Job Creation: Developing Countries

Baroness Featherstone Excerpts

Tuesday 24th June 2014 Westminster Hall

[The Parliamentary Under-Secretary of State for International Development (Lynne Featherstone)]

What a pleasure it is to serve under your unexpected chairmanship this afternoon, Mr Hollobone. You are a very welcome replacement. Thank you for enabling us to continue with the debate.

I thank my hon. Friend the Member for Stafford (Jeremy Lefroy) for securing such an important debate. In his opening remarks, he said he had just returned from Liberia and Sierra Leone, which listed unemployment as their biggest challenge, and DFID also believes that is the case. Jobs are at the core of international development, and I very much welcome the opportunity to discuss the issue. I am aware of my hon. Friend’s vast experience and great knowledge in this field—it is much greater than my own—which comes from his personal experience of living in Africa and being involved in business for many years.

I hope many of the points in my speech will address some of the issues that have been raised. If we have time, I will try to address some of the more specific points that have been raised. When we ask people in the UK or in a developing country what they want, the desire for a good job is normally one of the top things on their list—that is not rocket science. A job will allow them to work their way out of poverty, to provide opportunities for their families and to build for a better future. I always think that having something to do and somewhere to go every day is also good for keeping a person whole in mind and body.

Since I became a DFID Minister, there is something that has struck me about virtually all the African countries I have visited—and I have been to Africa perhaps 20 times now. Driving up the road—if there is one—at certain times of day, one can see that many young men are sitting at the roadside without anything to do. That is a reminder of something that has already been raised in the debate: how important and necessary work is and how much work is missing.

I want to highlight the scale of the challenge in developing countries. Most of the 600 million new jobs needed globally by 2020 for the growing working-age population are needed in developing countries, but at the moment only 15% of people in low-income countries in Africa have what we would call a proper job. There are 900 million people in developing countries who are working but who, as my hon. Friend the Member for Stafford said, are doing vulnerable self-employed work and living in poverty. They engage in subsistence farming and so on. Most people in developing countries have a job of some sort, but it is mostly in unproductive subsistence work that may even be unsafe.

To address those issues in the terms in which DFID thinks about jobs, we need modern, formal sectors to grow and to create better jobs. We need people who work in subsistence agriculture or unproductive household businesses to be able to earn a better living. I have visited some impressive projects to intensify and maximise the produce of small agricultural plots. Avoiding the loss of produce in getting it to market is one way to do that, but I also remember a market in Zambia where we had arranged for people selling seeds and market produce to meet small subsistence farmers to exchange knowledge of the best seeds and how to plant. There was a product to make cows grow, so that people could get them to market in two and a half years instead of seven. I did not ask what was in it; nevertheless, someone with one cow could triple their income with that product. Many of these people are in marginalised rural areas or cities, poorly connected to markets for their labour. They lack the right mix of skills, finance, land and information to enable them to find a job. My hon. Friend the Member for Stafford also talked about getting goods to market, the skills needed to get a job, access to finance, surety of land tenure and information about how to maximise produce.

We also need to address serious inequality in who gets job opportunities. Women are less likely to participate in the labour force and are more likely to be in unpaid or vulnerable work. Young people—and there are many in developing countries—also fare badly, which often poses a risk to social cohesion. That is not just unfair and dangerous; it is inefficient and represents a huge potential loss to developing economies. Changing this jobs picture requires economic development and transformation, much of which will be led by the private sector. People need the opportunity to earn more. For many, that will mean getting better incomes in agriculture, but over time—indeed, already and increasingly— the bulk of new jobs will come from higher-income opportunities in services and manufacturing, as has happened in every country that has successfully developed.

