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Departmental Minutes

Volume 264: debated on Wednesday 18 October 1995

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To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the three departmental minutes which the Overseas Development Administration laid before the House during the summer recess. [38446]

The departmental minutes refer to projects which are being supported by the Overseas Development Administration under the aid and trade provision soft loan financing arrangements which enable the banks to lend at concessional rates. Under new arrangements for ATP agreed in 1992, the ODA pays the aid portion of a soft loan to the bank or banks making the loan during the implementation period of the project, rather than, as previously, during the period over which the soft loan is disbursed. The former is much shorter than the latter. As a result, the banks would be exposed to additional charges if the tax regime relating to the lump sum payments were to change over the disbursement period of the loan. To safeguard the banks against such a potential liability the ODA provides an indemnity against possible tax changes. This indemnity creates a contingent liability on the aid programme, which therefore falls to be reported to Parliament.

The departmental minutes reported the estimated cost of these contingent liabilities as a result of making concessional loans to developing countries to finance the following projects:



Amount of Liability £

ThailandMini Hydros Samarinda Power1,346,909
IndonesiaPlant Samarinda3,856,568
IndonesiaTransmission Line Piston Engine500,778
IndonesiaResearch Laboratory New Nanjing1,436,633

The contingent liabilities for projects 1 and 2 were incurred in, respectively, August 1994 and March 1995 and it is regretted that they were not brought to the attention of the House at the proper time. Those for projects 3, 4 and 5 were incurred during the summer recess. It was necessary to give the indemnities urgently to avoid delaying the start of the projects. The minutes were placed in the Libraries of both Houses and copies were sent to the Public Accounts Committee and the Foreign Affairs Committee.