified.
It would be possible, therefore, for the Irish representatives to move an amendment almost immediately to this convention to expel South Africa and Democratic Kampuchea. There would be nothing to prevent them from doing that.
Certainly it would be possible to move an amendment but it would not take effect unless they got the support of three-fifths of the governors.
Would that be likely?
I have not had the privilege of being in the World Bank.
Schedule B refers to the election of directors. Paragraph (4) states that one-fourth of the number of directors shall be elected separately, one by each of the governors of members having the largest number of shares. Who are the governors having the largest number of shares? It is peculiarly loosely written phraseology. What is large and what is small?
One-fourth of the directors shall be elected separately.
By each of the Governors of members having the largest number of shares. I could not find a definition of the members having the largest number of shares.
What that means is that the countries that make the biggest contribution will be in a position to elect one-quarter of the directors, for example, the United States, the United Kingdom, Japan, the Federal Republic of Germany, France and Canada.
That is it?
They are the ones at the top of the scale with the right to elect directly. There are a number of countries, for example, Belgium, Italy, the Netherlands——
What about Saudi Arabia?
Saudi Arabia would not be on that list. All the countries I have named hold between 2,000 and 21,000 shares. They are at the higher end of the scale.
Saudi Arabia holds 3,000 shares, but is it on the wrong side of the list because it is in Schedule B? Are we effectively saying that the western developed countries have an almost controlling bloc of votes?
India is another.
They would be entitled to join in nominating also.
That is fine. I have suspected for a long time that this is not exactly as benevolent as it was presented but how is the largest number of shares defined? I do not understand detailed legislation which purports to be an international agreement where terms like "the largest number of shares" are not defined. I may have missed the reference but I could not find the definition of the largest number of shares. That is my final comment on this point.