CBI and Greening link to boost growth in emerging economies

The UK has dramatically switched the focus of its overseas aid spending from simply fighting poverty to helping recipient countries develop their economies.

The Department for International Development (Dfid), which is responsible for managing Britain's foreign aid budget, has traditionally spent its funds on services such as health, education, water and sanitation.But under plans outlined yesterday, the department will place a much greater emphasis on helping to develop emerging economies such as Nigeria and Kenya – and this will be to the benefit of UK plc as well as the countries Dfid helps, said the International Development Secretary, Justine Greening.

"Our investment in international development is in our national interest – in fact, I believe it's critical. We are market making ultimately, if we approach international development effectively. Trade between nations creates growth, jobs and prosperity for both countries and people. It drives down prices and increases choice," said Ms Greening, announcing her plan in the London Stock Exchange.

"I want Dfid to help build up strong and investable business environments. That means helping countries to build their own tax base, squeezing out corruption and providing technical advice so that when economic growth does happen, countries are well placed to reap and then reinvest the gains."

Ms Greening has teamed up with the CBI for a campaign to drive growth in emerging economies, especially in sub-Saharan Africa and South Asia. She is calling on British business to join her in the development push, which she argues will be good for the UK because it will stimulate trade.

Jim Blight, the CBI's head of public services reform, said: "Experience from other countries which follow this approach shows that business engagement benefits both developing countries and businesses, helping to increase the capacity of the private sector to drive growth across the world."

Ms Greening announced a new unit that will sit within HM Revenue and Customs and will work with Dfid teams in developing countries to improve their tax systems, as well as a £51m investment in growth policy advice to governments in Burma, Malawi, Liberia and Nigeria.

Rwanda, Malawi, Botswana and Sri Lanka are among the other countries that Dfid is targeting in its economic development drive, which comes in three parts.

The first aims to reduce regulatory, infrastructure, legal or institutional barriers to trade and investment, Ms Greening said. The second will "unlock the ability of entrepreneurs and business people in developing countries to themselves drive economic growth through their own businesses being more and more successful".

Finally, British companies need to step up their investment, she said, to help build economies that can sustain themselves.