Working Paper 171/2018: Promoting Private Sector for Development: The rise of blended finance in EU aid architecture
Since 2007, the EU has been pushing for blended finance to mobilise private sector for development. This is a novel and controversial financial policy coinciding with the growing debate on “beyond aid” and the emergence of new financial tools and actors that are actively engaged with the global development agenda. Since the 1960s, grants and concessional loans (or more simply, aid) have been the dominant type of development finance provided by the EU, together with debt relief and the costs of technical assistance. But aid is no longer the main source of development finance for most developing countries, now replaced by private financial flows: foreign direct investment (FDI), remittances and philanthropy. Business-led economic growth is at the core of the 2030 global development agenda seen as the primary driver of investments, jobs creation and production of goods and services. In consequence, the EU is moving to combine aid with other public and private resources (blended finance) to catalyse and leverage additional funds from the private sector. Promoting private sector for development: the rise of blended finance in EU aid architecture will critically analyse the emergence and evolution of EU blended finance to support the private sector to deliver the Sustainable Development Goals (SGDs) by 2030 and the potential implications for EU development cooperation.
Mah, Luís (2018). “Promoting private sector for development : the rise of blended finance in EU aid architecture”. Instituto Superior de Economia e Gestão – CEsA /CSG – Documentos de Trabalho nº 171/2018.
The emergence of new state donors from Latin America, Middle East and Asia as key development partners offering alternative models of development cooperation has had a significant impact on the workings of the international development cooperation arena (Hackenesch & Janus, 2013). The main distinction between the traditional and emerging donors has been the fact that, unlike the former, the latter present themselves as interested parties in what is described to be a mutually beneficial relationship with their development partner countries. In general, these emerging donors have been less eager to respect the dominant OECD-DAC normative discourse on quantity and quality of aid to focus more on mutual economic gains from the relationship. In exchange for aid from these emerging donors, beneficiary countries have been less constrained by political conditionalities and less subjected to scrutiny or oversight on macroeconomic policies. The EU Agenda for Change adopted in 2011 is the basis of the current EU´s development policy and aims at responding to the changes undergoing in the international development arena. One of the key principles and policy priorities of this agenda is differentiation which manifests the EU intention to increasingly provide aid only to Low Income countries (LICs). Beyond Aid: How trade interests Trumps EU-ASEAN development cooperation will critically analyse to what extent this shift to differentiation is shaping the relations between the EU and ASEAN. It will argue that EU relations with ASEAN have always been differentiated from other developing countries as they have been subordinated to trade interests rather than development goals.
Mah, Luís (2018). “Beyond Aid: How trade interests Trumps EU-ASEAN development cooperation”. Instituto Superior de Economia e Gestão – CEsA/ CSG – Documentos de Trabalho nº 169/2018.