Developing Countries: Jobs and Livelihoods

Jeremy Lefroy Excerpts

Wednesday 15th June 2016 Westminster Hall

[Jeremy Lefroy (Stafford) (Con)]

I beg to move,

That this House has considered jobs and livelihoods in developing countries.

I draw attention to my entries in the Register of Members’ Financial Interests.

“A good job can change a person’s life, and the right jobs can transform entire societies. Governments need to move jobs to center stage to promote prosperity and fight poverty”.

Those are the words of Dr Jim Yong Kim, president of the World Bank, in his introduction to the 2013 World Development Report. In 2014, my right hon. Friend the Secretary of State for International Development said:

“Growth reduces poverty through jobs…raising incomes for individuals through the dignity of work and providing tax receipts for governments to fund basic public services like health and education.”

On the other hand, the lack of jobs and the opportunity to earn a living fuels discontent and unrest and drives economic migration. We are seeing the consequences right now, which is yet another reason why working in partnership around the world is both the right thing to do and very much in our national interest.

In sustainable development goal 8, UN member Governments commit that by 2030 they will achieve

“full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value”.

Just last year the International Development Committee published a report on jobs and livelihoods. One of its recommendations was that jobs and livelihoods were “such an important issue” that its successor Committee in this Parliament should take it up

“to assess what progress has been made.”

I am sure that that will happen in the coming years, but I wanted to ensure that the matter was raised in the House. I am delighted to see so many colleagues present. Other members of the International Development Committee would have been here, but the timing of the debate clashes with a meeting of its Sub-Committee on the Independent Commission for Aid Impact.

[John Howell (Henley) (Con)]

Does my hon. Friend feel that the Prime Minister’s initiative to make a number of MPs, such as myself, trade envoys will contribute to the work he is describing, given the wide role we have been given? How much does he think the prosperity fund will play a role in helping to develop local industries and situations to enable the creation of new jobs?

[Jeremy Lefroy]

I am most grateful to my hon. Friend for that intervention. He is doing fine work as a trade envoy for Nigeria, which is vital, because British investment around the world will help to create jobs. The prosperity fund will provide opportunities for people to develop that work. I entirely agree with my hon. Friend.

The 2013 World Development Report estimated that, globally, 200 million disproportionately young people are unemployed, with a further 620 million young people neither working, nor looking for work. Due to age profile and population growth, the report estimates that a further 600 million jobs will need to be found in the next 15 years just to keep employment rates constant. Personally, I would put that figure even higher, at closer to 1 billion.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I congratulate the hon. Gentleman on securing this debate. He is discussing the figures and alluded to the fact that we would like to go further. Does he agree that it is almost a pipe-dream that the sustainable development goal that appears to indicate the elimination of poverty and unemployment, particularly in developing countries, will be achieved by 2030? We really need radically to reassess what we are doing to achieve that goal.

[Jeremy Lefroy]

The hon. Gentleman makes a valuable point. One reason why I called for this debate is because not nearly enough work is going on around the world. The UK is taking a lead, but he is absolutely right that much more needs to be done here and around the world.

In many countries, much of the work is subsistence agriculture and low-income self-employment—that is true for something like 50% of the 3 billion people working worldwide. Making ends meet is extremely difficult. I have to admit that all the figures I have cited are imprecise and sometimes speculative, which is a problem. We do not have accurate data, but I hope we will see more in future. It is about not only data but action, but action depends on good data.

The World Development Report found that: first, there are too few productive waged jobs in modern, formal sectors; secondly, most people are engaged in very low-productivity, seasonal or subsistence work in both rural and urban areas; thirdly, there are large gaps in job opportunities for women, youth and marginalised groups; fourthly, much work is in poor conditions, or is unsafe or risky, including in formal employment; and fifthly, many labour market-related institutions are ineffective, including skills institutions.

[Patrick Grady (Glasgow North) (SNP)]

I congratulate the hon. Gentleman on securing this debate. I apologise that I cannot stay for the whole debate, but I am going to an event in the House of Lords to mark Small Charity Week and speak about the importance of small charities in international development. Does he agree that many small and grassroots organisations have an important role to play in equipping people in developing countries with precisely the kinds of skills he is talking about, which they need in order to move into productive employment?

[Jeremy Lefroy]

I entirely agree with the hon. Gentleman. I will give an example of that later in my speech, but he is absolutely right. I made a similar point in Monday’s debate in this Chamber on foreign aid expenditure.

What can be done? I shall give several possible solutions. First, let us work with what we have. I shall start with agriculture, because it is at the heart of the economies of most developing countries. It provides most of the work and a considerable share of GDP, Government income and exports. It also provides the basis for local manufacturing. Even in developed economies such as ours, food and drink production is the largest manufacturing sector. Why should that not be the case in developing countries?

