House of Commons - Jobs and Livelihoods - International Development

Jobs and Livelihoods - International Development Contents

5 Engaging with businesses

55. The fourth pillar of DFID's Economic Development Strategic Framework is:

iv) Engaging with businesses to help their investments contribute to development.[86]

DFID examples of its work on pillar 4 of the EDSF

  In November 2013, DFID's Secretary of State visited Tanzania accompanied by representatives of 18 UK and international companies to promote investment through partnerships and co-investment. As a result of the visit, DFID has co-invested in Kilombero Plantations Ltd, with its 4,300 smallholder farmers, to support the pilot stage of a new gasification plant, and to expand irrigation for rice cultivation.
  In 2013, DFID intensified its work on the Trade in Global Value Chains Initiative which works with global businesses to improve working conditions and job opportunities for poor workers and smallholder farmers and support the long-term resilience of global supply chains. Over 700,000 people in Kenya, South Africa and Bangladesh in the horticulture and garment sectors are expected to benefit.
  The Responsible and Accountable Garment Sector (RAGS) programme aimed to improve working conditions in ready-made garment production. Factories in Bangladesh and India supported by RAGS increased their hourly pay for over 100,000 workers; enabled 4,575 informal women workers in India to benefit from social protection schemes; and helped to establish over 20,000 new peer education groups in Bangladesh to improve women workers' understanding of their labour rights.

Source: Department for International Development Supplementary Submission

Our predecessor Committee's report on Private Sector Development in 2006 found:

Working with the private sector

56. DFID says it has taken a number of steps to increase its engagement to better understand the priorities of the private sector and the role they see DFID playing. This includes:

· establishing an External Advisory Group on Economic Development to provide an opportunity for the Secretary of State to draw on private sector experience;

· redesigning systems for managing relationships with priority companies with significant potential to help reduce poverty through their core business;

· conducting a series of roundtables with business representatives from the extractives, retail, infrastructure/construction and accountancy industries/professions to hear views on how commercial and development objectives can support each other;

· increasingly forging new partnerships with the private sector to achieve development outcomes; and

· building its internal skills and capabilities. There are now over 80 private sector development advisers in the Department, up from 30 in 2011.

The Secretary of State said:

57. Dr Keith Palmer of AgDevCo was complimentary about DFID's work with the private sector. He said that it was doing well at facilitating contacts resulting in private investors now looking to "make good business that is also socially responsible and helps smallholder farmers." He said DFID was also trying to find evidence of what had worked and then taking it to investors to demonstrate what could be done.[89]

58. David Norman of SAB Miller said that working with donor agencies was about leveraging "real additional value" out of the company's investments and removing barriers which were holding this back for example the availability of finance, skills, education and training.[90] He praised DFID's new approach to the private sector-he said that the Secretary of State's delegation to Tanzania was "a good model of listening".[91] His experience was:

David Norman said SAB Miller now had a key contact within DFID "who brokers our engagements and connects our engagements with different departments" and this allowed for a sharing of experiences and for SAB Miller to also learn from DFID for example, through environment advisers and socialdevelopment advisers.[93]

59. However there have been criticisms. Some commentators were concerned with the concept of donor agencies and private sector companies working together. Jim Tanburn of the Donor Committee for Enterprise Development argued that in terms of both priorities and measurement there was a mismatch between development and commercial priorities. He argued that although most jobs were created by business, business itself rarely prioritised job creation and that for business, jobs were the means to an end, not the end itself.[94] Tim Brosnan of the Small Foundation however was not so concerned about whether the aims were the same but the importance was in the actions and impacts, which he referred to as the 'invisible hand':

60. Professor Gollin also was cautious of DFID's work with the private sector:

However Dr Keith Palmer believed that DFID country offices were very mindful in their decisions about working with the private sector of not losing their primary development goal and as a result more potential private sector programmes were turned down than accepted.[97]

