Noel Treacy (Galway East, Fianna Fail)

The Development Banks Bill provides for Ireland's future membership of the Asian Development Bank, the extension of the activities of the European Bank for Reconstruction and Development, known as the EBRD, to include Mongolia, and amendments to existing legislation governing Ireland's membership of a number of multilateral financial institutions, to better facilitate Ireland in meeting its obligations to these bodies.

The Asian Development Bank is an important agent for development in that region. When it was established, Ireland was not in a position to join and add our financial support. Today, we seek to join the Asian Development Bank. It is an important element of Ireland's strategy to join a number of regional development banks, which was recommended to the Government in the 2002 report of the Ireland Aid review committee. Membership of this bank will contribute significantly to Ireland's bilateral development programme in the region, providing further impetus to the role played by Ireland in supporting economic development and social progress in Asia and, in particular, reducing poverty.

The Asia strategy responds to the need identified for a concerted and strategic approach to the development of trade with Asia. Membership of the ADB was identified as a key objective of the Asia strategy. Into the future, China and other Asian countries will, to a progressively greater degree, influence political and economic developments throughout the world. Ireland's membership of the ADB will provide an opportunity to strengthen Ireland's voice and contribution to Asian development. It will confer economic benefits in providing greater opportunities for Irish companies and consultants to tender for various projects funded by the ADB and in helping to develop a greater awareness of business and commercial opportunities in Asia. The Government's primary motivation, however, is its belief that Ireland should, on foot of the progressive improvements in our national prosperity, deepen and widen our contribution towards helping the less fortunate peoples of the world to improve their different positions.

The Asian Development Bank is a multilateral development finance institution dedicated to reducing poverty in Asia and the Pacific. It aims to improve the quality of people's lives by providing loans and technical assistance for a broad range of economic and social development activities. It was founded in 1966 to promote social and economic progress in the region and to make loans to more developed member countries at market rates of interest. The ADB is owned by the existing 64 member countries, of which 46 are from the region and 18 are non-regional members, including EU states. It is a well-established and highly-respected development agency fostering progress in the Asia region.

Japan and the United States are co-equally the largest shareholders, each with almost 16% of the bank's total subscribed capital. I will outline briefly the governance and management structures for the bank. Each member country nominates a governor to the board of governors, often the Minister for Finance, to vote on its behalf. The board of governors meets formally once a year at the ADB's annual meeting. The members elect the president for a term of five years. Four vice-presidents are appointed by the board of directors on the recommendation of the president.

The board of governors also elects the 12 members of the board of directors. Eight are elected by member countries from within the Asia-Pacific region, and four others are elected by member countries from outside of the region. The board of directors performs its duties full time at the ADB headquarters in Manila and holds formal and executive sessions regularly. Members are arranged in constituencies, headed by one of the 12 directors. Ireland will, after membership, join an existing constituency as part of a group of members from outside Asia. Ireland will not have permanent staff assigned to the ADB.

The scale of the bank's operations are significant. In 2004, the bank's loans amounted to $5.3 billion. An excellent and timely example of the work of the Asian Development Bank, as we approach the first anniversary of the Asian tsunami, is its response to this disaster. The bank responded rapidly, moving to assist those countries most directly affected by the disaster, providing assistance of more than $750 million. It established a $600 million Asian tsunami fund and identified $175 million in funding to be redirected from ongoing projects and programmes, bringing the bank's total financial commitment to $775 million in this sad situation.

Indonesia, the Maldives, Sri Lanka and India requested the ADB's assistance in their rehabilitation and reconstruction efforts. In these countries, the bank's assistance packages support disaster management, helping to restore critical infrastructure, such as water supply, sanitation, solid waste management, power, agriculture and fisheries and to rehabilitate and reconstruct roads and railways. Disbursement priority areas include housing reconstruction, microfinance for livelihoods and coastal protection. The support of the bank, together with different national efforts and the work of the international community, has made an enormous contribution to the recovery of these countries which were severely affected by the tsunami.