Although all countries will of course wish to diversify into other sectors and reduce reliance on agriculture, that is not the same as neglecting agriculture. That mistake has been made far too often in the past, both by Governments and by their aid-funded advisers. I am glad to say that things have changed over the past three decades. Countries such as India and Vietnam, and more recently Ghana, Tanzania and Ethiopia—to name but a few of many—have given much more prominence to agriculture and increased their support of it. The same is true of development agencies, especially the Department for International Development. I welcome that.

Working with what we have in agriculture also means working with the smallholder farmers who are its backbone. When I started to work with smallholder farmers nearly 30 years ago, the view of many was that they were on the way out, and that the future of agriculture was large-scale farming. In fact, they are more important than ever, providing food security even in conflict zones. For example, in the 1970s Angola produced a similar amount of coffee to Uganda, but Angola’s coffee was almost all produced on large estates, while Uganda’s was produced by smallholders. Both countries went through long periods of turbulence. Today, Uganda’s coffee production is the same as it was back then, if not more, but Angola’s coffee production has almost disappeared. Smallholder farmers are incredibly resilient.

[David Simpson (Upper Bann) (DUP)]

I congratulate the hon. Gentleman on securing this debate. He has vast experience of developing countries. Does he agree that there needs to be an emphasis on educating young people so that there are links with the business community? He will know that every year in the House there are campaigns to get children in developing countries into education. That would help them on the pathway to jobs, no matter how little.

[Jeremy Lefroy]

I agree entirely. I shall address that issue in a moment, because it is vital.

I have a couple of other examples of sectors in which we can work with what we have. Hospitality is important in every developing country. It is about not only international tourism, but looking after people in one’s own country and wider region. Hilton estimates that, if there is proper investment around the world, the hospitality sector alone could create an additional 70 million jobs over the next decade. Apart from agriculture and agricultural processing, construction is very likely to create and sustain jobs and livelihoods in most parts of developing countries. I shall say a little more about that later in my speech. We must also consider local services. Services are often neglected in favour of large manufacturing investments, yet in every town and city, along every main street, one will see service businesses. We need to support and encourage them, because if every service business employed one more person, millions more people would be employed throughout the developing world.

Secondly, not only should we work with what we have, but we must not stand still. Everyone wishes to see a better life for their family. Incomes from agriculture can be improved in many ways. That subject is worth an entire debate in itself, but, to be brief, they include enhanced productivity through better inputs, advice, irrigation, finance, diversification, storage to reduce crop losses, and access to markets and to information about those markets. In other words, that means moving on from subsistence agriculture.

DFID’s recently published conceptual framework on agriculture puts it well. It says that there is

“the assumption that sustained wealth creation and a self-financed exit from poverty depend, in the long-term, on economic transformation and the majority of the rural poor finding productive and better paid employment outside of primary agricultural production”—

note that the framework says primary—

“Despite the need for this transition, agricultural growth and downstream processing and productivity growth are likely to be important, if not essential, as a continued source, if not driver, of growth.”

When I was involved in buying cocoa from smallholder farmers, we saw the price per kilo paid to farmers, and hence their income, rise at least fourfold over two or three years as result of a combination of improved quality, better logistics, a higher world market price and a greater percentage of that price being paid to the farmers. It also depended on having a reliable buyer prepared to take a long-term approach, rather than one driven by short-term trading considerations. The farmers’ improved incomes not only sustained and improved their own livelihoods but created jobs at a tremendous rate. The money stayed in the local economy to support input dealers, schools, clinics, general stores and bars. That, in turn, created jobs in local and national manufacturing and service businesses. I am a believer not in trickle-down economics, but in trickle-up economics, and smallholder agriculture is at the heart of that.

I have concentrated on agriculture, but the need not to stand still applies to all the other sectors I mentioned. In hospitality, training, good-quality service and investment meet the needs of nationals, not just tourists. There is no reason why someone cannot provide an excellent hotel or tourist spot for their own population. They do not need to rely on a few hundreds of thousands or tens of thousands of overseas visitors.

Construction jobs can be enhanced through a formal apprenticeship scheme of the kind I mentioned. They can also be supported by placing specific requirements on contractors in large infrastructure projects to employ and properly train local people in their work. That is increasingly happening, but it needs to be extended to the most senior levels of the contract, not just the grassroots workers. Skills are best transferred in the heat of building a major road, bridge, airport or railway line.

[Imran Hussain (Bradford East) (Lab)]

Does the hon. Gentleman also recognise the importance of urban planning, in particular for the foundations it lays for economic development? We need to do more on that.

