Justine Greening: Frontiers in Development - economic growth is key
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Speech by the International Development Secretary at USAID's Frontiers in Development, arguing that it is economic growth and the creation of jobs in developing countries that will defeat poverty for good.
Thank you for that introduction. And thank you to Raj for inviting me to speak at this timely and important conference. I’m delighted to be speaking here with so many key development players, donors and governments, civil society, NGOs, and representatives from the world of business.
It is 20 years of unprecedented progress in tackling global poverty that has made a conference like this possible. For the first time in human history the end of poverty could be in sight.
But all of us recognise this is not inevitable.
There remain around a billion people in the world living in chronic poverty. They are the most vulnerable, the most marginalised people on the planet, the most difficult to reach. Many are girls and women.
Last year global development aid reached the highest level ever recorded, and I’m proud that the UK plays a major part in this, contributing 0.7% of our national income to development. But the truth is that lifting a billion people out of extreme poverty will cost far more than the global development budget can provide.
So does that mean we should reduce our ambition? No, of course not. We wouldn’t be here if we thought that.
To defeat poverty I believe we need to go beyond what has been seen as traditional aid.
Sanitation, education, health programmes - this work will continue to be critical and life-saving. But ultimately it’s jobs, growth and enterprise that will defeat poverty for good.
And while it’s fair to say that parts of the development community have supported economic development for decades, I think we can, and must, do more. I think we can be more innovative and more ambitious. I think we can work more closely with businesses, which are the engines of growth.
A race against time
And we should remember that men and women in developing countries - just like in any other part of the world - want the dignity of work. They want the chance to work their way out of poverty, the chance to provide for their families and build themselves a future.
It’s clear that economic development also drives social development.
I saw an example of this for myself on a trip to Zambia earlier this year where I met a group of villagers by the Kafue river outside Lusaka. They had once been fishermen but one of them had had a different vision of how they could earn a living. With the assistance of UK funding, they turned arid land into farm land, growing wheat and soya beans. And once they got the hang of farming, they expanded to tomatoes and cabbages. They then invested in a horticulture expert to learn how to reap higher yields from their land. They bought a vehicle to get their own produce to the market, and they invested their profits into the local hospital and helped build a new classroom at their children’s school.
In short, supporting individuals to improve their livelihoods generates much wider community benefits and ultimately it benefits the whole country. Productivity might be a concept of economics, but to me, it’s about people. It’s about potential.
And supporting stronger economies is in our interests as well: because if we get development right, we are building new markets, helping today’s aid recipients to become tomorrow’s trading partners.
But we need to make that happen because we’re not on track. At the moment most developing countries are not growing fast enough to reach that zero poverty goal.
For instance, in Africa, many developing economies have seen incredibly fast growth in the last decade. But these economies are still largely centred around low productivity agriculture or heavily reliant on natural resources. Many developing economies are simply cruising on what they already have and already know.
So far, there has been very little industrialisation. Well below 10% of African workers find jobs in the manufacturing sector.
These countries need to invest in the skills and sectors that will see them graduating to the next level of economic success. This means not only more productive agriculture but more manufacturing and new service sectors to create genuinely diversified economies.
And this is all the more urgent because many of the poorest countries in the world will see a huge increase in the working age population over the next 10 years.
If this ‘youth bulge’ have productive work then income levels in these countries could increase faster than at any other time in their history.
But it is genuinely a race against time. These people are growing up day by day. Already in low and middle income countries the young are more than twice as likely to be unemployed than the rest of the population. The chance to have a job, to earn money, should never be too much to ask for.
We also need to ensure that we are driving inclusive, smart growth. Growth that enriches the many, not the few: girls and women are still routinely locked out of jobs and economic opportunities across the developing world.
So I believe our challenge is this: accelerating growth in developing countries and reaching the critical level of 7% per capita growth through economic transformation. And driving inclusive, sustainable growth that creates productive jobs and livelihoods.
Many of us are accelerating our efforts to meet this challenge. USAID, led by Administrator Shah, is pioneering innovative new approaches for working with the private sector, including using loan guarantees to unlock billions in private financing for entrepreneurs across the developing world, through their Development Credit Authority.
In the UK my Department for International Development is quietly revolutionising our approach. Economic Development is now a core priority right across the Department.
There are three key aspects to this new approach, which I’ll set out:
- making it easier to do business in developing countries
- building open economies where equal rights and equal opportunities mean everyone can reach their potential
- and working with private sector partners - the new development players - to maximise their development impact
Making it easier to do business
I’ve said the private sector is the engine of economic growth - businesses bring much needed investment, innovation and tax receipts to a country. They also provide jobs and economic opportunities for the communities where they operate.
