IBDE

EXCHANGE: The Magazine for International Business and Diplomacy    No. 3 March 2011 

EXCHANGE: Minister, it seems like the British foreign policy has put a strong emphasis on providing direct support to British business across the world, particularly in emerging economies. Recently the Foreign Secretary was quoted by the Financial Times saying: “Helping British business is an existential mission for the Foreign Office”. In what ways is the Foreign Office cooperating with DFID to undertake this role on behalf of the UK economy?

MINISTER: DFID and the Foreign Office are in close contact and work together on programmes throughout the world. Britain is serious about stepping up the work we do with business and enterprise as one of the most effective ways to tackle poverty in the poorest countries. We are looking to stimulate the private sector in the countries we work in so that it becomes a much bigger engine of growth, one that brings new enterprise, more investment, and ultimately helps individuals and countries pull themselves out of poverty.

In January, we opened our new Private Sector Department, with the aim of improving the way we work with and enable private enterprise. The department will work on a range of initiatives including pioneering and scaling up new business models that enhance the contribution of firms to development; publicprivate partnerships; fair and ethical trade; financial sector development including branchless banking, microfinance, finance for SMEs and remittances; and catalysing private investment in business, infrastructure and basic services.

At the same time, we’re also looking to do more to support growth, helping countries to develop a level playing field for all investors in the poorest countries, with a fairer and more open trading regime, reduced barriers to market entry and streamlined regulation to speed up the process of doing business.

Moves like this are good for developing countries, creating the jobs, goods and services that the world’s poorest people so desperately need. But it’s also good for UK businesses. Helping lower income countries become part of the global market place also helps us prosper, creating new sources of inputs and new markets for British business.

And it also represents tremendous value for money. Trade promotes global prosperity, can improve food security, helps countries adapt to climate change, secure access to vital medicines, can help rebuild economies and prevent conflict between nations. So helping countries make the most of trade and investment today means we'll spend less in future. That can only be good for our economy, our safety, our health and our future.

EXCHANGE: The world’s economic picture is changing rapidly. Therefore, in today’s globalised economy, good governance and closer cooperation are fundamental in achieving sustainable socio-economic development as well as effective poverty reduction. How would you envisage an effective partnership with developing economies as a DFID strategy going forward?

MINISTER: A good example is the Trade Mark East Africa (TMEA) initiative we have just launched, set up to boost trade and help millions of people across Africa to pull themselves out of poverty. It’s going to work across East Africa to fund new businesses, develop essential infrastructure to speed up transport links, and standardise regulation across the region.

In practice, this means things like developing better roads and ‘one stop border posts’, between Uganda, Tanzania, Rwanda and Burundi, ultimately reducing transit times by 50 per cent and making trading across the region faster and easier. We will also be working more effectively with East African institutions, national governments, business and civil society organisations in each country to improve the regional business framework. And the initiative will deliver a 60 per cent reduction in barriers to trade other than tariffs on exports and imports. Cutting down on things like fees, border taxes and complex regulations will make it easier and cheaper to do business between countries.

It’s an approach that’s already been shown to work. In Burundi, the Office Burundais de Recettes (OBR), which collects tax on behalf of the government, has already piloted a TMEA project. Since it began in 2009, the OBR has been turned around and in 2010 tax revenue increased by over 25 per cent. 

At the same time, The African Free Trade initiative (AFTi) will see Britain provide technical experts to unblock issues that continue to hold back economic growth across the region. This will include advising African countries on the design of border posts, infrastructure investment and analysis of major transport bottlenecks. Expected results include cutting the time it takes to travel the length of Africa's North South Corridor from nine to seven days and reducing the journey time for goods lorries from Mombasa to Uganda and back to Mombasa by three days. The initiative will help to break down trade barriers and open up opportunities for entrepreneurs, both large and small, to access new markets and invest in expanding production and trade.

This is one of the initiatives set out in the UK Government's new Trade and Investment White Paper, which includes an ambitious range of actions to help secure a strong, sustainable and open global economy that benefits all nations. This includes assisting developing countries to benefit from trade and investment by pushing for global trade rules that support their needs, promoting greater market access for least developed countries and implementing ambitious bilateral aid programmes that promote trade and regional integration.

EXCHANGE: DFID is one of the departments to benefit from an increased budget under the current government. In what ways do you think this increase will impact the livelihoods of the people in the developing world, including the Middle East?

MINISTER: The Gulf States are major contributors to poverty reduction in the Middle East, Africa, and Asia, and are able to offer significant resources to help developing countries. Saudi Arabia, Kuwait, and the United Arab Emirates (UAE) all have substantial aid programmes, with Qatar now emerging as a major regional donor. The UK continues to develop close relationships with Gulf bilateral donors, with the aim of improving the effectiveness of aid work in Yemen and other developing countries.

