UK Government to Knock Down Trade Barriers

by Developed Africa 17. July 2013 09:00

Justine Greening announced new UK investment into breaking down barriers to trade in Africa

It was announced on Monday by Justine Greening the Secretary of State for International Development that the UK is going further than just providing aid to Africa. It is going to break down barriers to allow for free and easy trade, allowing businesses within Africa to flourish.

We need to set the private sector free to create the jobs and incomes that the world’s poor desperately need."

The new deals are providing £27.8 million to Kenya and £30 million to Uganda and Rwanda through the TradeMark East Africa Programmes and promise to improve trade roads as well as modernising custom facilities. But not only this, the UK is also going to invest £7 million into International Trade Centre investigations into trade regulations and bureaucracy. 

This new announcement is very much what Developed Africa is advocating, and hopefully increased trading opportunities will encourage not only African businesses to go beyond what they have been able to do previously, but also will encourage UK investors to have more faith in opportunities and projects within Africa. 

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Categories: Development | Trade

Unpicking 0.7%: Investment was always the way forward

by Developed Africa 25. June 2013 09:00

For many years campaigners have fought to set the minimum level of aid spending in the UK at 0.7%. This target was promised by the Cameron government but has yet to be delivered leading many to criticise the current UK government. But where exactly does the figure 0.7% come from and why has it become such a focused target on third sector pressure?

Richard Thomas at African Arguments has recently written a fascinating piece on the history of this target. This particular aspect of the aid agenda stems from the Pearson Commission, a World Bank investigation into the history and future of aid led by Nobel Prize winner Lester Pearson. In 1969, the report 'Partners in Development' was released. As Thomas explains it, this report set out a new paradigm for aid:

Pearson concluded that initially 0.7% should be official (government) aid flows and that approximately 0.3% should come from the private sector. The first part of this formula (0.7%) was adopted by the UN and later by the major donor countries.  Pearson expected that this ratio of 2:1 (government: private) would, within two decades, be reversed. He felt that a more natural relationship was 0.3% from government funded aid flows and approximately 0.7% or more from the private sector. Reducing poverty in Africa and Asia depended on investment, trade, better health and education, adding value locally to primary products etc. Not, in other words giving developing countries fish (aid), but giving ‘them’ a fishing rod so that they could develop themselves.

Private investment would flow, they believed, when internal capacity and investment-friendly institutions had been developed – partly by aid. But it was necessary to begin with a front loaded ‘Marshall plan’ approach, hence the 0.7%. The long term need for 0.3% was to help build and sustain local capacity."

Private sector investment was always intended to become the major influence in development models. The huge amount of aid assistance currently offered is, as Thomas describes it, a misunderstanding of what Pearson recommended for long-term development in the Global South. Thomas argues that an enshrined governmental aid budget of 0.7% will almost inevitably fuel some of the major criticisms of aid - for instance, the problem of dependency and bad budgeting in recipient countries. See the TED talk below for a good example of this critique.

Unlike some critics, Thomas argues that cutting the aid budget isn't the answer; promoting greater private sector investment is.

The piece on African Arguments continues:

A new Paradigm for Aid and Development assistance is needed. The 0.7% model encourages donors to focus on quantity rather than quality and discourages the kinds of reforms which would engender sustainable growth. The Chinese alternative, which is just as exploitative as the western neo-liberal model, appeals to many African elites who are neither reformist nor pro-poor.

Pearson’s expectation that the educational and structural investments achieved by aid would trigger increasing investment and trade has, thanks to the Chinese, been realised (although probably not in ways he expected). But bulk or wholesale aid, whether 0.7 or 0.3, is no longer the key to African development. It could be argued that small scale initiatives which act as a catalyst (adjusting the ‘rules of the game’, removing log-jams, increasing the role and influence of civil society, improving the capacity to audit flows of funds etc) are both cheaper and much more useful to developing countries in the long run."

Governmental aid might serve a purpose but it is not the real solution to long-term development. The 0.7% debate should be diverted to reflect this - the UK government can and should fight for greater investment from British private sector organisations, bringing beneficial partnerships to everyone involved.

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Categories: Aid | Development | Investment