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Abu Dhabi, UAEWednesday 20 March 2019

Brexit Britain and international development: is big finance the answer?

Will the UK be free to build better bilateral relationships, or be crippled by waning international clout?

The UK is looking to the private sector to boost aid post-Brexit. AP
The UK is looking to the private sector to boost aid post-Brexit. AP

The only major Western economy to meet the globally recognised target for foreign aid spending, Britain faces rising domestic pressure to change the way it uses its development budget after Brexit.

Despite the uncertainty of Brexit, Theresa May and International Development secretary Penny Mordaunt are mounting a strong pivot to the private sector in international development. However the political leadership are further pressure to shift funds to other priorities.

Latest figures show that allocating Dh19.32 billion of developmental aid in 2017, saw the UAE spent 1.31 per cent of its gross national income on foreign developmental aid — almost twice the global target of 0.7 per cent set by the United Nations. Ranked in order by the Organisation for Economic Co-operation and Development (OECD), Sweden came second contributing 1.01 per cent followed by Luxembourg, Norway, Denmark and the UK, which spend 7.1 per cent.

In an October 2018 speech Ms Mordaunt touted the private sector as a willing and able partner to magnify the development impact of aid spending. “We will use the opportunity of Brexit, our aid budget, our unique investment expertise and financial services sector to make the British people more financially secure and to end extreme poverty,” she said.

Amid projections of a shortfall in global funding required to reach the UN’s sustainability goals by 2030, Ms Mordaunt told employees of DfID’s private investment arm CDC that “the private sector has to be part of the answer”.

This new approach is already in action, not just in the aid department but throughout Whitehall. On Wednesday, International Trade Secretary Dr Liam Fox announced over £130 million in support for UK firms’ contracts to develop Kumasi market in Ghana, including the construction of a new hospital and expanding an airport.

Using the clout of London’s financial centre could be a smart move to counteract the threat of waning British influence globally, especially if the UK were to exit the EU’s development funds.

However, the OECD warns that a model of blending government development funding with additional private sector resources is still an unknown quantity in terms of producing results.

“Little reliable evidence has been produced linking initial blending efforts with proven development results,” it said.

Both the prime minister and her international development secretary have given firm assurances that a reformed department and policies designed to encourage the City of London to enter the third sector will not lower the amount the UK spends on aid.

The government has committed to retaining the proportion of gross national income it spends on development at above the UN recommended rate of 0.7%, despite the anti-aid sentiments of some hard-line Brexiteers. This is important, a UN-commissioned report suggests, in retaining the nation’s position on the global stage. The report is the result of interviews with 29 UN diplomats, British officials and NGO staff.

“Interviewees said that if it were not for the UK’s continued commitment to spending 0.7% of Gross National Income on Official Development Assistance, the UK’s reputation “would be in sort of free fall territory”,” it reads.

The argument cuts little ice with Conservative critics of the current model, such as MP Andrew Bridgen, who argues that the failure of other countries to emulate London is reason in itself to change tack.

“One of the justifications of adopting the 0.7% target for foreign aid was to encourage other countries to also achieve that target, but unfortunately that appears not to have happened,” he said last year.

The UK may well keep spending up, but that does not mean it will keep spending cash on the same projects or countries as before. There is a distinct national-interest rhetoric from the British government on where Ms Mordaunt’s reformed department should be spending cash, including cash for North Africa to help deal with the refugee crisis.

Brexit might mean that suddenly we have a much stronger, broader UK development policy.

Dr Sophia Price, Leeds Beckett University

“I am committing that our development spending will not only combat extreme poverty but at the same time tackle global challenges and support our own national interest,” Theresa May said on a trip to Cape Town in August last year.

“This will ensure that our investment in aid benefits all, and is fully aligned with our wider national security priorities.”

The UK could repatriate the £1.5bn going to EU-funded projects to UK development spending, says Dr Sophia Price, Head of Politics and International Relations at Leeds Beckett University.

“The UK has had an increasing focus on value for money and securing its own interest through aid,” she told The National.

“It is very explicit about that. Brexit might mean that suddenly we have a much stronger, broader UK development policy.”

In the Middle East, where aid has focused on responding to the Syria crisis, UK support will stay strong, the UK embassy in Beirut told The National.

Lebanon, which hosts the highest number of refugees per capita in the world, is one of the most important recipients of UK aid in the region after Syria, totalling £608 million since 2012.

This past year, the UK has pledged an additional £90 million to Lebanon. The sum which covers infrastructure rehabilitation, education and development projects.

As the two countries prepare to sign bilateral agreements to replace the existing EU ones, the UK embassy wrote in an email that it was confident that “there will be no disruption to existing relationships”.

Dfid’s expenditures in the region should remain relatively stable, according to its website.

The planned budget for Lebanon will slightly decrease in 2020 to £80 million from £85 million the year before, while the planned budget for Syria and Turkey is set at £250 million in 2020 compared to £280 million in 2019.

Dfid did not respond in time to a request for comment.

Dr Price told The National that the UK would lose the cost-saving benefits of the EU’s combined effort on aid.

“All analysis up until the point that we decided to leave the EU found that collective action was a really good thing, particularly for development policy, because it was efficient. We had all 28 member states working together, efforts weren't duplicated and the UK had a very strong global reach through EU development policy,” said Dr Sophia Price, Head of Politics and International Relations at Leeds Beckett University.

European diplomats in Beirut said they had no clear idea what aid coordination would look like after Brexit, but did not expect any disruption.

“All I know is that there will be one chair less around the table when we meet to coordinate on assistance policy”, said one diplomat who requested to remain anonymous. “We will stay in contact like we do with other European non-member states such as Norway”.

The EU delegation in Beirut declined to comment.

Dr Price says the UK could work out a deal with the EU to continue contributing, but would likely to play the role of outsider in that case.

“While there are potential national gains,” she said, “there is also a loss of global engagement which the UK would find costly to replicate.”

Updated: March 4, 2019 08:39 PM

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