1. A new cross-government Prosperity Fund
In order to help promote economic growth in developing countries the government has created a new Prosperity Fund worth £1.3 billion over the next 5 years. Its priorities include improving the business climate, competitiveness and operation of markets, energy and financial sector reform, and increasing the ability of governments to tackle corruption. These reforms will drive sustainable development in developing countries, and create opportunities for international business, including UK companies.
Although increasing numbers of developing countries are able to finance their own development, many still face considerable challenges such as rapid urbanisation, climate change and high and persistent inequality which can lower long-term growth prospects, including in middle income countries where more than 70% of the world’s poor live. The Prosperity Fund supports the broad-based and inclusive growth needed for poverty reduction to make development sustainable.
The Prosperity Fund forms a strategic proportion of the UK’s total Official Development Assistance (ODA) commitment of 0.7% of Gross National Income (GNI). It represents a step-change in the ODA resources spent on assisting countries to grow and develop, which will help to make the world a more prosperous place. The Fund will provide expertise and technical assistance in areas of UK strength to:
- promote economic reforms and remove barriers to trade
- strengthen policy capacity and build strong institutions
- develop sectors which support growth such as infrastructure, energy, finance, education and healthcare
As well as providing development assistance which is likely to contribute to a reduction in poverty in recipient countries, we expect these reforms to create opportunities for international business, including UK companies.
All projects and programmes comply with the International Development Act, meet the OECD Development Assistance Committee (DAC)’s criteria, are untied, and meet UK government transparency commitments on ODA spend.
There is also a small non-ODA allocation through the Fund in order to support the government’s wider prosperity goals.
2. Why global prosperity matters to the UK
Boosting global prosperity is both the right thing to do and is in the UK’s national interest. The Strategic Defence and Security Review (SDSR) recognises the importance of a fast-growing, open and resilient economy to our national security, and the benefits to the UK of economic development overseas. It sets out the government’s broad approach to building the UK’s prosperity.
The UK Aid Strategy (2015) sets out how promoting economic development and prosperity in developing countries will reduce poverty and also strengthen UK trade and investment opportunities around the world.
The UK government can help promote global prosperity by encouraging and supporting overseas governments to adopt policies which drive sustainable and inclusive growth. Global economic growth, development and openness benefits the UK by:
- increasing opportunities for UK business
- enabling inward investment into the UK
- allowing imports that make UK exports more competitive and benefit consumers
3. Ensuring value for money
Under the guidance of a cross-government ministerial board, thematic, country and regional priorities are determined by a careful economic diagnostic and design process, assessing the constraints to and opportunities for growth faced by our partners overseas. Project design, management and evaluation ensure a focus on results and strong value for money. The approach focuses efforts in areas with the highest potential for inclusive growth, strengthening the golden thread of robust institutions, good governance and reduced corruption.
All proposed programmes and projects are assessed against:
- impact: how the programme supports the economic development and welfare of developing countries (ODA projects only) and how it creates opportunities for business, including UK business
- strategic fit: does it meet the needs and priorities of the partner country and the steer from the ministerial board
- value for money
4. Evaluation and accountability
The Fund is accountable to a cross-government ministerial board and the National Security Council (NSC). Spending departments are accountable for impact and value for money for the UK taxpayer, and for ensuring that spending meets ODA eligibility requirements and the legal requirements of the International Development Act. The Fund supports a fully joined up approach to prosperity delivery across departments and through the government’s overseas network.
The Fund is backed up by a systematic monitoring and evaluation framework.
5. Priority countries and sectors
The ministerial board have agreed ODA activity in the first year (2016 to 2017) which focuses on those countries where the development potential and the interest to the UK are highest. Non-ODA activity supports projects with the greatest impact and value for money for the UK.
Prosperity Fund activity in subsequent years will focus on sectors and countries where there is clear potential for high-impact work.
The ministerial board has asked UK government departments to consider multi-year work in sectors including: financial services, insurance, business services, infrastructure, energy (to include extractives, renewable, low carbon and climate), environmental industries, healthcare, education and other potential high impact sectors. Work will also be developed on the ‘golden thread’ – ie business environment, anti-corruption, trade and regulation.
Sectors and countries will continue to be kept under regular review over the duration of the Fund.
6. Our partners
We will continue to work with a range of existing partners in the UK and in-country, including business, NGOs and international organisations, such as the World Bank, WTO and OECD, and new partners who have particular technical or sectoral expertise. We will maintain and develop partnerships with expert organisations as well as partnering the private sector, directly in accordance with government procurement rules, where this will help harness specialist expertise, extend reach and influence complementary financing.
The government will maintain in-depth dialogue with UK business and will ensure that UK business and institutions are informed and ready to compete for new opportunities.