Cuts to Dutch development funds short-sighted

The Dutch 2023 election campaign saw a lot of focus on ensuring voters’ economic security (bestaanszekerheid). That requires money – but where would it come from?

Analysis by the CPB (Netherlands Bureau for Economic Policy Analysis) showed that the VVD (People’s Party for Freedom and Democracy) planned to do away with the budget for development cooperation altogether. The question is what the Netherlands would achieve by doing this – because there is a big chance that it would cause developing countries to deteriorate and become more dependent on us.

Shared long-term agenda

In recent decades, developing countries have changed rapidly, with a huge shift towards greater economic independence. Although critics point at corruption and fraud, the evidence points to tremendous impact: while 50 years ago 30% of African children did not reach the age of five, today that figure has dropped to 7%.

Let me focus on Africa, soon to become the most populated continent in the world. The Netherlands and Africa essentially have the same long-term agenda: letting go of development aid. This is only possible through stable economic growth and, in the current economic climate, by using the funds available smartly.

Stopping development cooperation today would mean a waste of investment of everything that has been built together with the Netherlands. Now is precisely the time that we must push on with forging long-term economic relations, making robust investments, and furthering digitalization and climate cooperation. Getting rid of development cooperation would be like a health insurer that wants to curb rising care costs by abolishing prevention programs. It leads only to short-term gains.

From charity to economic growth

The Dutch development cooperation policy has been transformed from humanitarian assistance to initiatives with businesses: “trade, not aid”. This aligns with the economic growth in many African countries.

The private sector is the engine of growth on the continent, accounting for nine out of every ten jobs. Furthermore, over 50% of Africans get healthcare from private providers. Businesses create jobs that support people to work their way out of poverty and help prevent conflicts, radicalization, and irregular migration. Innovation is crucial too: Africa is the global leader in mobile payments, which stimulates the new economy.

The transition from aid to trade has also been embraced by African leaders. In 2017, Ghana’s President, Nana Akufo-Addo, launched his vision of ‘Africa Beyond Aid’: “It’s time to build economies that don’t rely on charity.” The transition in Ghana was well underway before being set back by the global pandemic, the war in Ukraine, and high interest rates on foreign loans, forcing the country to approach the International Monetary Fund for assistance.

More income, used more efficiently

Africa’s stability and economic growth are in Dutch interests. The Netherlands has set up the Challenge Fund for Youth Employment to create 200,000 jobs in the Middle East and Africa. The VNO NCW (Confederation of Netherlands Industry and Employers) and the MKB Nederland (Dutch entrepreneurs’ organization) contribute to strengthening the local business climate, Invest International (a joint venture of the Dutch government and development bank FMO) stimulates development-related infrastructure, and the Medical Credit Fund provides loans to female healthcare entrepreneurs.

African governments must increase their regular income streams and use these efficiently. This is challenging since 70% of Africans work in the informal sector, from which little tax is paid. That is why the Netherlands is supporting the African Tax Administration Forum, the umbrella organization of African tax authorities. The Netherlands also supports digitalization in healthcare, to promote transparency and accountability about money flows.

Need for open dialogue

The world faces many challenges that extend well beyond national boundaries. One of the paramount examples here is the climate crisis. Global agreements can be a game-changer in this regard – but will only work if all countries can implement the agreed actions.

African countries currently view Dutch environmental demands as unilateral trade regulations that protect the Dutch market. The Netherlands needs to have an open dialogue that considers the African perspective when developing and implementing trade rules.

The Netherlands can also benefit from this. Africa has 60% of the world’s best solar energy potential, but just 1% of the installed solar panels. Dutch businesses excel in innovation, sustainable development, and knowledge, and can contribute greatly to the greening and digitalization of African economies.

Role models required

To wean Africa off development aid, role models are required. Take Ghana, for instance: it is not the richest country on the continent, but has a national health insurance fund, which makes it a pioneer. A large share of the insurance premiums is financed from VAT (value-added tax) revenues, and 17 million Ghanaians are now insured.

Despite the current economic downturn, Ghana continues to pay for national health insurance. With the support of Dutch development aid, PharmAccess is helping to make this national health insurance fund and the country’s hospitals function more efficiently. Ghana’s example is inspiring progress elsewhere in Africa.

The Netherlands must continue to invest to consolidate the progress made in recent years. Cutting the development fund budget now would disrupt the progress made in recent years. Let’s not push Africa back into dependence.

This article was originally published in Dutch by NRC on 23 November 2023.