More recently, the Asian Development Bank is playing a significant role in regard to the earthquake disaster in Pakistan. The bank has already completed a preliminary damage and needs assessment report in association with the World Bank. This estimates that Pakistan needs approximately $5.2 billion to effectively implement a relief, recovery and reconstruction strategy. Of this, $3.5 billion is for the physical reconstruction of housing, schools, health facilities, roads and other public infrastructure.

The Asian Development Bank has already established a special Pakistan earthquake fund with an initial contribution of more than $80 million. This fund is similar to that set up by the bank in response to the tsunami just a year ago. It will pool and promptly deliver emergency grant financing for projects that support immediate reconstruction, urgent rehabilitation and other associated development activities. In addition, the bank has announced that it will provide about $1 billion in concessional support for the rehabilitation and reconstruction of earthquake-hit Pakistan, with a focus on transport, power, health and education, and governance and institution building.

The initial cost to Ireland of entry to the ADB will be in the order of $40 million, or €33 million, depending on the rate of exchange prevailing at the time. This is made up of the following commitments which will be assumed by Ireland: a 12,040 shareholding in the ADB, of which 847 will be paid in capital shares at a cost of $10 million, or some €8.4 million, and 11,193 will be callable shares, this is the shareholding structure required of new members from outside the region; an initial contribution of some $28.046 million, or €23.102 million, to the Asian Development Fund which is a key resource and a major instrument of concessional financing, available for development from the ADB; and an initial contribution of some $2 million, or €1.6 million, to two trust funds operated by the ADB which support specific objectives.

It is proposed that Ireland's contribution to the bank's share capital and to the Asian development fund will be paid in equal instalments over four years. A once-off payment will be made into the two trust funds, namely, the governance co-operation fund and the gender and development co-operation fund. The governance co-operation fund supports government-led governance reform activities to improve transparency, accountability, predictability and-or participation. The objective of the gender and development co-operation fund is to promote gender equality and women's empowerment in the Asia-Pacific region, and to implement programmes and projects to narrow gender gaps in order to meet the millennium development goals. Ireland will also have to give the conventional legal immunities to the ADB which other international agencies have in respect of staff and other matters.

The House will wish to note that at the UN summit in September this year, Ireland recommitted to achieving the UN target of 0.7% of GNP for overseas development assistance by 2012. Given current economic projections, this implies a tripling of Ireland's ODA above current levels. Fulfilling the financial obligations which membership of the ADB entails will help achieve the objectives set by us for the coming year.

Let me now turn to the European Bank for Reconstruction and Development, of which Ireland was a founder member. The EBRD is a multilateral financial institution established in 1991 following the collapse of communism. It was a response to the recognition that the emerging democratic states in central and eastern European and ex-Soviet republics required significant financial support to nurture their economic development.

The EBRD invests in businesses and financial institutions that underpin the development of market economies in 27 countries of operation, from central Europe to central Asia. In 2004, the EBRD invested some €4.1 billion in 129 different projects. Investments are designed to foster and accelerate the transition to open market-oriented economies and to promote private sector development. The span of operations of the EBRD encompasses some of the less-developed countries in Europe and central Asia.

Mongolia lies in the heart of the Asian continent and has existed for decades as a buffer state between the Soviet Union and China. Amid the collapse of communism and the Soviet Union's disintegration, Mongolia too underwent rapid change. In January 1992, a new constitution was adopted that renounced socialism and made Mongolia a republic with a parliamentary government and a directly elected President. Mongolia has remained neutral in international affairs. Until 1990, Mongolian economic development had been directed by a series of Soviet-style central plans. Since then, Mongolia's economy has suffered substantially due to the withdrawal of Soviet aid for development.

At the time of establishment of the EBRD, Mongolia was neither part of the Soviet Union nor a founding member of the bank. Since Mongolia's needs for assistance are consistent with the needs generally faced by the EBRD's countries of operations, it was deemed appropriate that Mongolia should become a member of the bank. This took place in October 2000. Since early 2001, the EBRD has been providing technical assistance to Mongolia, using donor funds made available through the Mongolia co-operation fund.