But difficult business environments reduce the incentive to invest, stifle entrepreneurship and stop businesses from growing.
That’s why the UK is working to improve the business climate and boost investment - by modernising ports in Kenya, upgrading roads from Uganda to Rwanda, increasing Nigeria’s power supply.
Often one of the deepest and most difficult barriers to overcome for small and large enterprises operating in developing markets is access to finance.
We are providing smaller and micro enterprises with an economic launchpad. Our Global Finance Initiative for Small and Medium-sized Enterprises will deliver at least $1billion dollars of commercial loans to 25,000 enterprises headed or owned by women.
On a larger scale, capital markets are essential for financing business growth. A partnership between the UK Government and the London Stock Exchange is providing bespoke training for financial sector professionals, regulators and government officials in Tanzania.
Open economies and societies
We are also focusing on what the UK Prime Minister calls the Golden Thread of Development.
In other words, building the institutions - such as the rule of law and the presence of strong property rights - which enable open economies and open societies to thrive. These are also elements that represent a green light to companies thinking about investing in a frontier or emerging economy.
A key constraint to investment in Africa is insecure land tenure and property rights: 90% of Africa’s land is estimated to have insecure tenure or contested land rights. Our programmes are strengthening land and property rights for the poorest, particularly for women and girls.
We know that businesses headed by women will often face an even greater struggle because of discriminatory laws and practices that prevent them from owning land, signing a contract or registering a business.
No country can truly develop if it leaves half its population behind.
UK programmes have helped 740,000 women secure registered title to land over the last 3 years. We have provided nearly 27 million women with access to financial services such as savings, credit and insurance
Open for business
Finally, since coming into this job I’ve been determined to reach out to businesses of all sizes, starting in the UK, to join the development effort.
I think businesses are the new development players. Indeed investments from multinationals overtook development aid in 2000.
But it’s taken us some time to wake up to this. Historically, if the development community considered the role of businesses at all, it was about how best to mitigate the risks, not maximise the opportunities.
And yet more often than not the interests of the development sector are aligned with businesses and it makes sense for us to work hand in hand.
Forward-thinking businesses are looking at the world’s frontier markets and seeing the major markets of tomorrow. And if they’re smart and want to do successful, long-term business in these markets, they know it makes sense to promote high corporate standards and to invest in healthier, more productive workforces now.
The UK has supported a partnership between the NGO Care International and food multinational Danone that has seen the creation of a rural sales force comprising destitute women in Bangladesh. Some 2,800 of these women now sell the products of 7 major companies including Unilever and Danone, and a further 12,000 women are expected to be employed by the end of 2014.
We’re also partnering with leading global satellite operator Avanti Communications to deliver e-learning programmes in Kenya for thousands of marginalised girls.
And we’re working with major UK food and clothing retailers including Marks & Spencer, Primark, Tesco and Asda, via its subsidiary IPL, to improve the skills, health and working conditions of over 700,000 workers and smallholder farmers in Kenya, South Africa and Bangladesh.
Finally, we know donors can also play a key role in pushing the private sector into areas it would not otherwise go, or would not go to quickly enough to benefit the poor.
For example we are co investing with commercial and not-for-profit partners in four business projects, including a tea factory, that also have clear development outcomes for poor Tanzanians.
And these investments are commercial ones in the form of loans and equity rather than traditional aid grants, which is a new way of using our development budget. I think this is the future: aid money redeployed many times over, multiplying the development impact.
Last year I took a delegation of businesses, investors and potential investors to Tanzania, on an economic development focused visit and I very much look forward to hearing President Kikwete speak shortly. I know how committed he is to this agenda.
As I said at the beginning, economic development is critical for helping countries lift themselves out of poverty and for ending aid dependency for good. I believe it is in all of our interests.
Ultimately we all need to be on this economic development path. And that has to include NGOs and Civil Society groups, which have an important role to play actively engaging with business to help maximise their development impact.
It’s also important that all of us are pressing for these issues to be reflected in the post 2015 set of development goals.
There’s not long to go now before these goals are set. It is essential that we agree strong, clear language on economic development and on the importance of high, sustained and inclusive growth which transforms economies.
And to make this meaningful we need robust indicators, in areas like productive jobs, especially for women; on an enabling business environment; and on getting the right economic infrastructure in place.
To steal a phrase from this very city, “It’s the economy, stupid.” Wherever you are in the world, it’s about jobs. It’s about the dignity that work brings, the wealth that work and businesses create, the financial lifeblood that work generates to deliver services like schools and hospitals.
If we are innovative and ambitious on behalf of the poorest, I’m certain that a better and more prosperous world could be just around the corner.