Finance (African Development (Bank and Fund) and Miscellaneous Provisions) Bill 2018: Second Stage

Question proposed: "That the Bill be now read a Second Time."

The Bill, if approved by the Oireachtas, will facilitate Ireland’s future membership of both the African Development Bank and African Development Fund. The Bill will provide for the approval of the agreement establishing the African Development Bank and the agreement establishing the African Development Fund and for the payments to be made to the bank and fund, respectively. Additionally, it serves to amend the International Finance Corporation Act 1958 and section 851A of the Taxes Consolidation Act 1997, respectively.

Most significantly, completion of Ireland’s membership of the bank and fund will require the ratification of international agreements represented by the agreement establishing the African Development Bank and the agreement establishing the African Development Fund. Membership shall also entail Ireland making capital payments to both the bank and fund.

Article 29.5 of the Constitution provides, among other things, that "the State shall not be bound by any international agreement involving a charge upon public funds unless the terms of the agreement shall have been approved by Dáil Éireann". The enactment of the Bill would confirm such approval. Similar requirements applied when Ireland joined other international financial institutions such as the World Bank and, most recently, the Asian Infrastructure Investment Bank.

The mission of the African Development Bank and African Development Fund is to reduce poverty, improve living conditions and mobilise resources for the continent's economic and social development. Providing resources, advice and assistance to its regional member countries, the bank and fund will make a significant contribution to the improvement of the quality of lives in Africa.

The key driver in Ireland's seeking membership of the bank and the fund has been the bank's alignment and objectives with Ireland's development priorities. While membership may enhance our relationship with the wider African economy, the primary motivation of joining is from a development perspective, in particular the focus of the bank in the areas of climate change, agriculture and nutrition, fragile states and jobs and economic development align closely with priority areas for action identified in Ireland's current international development policy. Moreover the cross-cutting gender lens that the bank applies to its operations particularly resonates with development ambition for equality. Ireland has had a long and positive relationship with Africa. Strong links were built through the development work of aid workers, missionaries and the effectiveness of our aid programme.

Membership will reinforce and enrich our engagement and relationship with the region and its people. Membership of the bank and fund will also be consistent with the priorities set out in the recently launched Global Ireland initiative which seeks to double the scope and impact of Ireland's global footprint across the next seven years, in particular with regard to extending our influence in Africa.

As Senators will be aware, Ireland is in the process of developing a new international development policy to take account of the significantly evolving international development context. Given the increasing interconnectedness and scale of the international agenda, the co-ordination of efforts and the combining of resources will be increasingly important. Hence, our partnership with multilateral institutions will be a key part of our approach.

Ireland's membership of the bank and the fund is consistent with our commitment to the UN 2030 agenda for sustainable development and, therefore, our membership of the bank and fund will be consistent with the whole-of-government approach to implementing the sustainable development goals. Our membership will provide an opportunity for us to deepen trade relations with the African region through creating opportunities for Irish businesses to tender for the delivery of bank and fund projects and services. While this potential dividend is welcome, I would like to unambiguously state that Ireland's commitment to united aid remains unchanged with no strings or quid pro quo arrangements attached to this development contribution.

The operations of the bank and fund are underpinned by corporate strategy. The African Development Bank's strategy for 2013 to 2022 focuses on two objectives: improving the quality of Africa's growth and facilitating inclusive growth and the transition to green growth. In turn, the delivery of this work is to be achieved through five channels: infrastructure development, regional economic integration, private sector development, governance and accountability, and skills and technology. These areas are in line with our own international development policy. The bank and fund finance a wide range of projects and programmes covering areas such as health, education, agriculture, public utilities, transport and telecommunications and the private sector. Furthermore, the bank finances non-project operations, including structural adjustment loans, policy-based reforms and various forms of technical assistance.

Regarding performance, the bank and the fund have a strong record. The success of the bank in delivering results for Africa has been recognised by the Multilateral Organization Performance Assessment Network, MOPAN, which is a network of like-minded donor countries that monitors the performance of multilateral development organisations and of which Ireland is a member. A recent assessment from the network which was conducted in 2016, concluded that "the Bank is a robust and resilient organisation that, while operating in a particularly difficult environment, is able to continually adjust and improve to meet the changing conditions". The bank and fund's financial resources are largely derived from subscriptions paid by member countries.

