Developing Countries: Private Sector Development

Oral Answers to Questions — International Development – in the House of Commons at 11:30 am on 8th July 2015.

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Photo of Diana R. Johnson Diana R. Johnson Shadow Minister (Home Affairs) 11:30 am, 8th July 2015

What progress she has made on her strategy for private sector development in developing countries.

Photo of Justine Greening Justine Greening The Secretary of State for International Development

The Department for International Development’s private sector work has helped to mobilise £4 billion of investment, and we are expanding this work. We need to recognise that the private sector can often deliver development in ways that Governments and donors cannot. In fact, our development finance institution, CDC, reported last week that CDC-backed businesses directly and indirectly helped to create nearly 1.3 million jobs in 2014 alone.

Photo of Diana R. Johnson Diana R. Johnson Shadow Minister (Home Affairs)

I thank the Secretary of State for that answer. A recent Independent Commission for Aid Impact report on DFID’s private sector development stated:

“We found it impossible to identify how much DFID actually spends on PSD.”

Will the Secretary of State clarify how the £1.8 billion allocated for 2015-16 will actually be spent?

Photo of Justine Greening Justine Greening The Secretary of State for International Development

The strategic framework on economic development that we published several months ago gives the key pillars of work that we will invest in. As the hon. Lady points out, we are ramping up our investment in economic development. Later, we will have a question about migrants. If we are to stem the flow of migrants, it is vital that we do more to create jobs where those people are.

Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

Thinking about the private sector in an alternative way, will my right hon. Friend ask our embassies and high commissions that operate in developing countries and have plants or offices in those places to source materials, including labour, as locally as possible and pay the relative living wage to those whom they employ?

Photo of Justine Greening Justine Greening The Secretary of State for International Development

That is a very sensible suggestion, which I will certainly pass on to the Foreign Secretary. We work hand in hand with the Foreign Office around the world, not least in countries such as Tanzania, with which we have a prosperity partnership that is helping to create jobs.

Photo of Patrick Grady Patrick Grady Shadow SNP Spokesperson (International Development)

I recently met campaigners from Nigeria who told me that the privatisation of the country’s electricity system, which has been supported by DFID through projects worth £140 million over the past 12 years, has led to price rises, job losses and more blackouts. What evidence does DFID use when deciding to support privatisation as a means to improve the access to and affordability of public services such as electricity?

Photo of Justine Greening Justine Greening The Secretary of State for International Development

As the hon. Gentleman has, essentially, set out, investment in infrastructure, particularly energy infrastructure, is vital. The work in Nigeria has led to a doubling of the power supply that is available to Nigerian people and businesses, which I am sure he would support.

Photo of Stephen Phillips Stephen Phillips Conservative, Sleaford and North Hykeham

The ICAI report of May this year said:

“Collaboration between business and aid agencies has the potential to deliver major benefits for the poor” of this world. However, the report also noted a “lack of clear targets” and oversight by the Department. Will my right hon. Friend indicate what she and her excellent officials are doing to remedy that?

Photo of Justine Greening Justine Greening The Secretary of State for International Development

We are developing our work with the private sector. I met John Cridland of the CBI yesterday to discuss how that ongoing work is progressing, and we both feel that the relationship between the Department and businesses has never been stronger. The relationship is evolving, but we are on the right path and I think that we should be proud of how far we have come.

Photo of Mary Creagh Mary Creagh Shadow Secretary of State for International Development

Members on both sides of the House agree that decent work is the best route out of poverty, but last week, Radio 4’s “File on 4” revealed problems with a DFID programme in Nigeria. It alleged that the project exported rocks instead of leather products, and that it was used as a cover for export fraud and money laundering on an industrial scale. The right hon. Lady and her Department refused to speak to the programme makers, so will she tell the House what action she is taking as a result of those revelations?

Photo of Justine Greening Justine Greening The Secretary of State for International Development

The revelations were, as ever, not quite what they seemed. The export enhancement grant is not a mechanism that DFID is involved with at all; it is a Nigerian Government policy that was being misused and abused. We do work in the leather sector, but that work relates to helping local markets to develop. We became aware of issues with the export enhancement grant, and DFID worked with the Nigerian Government to encourage them, in the end, to shut it down, which they did about 12 months ago.

Photo of Mary Creagh Mary Creagh Shadow Secretary of State for International Development

It is interesting that the right hon. Lady chose not to share that knowledge with the British public and had to say it here in the Commons. [Laughter.] Well, it is interesting that an answer was not given directly to the programme makers, but instead had to be dragged out of the Secretary of State. There is a lack of accountability, transparency and governance in another DFID project: the Private Infrastructure Development Group.

This year, DFID’s spending on private sector development will double to £1.8 billion, up to £400 million of which will be the UK’s contribution to the new Asian Infrastructure Investment Bank—China’s rival to the World Bank. What oversight and governance procedures has the right hon. Lady put in place to ensure that social and environmental standards and human rights are upheld in the work of the new bank?

Photo of Justine Greening Justine Greening The Secretary of State for International Development

The hon. Lady will be pleased to hear that we tried to make sure that the “File on 4” programme was well aware of the facts. It was aware of the facts and if she feels that the way in which they were presented gave her a misleading impression of the reality, that is an issue for her to follow up with the BBC. I obviously believe in freedom of the press. On the broader question, we are working to make sure that the new Asian Infrastructure Investment Bank has the same quality of safeguards that we expect in the World Bank. Treasury Officials are working very hard on that as well.