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[Jeremy Lefroy]

That is a very interesting point. I agree. We see the consequences of poor urban planning in many parts of the world. In that context and the general context of construction, I would like to ask the Minister whether all the infrastructure and construction projects that DFID supports now have clauses that require the training and development of local skills, rather than just bringing in professionals and others from outside.

Thirdly, we must act locally and regionally, not just from the capital city. People working at the grassroots are the best at creating large numbers of jobs, so Governments and aid organisations need to concentrate their work there, not just in capitals or large cities. The Bangladesh-based international development agency BRAC is effective at doing that, as I saw in Babati in Tanzania—a small town south of Arusha, which the International Development Committee visited in 2014. Charities such as Hand in Hand, set up by the Swedish entrepreneur Percy Barnevik, also work outside the main cities and capitals.

In Nigeria, which the International Development Committee visited in March, DFID has an office in Kano. I think it is the only major aid organisation based in Kano, which gives it the advantage of having a greater appreciation of the situation on the ground. I would encourage the same elsewhere. I would like to see DFID staff based in regional towns and cities, not just capitals. Given modern communication technology, we do not need expensive infrastructure to do that, and I think many would welcome the chance to do their work outside the bubble of a congested, expensive capital city.

Regional trade is vital. DFID has some excellent programmes—in particular, TradeMark East Africa, which, like many things I am going to talk about, is worth an entire debate itself. I will not say more about it at this stage, other than that I believe it has done some excellent work in breaking down trade barriers across the region.

Fourthly, we need to embrace job creation in public services, which are sometimes forgotten. Building public services, such as health and education, provides huge job opportunities. The NHS is the UK’s largest employer by far. At the moment, in Tanzania there is one doctor for every 25,000 people, whereas in the UK it is something like one for every 350. If Tanzania increased its number of doctors to one for every 2,000 people, that would create more than 20,000 highly skilled roles in that country alone, and probably more than 100,000 in total in the health sector. I am very glad to hear that this month Tanzania is considering increasing its health spending substantially in its budget. If that happens, there will be greater employment in the health sector. The same applies to education.

Of course, there is an argument that that depends on increasing Government revenue. That is absolutely true, but it also depends on choices about how Government revenue is spent. It is a virtuous circle: greater access to healthcare and education helps people’s productivity, and hence increases the income that generates taxes. I do not have an estimate of how many additional jobs will be created in developing countries if staffing and education reached just one quarter of developed countries’ levels, but it would be in the millions globally, and almost all would be filled by the young people who need them most.

Fifthly, we need to be inclusive. We need to ensure that the work covers everybody, and women and girls must be at the heart of it. Policies that exclude people are not only wrong, but bad for jobs and livelihoods, and hence economic growth.

Sixthly, there must be access to the right kind of finance, without which we cannot create jobs and livelihoods. Again, a separate debate is required on that issue, so I will limit myself to two examples. Small and growing businesses, which will create the most jobs and need finance, tend to be seen as risky. Commercial banks are increasingly risk averse in developing countries, as they are in developed countries, as they implement capital adequacy rules designed, understandably, to protect depositors. Loans come with high security requirements, so finance will increasingly need to come in forms that are not so restrictive. The providers will need to be willing to take on risk—that applies as much to the UK as to developing countries. The last thing we should do is discourage entrepreneurs by promising them destitution if things go wrong, which is pretty much what commercial banks in developing countries do: they take everything away if the loan goes bad.

The Economist recently published an article with examples of that kind of finance, including GroFin and Equity for Tanzania. I have to declare an interest: I helped to found Equity for Tanzania, and I am director of its charitable parent organisation in the UK. It leases equipment to the growing businesses in Tanzania, and takes as security only the equipment itself. It has the specific aim of job creation. Returning to the point that the hon. Member for Glasgow North (Patrick Grady) made, it was supported by a small grant from DFID about 12 years ago and developed into a much larger organisation.

The second example is CDC—formerly the Commonwealth Development Corporation—which invests in larger business. It has the specific aim, set up by the previous Secretary of State, my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell), to create jobs and livelihoods, and to work in the most needy countries. I welcome that.

Finally—this also relates to the point made by the hon. Member for Glasgow North—we need education and training. A strong and diverse economy built from the grassroots also needs a vibrant education and training system that teaches not simply the essential building blocks—mathematics, sciences and languages—but the skills that people need to work for themselves or run a small enterprise. When the International Development Committee visited Sierra Leone in 2014, President Koroma stressed to us his desire to see more vocational training. In Nepal in 2015 we saw a vocational training scheme run by the Swiss and supported by DFID. There is a tendency to see traditional vocational training models as ineffective, having high capital and running costs and being inaccessible to young people. I believe we need models that are more akin to our apprenticeship schemes, and that are based on working alongside skilled businessmen and women. People should receive financial support for doing so, together with some central training. That is cheaper and more effective.

