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International Trust Fund For Tuvalu (Immunities And Privileges) Order 1987

Volume 491: debated on Monday 11 January 1988

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10.24 p.m.

rose to move, That the draft order laid before the House on 19th November be approved [7th Report from the Joint Committee].

The noble Lord said: My Lords, before I cover the detail of the order itself, perhaps I can set it in context by describing briefly the circumstances leading to the establishment of the trust fund. Your Lordships will not be surprised to learn that Tuvalu (which before independence in 1978 was known as the Ellice Islands), has a very small economy and physical base, and has received considerable aid from the United Kingdom. Our aid programme has provided people to work in Tuvalu; training of Tuvaluans, both in the United Kingdom and in regional institutions; and finance for capital aid projects.

We have also provided budgetary aid. This is a direct grant to make up the deficit between the Tuvalu Government's revenue and expenditure. But it is now one of the least common forms of British aid, and has certain unsatisfactory features when it is given to an independent country. We have to make tight conditions about how it is spent and accounted for.

Budgetary aid to Tuvalu has been substantial. Until 1987, it was running between £400,000 and £500,000 a year, and consequently the Government of Tuvalu were fairly heavily dependent on it. We were therefore very pleased to join with the Governments of Australia and New Zealand—and of course with the Government of Tuvalu—in negotiating the establishment of an international trust fund, income from which has now replaced it.

The trust fund was established by an agreement which was ratified by the United Kingdom on 24th July 1987, after it had been laid before Parliament. The three initial contributors, apart from Tuvalu, were ourselves, Australia and New Zealand. At current rates of exchange, the UK provided £3,327,592; Australia £3,131,851 and New Zealand £3,579,738. Since then, Japan has decided to provide £276,932 and South Korea £17,170. These original contributions are for investment, so that the income can be used to supply the recurrent needs of Tuvalu. After international tendering (from British firms among others), an Australian company has been appointed as fund manager.

Our contribution to the fund was on a once-and- for-all basis and we do not envisage contributing further to it. Our budgetary aid to Tuvalu has now ceased, although we continue to supply technical co-operation and capital aid, while funding for Tuvalu's recurrent needs is provided by way of the trust fund.

I now turn to the purpose of the present order before the House. It has a much narrower focus: first, to provide the trust fund with the legal capacity to hold and invest money, to buy and sell property and to institute legal proceedings in this country. For this purpose, the order would confer on the fund the legal capacity of a body corporate to make contracts.

The second main purpose of the order is to give exemption from all United Kingdom income tax and capital gains tax to the interest earned and the profits made on the sums which the fund holds and invests. This is to ensure that the maximum benefit from the fund goes where it should go: to the Government of Tuvalu. But I should emphasise that these financial immunities will apply only to the transactions of the fund itself; no personal privileges and immunities are provided under the order for members of the board of directors or the advisory committee of the fund.

The purposes of the order are entirely desirable and sensible. They are also in line with a requirement made by Article 5 of the agreement which stipulates that each party to the fund should accord to the fund precisely these legal privileges, immunities and status. Australia and New Zealand have already taken the necessary action to do that. Tuvalu is doing so. The establishment of the trust fund has been generally welcomed both in this country and elsewhere. The present order is the final legal step necessary to ensure the successful operation of the fund. In seeking approval for these measures and in promoting the establishment of the fund, I hope that your Lordships will agree that it reflects both a prompt and practical response to the needs of Tuvalu and also the very strong commitment which we have to the South Pacific region generally, as well as to its individual countries. I beg to move.

Moved, That the draft order laid before the House on 19th November be approved.—( Lord Glenarthur.)

My Lords, we are grateful to the noble Lord, Lord Glenarthur, for explaining the order to the House. As he has said, the nub of the order, which we have pleasure in supporting, is that the International Trust Fund for Tuvalu must have legal capacity and exemption from direct taxes to be conferred upon the fund.

We are, however, also dealing with an important and interesting problem, as the noble Lord has indicated. We must approach that with sympathy and with understanding. Here we have a small island with a population of about 8,250 which became independent 10 years ago, making it one of the world's smallest developing countries in terms of land area and population. As the noble Lord, Lord Glenarthur, has reminded us, Tuvalu was formerly part of the Gilbert and Ellice Islands. In a referendum in 1974 the people voted for separation, which was then implemented. I am bound to say that I thought at the time that that was perhaps unfortunate, leaving them, as it did, with so very small a population and without significant resources. Here we have nine coral atolls measuring 10 square miles with vegetation consisting mainly of coconut palms.

Whichever way one looks, there appears to be no prospect for economic development. There are problems in other small island communities, such as St. Helena with its population of 5,000. However, there are possibilities for development. In Tuvalu, those do not appear to exist, unless there are plans of which I am not aware. Perhaps the Minister will comment on that if he has other information.

