By Dirk Willem te Velde
Yesterday saw the launch of the UK coalition agreement. Whilst such documents should not be seen as White Papers (and while continental European coalition negotiations tend to take longer to prepare such documents), it is rather tempting to go directly to the International Development Section of the agreement for a review on what is being said about development. However, we are living in a changed world. Development is influenced by not only aid issues, but ‘beyond aid’ issues, such as finance, trade, migration and climate change. Developing countries not only face local problems, they also suffer global challenges, just as Britain does.
Here is my inventory of the key issues affecting development in the agreement, applying a development scorecard.
The agreement says ‘We will honour our commitment to spend 0.7% of GNI on overseas aid from 2013, and to enshrine this commitment in law.’
This is in line with the cross-party consensus. There is much discussion on how to make aid more accountable. Verdict: very good.
Beyond aid: promoting international finance
‘We will introduce a banking levy and seek a detailed agreement on implementation.
‘We will bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector; in developing these proposals, we will ensure they are effective in reducing risk.’
Neither of these ideas has yet been evaluated with a development lens. Few have actually thought about how these seemingly favourable measures affect the availability of finance for development. Much depends on how these proposals would be implemented. Verdict: unknown.
Beyond aid: promoting Foreign Direct Investment
‘We will ensure that UK Trade and Investment and the Export Credits Guarantee Department become champions for British companies that develop and export innovative green technologies around the world, instead of supporting investment in dirty fossil-fuel energy production.’
This can be positive for development in that it could address market failures associated with investing under uncertainty. It is puzzling though why there is nothing on development finance institutions. The paragraph above is from the aid section – but Export Credit Guarantee Department ( ECGD ) funds surely are not aid funds (as per the OECDDAC definition). CDC funds, however, still are. Verdict: cautiously positive.
Beyond aid: trade
’Our aim is to create the most competitive corporate tax regime in the G20, while protecting manufacturing industries.
‘We will support pro-development trade deals, including the proposed Pan-African Free Trade Area.’
The first of these statements is the most puzzling of all. Is it suggested that the UK should now seek the protectionist mantle? Surely not. There are many ways to promote local capabilities (without the need to develop them behind protectionist walls). The idea on (broad/deep) African trade deals sounds good. Verdict: mixed, because unclear.
Beyond aid: migration
‘We will introduce an annual limit on the number of non-EU economic migrants admitted into the UK to live and work. We will consider jointly the mechanism for implementing the limit.’
This is potentially the most anti-development part. There is by now sufficient evidence to suggest that migration leads to welfare increases in home and host countries. So the question becomes: will the limit be non-binding or at least large enough and implemented in a sufficiently simple way in order for it not to stifle universities, IT companies, the heath sector and productivity more generally. Verdict: potentially bad.
Beyond aid: climate change
’We will work towards an ambitious global climate deal that will limit emissions and explore the creation of new international sources of funding for the purpose of climate change adaptation and mitigation.
’We will push for the EU to demonstrate leadership in tackling international climate change, including by supporting an increase in the EU emission reduction target to 30% by 2020.
‘We will create a green investment bank.’
This is all very good and ambitious. It suggests ways to promote a cleaner world, including the use of climate finance for developing countries that is, very importantly, additional to development aid. Verdict: positive
Overall, there are elements that are good, some that are unclear, and others that are worrying, and my verdicts range from very good to potentially bad. But I am also left wondering why the following new challenges and ideas were not mentioned more specifically:
The role of the private sector in development . Reaching the MDGs depends on growth which depends on private sector development (and dealing with business). There are few new ideas on the private sector and development (PSD), growth or wealth creation. In particular, there could have been more on the positive role played by aid for trade . This is puzzling, especially from this Coalition.
Dealing with the new international powers. There is also no analysis of the implications for development (and the UK) of the rise of emerging markets .
Reducing vulnerability to shocks. There is no mention of the need to make the development architecture better able to deal with such shocks as the global financial crisis.
Taken together, this coalition agreement is a major milestone on the road to increase the volume and quality of aid and it recognises that the focus of development is gradually shifting. But the absence of concrete suggestions dealing with the new challenges – all of them critical to the development agenda – is a major concern. My verdicts range from very good to potentially bad.
What is your verdict?
Re-published with permission by the Overseas Development Institute.