CONFIDENTIAL
lection is vital. Where the decision on projects is taken in London, It is still part of the commercial function of the Post to draw atten- tion to specific commercial possibilities if in their view these might be neglected in the selection process.
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Certain improvements to the procedural machinery described above are in hand namely the provision by ODM of progress reports for DOT on projects which are being considered seriously and the formalising of an early warning system for DOT whereby Posts are instructed to copy to DOT all capital project requests and recommendations passed to ODM drawing particular attention to any possible conflicts of interest between developmental and commercial considerations. ODM will ensure that geographical divisions maintain close liaison with their colleagues in DOT/FCO at the early stages of project selection.
Commercial Factors
25 In general the aid projects which are most attractive commercially are capital intensive with a high offshore content and with the likeli- hood of generating future business on commercial terms; the aid projects which are most attractive in terms of the aid White Paper are those in the agricultural/rural sector which often call for high local costs and may offer less potential spin-off for UK firms, (it is not part of the aid strategy to have all projects in this category, but rather that there should be an increasing emphasis on such projects). There is some common ground between these two differing concepts but to spot the opportunities those concerned with the selection of projects, both overseas and in London, should be required to think in commercial as well as in developmental terms and to assess possible projects against commercial as well as developmental criteria.
26 In order to achieve this, it will be necessary to provide guidance for posts on commercial considerations relevant to project selection under the aid programme to complement the guidance posts already have on developmental criteria. This commercial guidance to posts and ODM should take into account the principles set out in paras 5 and 25 above, the Government's industrial strategy (bearing in mind the built-in time lags in both the aid programme and industrial production) and also the situation in various sectors of British industry (eg potential bottlenecks, unused capacity, export interests where aid could lead to future trade benefits) to enable the aid programme to be planned and undertaken with a fuller background knowledge.
27 As a counterpart to the commercial guidance it will receive, ODM should provide a rolling forecast over, say, a four year period of the likely aid financed demand for specific products which could be transmitted to industry, eg through sector working parties or planning agreements.
28 The proposals in paras 24-27 above should be useful in ensuring that commercial considerations are taken into account in allocating and operating the aid programme, although the basic strategy inevitably limits the extent to which commercial considerations can be decisive. Many of the disagreements which have arisen between departments over the handling of commercial considerations relate to projects in countries for which there is no aid allocation available under the Framework or where the allocation is already fully committed. We think there would be advantage in setting aside an additional contingency allowance in the Framework which would enable us to deal
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