CONFIDENTIAL
necessary to have more effective means than now exist to match Credit Mixte offers by our competitors or even in certain circumstances to offer it to support particularly important export orders, especially in markets which are known to be regular recipients of Credit Mixte facilities from other countries. If this is accepted it would be necessary to settle the basis on which the concessional aid element should be provided since to be effective we must have the ability to move quickly when the need arises. The simplest method would be to operate on the same basis as the French and use the aid programme to provide the necessary concessional aid element of the Credit Mixte. In certain circumstances, eg where there is adequate aid provision under the Aid Framework and the project is developmentally justified, this could be done within the terms of the Aid Strategy (though the element of conditionality may present a problem) but in others it would run counter to it. For example, Credit Mixte might be used to help finance a UK export of power generating machinery to counter foreign aid assisted competition in a country which is not a priority recipient on developmental grounds and has no existing capital aid allocated to it; this is one of the possible instruments to assist power plant exports, which is being considered by the Official Committee on Industrial Affairs (ICO).
16 The occasional use of Credit Mixte would not give rise, to any- thing like the same degree, to the potential dangers that argue against its general use; and its public justification might be unnecessary and if necessary would certainly be easier. Since this may be criticised however as a departure from the present aid policy of giving increasing emphasis to the needs of the poorest people in the poorest countries, it would be necessary, if it is to be done, for Ministers to endorse the proposal for the occasional use of money from the aid programme to provide the concessional element of a credit mixte operation; for adapting the allocation of that programme to particular countries where this is necessary. To implement such a proposal would require a change in policy on the programming of aid, since it would be necessary to carry a larger contingency allowance on the programme than at present.
(iii) Other methods of linking aid and credit
and
17 There are other methods of linking aid and credit, which do not involve a change in existing policy (because of the absence of any formal provision making the availability of the aid to the recipient conditional on the uptake of the credit). Une method is an "under- standing" that future aid flows may be jeopardised if specific commercial credit negotiations are not completed to the aid donors' advantage - this technique was successfully used recently in winning contracts for the supply by the UK of railway equipment to Kenya. Or there could be a mutual agreement between recipient and HMG to use part of a committed aid allocation with commercial credit. Others are a variation of the triangular deals (see para 18) and the use of aid in support of local costs (see para 29). Requests for the use of aid in this way may be increased by the recently announced measures to limit the amount of sterling financed medium term credit supported by ECGD. We consider that the flexible association of aid with commercial credit in such ways would be generally acceptable provided that the project for which aid finance is sought is acceptable on developmental grounds, and that commercial credit is available. The real problem is that of identifying such opportunities early enough and it is here that the posts have the key role this is discussed more fully in the following section on project selection.