By Judith Ugwumadu | 27 January 2014
The UK is set to double its investment in developing the economies of countries in Africa and Asia in a bid to end their dependency on aid, International Development Secretary Justine Greening has announced.
In 2015/16, the Department for International Development will plan to target £1.8bn of its budget on economic development, more than doubling the amount spent in 2012/12.
DFID said this amount comes on top of indirect funding through core contributions to multilateral organisations.
A DFID spokesman told Public Finance International that the investment would apply to all the 29 countries it works with, including Burma, Sierra Leone, Kenya, the Democratic Republic of Congo and Nepal.
In a keynote speech at the London Stock Exchange this morning, Greening set out DFID’s new approach.
‘Economic development is, without question, the only way countries can leave behind enduring and chronic poverty for good,’ she said.
‘I have restructured my department to focus on jobs and growth and can now commit to more than double the amount we will invest in this crucial area.’
The government will also agree a series of new partnerships with leading British and international companies to improve business conditions in Africa and south Asia, kick-start ‘embryonic’ capital markets and drive more investment into frontier economies.
Greening said: ‘Working with world-class businesses ensures frontier economies get the best support, advice and expertise they need to grow and Britain is well place to benefit from this growth.’
DFID will partner with 12 UK high street names to improve working conditions and job opportunities for more than 700,000 workers and smallholder farmers in Kenya, South Africa and Bangladesh.
She continued: ‘This will include working with Sainsbury’s to help workers gain qualifications; Marks and Spencer to develop leadership and management skills for farm workers; Debenhams, Primark, Asda, River Island, John Lewis Partnership, C&A, M&Co, Next and Morrison’s to improve management in Bangladeshi garment factories; and Tesco and Asda to invest in young fruit farm workers from disadvantaged backgrounds in South Africa.’
Greening also said that this new growth and development approach would seek to de-risk business investment in frontier economies by boosting investment insurance.
The lack of adequate and affordable insurance had prevented business investment in fragile states, she said, but the Multilateral Investment Guarantee Agency Conflict-Affected and Fragile Economies Facility – the political risk insurance arm of the World Bank Group – would provide political risk insurance to foreign investors.
DFID will contribute £20m to the first loss layer, alongside at least two other donors. Donor funding will mobilise up to £270m ($450m) of insurance to support investments in sectors such as manufacturing and infrastructure.
Greening also met with a delegation of east African businessmen, civil servants and regulators who are to be trained in managing capital markets through the DFID-backed London Stock Exchange Group Academy.