The authorised capital stock of the bank is approximately €79 billion, with approximately €6 billion of paid-in capital. In addition to member countries' subscriptions, like other multilateral development banks the bank raises capital on international markets at competitive rates through maintaining its AAA rating. In the year 2017 we saw total disbursements peaking at approximately €6.6 billion, with project approvals amounting to approximately €7.5 billion across 249 operations.

The bank and fund currently have 80 member countries, made up of 54 regional member countries, and 26 non-regional member countries, largely comprised of countries from Europe, America and Asia. Non-regional member countries account for approximately 40% of the total shares and 40% of the total voting power at the bank. On the basis of the terms offered by the bank, it is intended that Ireland will acquire 53,620 shares, equivalent to 0.799% of the bank’s total shareholding, which is in the region of the shareholding held by Belgium and the Netherlands, which hold 0.65% and 0.8% of total shareholding, respectively.

Ireland, like all other member countries of the bank, will be represented on the board of governors, which is the bank’s highest decision making body. As is the case at each of the other international financial institutions of which Ireland is a member, the Minister for Finance will be governor for Ireland. The board of governors meets formally once a year for the bank’s annual meeting and is responsible for electing the president who is elected for a five-year term, once renewable. The current president is Mr. Akinwumi Adesina, formerly Nigeria’s Minister of Agriculture and Rural Development, who was elected as eighth president of the bank in May 2015. Additionally, through our constituency membership Ireland will be represented at the board of directors which is responsible for the bank’s general operations. The board of directors comprises 20 members who are neither governors nor alternate governors. Thirteen members are elected by the governors of regional countries and seven by the governors of non-regional member countries. Directors are elected for a term of three years renewable once. The non-regional representation at board level is broken up into seven constituencies, four of which are led by EU member countries. Negotiations regarding the constituency which Ireland will join following membership are ongoing.

Subject to the passage of this Bill and the completion of our membership application, it is intended that Ireland will acquire 53,620 shares, equivalent to 0.799% of the bank’s total shareholding. On this basis, the expected cost of Ireland’s membership of the bank and fund will be approximately €99.8 million, payable over eight years, or approximately €12.4 million per annum, depending on prevailing exchange rates. This is comprised of two components; first the paid-in capital associated with our proposed bank shareholding of approximately €37.8 million or €4.7 million annually; and second, our subscription to the fund in the order of €62 million to be encashed in up to eight annual instalments amounting to approximately €7.7 million annually.

In capital terms, this shareholding in the bank equates to a capital allocation of approximately €630 million, made up of €37.8 million paid-in capital, with the remainder of the allocation, €592.2 million comprising callable capital. The callable capital element represents the capital which Ireland would be liable for if the institution encountered acute financial distress, while the paid-in capital element is the amount which we would contribute under normal circumstances.

Based on Ireland’s experience with international financial institutions of which we are already a member, the probability of the callable capital being called upon is negligible.

As is the case of our membership of other international financial institutions, Ireland’s contributions to the bank and fund would be sourced from the Central Fund, with payments to be provided for in the legislation. In accordance with OECD guidelines, our contribution to both the bank and fund will be reckonable in respect of the calculation of Ireland’s overseas development assistance, ODA.

I now turn to the specific provisions of the six sections of the Bill. Section 1 deals with the Short Title of the Bill. Section 2 sets out the definitions used in the Bill. Section 3 provides for the approval of the agreement establishing the bank, thereby enabling the State to be party to the agreement. The agreement establishing the bank is in the Schedule to the Bill. Section 4 makes provision for payments and receipts under the terms of the agreement establishing the bank. Section 5 provides for the approval of the agreement establishing the fund, thereby enabling the State to be party to the agreement. The agreement establishing the fund is in the Schedule to the Bill. Section 6 makes provision for payments and receipts under the terms of the agreement establishing the fund. The Bill now contains two additional sections under the heading “Miscellaneous Amendments”, following their approval on Committee Stage in the Dáil.

Section 7 provides for the amendment of the International Finance Corporation Act which governs Ireland's relationship with the International Finance Corporation, IFC, a sister organisation of the World Bank involved in encouraging private sector development in developing countries. The amendment will allow changes in the IFC's articles of agreement to be approved by way of Dáil resolution rather than by primary legislation. This will alleviate the legislative burden associated with Ireland's participation in the IFC and bring the legislation in line with that governing Ireland's membership of other international financial institutions, including the provisions now proposed in respect of the African Development Bank.