DFID’s work on economic development and jobs involves, first, getting the international system right; secondly, getting private sector growth going; and, thirdly—an absolute priority for me—ensuring that growth is broad-based and inclusive, in particular for girls and women. One example is the recent trade facilitation agreement reached in Bali, which will be instrumental in reducing the barriers to trade, helping to integrate developing countries into global trade flows and promoting jobs and investment. We are also pushing for productive jobs to feature prominently in the goals and targets of the post-2015 agenda, which is essential if we are to reach zero poverty by 2030. Our multilateral partners are also well placed to deliver on the jobs agenda and are upping their game. The UK-backed International Finance Corporation global SME finance initiative aims to provide at least 1 million new jobs and financing to 200,000 small and medium-sized enterprises. Access to finance is crucial, and I have just been in Mozambique, where I launched access to finance for women in SMEs. It is a crucial stage.

The World Bank Group has put job creation and economic development at the centre of its plans to achieve its goal of increasing shared prosperity and the income that accrues to the poorest 40% in each country. We are engaging closely with the bank on that. Across Government, the UK is also working to improve economic and trade relations. Our recently launched high-level partnerships for prosperity will improve trade between the UK and Angola, Côte d’Ivoire, Ghana, Mozambique and Tanzania—indeed, my hon. Friend the Member for Stafford mentioned the recent trip there by the Secretary of State.

Driving economic development and jobs is not only the most effective way to reduce poverty in developing countries; it is also in the interest of the UK. The hon. Member for Wirral South (Alison McGovern) raised the question of tied aid, and I assure her that there is no question of that. It is against the law and not appropriate. However, when we let contracts in open competition, a UK business will often win. That, however, can only be a compliment to British business and its ability to make the successful bid. There is no favouritism: the process happens on the open market and such contracts are always let competitively.

It is in the interest of the UK to build our future trading partners. Africa has a growth rate that we in the UK can only envy and there is phenomenal wealth lying beneath its ground. The challenge with extractive industries is to spread the benefits widely, as my hon. Friend the Member for Stafford said. One reason for the work we do on value chains and supply chains in extractives, and in the surrounding geographical area, is to try to link the economic benefit to the country. We also give technical support and assistance with the original contract negotiations, so that the country benefits from its own wealth, rather than other countries or the elites of that country.

Improving job prospects in developing countries, particularly for young people, reduces the chance of conflict. The recent awful case of the abduction of girls in northern Nigeria seems to have gone from the media pages, but it has not stopped being on our mind at DFID or the Foreign and Commonwealth Office. Part of the issue in the area where Boko Haram flourishes is that young men have nothing to do. I am looking at programmes to develop skills and jobs in that area, as possible diversionary tactics, which would also be very beneficial.

Many businesses in the UK are looking to Africa and Asia and seeing the markets of the future. Businesses see value in engaging with DFID and the rest of Government and they in turn have much to offer the countries that they choose to invest in. Interestingly enough, the business advisers to DFID’s advisory board have strongly called for exactly what my hon. Friend the Member for Stafford was talking about: the development of appropriate skills and education. There is a willingness to invest in countries and create jobs where the climate is stable enough, but there is also a need for skills, so that businesses do not have to import their own staff. A company that wants to open in many parts of a country needs to be able to use staff from the country in question to run branches, co-ordinate things and see to the logistics.

Our spending programmes create jobs in developing countries in a number of ways. The Commonwealth Development Corporation, the UK’s development finance institution, is having a huge impact on job creation in Africa and Asia. It is remarkable. In 2013, CDC’s 1,300 investee companies directly employed over 1 million people. That is a hugely successful rate.

[Jeremy Lefroy]

The Minister is absolutely right to point that out. I would further like to congratulate CDC; I understand that last year saw the highest level of investment by CDC in its history. That is a welcome sign of the success of the Government’s opening of CDC’s mandate, to include direct investment in businesses again, as well as investment in funds, and concentrating on low-income countries rather than spreading out through middle-income countries.

[Lynne Featherstone]

My hon. Friend makes an excellent intervention. CDC has gone from strength to strength. Not that long ago there were some question marks over it, but it has moved well away from that. As he says, because it works in the most fragile, conflict-affected and poorest of countries, its success is all the more remarkable. It has created more than 68,000 new jobs.

