Development NGOs warn EU ministers against their ‘fixation’ with the private sector

EU development ministers met today (12 December) in Brussels and adopted a “perspective” to boost the role of the private sector in the field of development cooperation. But leading NGOs warned that placing the private sector at the centre of EU development policy “shows ministers have failed to acknowledge its limitations”.

EU ministers adopted Council Conclusions, which contain strong language in favour of engaging more with the private sector. Ministers state that the private sector “is emerging as an increasingly active player in the development field”, and describe its role as “key” for implementing the future sustainable development goals.

Ministers essentially endorse a recent paper by the Commission on how to better work with the private sector, and make the EU executive responsibile for applying this approach at sub-national, national, regional and global levels.

Ministers support the use of innovative financial instruments, such as the blending of funding, to leverage private financing.

Leading international NGOs ActionAid, Eurodad and Oxfam published a communiqué, warning that ministers should not place the private sector at the centre of EU development policy. 

Hilary Jeune, Oxfam’s EU policy advisor, said his organization is worried EU governments are only seeing the good side of possible engagement.

“Development ministers seem charmed by the prospects of private finance flows and have failed to provide guarantees that ensure businesses will play by the rules and that their investment will benefit the poorest in society,” Jeune said.

María José Romero, Policy and Advocacy Manager at Eurodad, warned that promoting public-private partnerships entails many risks and is not always the best way to trigger development. She also warned that ministers appear to have forgotten the issue of tax dodging by Western private firms, which depletes the developing countries of revenue.

“A better policy would be to ask Southern countries to test the development impacts of these new proposals, putting developing countries back in the driving seat of their own development, where they belong. Instead, the EU should focus on putting its own house in order, starting with taking action to stop European companies dodging taxes, which costs the developing world dear,” Romero said.

Regarding the ‘blending’ of funds, the NGOs insist that before any schemes are put in place, that EU institutions take stock of the new findings by the European Court of Auditors in October. In about 50% of the cases examined by the Court of Auditors, the justification for awarding grants for blending with loans was not evident, the ECA report says.

According to the NGOs, Public Private Partnerships (PPPs) should be promoted and designed in a way that delivers real results for the poor. According to Laura Sullivan, ActionAid’s European Policy and Campaigns Manager, Europe needs to invest more in the smallholder farmers and small and medium sized businesses that generate the kind of jobs needed to raise people out of poverty for good.

The NGOs provided an example of failed PPP with a new huge hospital in Maseru, Lesotho’s capital, supported by the World Bank’s private-sector lending arm, the International Finance Corporation (IFC). The costs of running the hospital and paying the loans on it are eating up half of Lesotho’s entire health budget.