DFID’s economic strategy must promote growth, not increase inequality

17 July 2018

The International Development Select Committee yesterday released its report into the Department for International Development’s (DFID) Economic Development Strategy. While trade and investment were recognised as important tools for helping people living in poverty and conflict, the committee highlighted risks and concerns for delivering inclusive, sustainable growth

The report, which cited the written submission of Bond groups, welcomes a lot of the work DFID and the CDC Group (the UK’s development finance institution) have done in heeding previous critiques of the strategy, including reports into DFID’s Private sector development work (2014) and DFID Business in Development (2015). Both of these reports raised serious concerns leading to a red/amber rating.1

DFID is praised in a number of places in the report for continuing to update and adapt its strategy implementing its economic development work. This has included developing new diagnostic tools and new programmes that have a more concerted focus on fundamental development areas, such as inclusion, gender equality and climate change. 

CDC’s approach is also commended for continuing dialogue with DFID teams in the countries where it maintained active investments. 

However, the strategy was firmly criticised for not considering the most marginalised and vulnerable in countries where the economic development strategy was being implemented, with DFID being urged to maintain a focus on what will have the best and most equitable result for the world’s poorest. 

Emphasis on UK gains

The report focused on the emphasis of the economic development strategy on UK businesses. Evidence from Bond working groups stated that the “strategies emphasis on UK business and prosperity, and the likely resulting programmes, may present a serious risk to sustainable development and poverty impact outcomes.”

This has been dubbed “dual purpose” aid, where a development objective forms the primary objective of an ODA-eligible (official development assistance) activity accompanied by a secondary objective, often with the description of it being “in the national interest”, such as increasing trade.

In response to this potential risk, the committee re-emphasised its findings from its previous inquiry into the definition and administration of ODA: “ODA must be directed primarily at reducing poverty, helping the very poorest and most vulnerable rather than being used as a slush fund to pay for developing the UK’s diplomatic, trade or national security interests”. 

Recommendations and conclusions

Among the committee’s conclusions and recommendations for DFID and ICAI (Independent Commission for Aid Impact) were:

  • Praise for DFID for listening to Parliament and NGOs in constructing this strategy and in modifying and improving it since publication.
  • Welcome the changes that are being made to the country diagnostic tools currently being piloted to help inform the individual country plans, e.g. more emphasis on climate change.
  • Recommend DFID ensure the responses of individual country teams maintain a focus on wealth creation that includes marginalised groups, taking account of sustainable development and generating revenue for national governments to spend appropriately.
  • Stronger safeguards that any “wins” the strategy secures in trade and investment with least developed countries do not result in the most marginalised in developing countries becoming “losers”.

Claire Godfrey, head of policy and campaigns at Bond, says:

“We welcome DFID’s efforts to promote growth. However, these efforts must not be weighted in favour of UK trade at the cost of helping the poorest, most vulnerable and marginalised people in the world.

“To keep those, we seek to help at the heart of our economic development strategy, DFID needs to better understand how we can reach those at risk of being left behind such as women, youth and people with disabilities. DFID should also work to avoid forms of economic development that actually increase inequality, prevent people escaping poverty, and are harmful to the environment.”

Notes

  1. Note: The programme performs relatively poorly overall against ICAI’s criteria for effectiveness and value for money. Significant improvements should be made

Read the Bond Private Sector Group's recommendations for truly inclusive development.