The range and cost of imports to Tuvalu are not insignificant. It seems that, small though the population is, it will have to import food, clothing and consumer goods. There may be other significant items which it will need to purchase as well.

The question of budgetary aid—perhaps I should say aid in general—therefore assumes great importance. There have been inevitable budget deficits from the start—from independence day until the present. The agreement signed in Suva last June is, I think, a practical and realistic method of dealing with that virtually intractable financial problem.

We are also glad to know that we have the Australian and New Zealand governments with us in this imaginative experiment, if I may call it that. We also welcome warmly the contributions of the other countries listed by the Minister. As he has told us, the trust fund has a target sum of 27 million Australian dollars to last over a period of 20 years. Out of that, Britain contributes 8·5 million Australian dollars or £3·6 million.

We must not overlook the fact that Britain has, up to now, been the major source of assistance in filling the gap between income and expenditure. We note with interest the purposes of the fund set out in Article 2 of the agreement, and specifically the objective of achieving greater financial autonomy. We also note the creation of the board of directors by Article 6, as referred to by the Minister, on which Britain will be represented and which will manage the fund. The government of Tuvalu will of course appoint the chairman.

The advisory committee set up by Article 7 will also be an important body as it will advise the government of Tuvalu on the progress of the economy of the islands and the effect of the fund socially and economically upon them.

It is worth noting that it was the government of Tuvalu which proposed the idea of the fund and that the United Nations development programme has met the costs of setting it up. The fund therefore enjoys a wide measure of international support. There are problems to be tackled. However, I cannot think of a better way of dealing with them than is laid down in the agreement. On behalf of the Opposition, I wish the people of Tuvalu and their government every success and happiness in the future.

My Lords, I believe that I am the first speaker on this subject who took part in the original debate in 1978 which led to the independence of Tuvalu. That was at a time when the late and sorely missed Lord Goronwy-Roberts was speaking for the Foreign Office of the day. I well remember the conflicting feelings we had at that time. We had doubts as to whether such a miniature population would be able to sustain the burdens of full national sovereignty. We hoped that with determination and hard work they would make our doubts look silly. Above all there was tremendous good will all around this House towards this fledgling democracy which we were launching in the Pacific ocean.

Tonight I am very glad to welcome this order on behalf of the Alliance and I join in thanking the noble Lord, Lord Glenarthur, for introducing and explaining it. There is just one question that I should like to ask. In Article 7 of this agreement we read about the advisory committee, which is to consist of two members who,
"shall visit Tuvalu on a regular basis".
It seems particularly important that those two advisers should be entirely acceptable to the people and the Government of Tuvalu, and I should like to ask whether they have yet been appointed, and if so, who they are.

My Lords, I am grateful to both the noble Lords, Lord Cledwyn and Lord McNair, for their reception of this order. The noble Lord, Lord Cledwyn, is right when he describes Tuvalu as being a part of the world where perhaps the opportunities for self-development are not as enhanced as they might be in other places. The noble Lord gave examples of other islands and dependencies which have further, rather greater economic opportunities. The fact is that the prospects in Tuvalu for self-sufficiency are limited. Copra, stamps—and even that is not as great as it was—fishing and limited import substitution offer the main avenues for development, although land is limited and poor and fisheries development is still very much in its infancy.

I can tell the noble Lord that no major economic developments are expected in Tuvalu which would bring any dramatic change to the economy. The need for aid will be likely to continue for some years into the future. Of course the purpose of the fund is to provide an additional source of revenue for recurrent expenses of the Government. Duties covered by it include, for example, to maintain and if possible improve existing levels of social infrastructure and services, to assist the Government to utilise effectively external capital development and technical assistance, and to enable the Government to meet long-term maintenance costs of the social and economic infrastructure.

There are on-going current projects which form part of the capital aid programme which is split into three parts: first of all an independence grant; and that particular independence grant is now fully spent. Secondly, a special development fund which has some £60,000 uncommitted for on-going projects; and the Nivaga Replacement Grant for the cargo boat, which represents £3.8 million and which is fully committed. Then there is a new fish market in Funafuti, market crop development and also regional scholarships.

The noble Lord, Lord McNair, asked me a particular question (of which I am grateful to him for giving me notice) about the composition of the advisory committee. The minimum membership of the advisory committee under Article 7 of the agreement, as the noble Lord rightly says, is two. However, the parties to the agreement can decide that the numbers should be larger and in fact have done so. There are now four members: one from each of the original parties to the agreement. The United Kingdom member is Mr. Donaldson, who is the economic adviser in the British development division in the Pacific. I cannot give the noble Lord the names of the others; but I can certainly try to find out, if he would like me to do so.

I believe that is all to the benefit of the people of Tuvalu, and I certainly join with the noble Lord, Lord Cledwyn, and the noble Lord, Lord McNair, in wishing all success to the people and to the Government of Tuvalu in their future.

On Question, Motion agreed to.