I move: "That the Bill be now read a Second Time".
The African Development (Bank and Fund) Bill, if approved by the Oireachtas, will facilitate Ireland’s future membership of the African Development Bank and the African Development Fund, the key entities of the African Development Bank Group, a multilateral development finance institution focused on contributing to economic and social development in the African region. The bank was founded in 1963 and the fund established in 1972 with membership consisting of 54 African states and 26 non-African states. The group’s mission is to help reduce poverty, improve living conditions and mobilise resources for the continent’s economic and social development.
To achieve this, the bank group mobilises and allocates resources for investment in its regional member countries and provides policy advice and technical assistance to support development efforts. This Bill will facilitate the approval of the agreement establishing the African Development Bank and the agreement establishing the African Development Fund and facilitate payments to be made to the bank and the fund, respectively.
Following the approval of the Government in November 2017, the Department of Finance has been engaging with the bank secretariat regarding Ireland's potential membership. Formal notification of Ireland's interest in participating in the fund and being admitted as a member of the bank was sent to the current president of the bank, Mr. Adesina, in February of this year. If Ireland is to complete its membership of the bank and the fund, we are required to consent to be bound by the international agreements establishing the bank and the fund. Membership shall oblige Ireland to contribute to both the bank and the fund. As Deputies will be aware, Article 29.5.2° of the Constitution provides 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 before the House 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 last year.
The rationale for Ireland's membership of the bank and the fund is primarily based on the bank's alignment with Ireland's development priorities, as well our trade relations with the wider African economy. In particular, the bank’s emphasis on climate change, agriculture and nutrition, fragile states and jobs and economic development align closely with four of the six priority areas for action identified in Ireland's current international development policy. Historically, Ireland has had a long and positive relationship with Africa. Strong links were built through the development work of missionaries and aid workers and the effectiveness of our aid programme. Our reputation has been enhanced by the positive contribution of our peacekeepers, diplomats and business people. Our decision to join the bank and the fund complements our existing development relationship and is consistent with the priorities set out in the Global Ireland 2025 initiative, which was launched recently. I refer, for example, to our ambition to double the scope and impact of Ireland's global footprint across the next seven years. This initiative relates specifically to the objective of extending our influence in Asia and Africa.
As Deputies 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. In light of the increasing interconnectedness and scale of the international agenda, the co-ordination of efforts and the combining of resources will be increasingly important. Our partnership with multilateral institutions like the African Development Bank Group 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 is reflective of our whole-of-government approach to implementing the sustainable development goals. While the overarching rationale for our membership of the bank and the fund is based on values, our membership will also create new opportunities for Irish business. When we join the bank and the fund, our enterprises will be able to tender for the delivery of services or products for bank and fund projects which were not previously available to them. While the return from such access is difficult to quantify given the size of the operations of the bank and the fund in predominantly emerging economies, the potential for such new markets is timely and welcome.
The operations of the African Development Bank Group are underpinned by its corporate strategy. The African Development Bank's strategy for 2013 to 2022 is firmly rooted in a deep understanding of the process of economic transformation which Africa has embarked on in recent decades. It focuses on two objectives: improving the quality of Africa's growth and facilitating inclusive growth and the transition to green growth. 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. The authorised capital stock of the bank is approximately €79 billion, with approximately €6 billion of paid-in capital. In addition to subscriptions from member countries, the African Development Bank, like other multilateral development banks, raises capital on international markets at competitive rates by maintaining its AAA rating.
The African Development Group has 80 member countries, comprising 54 regional member countries and 26 non-regional member countries. Most of the countries in the latter group are in Europe, America and Asia. Among the European countries are Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom. Non-regional member countries account for approximately 2.65 million of the total shares within the bank, representing 40.9% of the total shares and 40.9% of the total voting power. Of the non-regional countries, the US is the largest shareholder, occupying 6.6% of the total voting power. Based on the terms offered by the bank, it is intended that Ireland will acquire 53,620 shares, which is equivalent to 0.799% of the bank's total shareholding. This is in line with the shareholdings held by Belgium and the Netherlands, which hold 0.65% and 0.8% of the total shareholding, respectively. Each member country at the bank is represented at the bank's board of governors, which is the bank’s highest decision-making body. As part of a system that mirrors the position at each of the other international financial institutions of which Ireland is already a member, the Minister for Finance would be the governor for Ireland at the bank. The Department of Finance would manage Ireland's shareholding and representation at the bank, which replicates the position at all other international financial institutions, including the World Bank, the Asian Development Bank and the Asian Infrastructure Investment Bank.