Section 8 makes provision for amendment to section 851A of the Taxes Consolidation Act 1997 which relates to the confidentiality of taxpayer information and will address a conflict between the legislative provisions of section 851A and those of the Freedom of Information Act. This anomaly currently prevents the Department of Finance from providing records for the Office of the Information Commissioner, even when it is statutorily required to do so in the context of the operation of freedom of information legislation. The proposed amendment to section 851A should address this legislative conflict and remove this anomaly. It will ensure the requisite records can be provided for the Information Commissioner in order that he can conduct his review and fulfil his statutory function without further delay.

I strongly encourage Senators to support the Bill and Ireland's membership of the bank and fund. I commend the Bill to the House.

Group spokespersons have eight minutes and all other Senators five.

I thank the Minister of State for outlining, very comprehensively, what is proposed in the Finance (African Development (Bank and Fund) and Miscellaneous Provisions) Bill 2018. I have quite a long set of briefing notes but they are very much in line with what the Minister of State said.

This is a very important Bill which my party supports. In ways, it is quite similar the Asian Infrastructure Investment Bank Act 2017. The overarching objective of the bank is to spur sustainable economic development and social progress in its regional member countries, thus contributing to poverty reduction. In many ways, the development bank is similar to the European Investment Bank, with which we are more familiar. The bank gets its money from the members' subscriptions and lends it out to projects. The Minister of State has outlined that it is quite a sizeable organisation in terms of the amount of money invested, the capital stock being €79 billion, with disbursements in 2017 peaking at €6.6 billion for project approvals, amounting to €7.5 billion across 249 operations.

There is also the African Development Fund which is a concessional window of the African Development Bank Group established in 1972 and operational since 1974. Administered by the bank, it has 32 contributing countries, benefits 38 countries and has cumulatively invested $45 billion over its 44 years of operation in Africa. This is important as some people may ask why Ireland would get involved in this. Investing in these institutions will reinforce our political, developmental, economic, trade and cultural relationships with Africa.

From a trade and economic perspective, Africa represents a growing market for Irish businesses. Exports to Algeria increased to over €100 million in 2017, to Nigeria to €279 million and to South Africa to €243 million. Imports have also grown in recent years. A growing and prosperous Africa will give rise to better business opportunities for Irish businesses. I do not want to talk about Brexit all the time, but in the context of markets other than the UK, Africa is certainly there and we should look at it as a market for our products and a source of raw material and products that we may want to buy.

Ireland has a long and proud history of missionary work in Africa, in which our various NGOs have been involved over the years. I will not list them all but I refer to the likes of GOAL, Gorta, Trócaire and everyone who has been involved in these organisations and the religious orders such as the Christian Brothers which went to Africa and provided much education there over the years.

I do not want to delay by repeating almost all of what the Minister of State said. My party will support the Bill. We are in favour of it. It is a good idea to be involved with the African continent and to try to promote its development and the reduction and eradication of poverty over time. Whatever this bank can do, Ireland will play a small part in its overall operation.

I support the passing of this legislation.

I welcome the Minister of State.

I am here a lot.

Too much for the Minister of State's own good. The Bill has humanitarian and strategic aspects for Ireland. It is important that we be involved in these projects worldwide. In fact, this is probably long overdue. Ireland will be one of 80 member countries of this body and it is important that we be seen to be operating on the global stage. I welcome this. Obviously, we will be a non-regional member. Non-regional members will account for 40% of total shares and 40% of total voting power. Are votes done via qualified majority? How does that system work? Our contribution, which will be in the order of €12.4 million annually, will amount to just under €100 million over an eight-year period. Does that count towards our percentage spend on overseas aid? This is a technical point, but it is important in view of the fact that we are trying to increase our metric. All areas of spending should be covered by it.

