5 May 2015

British aid does more than people think


Amid the dying light of the last Parliament one of the final pieces of legislation to hit the statute book was the aid bill, enshrining in law Britain’s commitment to spend 0.7 per cent of GNI on international development.  Included in all three party manifestos in 2010, it featured in the Coalition Agreement and finally got over the line thanks to a Private Member’s Bill from Michael Moore.

Although UK aid is criticised by those who often claim to be most patriotic about Britain, it seems to me our generosity to the world’s poorest people is something to be proud of rather than bitter about. Especially when you consider how the Department for International Development is leveraging this money to encourage free and fair markets and igniting an emerging global private sector.  In the same way the old left versus right ideological battle lines have moved on, so has the binary perspective of the state versus the market.  UK aid is an example of the two working together.

Sustainable economic growth in the poorest countries will be one of the quickest ways of alleviating poverty but leaving it to the free market alone hasn’t helped those that need it the most. The world’s Least Developed Countries receive only 1.9 per cent of foreign direct investment.  There are investment opportunities in these countries; they just need an injection of targeted capital to kindle them into flame.

Too often businesses are put off from investing in frontier economies because of the risk. In a speech at the London Stock Exchange last year Secretary of State Justine Greening explained how DfID was working to remove these investment obstacles. She said: “Poor infrastructure, poor regulation, information gaps and financial challenges tip the balance away from investment.”

In Nigeria, DfID’s technical assistance programmes have helped increase the country’s power supply by 45 per cent. In Bangladesh it has helped to cut the number of days it takes to register a business down from 57 to just three. And in East Africa UK aid is improving roads on crucial trade corridors, cutting time wasted in customs and modernising the largest port in Mombasa.

Creating competition is healthy to any market economy and the poor lose out to cartels more than anyone. Small businesses account for more than 45 per cent of all employment in developing countries and their growth is vital to creating jobs and increasing prosperity. But one of the primary stumbling blocks is raising finance. By working through local banks and NGOs British aid is able to help fill this finance gap and help the growth of the private sector.

Clearly nothing is perfect and the case for aid has been damaged by the examples of corruption which are trumpeted with glee in parts of the media.  But in the same way when one company boss is found guilty of malpractice or corruption we don’t nationalise their entire industry, so international aid can’t be defined by single examples where things go wrong. The issue of improving local governance is a strategic priority for DfID. It is also a reason to channel funds through British NGOs which often deliver aid directly to those in need and operate under DfID’s rigorous accounting and auditing conditions.

International development is a complex process requiring nuanced approaches to be effective. In the same way old notions of the state versus the market are out of date, so is the simplistic definition of a ‘poor country’. Today 75 per cent of the world’s poorest people live in middle income countries like India – hence the headlines about aid going to nations with space programs.  But if we want to reach the world’s poor and create a more prosperous planet then working with middle income countries is essential.

A lack of money and possessions is not the cause of poverty, it is a symptom of it. That’s why getting to the root of the problem and tackling structural causes is so important.  DfID’s focus on job creation and economic growth is one example of this. Others include increasing the economic choices of women and addressing climate change (effectively international development in reverse).

DfID not only encourages a growing global private sector it also recruits UK firms to help deliver development.  It has teamed up with Sainsbury’s to help workers gain qualifications and access better jobs in South Africa, worked with Marks & Spencer to develop leadership skills of farm workers in Kenya and collaborated with Debenhams and Asda to improve the management of garment factories in Bangladesh.

It’s worth noting that emerging markets in 2015, where British businesses trade and make money, were minnows 20 years ago. Investing in today’s poorer countries will create tomorrow’s trading partners.  But overseas aid shouldn’t just be spent to make ourselves richer. Ultimately it is a good thing for the world’s fifth largest economy to invest 0.7 per cent of its income to help the world’s poorest people.

Aid delivery in the 21st century is getting better and smarter all the time. Fuelling enterprise, opening up markets and tackling the structural causes of poverty have the potential to change the world.

Joe Ware is Church & Campaigns Journalist at Christian Aid.