61. ICAI's report on DFID's Private Sector Development Work highlighted that in the market and private sector there were winners and there were losers-the risk being the poor becoming the losers:

Later, the report cautioned that:

62. ICAI's report was also critical of DFID's new private sector development advisers. One of the ICAI commissioners, Diana Good, reported back to us that:

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Adam Smith International suggested that DFID needed to get much better at coordination across country programmes and within country teams on its private sector development work.[101]

Which sectors of the economy: tourism and culture

63. DFID supports projects in a range of sectors. Agriculture is a particular emphasis. The EDSF also stresses the importance of manufacturing and services:

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As outlined in Chapter 3 the biggest manufacturing industry in the UK is the food and beverage sector which itself relies on agriculture. Of service industries, tourism is very important for jobs. The sector is the UK's third largest employer, accounting for almost 10% of total employment. Tourism also has considerable potential to create jobs, as we heard on our visits to Tanzania and Nepal. Studies have shown that tourism could bring benefits to millions of poor people.[103] Hilton have reported that the travel and tourism sector as a whole currently employs more than 255 million people around the globe, and it is predicted to create 73 million new jobs by 2022.[104]

64. Individual members of staff we have met in DFID country offices have been enthusiastic about the potential of the industry. DFID has a few programmes which provide some support for tourism such as the Skills Improvement Programme in Zambia and the Nepal Market Development Programme, but the tourism industry does not seem to be a focus for DFID.

65. This has not always been the case. From 1999-2005 DFID ran a Tourism Challenge Fund, but later tourism seems to have become less of a priority for the Department. Our predecessor Committee considered the issue of tourism in its report in 2008-09 on Sustainable Development in a Changing Climate:

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The Government replied:

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66. We raised the issue of tourism in our inquiry into Nepal and asked whether the Nepal market development programme which inter alia supported tourism should be expanded. The Minister of State replied that:

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The deputy Head of DFID Nepal added that

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67. As well as providing support to tourism through specific programmes, DFID can also engage in discussions with governments to discuss the barriers to the expansion of tourism such as the levels of litter scattered round the lake at Pokhara in Nepal and the impact of poaching in Tanzania, which seriously threatens the future of tourism in the country. Here DFID and the FCO could reinforce the work done by Prince William as patron of the Tusk Trust.

Tourism and the illegal trade in wildlife in Tanzania
As part of this inquiry we visited Tanzania. Whilst on the visit we learnt about Tanzania's huge tourism potential to create jobs and improve livelihoods. However we were very disturbed to learn about the increase in poaching and the illegal wildlife trafficking in Tanzania. Tanzania's wildlife is one of its great natural assets. It is the reason that people from all over the world visit Tanzania to safari in the Serengeti or the Ngorongoro Crater. However the current rate of ivory poaching and the killing of Giraffes is seriously depleting the country's assets. We spoke to tour companies who were greatly concerned on the effects on their businesses.
A recent report by the Environmental Investigation Agency: Vanishing point: Criminality, corruption and the devastation of Tanzania's elephant population, found that Chinese-led criminal gangs were conspiring with corrupt Tanzanian officials to traffic huge amounts of ivory: even diplomatic visits by high-level Chinese Government delegations have been used to smuggle ivory. The Giraffe Conservation Foundation have reported that giraffes are being killed for their heads and bones which can fetch a high price in Tanzania, due to the belief that their bone marrow can cure HIV/Aids, many are also killed for their meat. As a result giraffe numbers have plummeted by 40% in the last 15 years.
This is one of the many areas that the UK must work across cross government between departments and agencies such as DFID, DEFRA, the Foreign Office, Customs and Excise and The Crown Prosecution Service.