I also suggest there is a need to embed business and self-employment training within school curricula. Most students will end up working for themselves, or in small enterprises, and they will be better prepared if the training starts in school—again, the same applies in the UK. We do not have enough of that in our school curricula. It would also raise the status of business and self-employment as something a student wishes to do, rather than as a last resort if they cannot go to university or obtain a government or salaried job of some kind. Excellent work on that is done by Youth Business International, part of the Prince’s Trust network, and Peace Child International.

I will now look briefly at DFID’s work, first at its economic strategic development framework, which has five pillars: improving international rules for shared prosperity; supporting the enabling environment for private sector growth; catalysing capital flows and trade in frontier markets; engaging with businesses to help their investments contribute to development; and ensuring that growth is inclusive and benefits girls and women. I have already touched on many of those subjects, so DFID is already covering a lot of the ground. The DFID framework, however, excludes the role of public services in economic development, especially job creation. When the framework is next revised, I ask the Minister to include that in it; it is important.

The second area in which DFID is doing a lot of work is its youth agenda, “Putting young people at the heart of development”, published only in April this year. It focuses on two transitions, between childhood and puberty, or adolescence, and between education and productive work, going from dependence to independence. The April publication has been followed up with a couple of internal papers on youth and jobs, and youth and entrepreneurship. DFID is apparently preparing for a consultation on the issues later this year. That is good, and I welcome it, but we need not only consultations and papers, but action. DFID has the opportunity to lead such work internationally.

Finally, there is the World Bank, which I began with. I declare an interest, as I chair the international Parliamentary Network on the World Bank & International Monetary Fund. In 2014 the bank launched its Solutions for Youth Employment initiative and an umbrella trust fund for jobs, which is supported by DFID. Will the Minister tell us about any progress on that? Are we simply discussing a lot of nice platitudes, welcome though they are, and even policies, or are we talking about real action to create, or support the creation of, those jobs and livelihoods, which are so urgently needed?

In conclusion, I welcome what is being done at the moment. As the hon. Member for East Londonderry (Mr Campbell) said, we must go a lot further and a lot faster. I want to see every DFID bilateral programme fully engaged with the host Government on jobs and livelihoods, particularly for young people. They will find an open door, because that will always be one of the top priorities of any responsible Government. That does not necessarily mean large programmes in every country—we need to avoid duplication—but it does mean constant dialogue to see how we can support the Government.

DFID needs to use its influence in all multilaterals to put jobs and livelihoods at the centre of activity, particularly in health and education, which we cannot see as somehow completely divorced from jobs and livelihoods, because they depend on people working in them and having their jobs and livelihoods in those sectors.

Make no mistake, this is possibly the biggest challenge of our generation, along with tackling climate change. Hundreds of millions of young people could be ignored, without hope, seeking to move elsewhere, and at the mercy of people traffickers or extremists, or we could have those same young people engaged, valued and able to contribute where they are.

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[Jeremy Lefroy]

I am most grateful to everybody here for their valuable contributions. We have touched on a huge range of subjects that are vital to consider in relation to jobs and development. The hon. Member for Strangford (Jim Shannon) spoke about the need to tackle unemployment everywhere, and the importance of small projects. The hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) mentioned the important work that the Scottish Government do through their development fund, and how critical it is to work with young people. The hon. Member for Islwyn (Chris Evans), in a powerful and passionate speech, spoke about the business environment, the importance of tackling corruption, stability and direct investment.

My hon. Friend the Member for Portsmouth South (Mrs Drummond) spoke about many issues, and particularly the importance of the digital economy in the developing world. My hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) mentioned the importance of education. The hon. Member for West Aberdeenshire and Kincardine (Stuart Blair Donaldson) spoke about the vital nature of partnership working and the work that the Scottish Government have done in partnership with Malawi on Kilombero rice and, indeed, Mzuzu coffee, which I have had the pleasure of tasting. The hon. Member for Bradford East (Imran Hussain) spoke powerfully about the need to be ambitious and aspirational, and touched on city planning.

The Minister spoke about DFID’s work, which I commend. He indicated that DFID is moving powerfully in the directions in which I would like to see it go. He spoke about infrastructure and Energy Africa, which my right hon. Friend the Member for Welwyn Hatfield (Grant Shapps) instituted last year, and about how that is already making progress.

Above all, there is a passionate desire here to work for inclusive, job-rich growth in developing countries, because that is important for the people in those countries, and because it allows them to stay where they are and not put pressure on our country. It is in their interests and ours.

Motion lapsed (Standing Order No. 10(6)).