How does “business as usual” fit development?

Lyydia Kilpi

The Finnish NGO Platform (Kepa)

Nearly 50 researchers, activists and other interested citizens gathered together on 7 June to discuss the current role of private sector in development discourse and practice in the seminar “Private-sector driven development: Views from Academia and Activists”, organised by the Finnish Society for Development research.

The trend is clear: the Sustainable Development Goals and the official development policies of European countries rely increasingly on leveraging private sector investments. Funds are allocated through development finance institutions (DFIs) and policy documents underline private sector development.

Matti Ylönen, a doctoral researcher at the University of Helsinki, described the shift as “new instrumentalism”. Traditional instrumentalism that considered aid as a lever to further Finnish interests is now coupled with an altruistic idea that Finnish companies can strengthen the private sector in the Global South and create jobs, which has intrinsic developmental value.

This resonates with Dr Bonn Juego’s (University of Jyväskylä) idea that the state’s role is reduced to creating an enabling environment for business and, on the other hand, the export-promoting orientation is a logical result of the stagnation of developed economies and the growth potential of many emerging ones. Dr Marikki Stocchetti confirmed that the recently published report by the Development Policy Committee (of which she is Secretary general) found that private sector instruments focused too much on Finnish companies and too little on strengthening the private sector of partner countries.

Dr Juego argued that in Finland’s relations with Asian countries, business interests had overtaken democratic values. He explained how under “authoritarian neoliberalism” unfree regimes adopt free market policies. Finland’s current export and development policies seem to enforce this trend at the cost of democratic institutions.

Aid has become more financialised, argued Ylönen. As more development finance is directed through funds and to private companies, the rules of private finance enter the sphere of development aid. Transparency is one of the obvious victims. Many researchers and civil society actors looking for information about the investments made by the Finnish DFI Finnfund have hit a wall of arguments leaning on business confidentiality, contracts and banking secrecy.

As aid financialises, it tends to become a part of the unsustainable global financial architecture. Tax havens and tax avoidance are some its building blocks. Finnwatch revealed in March how Finnfund had invested in a fund that had avoided taxes in Malaysia by exploiting shady deals with the tax authority of Luxembourg. Sonja Vartiala, the Executive Director of Finnwatch, highlighted that what is considered as “business as usual” in the financing world, isn’t good for development.

That brings us to the important question posed by Dr Stocchetti: When something goes wrong in one of Finnfund’s investments, who is responsible? The mechanisms of accountability aren’t clear.

Professor Barry Gills from the University of Helsinki referred to the Agua Zarca hydropower project in Honduras. Human rights risks related to the project, that led to the murder of activist Berta Cáceres, should have been identified and adequately addressed much earlier.  It is unclear what, if anything, has since changed in how Finnfund operates. Lack of transparency makes assessing this, or following the money, practically impossible.

Professor Gills raised the need to address the “moral dichotomy” between “us” and “them”, noting its colonial history and its present day reproduction. He called for all of us to clarify our moral standards, and hold ourselves true to them also in regard to “others” —rather than to continue to reproduce the dichotomy that separates “us” from “them “ into distinct moral spheres, where we apply very different standards of conduct in regard to “others” in the Global South.

Dr Zerfu Hailu, Senior Advisor of FFD from Ethiopia, reminded about the diversity of private sector. The same applies to the public sphere. Dr Gutu Wayessa raised an important point from the audience: the role of civil society. The public sector is seen as representing the interests of the people, but in authoritarian countries this often isn’t the case. The official development agenda may serve the elite, rather than the poor. Importantly, Ylönen raised the questions of opportunity costs for private sector aid. Is channeling public development funding through the private sector the most efficient way to reach desired development goals?

While more resources have been directed to private sector instruments, such as Finnfund, funding cuts have hit traditional development actors and research institutions. Speakers called for more engaged research that critically assesses the drivers and implications of shifts in development policy and changes in the development paradigm.