Source-visit meetings and The Giraffe Conservation Foundation

68. In the UK, according to the Government, the creative industries accounted for 1.68 million jobs in 2012, or 5.6% of UK jobs. Clearly, we would not expect such a high share of jobs in these industries in developing countries, but that does not mean the sector should be ignored by DFID. In Tanzania we visited the Nafasi Art Space which receives EU funding. The centre provides studios and support for artists 'to stimulate the creation of contemporary art in Tanzania'. It was pointed out that the arts support not just the artists but a much larger group of ancillary workers. The EU was also providing funding to help train craftsmen to restore buildings in Zanzibar. This would provide jobs not only for the craftsmen but also to cater for the additional tourists which the restored buildings would attract.

Decent jobs

69. ActionAid thought that a major gap in DFID's EDSF was the failure to link the aspiration to create jobs to the imperative that those jobs be "decent" jobs.[109] ActionAid said that its research in Costa Rica, Bangladesh and India found that the pressure on suppliers for lower prices, faster delivery times and greater flexibility was passed on to workers in the form of low wages, job insecurity and a denial of their basic human rights:

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70. ActionAid added that whatever commitments UK retailers had made to ethical standards, it was impossible for these to be met whilst insisting on purchasing practices which forced suppliers into such a weak position that pay and conditions could not be improved. Mike Bird of WIEGO referred to the research carried out by DFID on supply chains and contractual arrangements within them called 'Capturing the Gains'. It found that the business model pushed risk down the supply chain creating 'hollowed-out companies' which did not own the factories where garments were produced and did not own the shops where the garments were sold-only owning the brand and therefore evading responsibility.[111]

Bangladesh Garment Workers—Tazreen fire and the Rana Plaza building collapse
In December 2012 there was a big factory fire at the Tazreen Fashion factory on the outskirts of Dhaka. It was reported that they had a large order to fulfill so when the fire alarms went off, managers insisted the workers kept working. Once the smoke built up and people tried to escape, some doors were locked or exits were blocked with packing cases for the order. People jumped from the burning building, 114 died and hundreds were injured. At the Rana Plaza factory, also on the outskirts of Dhaka, the building had been evacuated because giant cracks had appeared in the walls but the next day, managers insisted that workers returned to work. The building then collapsed during the morning rush hour and 1100 people were killed, many more were injured.
The 'Capturing the Gains' report found that although the Bangladesh government had the main responsibility for buildings it was concerned that safety regulation would increase costs and reduce the country's competitiveness. The Bangladesh Commerce Minister admitted that oversight had been lax because they wanted the jobs. Farah Kabir of ActionAid Bangladesh told us that one of the barriers to progress in improving conditions for garment workers had been that often legislators themselves owned the factories, and they were more interested in "their own pockets and interests" than "making legislation for the poor and the workers".
Both incidents led to demands for improvements in safety and working conditions but also wage increases. Farah Kabir said that "suddenly, there was this awakening, and talk about inspectors, changing the labour law and bringing in association. There was a lot of pressure, and, of course, my government has complied, and now we have 200 labour unions registered. There are 200 or so inspectors to be employed."
Some of the brands themselves have insisted on better standards. The Accord (mainly North American retailers and brands) and the Alliance (largely European based buyers) initiatives were set up which have carried out more than 1250 factory inspections and identified thousands of deficiencies. However the question of who pays for the necessary factory repairs and upgrades is unresolved—so far none of the major brands or retailers have made a public commitment to fund them. The Alliance have estimated an average cost of $250,000 per factory. DFID has been involved in the Challenge fund and the RAGS fund, creating opportunities for workers to attend legal literacy programmes outside of factory premises helping them to understand their rights.
There have been concerns that the improvements in working pay and conditions would increase costs so companies would source elsewhere where prices were more competitive. The 'Capturing the Gains' report found that wages and working conditions-although nowhere near desirable for standards of decent work-had been improving. It was seen to be as a result of "the rapid and continuing growth of the garment industry in the country [which] has increased workers' ability to exit from particular factories, certain of getting jobs in other factories." This had increased 'the voice' of garment workers which in turn had forced the Bangladeshi governments and factory owners to listen and accede to demands.
In the first quarter of the current fiscal year 2014-15, Bangladesh's total export earnings rose to $7.7 billion, which was nearly 1% higher compared to $7.63 billion for the same period of the previous year, according to Bangladesh's Export Promotion Bureau data of October 2014. ActionAid staff in Bangladesh have concluded "So far the confidence of international brands towards the Bangladesh market is still in place which showcases the impact of improvements of safety concerns and compliance in the garment industries."

