Q&A: Sustainable development should be profitable, says Belgian minister

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21.11.2017

Source: Devex, Catherine Cheney

NEW YORK — In order to achieve the United Nations Sustainable Development Goals by 2030, development must be done differently, facilitated by a shift from giving to investing.

That was the message given by Alexander De Croo, Belgium’s deputy prime minister and minister for development cooperation, when he took the stage at the AidEx conference in Brussels this week.

Formerly a consultant and entrepreneur, De Croo has brought a business mindset to his work in government. At the United Nations General Assembly in September, he spoke with Devex about his country’s aid priorities, and the changes he would like to see in the international development industry — later announcing that Belgium would double its investment in humanitarian innovation next year.

You mentioned that you have really shifted your development policy over the past three years. Can you talk about what changes have been made and what your current priorities are?

First of all, I would emphasize that our focus is on least developed countries. We have 14 partner countries. Of those, 12 are LDCs. We’ve really made a shift in recent years by saying we’re going to pull out of the middle-income countries because there it’s not a resource problem. It’s often a policy problem, and official development assistance is not an effective way of working there.

Secondly, we have a very strong focus on gender equality. There is a statistic of the Organisation for Economic Co-operation and Development that looks at your bilateral work and how much of it has an impact on gender equality. In the Belgian case, 76 percent of what we do has some impact on gender equality, whereas the OECD average is 36 percent. So we are way above that.

The third element is a very strong focus on innovation. We try to use innovation in two dimensions. The first is on the financing side. We believe ODA should be much better leveraged and used almost as a hedge fund — where we say for every dollar or euro you are putting forward, how much can you leverage in other sources? For example, our development finance institution is now setting up a fund where we will finance one-quarter and the other 75 percent is coming from wealthy families, financial institutions, and so on. We think that is a good thing. It is one euro and you get four euros for it.

We also want to see innovation on the technological side. For example, we are doing a lot with big data. In Africa, most people use prepaid cards for their cell phones and just recharge every day because they don’t have the financial means. What you can see is there are days when the number of recharges is much lower than expected. Why is that? Because when you have a spike in food prices, people spend money on food and they don’t recharge, so this is data we could never have had before.

We were always making decisions based on old data or no data or very poor quality of data, whereas in the digital world and especially because of mobile phone access, today we have data we never could have dreamed of.

Speaking of financial innovation, Belgium is one of the outcome funders for the world’s first Humanitarian Impact Bond, an example of payment-by-results. Do you see this as the start of a trend?

I think we will be going much more into these types of schemes, knowing that actually making a profit in development is a good thing. This question — can you actually make a profit on humanitarian aid? — has been a huge political debate in Belgium. And I’m very much convinced that you should.

We often talk about SDGs and how it’s moving from billions to trillions. But government funding will not get us there. We need private finance do that. If you want to get private finance, you should be okay with a profit. Everyone knows that if you want to get investment you need to guarantee a certain profit. And so I think these schemes where you say “well if things go well, there is a certain profit” are the way to go.

I believe the development world is sick. The only thing they look at is the input metric — how much money you spend — and that is a disease.

As a minister, I know I will be evaluated on one dimension: did you spend 0.7 percent or not? If I spent it, I’m a good minister. If not, I’m a bad minister, which I think is completely crazy. What I want to be evaluated on is: what’s the impact? How much did I achieve? Especially in the least developed countries, the solution is never to throw more money and let’s see what is solved. Usually it is quite the opposite.

So we try to make models where the financing is very much related to how much impact you have.

We are in the era of sustainable development. There is no sustainable activity if it’s not profitable. Making a certain profit is perfectly okay if it means you can continue your activity.

Let’s talk about your work in the context of European development assistance. Why might some of the changes you have implemented in Belgium be harder to implement across European donors?

The European Commission has a gigantic budget, of course. If you take everything they spend at the member state level and at the commission level, it makes up 60 percent of global ODA. We have a much stronger voice than we use and I think we should use our voice much more.

European development policy comes from a certain history, and that history is the colonial period. Development policy used to be, in the past, about economic interest, and a lot of what we call “accidents” have happened. And it was also based on the feeling of guilt — the idea that “okay, this is what we’ve done in the past and maybe we should now make up for that.”

I understand that, but the colonial times were long ago. I was born in 1975, and Congo became independent in 1960, so for me, I ask: What are we really talking about? There’s no link whatsoever.

We need to shift the mindset away from giving to investing. If you’re giving a gift to someone, why are you doing that? In the end it makes you feel good as well. And you see that too often in the development world. But that is short-term thinking. Investment is about long-term engagement.

The worst example is — “Oh we have old medical material from our hospitals. Let’s put them in containers and ship them there. They will be happy with what they receive.” It’s done with good intentions but it’s not what those people need. I’ve seen so many hospitals with eye surgery equipment but there’s no electricity. So what are we doing here?

We need to embrace globalization in the sense that you see that people are perfectly willing to pay for something if it is exactly what they want, if it is adapted to their needs, if it is suited to the difficult circumstances they have. So that idea of a commercial transaction is perfectly okay.

You can read the original article on Devex.

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