The board of governors meets formally once a year for the bank's annual meeting. This board is responsible for electing the president of the bank, who is elected for a five-year term which can be renewed once. The current president is Mr. Akinwumi Adesina, who is a former Minister of Agriculture and Rural Development in Nigeria. He was elected as the eighth president of the bank in May 2015. The bank's board of directors, which is responsible for the bank's general operations, comprises 20 members who are neither governors nor alternate governors. Thirteen members are elected by the governors of regional countries and seven members are elected by the governors of non-regional member countries. Directors are elected for terms of five years which can be renewed 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.
The operations of the African Development Bank Group are wide-ranging. The bank finances projects and programmes in areas like agriculture, health, education, public utilities, transport and telecommunications and the private sector. The bank also finances non-project operations, including structural adjustment loans, policy-based reforms and various forms of technical assistance. In 2017, total disbursements for the bank group peaked at approximately €6.6 billion, with project approvals amounting to approximately €7.5 billion across 249 operations. With regard to performance, the success of the bank group in delivering results for Africa has been recognised by the Multilateral Organization Performance Assessment Network, 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". It is of particular note that the assessment highlighted that the bank is particularly strong in the area of safeguards and standards, which facilitates the delivery of social and environmental standards, as well as in the area of screening projects against gender and climate change criteria. While the bank is an independent institution, it has a close working relationship with other multilateral development institutions such as the World Bank, specifically in the area of co-financing. In 2017, co-financing investments from partners such as the World Bank and the European Investment Bank generated approximately €9 billion.
Subject to the enactment of this Bill and the completion of our application for membership, Ireland will acquire 53,620 shares, which is equivalent to 0.799% of the bank's total shareholding.
In capital terms, this equates to a capital allocation in the order of €630 million, of which approximately €37.8 million represents paid-in capital, with the remainder of the allocation, €592.2 million comprising callable capital. In general callable capital represents the capital which a member country would be liable for if the institution encountered acute financial distress, while paid-in capital is the amount which a member contributes under normal circumstances. Based on Ireland's membership of existing international financial institutions, the probability of the callable capital being called upon is negligible. Therefore, in practice, our proposed shareholding equates to a subscription of approximately €37.8 million, payable over eight years at €4.7 million annually. With regard to our participation in the fund which is a prerequisite to facilitate our membership of the bank as a non-regional member country, a subscription of approximately €62 million will be required, with payments to be encashed in up to eight annual instalments. This is in line with our pledges to similar funds at the World Bank and the International Development Association.
Combined, the expected cost of Ireland's membership of the bank and fund would be approximately €99.8 million, payable over eight years at approximately €12.4 million per annum, depending on prevailing exchange rates. As is the case with our membership of other international financial institutions, Ireland's contributions to the bank and the fund would be sourced from the central fund, with payments to be provided for in the legislation. Furthermore, in the context of our continued efforts to achieve the UN target of 0.7% of gross national product, GNP, for overseas development assistance, ODA, Ireland's contributions to the bank and fund provide a further channel to effectively deliver increased levels of ODA. Moreover, the consistent level of payments over an eight year period would avoid perceptions of volatility or periodic reductions in Ireland's annual ODA contribution.
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 and 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 attached as a 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 attached as a Schedule to the Bill. Section 6 makes provision for payments and receipts under the terms of the agreement establishing the fund.
I also would like to bring to the attention of Deputies that, subject to Government approval, a number of amendments to the Bill may be introduced on Committee Stage, and, of course, any suggestions put forward by Deputies will also be considered by the Minister. I strongly recommend Ireland's membership of the bank and fund. The bank and fund play a significantly important role in driving economic and social development in Africa, and hence our membership would strengthen our existing development relationship in the region. Additionally, our membership would be consistent with the priorities set out in the recently launched Global Ireland 2025 initiative notably the ambition to double the scope and impact of Ireland's global footprint over the next seven years, and with regard to the objective of extending our influence in Africa. In that context Ireland's participation in the bank provides an opportunity to extend our reach and impact in terms of trade, in particular through enhancing opportunities for Irish companies to secure procurements. The membership of the bank and fund would also provide a further channel to effectively deliver increased levels of ODA. I commend the Bill to the House.