some countries the involvement of local capital may be a precondition of
foreign investment.
However local capital to meet this requirement is not
always readily available. It is hoped that the provision of funds to enable
local development institutions to participate in, or to promote, joint ventures
will thus facilitate additional British investment of development value. Further
guidance on the use of aid in this way has been issued in the circular saving ram
"British private investment in developing countries" of 17 July 1972, of which
copies have been circulated to Departments. Further copies of this are available
in PIC Department.
Evaluation of Development Banks
The
6. A list is attached suggesting the basic questions that will need to be asked
to enable Geographical Departments and the EPS to make an evaluation of a
development bank. The questions are designed to produce information about the
bank's financial soundness, quality of management, freedom from political inter-
ference, objectives, policy, project appraisal methods and performance.
same questionnaire should also be useful to Departments when appraising any
proposals for help in the setting up of development banks (eg by providing aid
funds to governments for subscription to the equity financing of the institutions).
7. The IBRD has established satisfactory relationships with a considerable number
of development banks and has indicated that it would have no objection at all to
our consulting it as we wished about individual institutions. We understand that
nearly all the banks concerned are quite prepared for the detailed information
that they have provided to the IBRD to be passed on in confidence to other aid-
givers. This information includes a policy statement satisfactory to IBRD on
the bank's orientation and operations.
8. In cases where consideration is being given to lending through a development
bank for the first time, it would therefore be desirable to ask the UKTSD in
Washington (through International Department/Aid Policy Department) to obtain what
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