Does CDC Group's rebrand signal a shift in UK development strategy?

The United Kingdom’s development finance institution is getting an overhaul and is set to become a key foreign policy tool of the British government, investing in infrastructure and technology in Africa, Asia, and the Caribbean. Last week, Foreign Secretary Elizabeth Truss made the surprise announcement that CDC Group is changing its name to British International Investment in April — a move that attracted criticism from some parts of the development sector. Many observers interpreted the news from Truss, who talked about “building a network of liberty across the world” and “reliable and honest sources of finance,” as suggesting the move was made to compete with Chinese finance. The overhaul — which will see £8 billion ($10.67 billion) mobilized by 2025, including through capital markets and sovereign wealth funds — was cautiously welcomed by some development economists, such as Mark Miller, a program director at the Overseas Development Institute who described it as a “useful vehicle” for the U.K. to build economic ties with new markets. Ranil Dissanayake, a policy fellow at the Center for Global Development, said more money for lower-income countries is a “good thing” but added that operational details are lacking and that implementation will be key. Some were even warier. “This is more than a name change and we will watch this carefully. To start with, the word ‘development’ has been taken out of the title. That’s a worrying sign,” said Sarah Champion, chair of the International Development Committee of parliamentarians, after last week’s announcement. Separately, she tweeted, “Add this [to] spending more Aid on capital, & fact they still invest in fossil fuel - & it adds up to a major shift without a strategy or Parliamentary scrutiny.” The Foreign, Commonwealth & Development Office has yet to publish an international development strategy, and the document is not expected until next year. So how much of a change does CDC Group’s overhaul represent to U.K. development strategy? “I don’t think it signals a huge shift in U.K. development policy,” CDC Group Chief Executive Nick O'Donohoe told Devex, adding that questions about the magnitude of the transformation are “for the government to answer.” A lot of CDC’s work under its new strategy would be similar to its past efforts, he said — though with a bigger focus on climate-related investments. Truss is “putting investment very much at the center of her foreign policy discussions,” O'Donohoe said, adding that she is trying to take advantage of having “the world’s largest financial center situated here” in London. As CDC Group is the country’s main investment tool for development, it “becomes quite front-and-center,” he added. Others saw it differently. The changes to CDC Group are an “acceleration” of a wider shift that has been ongoing for some time in U.K. development policy, according to Dario Kenner, lead analyst for sustainable economic development at the Catholic Agency for Overseas Development. He told Devex: “It’s been happening over the past few years. There’s been a clear public … deliberate link being made between U.K. ODA [official development assistance] and opening up opportunities for business and investors from the U.K. … This is solidifying the latest move of what's already been happening.” Kenner said CAFOD is concerned about whether this is the “best use of ODA,” especially considering the recent U.K. aid cuts and the ongoing COVID-19 pandemic. Kenner said he is also troubled by what he called a “severe lack of transparency” in CDC Group’s investments, whether some of its investments would have been made by private companies anyway, and its continued financing of fossil fuels. O'Donohoe, however, told Devex that CDC Group is “extraordinarily transparent.” The agency insists its fossil fuel investments are aligned with the Paris Agreement and made where there is a development need. Miller was more sympathetic. “It’s the latest example of a longer-term trend towards thinking much more about how the U.K.’s international investment serves mutual interests,” he said. Miller told Devex that a decade ago, the country didn’t “really have an international economic cooperation strategy beyond, say, Europe” and that “U.K. development policy was essentially about channeling aid to the world's poorest countries.” “Now [that] the U.K. is out of the EU [European Union], it’s increasingly looking to build ties with other markets — in Africa, the Caribbean, Asia. And this announcement gives the U.K. another vehicle to support those ambitions. In and of itself, that's a good thing,” he said. Dissanayake said it was “really hard to tell from details out there so far whether it will be a real shift [in policy] or a repacking of stuff that was already happening,” adding, “I suspect it’s a bit of both, with repacking of things already in the pipeline.” The CDC’s new strategy is also set to see it expand in Southeast Asia — predictably, as the government has touted an Indo-Pacific tilt for at least a year. Less expected were the organization's announced ventures to the Caribbean, but O'Donohoe highlighted the strong climate-related need of small countries there. "The U.K. has struggled to articulate the benefits of its international policies in middle-income countries that do not rely on aid, but still have high numbers of people living in poverty," Miller said. Referring to the U.K. government’s cuts to the aid budget, he added, “The challenge comes because of the way it’s being financed — the squeeze on the budgets that have historically gone as grants to the poorest countries.” From the merger of the Department for International Development with the Foreign & Commonwealth Office to the government’s so-called Integrated Review of Security, Defence, Development and Foreign Policy — a key strategy that made little mention of aid — the influence of foreign policy over development has also been increasing for some time. After Truss’ announcement, Nus Ghani, a member of Parliament with the Conservative Party, tweeted: “Good. About time the UK started to properly compete with China's debt-trap diplomacy in the BRI [Belt and Road Initiative]” — a reference to that country’s international strategy. “Next, Govt needs to accept Parliament's decision on Uyghur Genocide,” he added, referring to a declaration by U.K. lawmakers on the treatment of people in China’s Xinjiang region. “The rebranding would seem to be consistent with the direction of where development policy was instrumentalized to serve British interests in an increasingly competitive world,” Miller said. “The government have been very clear [about] the direction they see development policy moving in,” he added, saying it is also “consistent” with the Integrated Review. Another observer, speaking anonymously, saw the move as “flag shagging.” The person said: “How are they [the government] deciding to put money there, rather than in Afghanistan right now? Or girls' education? The bandwidth required to do something like this tells you about where the Tories’ priorities are, in terms of branding everything British.” But others were more skeptical of the foreign policy rhetoric surrounding the announcement. “It’s farcical that a vague ambition to hit £8 billion by 2025 is going to put a dent in Chinese influence in the Indo-Pacific” when the size of Chinese loans in the region is “many multiples of that,” Dissanayake said.