Does the UK’s new development strategy support its foreign policy objectives?

Will the new UK development strategy help create a ‘network of liberty’ – or is its investment focus simply ‘unashamedly commercial’?

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David Lawrence

Former Research Fellow, UK in the World Programme

The UK government’s decision to cut aid – from 0.7 per cent to 0.5 per cent of Gross National Income – has triggered widespread criticism for both its immediacy and potential humanitarian damage. These cuts were recently confirmed as part of the government’s new development strategy.  

While this article does not seek to castigate the UK government’s failings in adequately supporting the world’s poorest and most vulnerable – plenty of others have done this – it will assess the UK’s development strategy on the government’s own terms: does it help to achieve UK foreign policy objectives?  

The strategy is that ‘development work must form an increasingly key part of a coherent UK foreign policy’, and calls for a repurposing of international development towards the UK’s geopolitical ambitions. These are, broadly speaking, the strengthening of partnerships with other liberal democracies to create what Foreign Secretary Liz Truss calls a ‘network of liberty’.

The new development strategy must overcome significant challenges to achieve its integrated geostrategic aims. 

Behind the cuts to aid spending lies an emerging shift in UK development finance away from direct aid and towards investment, facilitated through British Investment Partnerships (BIP), a packaging together of (mostly pre-existing) financing instruments. At the core of this is the  UK’s development finance institution, British International Investment (BII), which will scale up investments to around £9 billion between 2022 and 2026, in order to mobilize up to £8bn a year of public and private investment by 2025.

BII is emblematic of the UK’s new approach to development. There is a risk that public-private loans could lead to a bias towards larger scale infrastructure projects in middle income countries, rather than disaster relief or the alleviation of extreme poverty in smaller economies.  

So, does BII at least support the ‘network of liberty’? In theory, it could: targeted finance could support fellow democracies that are at risk of debt-dependence on China (such as Malaysia) or resource-dependence on Russia (such as India). This would earn a return for British investors while supporting the UK’s geopolitical aims. Many of these projects could also help achieve the government’s aim of ‘tilting’ towards the Indo-Pacific.  

But the new development strategy must overcome significant challenges to achieve its integrated geostrategic aims. 

1. The UK government has limited oversight over where capital goes 

Realistically we can expect private firms to prioritize profit, and it is unclear how foreign policy objectives fit into this.

Private finance plays a key role in BII, but can this help support the UK’s foreign policy objectives? Although BII is technically owned by the government – with an arm’s-length governance model – in practice, it operates entirely independently of the Foreign, Commonwealth & Development Office. 

The UK government cannot compel BII to invest in particular projects or with particular private investors and must rely on BII’s mandate to balance profitability and development impact. However, realistically we can expect private firms to prioritize profit, and it is unclear how foreign policy objectives fit into this. 

Oversight and effective governance are particularly relevant for green infrastructure and climate change projects, a key sector in the new development strategy. But oversight is also important for using funds to promote liberal values, stability in areas of conflict, and democratic resilience – all of which line up with UK geopolitical interests. Furthermore, lack of oversight will make it harder for the government to ensure that funding goes to regions that are also diplomatic priorities.  

2. Undemocratic partnerships undermine the ‘network of liberty’ 

In its earlier incarnation as the Commonwealth Development Corporation, BII has a somewhat questionable record. The CDC came under fire for pursuing a £65 million telecoms investment in Ethiopia, supported by private firms including Vodafone, which Tigrayan groups alleged could be used to support serious human rights abuses against them. In contrast, the US and the EU suspended aid funding to the region.  

Similarly, one of Liz Truss’s first steps on bilateral investment partnerships was to set up working groups with Saudi Arabia and Qatar, countries she described as ‘like-minded’ partners. This is despite serious concerns about the rights of workers, women and LGBTIQ+ communities in these countries – as well as a lack of political and media freedom. 

3. Striking out alone carries risks 

A primarily bilateral approach to economic development seems somewhat inconsistent with Truss’s proposal for an ‘economic NATO’.

The UK’s reduction of multilateral funding is perhaps understandable in the shadow of COVID-19 and Russia’s invasion of Ukraine, which have both tested the capability of multilateral institutions to enact change effectively and quickly. However, moving away from multilateralism is risky, and hinges on the UK’s ability to sufficiently cultivate the ‘sustained and strengthened collaboration with like-minded allies’ that the government’s new strategy envisages

Furthermore, a primarily bilateral approach to economic development seems somewhat inconsistent with Truss’s proposal for an ‘economic NATO’: an alliance of economically connected countries providing an alternative to reliance on China and Russia.

Brexit has damaged the UK’s economic cooperation with European partners, and there are only very early green shoots of diplomatic gains in the Asia-Pacific region. It is notable that some recent infrastructure collaborations have run through like-minded partnerships that do not include the UK, such as the Blue Dot Network founded by Quad members US, Japan and Australia. 

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That being said, a potentially interesting aspect of the new focus on investment is that BII has an established history of partnering with other countries’ development finance institutions. A more collaborative approach from the UK government could capitalize on these relationships and achieve bigger-scale development impact, while shoring up liberal alliances. The G7 summit in Germany in late June will be an opportunity to clarify the UK’s role among ‘willing partners’ in international development and resilience.

The new development strategy has been interpreted by many as a shift away from direct aid for aid’s sake, towards ensuring that aid supports the UK’s geopolitical objectives. However, as things stand it is very unclear if the new strategy achieves these objectives. With the much-trumpeted BII initiative, it is argued that British investment has prioritized a ‘network of liberty’. In reality, the best we can say that it lives up to its aim of being ‘unashamedly commercial’.