As the accountant is coming out in me, in the interests of prudence, the callable capital element looks very structured financially. In terms of our country carrying out some form of due diligence on the finances annually, is there a mechanism for us to peruse how the development fund and bank perform? Will the Central Bank and/or the Department of Finance examine the figures to ensure there is a prudent eye on behalf of the €100 million of taxpayers' money that is going into this? It is a worthwhile cause, but as it is still taxpayers' money that we are spending, there must be an element of prudence and probity. That is the case, regardless of the level of spending, and iu=t is often missed in discussions. As this is the money of the worker and the person on social welfare who is buying goods and paying VAT, it must be accounted for when spent. It is coming full circle.

I welcome this measure. Are we taking all Stages?

I would have thought we could have dealt with all Stages today. Perhaps the Minister of State will indicate when he anticipates that the Bill will be enacted and whether it will be implemented in its totality or via commencement order.

Sinn Féin supports the Bill. It is right that Ireland should play a part in supporting development in Africa. A different model is needed than that of the old foreign development aid which tended to extract as much from African countries as it gave.

I note that most of the money given out by the African Development Bank is for key infrastructure such as roads, water supplies and communications. There are parts of Africa where such infrastructure is desperately needed. In the briefing note, the Department of Foreign Affairs and Trade makes reference to the opportunities for Irish companies to take part in the development projects in Africa as a result of our membership of the African Development Bank. We should be members of it on its own merit. Hundreds of years of colonisation have left many parts of Africa severely underdeveloped.

A cruel irony is that many of the parts of the continent experience the worst affects of climate change also. There is need for development capital to invest in renewable energy. I note that during the debate in the Seanad on the Asian Infrastructure Investment Bank Bill 2017, serious questions were raised about human rights abuses in member countries of that bank. I share the same concerns about this Bill and hope that through regular appearances by the Tánaiste and Minister for Foreign Affairs at the Joint Committee on Foreign Affairs and Trade, and Defence and the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, we can address any concern in that regard.

Ireland's contribution of €62 million is small both from the perspective of our budget and the budget of the bank, with the eight instalments amounting to approximately €8 million per annum for participation in the fund. There is a paid-up contribution of in the region of €37.8 million for membership of the bank which is also payable over eight years and amounts to approximately €4.7 million per annum. The first instalment is to be paid on enactment of this Bill. We need, therefore, to give the Bill full scrutiny. In Ireland's case, the maximum capital under the agreement would amount to less than €600 million. While it is highly unlikely that this amount would ever be called on, we should treat this Bill and its enactment as if it were a possibility.

Does the Minister of State propose to request that the annual report of the fund or the bank be laid before the Houses of the Oireachtas? We should also consider the connected issue of Ireland's overall aid commitment to developing countries. We still have a journey ahead of us to meet our overseas development aid obligations. The recent report of the Joint Committee on Foreign Affairs and Trade, and Defence indicates that for Ireland to reach the 0.7% target by 2030 the overall aid programme needs to grow from €707 million to €2.5 billion or an increase of €150 million per annum over the period, which amounts to an increase of approximately €1.8 billion.

Budget 2019 announced on 9 October provides an additional €110 million for 2019. The Government is, therefore, falling short in respect of what our trajectory should be. The State's GDP is distorted but there are times, such as when meeting our fiscal targets, that this plays to our advantage. We are still a long way from reaching our overseas development aid obligations. There must be a clear trajectory and a roadmap from the Government on how it proposes to do this. It should be separated from the budgetary process to make it clear internationally that we stand by our commitments and that we meet them.

My colleague, Deputy Pearse Doherty, raised a concern that a large portion of contributions to the development bank could be counted as overseas development aid. What percentage will be counted? We have to ensure that in investing, as provided for in this Bill, we are not double counting the money and claiming it is a donation.

I welcome the Minister of State. In principle, I support this Bill. As others have said, we have previously discussed the relationship between Ireland and many African countries. Africa is a young continent. As many of the new approaches to development that are going to come out of countries of Africa will shape much of the next millennium, it is appropriate that the State engages in partnership with them. I have concerns about how the Bill and our participation in the African Development Bank and Fund, which itself is positive, intersects with our other areas of partnership. I am concerned to ensure that, for example, our contribution to participation in the African Development Bank and Fund will in no way be seen as contributing to or marked against our commitments in terms of international development funding. That is important because in terms of our aid budget, Ireland has a strong record of untied aid. We have won respect internationally because we have not, as many other countries have, attached conditionalities and commercial benefit for ourselves to our aid budget but have instead worked to ensure the money which Ireland gives in aid is targeted at the most vulnerable. For example, we work with Governments to ensure the education, health and front-line services are improved. We have a strong record through our aid programme of supporting civil society such that it is civil society in the different countries of the African continent that is strengthened and able to hold governments to account in that regard.

