CONFIDENTIAL
bilateral capital aid
of which capital aid to India (the largest single recipient) in 1975/76
The greater part of bilateral aid to British goods and services.
Em
202
79
estimated at 60% in 1975 - is tied
3 We prepared our Report against the background of the 1975 White Paper "Overseas Development The Changing Emphasis in British Aid
Policies" (Cmnd 6270).
II
THE AID STRATEGY AND COMMERCIAL CONSIDERATIONS
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The two key developmental aims of the aid strategy endorsed by Ministers are:
(a)
(b)
to give an increasing emphasis in UK bilateral aid towards the poorest countries; and
to give a special emphasis to programmes orientated towards the poorest groups within these countries.
5 In considering how commercial objectives should be taken into account within the context of this strategy, we note that about 60% of bilateral aid is currently tied to British goods and services, Moreover the evidence suggests that the types of goods financed under tied aid come largely from industrial sectors in parts or all of which spare capacity is expected to remain until 1980. UK commercial/ industrial objectives can however be advanced by particular uses of aid, eg if follow up orders financed from some other source than UK aid are generated, or if the goods are supplied from some UK supplier which the Government is particularly concerned to assist because of commercial/industrial strategy considerations. Particular ways in which aid might be used to achieve commercial and industrial objectives
are:
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(a) facilitating entry into a new market or market sector;
(b)
establishing or maintaining technological links with a developing country;
(c) retaining a traditional market temporarily endangered;
combating any aggressively commercial use of aid by our trading competitors where this seems likely to damage our commercial interests;
(d)
(e)
paying particular attention to those countries where free foreign exchange is available or is likely to be available in future;
(f) helping industries with surplus capacity, or declining
industries.
These developmental and commercial aims need not be incompatible. The White Paper setting out the aid strategy recognised that while the criterion used in MG's aid policy is primarily that of need, the allocation of UK aid, like that of other donors, is conditioned by a number of wider considerations including commercial factors. In
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