BRITISH AID – COMING OR GOING ?

The British Department for International Development, (DFID), is now merged with the UK Foreign and Commonwealth Office (FCO). Its budget this year will be cut by £2.9 billion, index-linked to 0.7% of UK GDP, which has fallen due to COVID 19. Economists predict that the UK GDP will not recover to 2019 levels until 2024, with negative implications for availability of UK official development finance until then.

UK development activists, interest groups and parliamentary opposition fear the end is nigh for British aid. Death by merger and by a thousand cuts as UK Ministries, Departments and Agencies with international aspirations seek to join the action. Britain’s overseas partners may be mildly mystified by this as well as Brexit.

A funeral for a dead duck DFID aid programme will however prove premature if the merger means a more focused fresh start for UK development finance programming. An integrated approach to foreign policy and international development, linked to investment and trade, jointly with the private sector and facilitated by closer cross-Departmental co-ordination might be better for future British development efforts.

The COVID recession means less money for a while. But with more active coalitions, backed by partners, private firms and banks, we can get a bigger bang for a buck. Declaring wistfully that we will restore DFID independence later is the wrong answer to much bigger and wider questions.

The first step is to recognize that the FCO-DFID merger into the new Foreign Commonwealth and Development Office (FCDO) was a long time coming. A culminating administrative step reflecting seed changes in geo-politics, economic history, social trends and public opinion, globally and at home.  These trends cannot be reversed by administrative edict. This does not mean the British are against supporting international development or globalization. It means they want change.

The second step is to recognize that the classic “international aid” project approach needs to be restructured, re-branded and replaced.  The President of Ghana, among many others, argues for what comes after “aid”. That the mobilization of finance to secure trade, investment and sustainable growth, and targeted technical assistance, backed by global and regional public-private coalitions, now makes more sense. 

We need development bonds instead of being chained to projects ! Joint ventures combining blended finance from banks, Development Finance Institutions and investors, with donors and agencies backing targeted technical assistance.

This approach can support economic development, build infrastructure, support social change and fight poverty. Now we must practice what we preach. The state should facilitate.  The private sector and civil society should drive delivery.

The key to success is the coming of age of social entrepreneurship in mainstream commerce and banking, as private firms seek balanced sustainable growth.

Agriculture still provides the ground floor for jobs and livelihoods in many countries. Farmers, processors and value chain actors are learning how to include redistributive and social strategies to help give medium term certainty and security of supply to value chain stakeholders, based on mutual recognition, fairness and trust. 

No one pretends this is easy. Firms may seek easy money. Farmers may break contracts to sell on spot markets. The new FCDO must facilitate socially responsible contractualization in value chains, with sustainable market links. This is the new front line if the FCO prosperity and security agenda is to combine with the DFID poverty focus. Too much red tape or too little social commitment and it won’t work.

The new globalization, reflecting green economic objectives, tempered by COVID 19, populism and anti-globalization sentiments demands re-design of international value chains with more certainties closer to home. These trends are fostered by climate change, and the insecurity that goes with increased competition for land and water. Global pandemics with economic consequences, may be mitigated by vaccines, or not.

Suddenly we glimpse where the 21^st century is taking us.  Recent anti-globalization sentiments were triggered by inequalities especially in the US and UK and the decline of the 1945 Bretton Woods consensus, leading to fear of free movement of labour alongside capital.  Now we have projections that the world’s population will decline starting mid-century. Some countries will desperately need young migrants.

Many developed countries, including transitional economies, will face a fall in the working population alongside aging, and competition to secure younger inward migration by the last quarter of the 21^st century. We must optimize jobs now at home and abroad but also prepare for a new global demographic dispensation accelerating by mid-century, with labour shortages. We can already see some of this in agriculture.  

The new Foreign and Commonwealth Development Office faces new priorities in these rapidly changing conditions amidst insecurity, disasters and emergencies  -

• To help build more resilient and re-balanced value chains nationally, regionally and globally to contribute to green lower sustainable growth rates.

• To strengthen labour markets in countries and regions with high population growth and youth unemployment (Brazil, Nigeria, Egypt, Pakistan, Indonesia).

• To help build capacities of institutions, coalitions and delivery systems to mobilize up-scaled financing and resources to deliver these objectives.

We need practical responses by UK actors given Brexit and COVID 19 :-

• We can no longer think of the development budget and actions financed by it as a sheltered vertical silo. Development strategy is a key part of deployment of soft power and must be geared to synergies with UK interests when possible to promote UK jobs, economic recovery and public support.

• We need deployment of integrated development programmes to help tackle widespread areas of global insecurity alongside minimum security measures needed to facilitate development, secured with coalitions and allies.

• Integrated development requires better co-operation between UK Ministries and agencies. We need a new public awareness rationale to close the gap between the development bubble and public opinion alienated by domestic inequalities. Modernized 21^st century interdependence can benefit Brexit Britain, with better prospects for investment and trade, involvement in world-class infrastructural initiatives, and British jobs, alongside beating poverty.

The FCO-DFID merger must make this integrated approach to development work to help secure prosperity and peace. We in the UK have to support all this in the midst of a global pandemic and recession that will be with us for several years, probably to be followed by others. The new integrated development led by FCDO can help us to fight our way out of the COVID 19 recession and help prepare us for the next one.

@Terry Lacey

01.08.20

Terry Lacey is a practical development economist who works in the field in support of development programmes, most recently in West Africa.