EU Development Policy

BACKGROUND

At a global level, donors’ approach to development has been rapidly changing, placing the private sector increasingly as a central feature in donor’s policies, strategies, and programming. The EU’s development cooperation is also following this trend.

The EU action on development is based on the 2006 European Consensus on Development, which was updated in 2017 to build on the 2030 Agenda. In this new consensus, the focus is put on the private sector as a key player in development. The idea is to use development aid to leverage private finance, which will be invested in developing countries, thereby fostering economic growth and job creation.

For that, the EU has developed the external investment plan (EIP), which includes 3 pillars: guarantees for blending; the European Fund for Sustainable Development (EFSD), technical assistance and an enabling policy environment for private sector investment. Currently, the EIP is focused on Africa and neighbouring regions.

The new Multi-Financial Framework (MFF) 2021-2027 proposes a new instrument that integrates the model of the EIP, through an expanded European Fund for Sustainable Development Plus (EFSD+) and a new External Action Guarantee. The new instrument will represent a substantial scaling up in the provision of blending, guarantees and other financial operations supporting external investment.

Along with investments, trade, and aid for trade, this is another way for the EU to stimulate economic growth.


WHAT ARE THE FTAO’S VIEWS?  

The FTAO acknowledges the role of the private sector in development, but wants to raise some words of caution:

  • Economic growth does not necessarily lead to sustainable development. The EU should ensure that environmental and social standards are upheld and strengthened and that the jobs that are created are decent and sustainable.
  • The EU should only invest in private sector partners that have clear monitoring and accountability mechanisms, which observe local and national laws and international standards and have ethical checks.
  • The EU should actively promote micro, small and medium enterprises (MSMEs) and alternative business models which are structured to keep more value with local workforces and put people and planet over profit.
  • Regulation reforms should not create an enabling environment for external investors at the expense of local companies and producers. Reforms should rather foster local economic development, focusing on small farmers, cooperatives and small enterprises.

FURTHER READING

EU Development Cooperation Policy

The proposal of the European Fund for Sustainable Development (EFSD)+

Open letter from Concord on the EFSD+

ECDPM discussion paper on the EFSD+


You can find out how our work on EU policies links to our key topics here.