The Minister of State has said our international development policy is being reviewed. In that context, I seek assurances that this financing which has a very different approach and a very different set of conditions will not be cited as a rationale for us not working to achieve the 0.7% goal in the context of our aid commitments. This is different because it is in an investment framework and is not the same as aid.

In terms of conditionality and the question of untied aid, one investor that has had a poor record in terms of the conditionalities that were attached to countries in the past is the World Bank. I note the change to the Bill that was made in the Dáil with regard to Ireland's participation in international finance co-operation which means that we are moving to a situation where our engagement with the World Bank could now be done via a motion in the Dáil rather than by way of the legislative process. This means that those of us in the Upper House will potentially have no opportunity to engage on any changes in policy. That is a matter of concern because while the World Bank's recent research has taken it in a much more positive direction, it has had a very poor record of imposing conditions and development models on developing countries that have proved very damaging. That has been shown by the bank's own research. In that regard, I have some concern that we may not have the opportunity to engage on these matters in the future. I ask the Minister of State to reassure me that we will have the opportunity to debate and discuss the way that Ireland engages with other investors such as the World Bank because I fear that such opportunities may be diminished by this Bill.

The Minister of State talked about public investment and again, the devil really is in the detail. Are we talking about investment in roads, water and infrastructure? This is also where conditionality is important because in the past, particularly in the case of the IMF, we have seen conditions attached whereby investment must be done by private corporations. There is a real potential for tension, as we saw with regard to water in this country and the debates on that issue. In the context of sustainable development goals, we must ensure there is flexibility for African governments to respond to civil society. We must also ensure they are accountable to their people for the way they deliver infrastructure and not just accountable to investors. That space is important. These are important principles which Ireland has always supported and I want to ensure we do not slip away from them. Our role in the context of governance is also important.

I have a very specific concern about fossil fuel divestment. Under the provisions of the Fossil Fuel Divestment Bill, we must be satisfied on reasonable grounds that any indirect investment in which we engage, as per this Bill, is unlikely to have an excess of 15% of its assets invested in fossil fuel undertakings. I am sure the Minister of State will be keen to satisfy this House that the African Development Bank and our investment in it is not compromised and satisfies the 15% condition. Concerns about human rights have also been mentioned and I would like to add to them. We know that a number of Irish companies are involved in the extractive industries and must ensure, in line with our business and human rights policies, that best practices are promoted.

We want to ensure best practices are promoted in line with our business and human rights policy. For example a complaint has been made against San Leon Energy regarding its proposed extractive work in Western Sahara, an area in which there is currently not an actor who can agree to the work. It, therefore, cannot satisfy the UN requirement that an authorised, recognised party engage in local consultation in respect of that extractive practice. This is key because this is an Irish company. It is the kind of Irish company that may potentially come looking for investment from the African Development Bank. What are the safeguards in that regard? What will Ireland's role be? How does the Minister of State see human rights and the environment being safeguarded?

My last question is related. The Minister of State has discussed green bonds and Ireland's recent sale of same in the House on a couple of occasions. Will he commit to coming to the House and having a longer discussion on green bonds at a later stage, perhaps in January? It is an important issue.

Before I call on the next Senator, I welcome Coláiste Bhaile Chláir, Claregalway College, and Ms Paula McDonagh, who are guests of Deputy Anne Rabbitte. They are very welcome.

Like previous speakers, I welcome the Bill. I have a couple of queries about Irish Aid. Will the 0.7% be included in the current budget? Will the Minister of State identify from where the funding for our membership of the organisation and the various payments to be made to it over the eight years in the context of our full subscription will come?

There is one thing that always makes me nervous about vehicles of the sort proposed in the legislation. The Bill digest states, "the overall objective and purpose of the Bank Group is to contribute to the sustainable economic development and social progress of its regional (African) members individually and jointly". One often wonders whether an analysis has been done since the bank was established in 1962 as to whether this objective has been achieved or as to whether it is still one of the bank's objectives. As far as many people are concerned, it has not achieved this objective.