[Alison McGovern]

On that point, would the Minister be so good as to respond to my question about deadweight loss and what research DFID is undertaking to ensure that none of those new jobs represents such loss?

[Lynne Featherstone]

I will respond to the hon. Lady in a moment on the issue of deadweight loss.

Moving on from CDC, in the long term, the key to mass job creation is improving the environment for domestic and other businesses to invest and grow. DFID is focused on these long-term determinants of job growth.

[David Simpson]

As we believe that these projects and job creation are very important, does the Minister agree that we cannot overestimate the number of jobs that need to be created? I believe the figure is 95 million over the remainder of this decade, so time is of the essence. We need to move on this issue.

[Lynne Featherstone]

The hon. Gentleman is obviously right. We work in that direction and we are working as fast as we can to enable job creation to happen. I have covered a number of things, but part of what DFID does is on the enabling environment for investment and therefore job creation, whether that means cutting the time it takes to get goods across a border from four weeks to one day, or help with filling in forms or how long it takes to start a business—all the things that are very off-putting to investors. We are working on all fronts.

I do not know whether those hon. Members present have ever eaten in Nando’s, for example, but I was in Mozambique, where Nando’s exclusively grows its peri-peri peppers. It is a labour-intensive process, with massive work for smallholdings, done to a very high standard—because the standards, both of the product and how people work, are very important to DFID and the British Government—which means huge job creation. It is a win-win for the country, the company and the individuals who are being taught and looked after while they grow peri-peri peppers—and I can highly recommend peri-peri chicken.

DFID currently supports more than 60 programmes with specific targets to provide economic assets to girls and women in developing countries. We have set ourselves a target of helping 18 million women to access financial services and 4.5 million women to strengthen their property rights by 2015. Both will have a fundamental impact on the job prospects of the women involved by improving their control over assets and finance.

For some women in work, the conditions remain unacceptable. The UK is supporting the International Trade Centre to work with Governments and customs authorities in east Africa to improve conditions for female informal traders, who face harassment and extortion at borders—the example often given is someone who starts with 12 eggs and, by the time they pay off all the people who have to be paid off, has about three eggs left to sell. That is a common, everyday kind of factor.

The Department is also scaling up its work on education and skills—an important point that my hon. Friend the Member for Stafford raised—to make sure that skills are relevant to people’s changing opportunities and that the private sector is involved in designing, delivering and financing them. We are also increasing our work on infrastructure—my hon. Friend talked about power and transport—and thinking afresh about urbanisation, in order to create more and more productive jobs.

[Jeremy Lefroy]

My hon. Friend is making some extremely important points. One issue that I did not refer to directly in my speech—but which relates specifically to skills—is the great need for additional skills in, for instance, the health and education sectors, which are themselves financed through the development of the economy, the payment of taxes and so on. The hon. Member for Wirral South, who speaks for the Opposition, and I were both keen to see the International Development Committee look into health system strengthening. I am glad to see that that inquiry has now taken place. One of the things that I think will emerge from it is the enormous number of job opportunities for people at all skill levels in the health and education sectors, but of course those sectors have to be financed and the finance comes from the growth of the private sector.

[Lynne Featherstone]

That is absolutely the case. There are some benign circles that we need to get going in, for example, higher education in developing countries, because skills in health and education need to be supplied locally. We need to up the quality of teaching and professionals in the health service. Indeed, that is how we are moving forward, and I believe I will be giving evidence to the IDC on health system strengthening. The need is great, because the numbers are enormous and those jobs must be filled by training individuals within countries and not “borrowing” them, as has happened in the past.

