Finland’s Development Policy in 2017: How is Finland strengthening the economies, private sector and taxation capacity of developing countries?

KPT_Finlands development policy in 2017_web (PDF)

In line with the current Government Programme and the Government Report on Development Policy, the focus of Finland’s development policy is now on efforts to strengthen the economies of developing countries, their private sector, and tax base. In this report, the Development Policy Committee examines the implications of these new priorities, how they will impact Finland’s development policy and it’s execution in practice.

The new priorities are important, and welcome. The main issue, however, is how and on what terms the strengthening of the economies and private sector in developing countries can meet the rights and needs of people living in these countries. In the view of the Development Policy Committee, Finland should work to ensure that the poorest people, especially women and girls, can get a greater share of the economic benefits generated by economic growth. Finland must strengthen the developing countries’ own resource base, create stronger foundations for entrepreneurship and economic policy, and allow more people to benefit economically from the growth process.

In the efforts to strengthen entrepreneurship in the developing countries, the quality of the jobs should be an important consideration. The criteria for decent work laid out by the ILO should be adhered to. For this reason, development cooperation funding should only go to enterprises that operate responsibly in accordance with national and international norms, such as the UN Guiding Principles on Business and Human Rights. The companies must be able to demonstrate that their business operations can help to reduce poverty. The impacts of private operators should be assessed both beforehand and afterwards so that the consistency of their activities can be ensured and that resources are not wasted. When companies are provided with public sector support, the development, human rights and environmental impacts of the activities will be assessed, and reports on the results are required.

Supporting developing countries in building up their economies and private sector can be difficult. For this reason, there must be a strong consensus on the guiding principles and their content as well as on the degree of their obligatory nature. This implies that the new priorities need a detailed action plan and guidelines, which reach over several government terms and can be easily followed by different actors involved. In particular clarifications are needed regarding human rights based approach, the principles of coherence and transparency as well as results based management. In order to implement the sustainable development Agenda2030 credibly, Finland must also have a clear and concrete plan for how to strengthen the economies, private sector, and taxation capacity in the developing countries.

During the current government term Finnish development cooperation tool kit emphasises the role of Finnish companies in the strengthening of the private sector in developing countries. This is an important aspect, but too narrow a view by itself. The Development Policy Committee underlines that Finland should be more consistent in its efforts to strengthen the economies and private sector in all partner countries. Finland should do this as part of its development cooperation, and by pursuing a development policy that is in accordance with the Agenda2030, as well as by promoting cooperation with companies. The cooperation should aim at complementarity, between the actors involved, the financing models, and the course of action as well as at perseverance in implementation of the objectives.

The Development Policy Committee would like to point out that a development policy focused on strengthening the developing countries’ economies, and taxation capacity, requires more than just cooperation in the partner countries. This approach should be examined as an entity that entails local, regional and national matters as well as the rules, treaties and chains governing international trade and taxation, which connect the partner countries in global economy and trade.

We welcome Finland’s Tax and Development Action Programme, which is a notable development policy initiative since taxation is an essential part of the economy in every country, and it is crucial in ensuring the proper functioning of a society and the wellbeing of its citizens. Taxation enables economic resources to be retained in developing countries, and these resources can be used for narrowing down gaps between countries, and between individuals. It is clearly stated in the Tax and Development Action Programme that all its goals require policy coherence as well as cooperation between the parties involved. Finland should yet clarify its goals in international tax policy.

As the Development Policy Committee sees it, Finland would be able to play a stronger role as an international development policy actor if it could rely on an action plan for its multilateral development cooperation. This would increase openness and monitoring of effectiveness as well as results based management both within the Ministry for Foreign Affairs and nationally.

The Development Policy Committee is, however, worried that the cuts in development cooperation funding, limited personnel resources, and challenges in performance monitoring complicate the translation of the new development policy priorities into practical action. The priority-specific targets should be in accordance with the resources available. The targets also need clear and appropriate indicators for assessing their results. Still fewer staff at the Department for Development Policy in the Ministry for Foreign Affairs is responsible for managing an increasing number of different tasks. For example, only a few people manage private sector cooperation, even though importance of the sector has grown considerably. The dimensions of under-staffing are clearly felt in the Finnish diplomatic missions in the partner countries.

Further information:

Aila Paloniemi, Chairperson, Finnish Development Policy Committee, ph. 050 511 3067

Marikki Stocchetti, Secretary General, Finnish Development Policy Committee, ph. 050 535 8649