Source: Capturing the gains 2014 Working Paper 40 University of Manchester, IDS, Dhaka and Institute of Human Development New Delhi and observations of ActionAid staff in Bangladesh

71. Farah Kabir of ActionAid Bangladesh highlighted that part of the problem for Bangladeshi workers and workers' rights lobbyists was that although they could travel to the UK or USA to lobby the garment companies, it was only companies' countries of origin that could hold the firms responsible. She said:

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She said consumers had to ask, "How can I get a tshirt for £3?" Somebody, somewhere, is being deprived."[113] Mike Bird referred to one of his board members who had said "It is difficult to wake people up when they are already awake and pretending to be asleep."[114]

72. ActionAid recommended that for real change to happen, retailers needed to pay a better price for goods and enter into relationships with suppliers which allowed space for fair treatment of workers. It suggested that 2015 was an appropriate year for the UK Government to re-engage on the issue as the UK Action Plan for the UN Guiding Principles on Business and Human Rights was due to be reviewed. As part of the review ActionAid would like to see the explicit recognition of the gendered impacts of UK business activities overseas as well as references to the Convention on the Elimination of All forms of Discrimination Against Women and the Beijing Declaration and Platform for Action.[115] Farah Kabir of ActionAid Bangladesh said:

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73. The new Trade in Global Value Chains Initiative was set up aimed at encouraging UK businesses to improve supplier standards. Recipients of funding include Tesco, Primark and Asda. For example Marks and Spencer is to receive money to develop "the leadership and management skills of farm workers in Kenya and South Africa", while Sainsbury's is receiving funding to establish an "innovative radio show" for farmers in Kenya. Firms are eligible for grants of up to £750,000 for which they then provide match funding. The goal is to harness private sector expertise, to leverage private sector finance, and to raise standards in value chains with benefits for all. Critics expressed concerns that this was not the most appropriate or efficient use of ODA, and that these initiatives were sticking plasters: they were not helping structurally improve the terms and conditions of labourers.[117] The Secretary of State said:

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SLAVERY AND FORCED LABOUR

74. Slavery and forced labour[119] still affects a minimum of 21 million people in the world, according to the International Labour Organization's (ILO) 5.5million of them children.[120] Anti-slavery International says that its investigations have shown that millions of people work as forced labourers in high profile industries and as a result "their employment contributes nothing to poverty reduction".[121] It gives the examples of:

· "the fisheries supply chains of Thailand, most notoriously that of prawns, are rife with forced labour of migrant workers;

· the brick kilns of northern India are staffed almost exclusively with bonded labourers from the Dalit or minority communities;

· the garment workshops of Southern India which supply many prominent UK retailers are in large part staffed by the forced labour of girls and young women;

· the building sites for the infrastructure and venues of Qatar's World Cup employ the forced labour of vulnerable South Asian migrants; and

· domestic workers in every major city on earth are frequently trafficked for forced domestic servitude."[122]

We came across this ourselves on our visit to Pakistan where on a school visit it became apparent from talking with the school children's parents that they were bonded labourers from the local brick kiln.[123] In Burma we met Rohingya who try to escape from persecution by boat to Thailand only to become forced labourers in the Thai fishing industry.[124]

