U.K. Secretary of State for International Development Andrew Mitchell informed the U.K. Parliament on June 7 about the details of the new business model that the government has adopted for the Commonwealth Development Corp., or CDC.
In particular, Mitchell discussed the U.K. government’s plans to focus all future CDC investments in the world’s poorest countries as well as the goal of scaling back salaries and bonuses provided to CDC employees.
“CDC will be more focused on the poor than any other development finance institution, building further on its strong concentration on the poorer countries in south Asia and sub-Saharan Africa.” Mitchell said in a written report to Parliament. “In future, all CDC’s new investment commitments will be for the benefit of these two regions, where over 70 percent of the world’s poorest people live. In India, CDC will move to a concentration on the eight poorest Indian states.”
The secretary added that CDC will no longer invest in sectors and regions already served by private investors, gradually reduce its portfolio in countries outside its priority regions, implement a new performance framework, and adopt a bolder approach to risk and innovation. CDC will also stop working exclusively through private equity funds and begin operating through a broader range of intermediaries, Mitchell said.
Mitchell first unveiled the new business model for CDC, a government-owned development finance institution, in May as part of the reforms he outlined in line with the aim of the U.K. government to increase private sector engagement in its development work.
New pay structure and more transparency
CDC’s business model includes measures to revamp the organization’s salary system, which Mitchell said had led to inflated payments for CDC employees. It also covers efforts to make the organization more transparent, Mitchell said.
“The CDC board will take immediate action to cut bonus levels by 50 percent for this year. Once a new CDC chief executive is in place, the Government will agree with CDC’s board how to restructure pay to attract, motivate and retain people with the attitude and skills necessary to take part in this exciting new phase of CDC’s existence,” Mitchell told Parliament.
On transparency, the secretary explained: “In response to the public consultation on CDC, CDC will publish a new disclosure policy aimed at making its work as transparent as possible. While observing the constraints of commercial confidentiality and the Data Protection Act, CDC will publish more information on the businesses using its capital, the funds investing it, and the economic impact of investments; and on CDC’s remuneration and operating costs.”
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