International development cooperation (Aid): An effective tool of Economic Diplomacy

“Expecting something for nothing is the most popular form of hope” Arnold H. Glasgow

Ever asked yourself, the relationship between rich nations of the OECD giving generously their wealth to much poorer nations around the globe ?

It’s all down to economic diplomacy – ably applied through government related relations and influence, to stimulate international trade and investment.

Economic diplomacy includes international aid, investment, import, export and free trade agreements (not an exhaustive list of course).

Behind the scenes of the billions flowing to poorer countries is a special relationship between foreign policy objectives of the donor country and development aid all cobbled together and intrinsically managed.

Research by The US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics recently published some astonishing data.

They discovered  that the flow of money from rich countries to poor countries is less important in comparison to the flow that runs in the other direction

This shows us that the nexus of how a country manages its economic diplomacy rests on how it sees its foreign policy objectives thus the link with development cooperation is irrefutable.

The United Kingdom (UK) Department for International Development (DfID) first ever Economic Development Strategy titled Economic Development Strategy: prosperity, poverty and meeting global challenges 2017 is a wonderful coruscate of how government relations and influence work in tangent to spur economic development for the benefit of Great Britain.

The strategy presents a clear and firm focus on Britain’s global role and puts in place key messages worth recalling.

Unsurprisingly,  international development cooperation is at the forefront in shaping Britain’s global development agenda.

Fleshing out key aspects of the strategy and you are left with a focus on increased trade between developing countries and the UK; stimulating development to spur economic growth; supporting countries to mobilise their own domestic resources; and focussing efforts on sectors that can unlock growth.

During my time working in Kenya and on a DfID Kenya Markets Assistance Program I noticed and experienced how aid development profusely leaned towards economic diplomacy.

The DfID commissioned Making Markets Work for the Poor (M4P) approach supported the overriding objective of building the potential of Kenya to trade and integrate into local and eventually global value chains for its economic development.

The East African region was never left behind the development agenda by DfID.

To increase trade between the member states in East Africa. DfID took the lead in 2010 by creating TradeMark East Africa (TMEA). TMEA works with the East African Community and member states to strengthen economic integration and trade competitiveness.

So when the then Secretary of State for International Development – Rt Hon Priti Patel expressed confidence in the UK’s development finance institution (CDC the investment arm of the DfID aid programme) to deliver the Economic Development Strategy – it was not a surprise!

In countries like Kenya, we are seeing an improved investment climate with innovative financing approaches and CDC at the heart of catalysing investment.

Garden City is a 32 acre mega development in Nairobi, Kenya and through the CDC development fund  – GBP20m was invested into the project to build a gated community, shopping centres and luxury properties as part of the UK investment agenda.

DfID has also focussed on sectors that can unlock growth for example with the Kenya Extractives Programme (K-EXPRO) which was tasked to support a growing extractives sector leading to equitable, inclusive and sustainable benefits to Kenyan citizens.

Unsurprisingly, the UK firm Tullow Oil signed an Early Oil Pilot Scheme (EOPS) production of oil agreement with the Government of Kenya.

These opportunities help to create an enabling environment for Britain to flex it’s financial muscles, reshaping the international system and by building trading partners of the future able to safeguard national security and foreign policy interests.

The impact of all this is that Britain remains the largest cumulative investor and contributor to Kenyan prosperity with over 100 British companies based in Kenya valued at over GBP 2,5 billion. The trade balance still remains in favour of the UK.

According to the Kenya High Commission London, the UK is also Kenya’s second most important export destination.

Kenya mainly exports tea, coffee and horticultural products, with the country accounting for 27 % of the fresh produce and 56 % of the black tea market in the UK. 

DfID’s Economic Development Strategy is a powerful approach of utilising development aid as a theory of change for economic restructuring, social policies and administrative reforms to manage the diplomacy and politics of the development narrative of poor countries.

Economic diplomacy through the lens of International development cooperation is firmly in Britain’s own national interest and an essential tool for increased trade and investments across the developing world.