EU governments’ fixation with private sector could compromise commitment to people in poverty
Today EU Development Ministers agreed to boost the role of the private sector in development cooperation. Leading international NGOs ActionAid, Eurodad and Oxfam recognize the important role businesses can play in reducing poverty, but argue that placing the private sector at the center of EU development policy shows ministers have failed to acknowledge its limitations.
The NGOs are reacting to the EU Council Conclusions on "A stronger role of the private sector in development cooperation: An action oriented perspective" published today. EU governments are essentially giving the green light to increase practices such as using public money to ‘leverage’ private finance.
Hilary Jeune, Oxfam’s EU policy advisor, said: “The private sector has an important role in helping to lift people out of poverty but we are worried EU governments are only seeing the good side of possible engagement. Development ministers seem charmed by the prospects of private finance flows and have failed to provide guarantees that ensure businesses will play by the rules and that their investment will benefit the poorest in society.”
Laura Sullivan, ActionAid’s European Policy and Campaigns Manager. said: “Europe needs to invest more in the smallholder farmers and small and medium sized businesses that generate the kind of jobs needed to raise people out of poverty for good. Smallholder farmers are the real backbone of the private sector in Africa and the potential driving force behind lasting development that champions the poorest over the clamour to sustain economic growth.”
María José Romero, Policy and Advocacy Manager at Eurodad, said: “The EU must recognise that leveraging private finance, and promoting public-private partnerships, entails many risks and is not always the best way to trigger development. A better policy would be to ask Southern countries to test the development impacts of these new proposals, putting developing countries back in the driving seat of their own development, where they belong. Instead, the EU should focus on putting its own house in order, starting with taking action to stop European companies dodging taxes, which costs the developing world dear.”
Today’s Council Conclusions follow the publication in May of the European Commission’s Communication A Stronger Role of the Private Sector in Achieving Inclusive and Sustainable Growth.
One of the practices that EU governments want to increase is the ‘blending’ of loans from financial institutions with public sector grants to ‘leverage’ additional financing. Before this expansion takes place, it is recommended that:
• EU governments request a report from the European Commission and the EU Platform on blending in external cooperation (comprised of EU member state representatives, the EC, the European External Action Service, financial institutions, plus the European Parliament as an observer) to take stock and publicly disclose what they have been working on since December 2012, particularly following the new findings by the European Court of Auditors in October;
• Use cautionary language in line with the new Court of Auditors report, which casts serious doubts on the finance and development additionality of blending;
• Public Private Partnerships (PPPs) are promoted and designed in a way that delivers real results for the poor. Click here to read an NGO policy briefing looking at this angle. Example of failed PPP: A new huge hospital in Maseru, Lesotho’s capital, supported by the World Bank’s private-sector lending arm, the International Finance Corporation (IFC). The costs of running the hospital and paying the loans on it are eating up half of Lesotho’s entire health budget. Click here to read the full report.
Oxfam: Angela Corbalan on + 32 (0) 473 56 22 60 or firstname.lastname@example.org
Eurodad: Julia Ravenscroft on +32 (0) 2 893 0854 or email@example.com
ActionAid: Laura Sullivan on +32 (0) 485 78 12 55 or firstname.lastname@example.org