Wednesday

18th Jul 2018

Opinion

The EU's choice for aid: big business or those in need?

  • Development must also ensure that important issues such as environmental well-being are respected. (Photo: Unsplash)

The EU is about to finalise plans for using aid money to subsidise private investors.

Despite the European Commission and member states saying it will boost development by creating new jobs, it might not help the people who are most in need.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... our join as a group

Growth does not automatically create jobs, let alone decent and sustainable jobs.

Without strong, clear safeguards, the EU risks making life worse for the very people that development is meant to help.

Supporting companies may come at the expense of people who need the most help.

The EU’s External Investment Plan will use aid meant for development to offset risk for firms investing in developing countries, “blending” public and private finance.

The EU commission, which launched the proposal, argues that the wealth generated by investment will trickle down to the countries’ poorer inhabitants.

However, there is widespread and growing evidence that economic growth has often benefited the richest, while the rest of society suffers, casting grave doubts on “trickle down” theories.

The investment plan is likely to favour supporting large-scale infrastructure projects aimed at macro-economic growth.

Such infrastructure development can be an essential contribution to relieving poverty and can create jobs.

However, unless there are checks and balances to ensure those jobs are secure and sustainable, and that women are not consigned to positions with little opportunity for development, then it will be the few who benefit while the many are left behind.

The European Parliament, meanwhile, has put a more effective approach on the table, one that contains clear safeguards for sustainability, women’s and workers’ rights and environmental standards. Those improvements must remain a priority in negotiations.

No subsidies for damaging industries

The new EU plan must guarantee that development funds will not be used for the kinds of business that can prove harmful to people, communities and the environment.

It must not support, for example, the fossil fuel industry or investments linked to land grabbing.

The parliament should push for effective checks and balances, such as an “exclusion list” of damaging industry practices that should not benefit from the plan. This would help the EU to live up to its principle of “doing no harm”.

It would also avoid the risk that investment in industry in the name of development would undermine other EU priorities, such as fighting climate change and promoting human rights.

Also, it is a real risk that the new EU plan could end up doing more harm than good.

More than half of all corporations listed on the largest stock exchanges in the UK, France, and Germany – businesses that are more likely to benefit from the EU plan – have been accused of being linked to human rights abuses.

In developing countries, where there is less (or less well-enforced) regulation, ensuring good corporate conduct is a challenge, to say the least.

That’s why it is crucial that if the EU channels funds through private business, it must also enforce strong policies to make companies accountable on human rights and environmental standards.

It is also why the EU must establish grievance mechanisms that work. Local people must be guaranteed safety and freedom to speak out against corporate malpractice when it occurs.

Transparent and domestic

Furthermore, evidence from previous “blending” projects shows that it is essential to ensure full transparency in how the External Investment Plan works and how it is achieving its aims.

Local communities and civil society have valuable contributions to make. They are the ones who know most about what helps people improve their lives.

Enabling them to see what is going on and to have their say can only help in the process of improving development.

A positive way forward is also to focus on domestic businesses.

The investment plan should ensure that development aid focuses on these businesses – run by the same people that EU aid is supposed to help – not multinationals or investment firms who have no need of subsidies.

Domestic businesses, often run by women, contribute most to poverty alleviation and to helping communities lift themselves up from poverty.

Such enterprises are embedded in their own economies, and supporting them would mean supporting new sustainable, local jobs and raising living standards.

Development is about more than just money, and more than just growth. It is about human rights, environmental well-being, and empowering local communities and civil society. The EU recognises this in its own objectives for foreign aid.

If it is going to achieve those targets, and achieve fair and sustainable development, it must make sure that development money goes to those who are most in need.

Hilary Jeune is an Oxfam EU development policy adviser

Analysis

Doubts hang over EU investment plan's future

Questions of value for money and a lack of transparency complicate adding almost €200 billion more and extending the Juncker investment plan to 2020.

EU must create safe, legal pathways to Europe

As the rapporteur for the European Parliament on an EU regulation on resettlement, my colleagues and I have outlined an effective plan based on solidarity and humanitarian principles.

How the World Cup exposed Russian chauvinism

The suggestion that Russians themselves play a role in the condition of their state today is often dismissed as "xenophobic" or "Russophobic". But if not addressed, the evils of nationalism, chauvinism, and imperialism will continue even after Putin is gone.

How the World Cup exposed Russian chauvinism

The suggestion that Russians themselves play a role in the condition of their state today is often dismissed as "xenophobic" or "Russophobic". But if not addressed, the evils of nationalism, chauvinism, and imperialism will continue even after Putin is gone.

News in Brief

  1. Johnson slams 'dithering' May in resignation speech
  2. EU border guards to be sent to Macedonia
  3. Juncker investment plan exceeds target
  4. EU will reply 'tit for tat' to US trade measures
  5. EU Commission registers Brexit citizenship petition
  6. EU launches pre-accession probe for Albania and Macedonia
  7. Google faces multibillion euro EU fine for Android
  8. EU wants more guarantees from VW on Dieselgate fix

Stakeholders' Highlights

  1. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  2. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  3. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  4. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  5. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  6. Mission of China to the EUChina: Work Together for a Better Globalisation
  7. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  8. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  9. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  10. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  11. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  12. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs

Stakeholders' Highlights

  1. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model
  2. FIFAGreen Stadiums at the 2018 Fifa World Cup
  3. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development
  4. Counter BalanceEuropean Ombudsman Requests More Lending Transparency from European Investment Bank
  5. FIFARecycling at the FIFA World Cup in Russia
  6. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  7. Centre Maurits Coppieters“Peace and Reconciliation Is a Process That Takes Decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  8. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  9. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  10. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  11. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  12. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments

Join EUobserver

Support quality EU news

Join us