75. Anti-slavery International said it did not believe that DFID demonstrated an understanding of the issues of slavery, forced labour or the systems of social exclusion and discrimination that underpined them. It highlighted DFID's guidance on technical assistance to India which it said did not "grasp the fundamentals of how the politically entrenched issue of caste discrimination underpins poverty and slavery in that country".[125] It believed that to maximise the opportunity for decent work within any given country or community it was essential for DFID to understand the constraints on people obtaining decent work. In many parts of the global South those constraints came most sharply into focus by consideration of the underlying causes of forced labour and slavery.[126] We note that consideration of forced labour and slavery does not feature on DFID's 'growth diagnostic'. Anti-slavery International recommend that DFID could be more involved in investigations of slavery in international supply chains to help businesses better understand and address the risks of slavery in their supply chains and to encourage engagement in the struggle for slavery eradication. It also recommended that all DFID programmes and DFID funded projects on jobs and livelihoods should ask about the threat of slavery. It said:

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THE INTERNATIONAL LABOUR ORGANISATION

76. Christian Aid said:

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Following the Multilateral Aid Review (MAR) in 2011, DFID decided to end core funding to the International Labour Organisation. The MAR cited 'significant weaknesses' and 'poor value for money'. However, the ILO's response revealed inconsistencies in the UK's position, and deficiencies in the evidence base for its decision.[129] Submissions to this inquiry have asked DFID to reconsider its decision. Mike Bird from WIEGO said:

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He told us about the ILO's Better Work project, set up initially as the Better Factories project in Cambodia. It provides factory inspections, and it is building a framework supported by both management and workers. It also assists the running of commercial courts.[131]

77. We asked the Secretary of State whether with the new emphasis on job creation DFID should be working more closely with the ILO. She said:

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She also highlighted that DFID still does "individual programmes with them" and it also partners with DFID "on some of the World Bank work that is under way, looking at how we can drive economic development more broadly."[133]

DFID's funding of the private sector

78. We looked at financial instruments in our development finance report[134] and in our report on CDC.[135] We were pleased to see that some of DFID's Economic Development Strategic Framework accords with our findings. Notably, the strategy sets out new ways DFID is to finance growth. It said:

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The strategy goes on to say:

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79. The Secretary of State further endorsed the case for returnable capital:

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Conclusions and recommendations

80. DFID has recognised that if it is to spend large sums on economic development and engage with the private sector, it needs to recruit people who have worked in that sector. We welcome the progress made, but recommend that DFID recruit people who have set up businesses themselves or have run businesses in developing countries to work in the private sector department.

81. DFID must ensure it has put sufficient emphasis on economic growth which creates jobs and improves livelihoods. It needs to be open to working in a wide range of economic sectors which have the potential to create large numbers of jobs. This should include tourism and the creative industries. We recommend that DFID and the FCO make tourism a greater focus of its work, both in programmes which support the industry and in engaging with governments; this might include in Tanzania encouraging the Government to increase efforts to combat poaching.

82. The creation of decent jobs is important; working conditions can be improved without losing jobs, as the experience of the Bangladesh garment industry shows. We recommend that DFID insist that any multinational company receiving its funds respect international standards set out in the OECD Guidelines for Multinational Enterprises and that other companies fully respect local standards. We welcome the Secretary of State's commitment to review DFID's relationship with the International Labour Organisation as part of its reconsideration of the Multilateral Aid Review. In light of the much greater involvement of DFID in jobs we recommend that it should reinstate its core funding to the International Labour Organisation.

83. We recommend that as part of DFID's growth diagnostic consideration should be given to the presence or potential for forced labour, debt bondage and slavery in its priority countries. An explicit part of DFID's economic development programme in a country should be working to ensure labour contracts are freely entered into and the end of forced or bonded labour, on the understanding that this is a condition for economic development in the same way as secure property rights or access to capital.

84. On our visits we have seen several examples of DFID's productive involvement with private companies. However, our concerns from previous reports persist. DFID has to be careful not to distort the market by favouring one company over another. We welcome the Secretary of State's support for new forms of finance along the lines we recommended in our report on Development Finance. We look forward to seeing greater use of returnable and recyclable capital alongside more traditional grant aid develop further.

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87 International Development Committee Fourth Report of Session 2005-06 Private Sector Development HC 921, Summary Back

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94 Donor Committee for Enterprise Development Back

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