Seanad Éireann díospóireacht -
Thursday, 1 May 1997

Vol. 151 No. 7

International Development Association (Amendment) Bill, 1997 [Certified Money Bill]: Second Stage.

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

Minister of State at the Department of Finance (Mr. Coveney)

I will not subject Members to the 17 pages of my script and will instead give the briefest outline of what it is about. This is important but simple legislation which was passed unamended by the other House.

The International Development Association, IDA for short, is an affiliate of the World Bank. It is one of the bank's main instruments in the fight against extreme poverty. It was set up in 1960 to assist the poorest countries which cannot afford to borrow money from the World Bank on its normal lending terms. These countries had an annual per capita income in 1995 of $905 or less. IDA beneficiaries are the people of the world's 79 poorest countries, which have a total population of 3.3 billion. This is equal to 57 per cent of the world's population. The IDA is the world's most important source of global multilateral concessional assistance. Sustainable poverty reduction remains the overarching objective of the association and of development.

Broad based economic growth, led by the private sector, and environmental sustainability are two key supporting objectives of the IDA. The association also recognises that development requires growth accompanied by broad based investment in basic health, education and infrastructure. The critical underpinning requires macro-economic stability accompanied by structural adjustment and the building of civil society.

The International Development Association fund is replenished every three years. This Bill provides for the next replenishment, which covers the period June 1996 to June 1999. The appendix to the Bill outlines the previous replenishments. Donor funds will be supplemented by repayments made by IDA's borrowers in respect of earlier loans and by transfers from the available net income of the World Bank. The United States is contributing only to years two and three of the eleventh replenishment. As a result, it has been necessary for the IDA to establish a one year interim fund on an exceptional basis. The absence of the US contribution for the first year prevented the other donors from agreeing on an adequate and fully burden sharing funding basis for the full three year period. The fund is therefore divided to provide a facility in year one without the United States and with its full participation for the other two years.

The Irish contribution to the eleventh replenishment will amount to £13 million. This Bill facilitates the State's contribution. The money goes to the poorest of poor countries. We have had a traditional interest in those countries through our missionaries and our overseas aid programme. I can offer more information on the past performance of the fund and so forth and I am willing to answer questions in that regard. However, it would be fairer if I listened to the views of Senators rather than lecture the House for another 20 minutes.

Mr. Lanigan

The Minister of State said the International Development Association is an affiliate of the World Bank and is one of the bank's main instruments in the fight against extreme poverty. With regard to the latter, the World Bank has been a total failure. Poverty in the poorest countries in the world has not been eliminated or ameliorated by the International Development Association. Huge amounts of money have been given to Governments and not to people. The World Bank and the IDA deal with Governments and in many of the poorest countries the money does not filter down to the people.

The Minister of State said annual per capita income in 1995 terms is $905 in these countries. However, in some countries the annual per capita income is not even half that amount. The people in those countries are not being helped by the International Development Association. I am glad more money is being provided for NGOs which deal directly with people rather than with Governments. The poorest countries have the worst Governments in the world. We must look at how money provided by the Irish Government is spent by the agencies which receive it. Where is it spent? Who has benefited? Has it gone to Governments instead of people? Unless we carry out such an audit we should not continue to increase our contribution at the rate it has increased in recent years.

Why has the United States declined to be involved in the first year of replenishment? That is a disgrace, even if I am critical of how International Development Association money is spent. What reason has the United States offered for its non-participation in the first year? The United States is already the largest debtor of the United Nations and has not paid its full contribution for many years. It offered geopolitical reasons for this and claimed not to favour the previous Secretary-General. If it favours the current Secretary-General it might start to pay its fair share to the UN.

The world's poorest countries are getting poorer. The western world, including Ireland, is not contributing enough at ground level to deal with the problem of poverty in those countries. Poverty in the Third World cannot be compared with poverty in Ireland. In Ireland poverty is based on comparisons between what some people have and others do not have. Poor people in Ireland are not in the dire poverty experienced by people in the Third World. There is no conception in Ireland of the reality of poverty in those countries.

One of the problems with the trans-global media is that while one can see and hear what is happening, one cannot smell it. If it were possible to convey smells through television or radio and if people could smell poverty, deprivation and death, a giant step could be taken towards eliminating poverty in the Third World. Unless one can smell poverty and deprivation at its most dire, one cannot get a true sense of the problem. Having seen a picture once on television, another picture will not have much impact. However, if people could smell the odours associated with the picture there might be a chance of eliminating such terrible poverty.

If one visits a country where the World Bank operates, one will discover its headquarters in the most sumptuous surroundings. Its personnel have the best hotels, vehicles and food, even though they are living among people who have nothing. They create a sub-society within those poor countries. They employ people at above average rates and create a second stratum of society. The same is true of people who work with the United Nations. They, too, live in the lap of luxury among the poorest people in the world. Perhaps the United States is making a point by its non-participation. If it was a political decision, it is unacceptable that the United States should not be involved. If it was not a political decision, what reason was given?

The United States has an annual per capita income which is almost 100 times the amount of £588 per year quoted by the Minister of State for the world's poorest countries. Incidentally, I disagree with that estimate. In some countries of west and east Africa, the annual per capita income is more likely to be $200. There are atrocious differences in such statistics.

I welcome the Irish Government's contribution of £13 million to the replenishment. The money should be placed where it will be best utilised for the benefit of the people of the countries concerned and should not go to Governments and dictators, as happened in the past. The Minister's contribution and effort are welcome. One of the bank's main instruments in the fight against extreme poverty has not worked. It should be better focused in the future to work for the people of the Third World whose poverty we cannot even imagine.