However, the Mongolian authorities considered that the involvement of the bank should not be limited to technical assistance but should also include the financing of specific projects. In July 2003, the Prime Minister of Mongolia formally expressed an interest that Mongolia be granted "country of operation" status. However, being non-European and located outside the territory that the bank's founders had originally intended for its activities, Mongolia could only become eligible for EBRD financing after an amendment of the agreement establishing the bank at the outset. In January 2004, the board of governors unanimously adopted a resolution establishing an amendment to the agreement establishing the bank in order to admit Mongolia as a "country of operations". The resolution must, however, be ratified by all members of the bank. Passage of this Bill will enable Ireland to ratify that important resolution.

Ireland is currently a member of several multilateral financial institutions. These are the International Monetary Fund, known as the IMF, the World Bank, the European Bank for Reconstruction and Development, the European Investment Bank and, most recently, the Council of Europe Development Bank. A significant element of this Bill is the proposed amendment to the current legislation governing Ireland's participation in these international financial institutions. This will allow for future changes in the articles of agreement of those institutions to be approved by resolution of the Dáil Éireann rather than through primary legislation, but only where this is consistent with constitutional requirements.

I will outline briefly the constitutional and legal position. Article 29.5.1° of the Constitution requires that every international agreement to which the State becomes a party shall be laid before Dáil Éireann. However, under Article 29.5.2° the State is not bound by an international agreement involving a charge upon public funds unless the terms of the agreement have been approved by Dáil Éireann. Traditionally, our participation in these organisations and related entities such as the International Development Association has been provided for exclusively by primary legislation thus necessitating the passage of new primary legislation to ratify every and any change in the establishing agreements.

These changes could encompass, for example, the requirement for additional financial contributions or the extension of operations to new member states. Legislation cannot be drafted until the change has been agreed by the members of the bank. There is then significant pressure for the agreed change to take effect immediately or for Ireland to meet agreed financial commitments. The required legislation has, in many cases, been delayed due to other legislative priorities and as a result Ireland has, in some instances, had to seek time extensions or has been unable to make timely payments when required.

Accordingly, this Bill will provide that in future, where appropriate, approval of an international agreement to which Article 29.5.2° of the Constitution applies would be done by way of Dáil resolution in accordance with that provision of the Constitution rather than by way of primary legislation and that the definitions in those existing cases already dealt with by way of primary legislation would be amended to allow any future changes to be approved by resolution of Dáil Éireann. The advice of the Attorney General will be sought on each future amendment to an existing agreement to ensure that it does not require substantive changes in primary legislation, or substantive Irish law, for effective domestic implementation.

I will now turn to the specific provisions of the nine sections of this Bill. Section 1 sets out the definitions used in the Bill. Section 2 provides for the approval of the terms of agreement for membership of the Asian Development Bank. The articles of agreement establishing the Asian Development Bank are set out in a Schedule to the Act. Section 3 sets out the financial and other provisions associated with joining the bank. Section 4 provides for an extension of the definition of "Agreement" in section 1 of the European Bank for Reconstruction and Development Act 1991 to take account of the EBRD's resolution dated 30 January 2004 providing for the extension of the bank's activities to Mongolia. In the case of sections 2 and 4 the Bill provides for future changes to the terms of agreement to be approved by resolution of Dáil Éireann and for publication in Iris Oifigiúil of notice of any such approval. Sections 5 to 8, inclusive, amend the Bretton Woods Agreements Act 1957, the International Development Association Act 1960, the Multilateral Investment Guarantee Agency Act 1988 and the Council of Europe Development Bank Act 2004 in a similar fashion.

The Bill will allow Ireland play a much more significant role in supporting Asian development through membership of the ADB and the extension of the EBRD activities to Mongolia and facilitate meeting Ireland's international obligations in a timely fashion fully consistent with our constitutional Oireachtas requirements. This will be critical in enabling us to provide our contribution to debt relief in Africa, in line with the World Bank's multilateral debt relief initiative, which builds on the proposals that emerged from the G8 Summit in Gleneagles. It also contributes in an important way to the delivery of the Government's objective of increasing Ireland's overseas development assistance towards the UN target. I commend the Bill to the House for approval.