EU plans to de-risk private investment in health, education

The European Commission is exploring how to use its development budget to incentivize private investment in health and education around the world, triggering concern from aid NGOs. During a webinar with more than 300 business representatives last month — a recording of which was obtained by Devex — a commission official said Brussels is looking at “human development” as a new area for its budget guarantees. Launched in 2017 and set to be expanded in the next seven years, the guarantees allow the commission to allocate billions of euros to mostly European development banks to partially cover the banks’ potential losses on risky projects in investment-starved countries. The first batch of guarantees was steered by the commission into five areas: sustainable energy and connectivity; micro, small, and medium-sized enterprises; sustainable agriculture; sustainable cities; and digital solutions for development. But Kay Parplies, who heads the unit in charge of guarantees at the commission’s development department, said during the webinar that for the 2021-2027 programming period, “there is a new sector, ‘human development’ — a little bit more challenging perhaps for private sector investment, but it includes essentially health care and education.” “There is a growing body of evidence demonstrating that schemes using public money to encourage private investment in vital sectors … is a risky business.” --— María José Romero, policy and advocacy manager, Eurodad Parplies said, “We’d like to push the envelope a little bit — of course, without replacing what governments should do and are doing, but we would like to see whether [the] private sector can help us to bring more of these human capital investments into our [partner] countries.” Asked by Devex for an example of how a budget guarantee supporting private sector investment in health and education would work, the commission declined to comment. Jutta Urpilainen, European Union commissioner for international partnerships and a former teacher in her native Finland, has made education one of her priorities since taking office in December 2019. However, the department she oversees was already envisaging guarantees on human development before her arrival. That work is ongoing. Civil society is wary. The European Network on Debt and Development, or Eurodad, released a report earlier this month arguing that private sector instruments are undermining traditional aid budgets. “There is a growing body of evidence demonstrating that schemes using public money to encourage private investment in vital sectors like healthcare and education is a risky business,” María José Romero, policy and advocacy manager at Eurodad, told Devex by email. “At the same time, the global [COVID-19] pandemic has made it crystal clear how crucial robust public healthcare and education really is. The EU must focus on using scarce development aid to support public systems and universal access, instead of turning towards guarantees which would be nothing less than gambling with people’s lives,” she said. Jeroen Kwakkenbos, senior aid policy and development finance adviser at Oxfam’s European Union office, told Devex that the commission should spend more money on health and education but also warned against using “modalities that circumvent public services.” Kwakkenbos wrote that the EU deserved credit for the 20% spending target on human development in its 2021-2027 development instrument but that this should be achieved through grants “and only the most generous and concessional of sovereign loans.” For Charles Goerens, a member of the European Parliament’s development committee, support to the public or private sector should not be subject to an “ideological debate.” Evoking the case of the Democratic Republic of Congo, Goerens told Devex that in remote areas where the state is “hardly present or so corrupt that we can’t say the state is present,” the EU should be ready to act with everyone: NGOs and the United Nations but also businesses and local entrepreneurs. If a health clinic is required that the Congolese state is not able to build, “then let’s do it with those who are ready to do it,” Goerens said.