But DFID is also directly involved to improve livelihoods in the region. We have been working in the Occupied Palestinian Territories (OPTs) for over 16 years, for example. Our work supports a wider international objective: creation of a viable and independent Palestinian state, so that Palestinians can live in peace alongside a secure Israel. But we are also supporting private enterprise in the OPTs, as a means of creating jobs, wealth and opportunities and harnessing the talents and enterprise of entrepreneurs who, through their ingenuity and drive, create opportunities for prosperity.

In the context of the Middle East Peace Process, a strong Palestinian economy, underpinned by a vibrant private sector, is essential to improve the prospects for sustainable peace. That’s why we supported the third Palestine Investment Conference in Bethlehem in June last year.

Nearly 120 Palestinian businesses, some of which have already established export markets ranging from North America to Russia, China and the Gulf, exhibited at the conference. For the 900 potential investors, from over 30 countries, it provided investment opportunities in small and medium enterprises (SMEs) from across the West Bank and Gaza.

In fact, we were delighted to see nine companies from Gaza exhibiting, all funded by the Facility for New Market Development (FNMD), a joint DFID and World Bank funded scheme that works to support the growth of businesses across the Palestinian Territories. Decimated by continuing restrictions on the import and export of goods and with close to 40 per cent unemployment, it is crucial that the Gazan economy is not forgotten. For FNMD-supported businesses in Gaza, the facility is vital if they are to expand into new markets or develop new products.

More broadly, we should be in no doubt that well spent aid can have a transformative impact on people’s lives in some of the poorest countries globally. Economic growth is the most important means of raising incomes and reducing poverty in the developing world.

To drive this, we are working at both country and regional levels to identify and address key infrastructure bottlenecks to business growth and regional market integration. We are working with civil society and competition agencies to promote better competition policy and a culture of competition. We also work to shore up the rule of law, on the basis that uncertainty over property rights and contract enforcement deters business investment. Finally, we work to promote better trading conditions and opportunities for rich and poor countries alike, through international trade negotiations, trade facilitation and trade capacity building is vital to enabling business.

And it’s not just about business. UK funding saves three million people from poverty each year. It has helped to eliminate smallpox and brought polio to the brink of eradication. Last year alone the UK brought food to 13 million people on the brink of famine, vaccinated 4 million children against measles and provided clean water to 2.5million people.

EXCHANGE: Exchange is dedicating a large part to the Gulf countries – providing informative reports and analysis / research about possibilities and potentials these countries offer to do good business through increased regional cooperation and foreign direct investment. The UK has historic ties with the region and the government seems to be committed to strengthen the relations with these countries. What does this mean for the British and the wider International business community based in the UK?

MINISTER: Britain’s strong commitment to elevating relations with all our partners across the Gulf is a signal of their emerging economic and political influence – as well as deep historical roots, dating back to protectorates and the role we played in helping ensure independence and sovereignty.

Co-operation is everywhere: The Shard in London is being built with the help of investors from Qatar. Milford Haven in Wales is receiving Liquid Natural Gas shipments from Qatar, and Gulf investment in the London Array has helped to make the UK the world number one in offshore wind energy.

With a collective GDP of around $1.2 trillion, the Gulf States play a major role in the global economy. Over 160,000 British nationals live and work in the Gulf. We export around £15 billion worth of goods and services – to give some context, that’s on a par with China and India combined, three times more than we export to Russia, and five times more than we export to Brazil. But this is a two-way street: investment from the Gulf in the UK economy totalled around $2.25 billion last year.

Our exports to the GCC states have increased by nearly a fifth in the last year alone. With our historic ties and already strong relations we are in a very good position to both support and benefit the Gulf’s development.

We want to be the Gulf’s commercial “partner of choice” and an increasing number of UK top businesses are seeking long-term partnerships and new markets. British business have the skills, technology and expertise to help the Gulf states realise their ambitious development plans. An estimated $2.2 trillion in infrastructure projects is currently planned or underway in the region.

British companies and academics are working with Gulf partners to develop and implement the industries and technologies of the future. Foster & Partners, BP, Rolls Royce, Imperial College and others are working on Masdar City in Abu Dhabi – the word’s first zero carbon, zero waste city development.

And Gulf States also have a significant role as investors in the UK across a range of sectors, including real estate, banking, sport and infrastructure. This long-term and responsible investment is a sign of the confidence that our Gulf partners have in the UK economy.

The UK is seeking to double bilateral trade by 2015 with regional Gulf States as well as increase investment through establishing a network of bilateral economic agreements to identify and raise awareness of opportunities and tackle barriers to business. Our commitment to strengthening relations with the Gulf countries is clear. We are the Gulf’s oldest friends, but we are still expanding co-operation across the board.