This is what a private-sector solution to the refugee crisis looks like

Solving the refugee crisis will involve mobilising private sector funding to achieve developmental goals, writes Nirj Deva from the European Parliament. Could blended finance be the answer?

Afghan refugees in Iran
Afghan refugees in Iran. Can the private sector help? Image: EU/ECHO Pierre Prakash, CC BY-NC-ND 2.0

International development is not just about alleviating poverty; it is also about delivering security, stability, and economic opportunities to poor and fragile communities, thereby preventing citizens from having to flee their home country in search of a better life. For a West eager to stem the flows of refugees and migrants from Africa and the Middle East, supporting development is a much more effective approach than building walls and razor wire fences.

But too often development is forced to take a back seat in policymaking. The so-called War on Terror that began in 2001 has evolved into multiple brutal conflicts that are destabilising the entire Middle East, eroding people’s freedoms, undermining their safety, and transforming the very nature of their societies. This is driving people from their homes, and often from their countries. The ongoing conflict in Syria, in particular, has already displaced some five million people.

It is, of course, sensible to say that refugees should stay in the first safe country they can reach. But many, nonetheless, clamor to escape the instability of their region altogether. They dream of a life of security and opportunity in Europe, and are willing to go to great lengths to obtain it – even embarking on a life-threatening journey across the Mediterranean Sea.

For Europe, turning our backs on these refugees is not an option – desperate people will continue to march toward safety and hope – though many continue to believe that it is. When German Chancellor Angela Merkel agreed to accept a million refugees into Germany, she was praised by many – and opposed by many others.

But simply absorbing the refugee flows is not really an option either, at least not a complete one. What if Egypt were to explode in the way that Syria has? Developed countries – some of which have resisted accepting any refugees at all – would not simply accept 20 million newly displaced people.

The only real option for tackling the refugee crisis is to address the causes of people’s displacement, including terrorism, hunger, disease, oppression, inadequate infrastructure, scarce vital resources, a lack of jobs and economic prospects, and falling standards of living. Seen in this light, supporting international development is not some discretionary act of generosity; it is a matter of mutual survival.

To succeed, however, requires adapting development policies to economic reality. Rather than simply handing money from one state to another, as the world has done for the last 60 years, development funds must be used to mobilise the private sector – the real engine of economic growth and development. Indeed, in developing economies, the private sector accounts for 90 per cent of jobs.

With the right approach, the €20 billion ($21.9 billion) in annual development funding provided by the European Union could be leveraged to mobilise €300 billion of capital for the developing world, changing millions of people’s lives for the better.

The model is straightforward: first, blend public, private, and charitable contributions; second, invest the funds under rigorous private-sector standards, rather than entrusting them to profligate public-sector actors who often treat donor money with contempt.

Such blended finance vehicles, though in their infancy, have already been shown to work well elsewhere in the world. A World Economic Forum survey found that every $1 of public money invested in such initiatives attracted as much as $20 of private investment. And this does not even account for the benefits implied by improved accounting, tendering, and reporting procedures – all by-products of greater private-sector involvement.

The only real option for tackling the refugee crisis is to address the causes of people’s displacement… supporting international development is not some discretionary act of generosity; it is a matter of mutual survival.

This approach is especially appropriate at a time when many European countries are struggling with sluggish growth and face tight fiscal constraints. Only four EU members now spend the globally agreed 0.7 per cent of gross national income on development aid.

The good news is that European governments increasingly seem to recognise the need to tap the potential of the private sector to support development. Last month, at a European Parliament plenary session in Strasbourg, the European Commission threw its support behind my plan to put the private sector front and centre in development projects.

But establishing private-sector investment as a key component of Europe’s development strategy is just the first step. The Commission must now put words into action, which means engaging directly with the private sector and business communities.

By stabilising Middle Eastern societies and advancing their economic development, Europe can help to stem the influx of migrants and asylum-seekers today, while securing new markets, business opportunities, and partnerships tomorrow.

Nirj Deva is a ranking member of the European Parliament and Conservative Vice-President of the Development Committee.


Copyright: Project Syndicate, 2017.

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