As for monitoring and evaluating DFID’s work, we are scaling up efforts to monitor and evaluate the impact of our work on economic development. Some areas of this agenda, such as job creation, investment and trade, are quite complex to measure. The International Finance Corporation’s “Let’s Work” initiative, which DFID, CDC and the Private Infrastructure Development Group engage with, is working to develop an agreed approach to estimating the impact of private sector infrastructure interventions on job creation. DFID funded the IFC’s study in 2013 of the private sector and jobs, and a whole chapter is devoted to the difficult issue of measuring net additional job creation. Measuring it exactly is one of the challenges, but it is our ambition both to measure it and to ensure that the jobs being created are additional and would not have been created in any case.

Under the economic development scale-up, we are looking to increase the relevance of education and skills for the changing job market, as I have said. That goes for foundational skills and technical skills, so that skills taught in school and technical training institutes have to be right and join up what is needed for industry in the country with the skills that are available. New interventions for marginalised groups in rural and urban areas provide combinations of interventions, such as entrepreneurship skills and finance and innovative business models—we are trying to create another benign circle. I have visited some of the larger pilot entrepreneur skills awareness training projects, where an inspirational speaker talks to 700 or 800 young people at a time, who all seem absolutely fired up and up for going out and becoming entrepreneurs in their own right. It is very exciting work.

My hon. Friend the Member for Stafford mentioned power. The Public-Private Infrastructure Advisory Facility is delivering technical assistance to unlock private investment in developing countries and the EU is investing in the EU-Africa Infrastructure Trust Fund.

As for ports, in Mombasa in Kenya we are helping to tackle problems with port management to improve trade and regional integration. Most importantly, of course, as Mozambique’s ports develop, the corridors that will open up to neighbouring landlocked countries will be incredibly valuable, both to those countries and the ports themselves.

As for work, I hear what the hon. Member for Wirral South, my opposite number, was saying. I can assure her that I go to the International Labour Organisation every three months and I work closely with the unions. They have raised the issue of our stopping their funding many times with me. However, as I have explained, we work in different ways. We are working with them on a project on trafficking in Asia and we have given £4.8 million to an ILO programme to improve working conditions in the readymade garment sector in Bangladesh. That was launched in October to help to conduct safety inspections of the 1,500 factories that are not covered by existing initiatives and to help the victims of the disaster.

In a similar field, the trade and global value chains initiative encourages buyers, factories and workers to work together to improve productivity and working conditions. Our overarching message and narrative on working conditions—in all businesses and in all ways, and with Governments—is that they should be good and professional. It is no good a Department such as DFID not caring about standards; we care very much about standards and responsible business. We encourage companies to respect voluntary global standards, which improve labour standards and reduce harmful working practices. We provide funding and support that strengthens mechanisms that ensure that companies comply with their commitments on labour standards and working practices, such as the ethical trading initiative. We have also funded and supported the extension to the global fair trade system and are building evidence about its impact on wages and working conditions.

As for ensuring that poor people are not being excluded from any newly developed markets, which obviously is important, we support inclusive growth, benefiting women and girls in particular. That is an essential pillar of DFID’s economic development strategic framework. Although occasionally one sees “economic development” written in a report, it is always meant to read “inclusive economic development”. There is no point developing a country if the process is not inclusive, because if it leaves people behind, it will simply repeat the worst mistakes that have been made in other parts of the world. I am pleased that the overarching principle of the high-level panel report on the post-2015 agenda is exactly that. “Leave no one behind” is the most important message.

In conclusion, I thank my hon. Friend the Member for Stafford, who covered the issues and subjects in better detail, perhaps, even than myself. I think all hon. Members would say that we are all committed to the creation of useful employment and work and the improvement of subsistence work and agriculture. That is important, right across the developing world, because if we do not do it right, we will be guilty of leaving many people behind. Ultimately, it is in our own interests—in the country’s and everyone’s interests—that we get this right and support the developing world in the creation of the right sort of jobs, the right environment and the right economy.

[Mr Philip Hollobone (in the Chair)]

I thank all hon. Members who contributed to this important debate. I now suspend the sitting until 4 pm, or earlier if both the Member whose debate it is and the Minister responding arrive earlier.