I have a question about the bank and about those to whom it lends. I was in Benin and saw a small credit union being set up. I was fascinated by how whatever money was available was being lent at a very basic level. It was all being lent to women who were operating within their own co-operative and lending money to one another. The money was being used to set up small sustainable industries. Money raised was used to educate their children. To my mind, that is a very sustainable way of doing things. I get concerned about big banks coming in and about whether they look at the sustainability of what they are trying to achieve. Is there an opportunity for a farmer, either male or female, to access this to add value to his or her product? Is funding available for small groups in communities to create their own industries so that they can send their children to school for further education? That would be sustainable in the long term.

I have a concern that governments will end up deciding where the funding is going. As we have seen in our own Irish Aid budget, when money is allocated to the general budget, there can be difficulties in the context of accountability. Do we know it is going where it is supposed to be going? I have always worked on trying to get African parliamentarians to discover where the money actually goes in their countries. They find it extremely difficult to do so.

Do African parliamentarians have access to the kind of scrutiny we have here to enable them to follow the money trail when they are examining where the money from the African Development Bank is going? I suggest we look at supporting an equivalent body to the Committee of Public Accounts in African Parliaments to enable them to follow the money trail when money is being borrowed for public purposes. The idea of providing sustainable sources of funding for African states is very important. I believe the initial cost is small in comparison with the call. Since 1962, there has never been a call on the funds that states have to provide. I am disappointed that more countries are not involved in the African Development Bank. We do not see countries in eastern Europe-----

The Senator has half a minute remaining.

I thank the Chair for the warning. It is possible that I will be the last person to speak. It is disappointing that many countries in eastern Europe and the Middle East are not involved in the African Development Bank. Other sources of funding could be used to broaden the scope of the funds in the bank. Overall, I am supportive of this initiative. Perhaps the Minister of State might respond to the couple of queries I have outlined. I am happy to see that we are eventually participating in this fund, almost 50 years after it came into existence.

I assure Senator Higgins that I would be happy to address the matter of sovereign green bonds at any stage. It is a question of when this House can facilitate me. If there are any questions that I do not answer in these remarks, I will try to answer them on Committee and Report Stages. The African Development Bank and the African Development Fund make an important contribution to the improvement of the quality of lives in Africa. This is the primary driver for our ambition to become a member of the bank and to participate in the fund. Membership is consistent with the goals of Ireland's development policy. I have no doubt that it will add to our long and proud development tradition of investing in Africa and investing in people.

Although membership may create new opportunities for Irish businesses - for example, to tender for the delivery of bank and fund projects and services - I reiterate that Ireland's commitment to untied aid remains unchanged. We will be an active member of the banking fund when we join it. We will contribute to the discourse in the bank and the fund on policy, resource allocation, governance and such matters. However, no restrictive conditions will be attached to our subscription. The importance Ireland places on ensuring its operations are held to account against robust standards in human rights, social and environmental standards, gender equality and governance issues is central to our engagement with the bank and the fund. In that regard, I am advised that the bank has strong operational frameworks and standards in place. Of particular note is the bank's integrated safeguards system, which is the cornerstone of its strategy to promote growth that is socially inclusive and environmentally sustainable. I am advised that the bank has operational safeguards and mechanisms in place to make sure vulnerable populations and the environment are not harmed by its projects. I understand these independent review mechanisms cover adverse impacts on the environment, society, labour conditions, health and safety, involuntary resettlement, biodiversity of ecosystems, pollution prevention, the control of hazardous materials and resource efficiencies.

From an accountability perspective, the bank's governance structures ensure there is transparency. Its operations are open to the scrutiny of its members. When Ireland joins the bank, it will be represented on the board of governors, which is the bank's highest decision-making body. Through our constituency membership, we will be represented on the board of directors, which is responsible for the bank's general operations. This will give Ireland ongoing access to channels of communication regarding the work of the bank and the fund and will enable Ireland to make an input into the decision-making process. Another point of discussion which has emerged during the debates on the Bill to date relates to reporting arrangements in the Oireachtas. I am sure the Minister will give full consideration to the views Senators and Deputies have expressed on Ireland's prospective membership of the bank of the fund and Ireland's dealings with international financial institutions more generally.

I thank the Senators for engaging with their time in this legislation.

Question put and agreed to.
Committee Stage ordered for Thursday, 20 December 2018.