I thank my hon. Friend for his comments. As he knows, a great deal of work is taking place with other Governments, helping them to develop their own capacity for aid so that they can work more effectively bilaterally and with multilateral agencies. At a time when we see a great deal of conflict in that region, we are working on an agreement with some countries in the Gulf and the middle east on what their own development bodies and agencies can do to support humanitarian relief as a result of crises taking place on their doorstep.
Today I want to explain why CDC is a vital partner in our efforts to end poverty, for it is widely recognised that aid on its own will not eliminate poverty. No country can defeat poverty and leave aid dependency behind without the prospect of a functioning economy, sustainable economic growth, jobs, trade and investment. Development investments via CDC complement our other work, and allow us to fight the scourge of poverty on all fronts. In the world today, faltering economic growth and rising young populations have exposed the chronic need for jobs and better opportunities. At present most developing countries are not growing fast enough or industrialising fast enough to leave poverty behind.
The additional financing needed to achieve the UN sustainable development goals by 2030 is estimated at $2.5 trillion every year, but current investment levels are less than half of that. As the UN and many international development banks have made clear, much of this finance will need to come from the private sector. The chair of the OECD’s development assistance committee, Erik Solheim, has stated:
“There is no longer a dispute about the need for private sector involvement in development. The role of DFIs”—
that is, development finance institutions—
“is to connect development aid with private investment, and explore how we can employ market forces in the world’s most challenging places.”
Dr Dirk Willem te Velde, head of the international economic development group at the Overseas Development Institute, writing in the Financial Times yesterday, said:
“Statistical evidence to be published by the Overseas Development Institute soon suggests that a £10bn increase in exposure of DFIs in Africa would raise average incomes and labour productivity by a quarter of a per cent, which is actually slightly above the average impact of aid overall. Most jobs are created by the private sector, and working with the private sector to create jobs is vital for inclusive growth.”
We know that that will be difficult in the poorest, most fragile and conflict-affected states. These are the hardest markets, where businesses will not go on their own because it is perceived as too risky, yet it is in those very places that jobs and economic opportunities are so desperately needed. CDC does exactly that by creating jobs, stimulating growth and supporting local business.
There are currently only a few investors in the world with the skills and risk appetite to create jobs and opportunities in the most difficult frontier markets. CDC is one of those investors. CDC uses its expertise and capital to support over 1,200 businesses in more than 70 developing countries to grow and create jobs. It is a great British success story that has a long history of creating jobs in the developing world.
This is not just about abstract numbers; importantly, it is about investing in people. The life-changing impact of CDC’s investments can be seen in countries such as Sierra Leone, where the UK has supported businesses
to get up and running to drive forward the country’s recovery following the devastating Ebola crisis, which killed thousands and damaged the economy. In the words of Henry Macauley, Sierra Leone’s Energy Minister, whom I met just three weeks ago:
“CDC has played an important role in supporting key businesses during the Ebola crisis and continues to do so in Sierra Leone as the economy now recovers. They are an increasingly important investor in the nation’s power sector and I’ve found them to be a great and promising private sector partner.”
The life-changing impact of the CDC’s investment can also be seen through people such as Yvonne, in Uganda. Thanks to a CDC-supported loan, she could buy a vehicle, a scrubbing machine and a vacuum cleaner for her cleaning business and attend training courses. In just 10 years, she had expanded her business from one person to providing jobs for 175 people. It is people such as Yvonne who we should have in our minds as we debate the Bill.
In the past, legitimate concerns were raised about some aspects of the CDC’s performance. That is why, in recent years, the CDC has modernised and transformed its approach. In 2010, DFID undertook a public consultation and an extensive review of the CDC, and began moving the CDC in a new direction, including by bringing in a new board and chair and hiring a new chief executive. Under its new leadership, the CDC has transformed itself. Before 2011, it operated a financial-return-first strategy, with no screening tool to help filter out insufficiently developmental investments.