Mr. Burke

I welcome the Minister to the House. This is an important Bill which has not been amended in the Dáil. I do not see any reason why it should not pass through this House quickly. The Bill provides funding for people who live in extreme poverty in poorer countries. The Minister mentioned that the average annual income per capita in those countries is less than £600. I visited South Africa and saw people living on far less.

Senator Lanigan raised the important point about the fund being administered through the agencies. The second section of the Bill states that the International Development Association is the "soft" loan arm of the World Bank. It provides loans to the world's poorest developing countries on highly concessionary terms. The IDA is the largest single source of global multilateral concessional assistance, providing aid across most regions and sectors. IDA obtains its resources principally from periodic replenishments which are, in effect, grants provided by its richer member countries, also known as Part I members, and a small number of its other members. These funds are supplemented by repayments made by IDA's borrowers in respect of earlier loans and transfers from the available net income of the World Bank.

In view of this, the grants or loans are made directly to countries. The agencies do not administer the funds. I agree with Senator Lanigan that much of this money goes to the Governments and is not reaching the people who deserve it. We are doing our best in providing funds to the poorest people in the world. It is right that the rich should pay for this. Where it is possible, we should try to ensure the funds are given to people who need and deserve them. It seems that the funds go directly to the Government in some countries and, as Senator Lanigan said, those are the worst run Governments in the world.

I welcome the Bill. It is right that the people who can afford to pay should do so. The contribution of £13 million over a three year period is a small amount in our terms. It is interesting that the Americans are not involved in the first year of this programme and perhaps the Minister can inform us why. For people who are earning less than £600 per annum, £13 million is a sizeable sum of money. I look forward to the Minister's reply.

Minister of State at the Department of Finance (Mr. Coveney)

I thank Senator Lanigan and Senator Burke for their concise contributions and their obvious support of and interest in the principle of this Bill. Some of the questions raised are answered in my script, but I would like to emphasise some of them.

I cannot make judgments about the US position. They are far and away the biggest contributors to different types of overseas ventures, both inside and outside the UN. There is an element of resistance in some sectors of Congress, just as there is a strong isolationist streak in the US generally. Successive administrations, because of the interaction of the American Executive and Congress, have delayed funding indefinitely in pursuit of other budgetary objectives. Although it sounds shocking in some respects, those who feel strongly about cutting US debt have done so indiscriminately at times, including reducing much of the proposed expenditure in overseas aid. I do not make any excuse or case for that as it is what has happened.

It is heartening that the US has made a clear commitment to the second and third year of this programme and also to pay the arrears which have arisen under IDA 10. There seems to be a cohesive move in the American administration, now it has more confidence in the Secretary General, to bring its arrears to the UN and its agencies up to scratch. This should be welcomed, although the US position is not defensible in terms of the poverty Senator Lanigan and Senator Burke referred to. US bashing is not necessarily the best policy. It tends to react strongly to certain forms of criticism. We need to use the carrot and stick approach to encourage it to fulfil its responsibilities, which I think is beginning to happen.

The point about how this money is spent is well made. One of the great difficulties for many of the agencies is that they are dealing with intensely corrupt Governments. It is spelled out clearly in this Bill that Ireland is not satisfied with that. We need to built partnerships not just with Governments but with agencies in the countries, whether through our NGOs or other organisations. Those who are not involved in Government need to take possession of many of these programmes. The combination of foreign advisers and Governments has not worked. Ireland is in the forefront of making that case.

Our total overseas contribution this year is £122 million. I know the Leader of Senator Burke's party undertook some months ago to increase that by £50 million, which would bring the figure from 0.3 to 0.4 per cent of GNP, which is well on the way to the objective of 0.7 per cent. I do not know how the Taoiseach will pay for this but I do not think there will be any disagreement across the House if he can do it.

IDA aid is the softest type of loan funding imaginable. It has virtually no interest rate — only 0.75 per cent per annum as a charge. It has a ten year moratorium on repayments and a 30 year payback provision. The loans are deliberately designed to make repayment as easy as possible. In that sense this is specifically targeted at the poorest countries.

The Senator referred to the past failure to direct money to where it was most needed and pointed to the wrong signals being sent out by the over elaboration of buildings and lifestyles associated with some of the UN agencies. His point was well made. I can assure Members that the Irish effort, led in many respects by our own President, does get through to the people on the ground through the NGOs and through our long history of a non-colonial and missionary involvement in this area. Ireland has adopted a position which is out of proportion to our size and ability to pay, but we do play a moderately successful role. The encouraging support received from Members of the House obviously recognises that.

Ireland has been to the forefront of getting the debt initiative for the heavily indebted poor countries underway as quickly as possible. The first country which will benefit from this is Uganda. At the spring meeting of the international financial institutions such as the World Bank, the IMF and so on, a decision was taken on Uganda. That decision will have an effect on Uganda's debt service of a reduction in its multilateral and bilateral debt of 20 per cent, which is equivalent to $700 million. That will come into play within a year. Ireland pressed to have the initiative brought into play immediately but there was some opposition to that and a compromise was reached. Other countries, primarily though not exclusively in Africa, are also on the list of countries which will benefit from this initiative.

The story is not all bad. With the strong commitment of countries such as Ireland, Canada and others to the Third World, progress is being made on this issue. However, that progress is too slow and it may be too late for some countries. We cannot afford to become complacent about that. In so far as this side of our overall effort must be facilitated through the Houses of the Oireachtas in order that Ireland can begin to pay the money, I am very grateful for the support of Members in both Houses and I thank the Senators.

Question put and agreed to.