Results — Implementation of the aid, trade and investment agenda in 3 partner countries: Bangladesh, Ethiopia and Kenya

In 2012, under the Rutte II cabinet, a new ministerial post was created: the Minister for Foreign Trade and Development Cooperation. Dutch development cooperation, trade and investment policies were combined for the first time into one policy agenda. This was expected to generate synergy and benefit both the Netherlands and recipient developing countries. The policy paper ‘A world to Gain’ (2013) defined three central objectives: 1. eradicate extreme poverty in a single generation; 2. sustainable, inclusive growth all over the world; and 3. Success for Dutch companies abroad.

This evaluation reviews the implementation of the aid, trade and investment policy in Bangladesh, Ethiopia and Kenya (2013–2020). The evaluation reviewed:

• The way the integration of the aid, trade and investment policy has taken shape in practice.
• Results of Dutch interventions.
• The extent to which the three main objectives of the policy have been served coherently and concomitantly.

Conclusions

1. Different approaches, available resources and capacity

The implementation of the aid, trade and investment policy was shaped differently in the three selected partner countries. Several reasons explain the different approaches chosen...

2. Enhanced focus on PSD in development cooperation

To implement the new agenda, Dutch development cooperation for the three partner countries included more focus on PSD, albeit to different extents.

For example, enhanced embassy spending on PSD-related aid programmes was most evident for Kenya and, to some lesser extent, Bangladesh. In contrast, enhanced focus on PSD was not visible in the development cooperation portfolio of Ethiopia. This is explained by the embassy’s strategy, identifying a continuation of development cooperation – serving aid objectives such as food security – in the long run. 

Central expenditure (including via instruments of RVO) also showed enhanced focus on PSD in aid programmes. Social development remained an important share of the central ODA expenditure, but a shift has been visible to increased spending on PSD and – to some extent – on promoting trade and investment.

3. Unique approaches in trade and investment promotion

Interventions to support (enhanced) trade and investment occurred along two tracks: providing direct support to individual companies and activities to enhance the enabling environment. Examples of trade and investment promotion included, for example, economic diplomacy, trade missions and the PSD Apps. The two-track approach was applied in all three partner countries, they were also unique in their implementation. Various stakeholders have identified the added value of the embassy in these interventions.

4. Integrating  aid, trade and investment objectives has remained a difficult task

In terms of portfolio organisation, embassy’s development cooperation interventions have shown enhanced integration of aid policy on the ground, linking spearheads and focusing on themes such as water, agriculture and SRHR. Nevertheless, integrating trade and investment objectives into development cooperation programmes has been a daunting – and at times impossible – task.

Similarly, integrating aid objectives into trade and investment promotion has also been difficult, with little evidence of coherent approaches or successes so far.

Positive results have been found for IRBC-related interventions, in ODA and non-ODA interventions.

5. Increased bilateral trade but no clear conclusions on the effects of policy interventions

To assess the implementation of the new agenda, bilateral trade and FDI patterns were reviewed. Unfortunately, FDI data was found incomplete and/or unreliable, thereby not allowing to be used for conclusions.

For all three countries, bilateral trade with the partner country increased over time. Between 2013 and 2018, total trade (import and export values) more than doubled for Ethiopia and almost doubled for Bangladesh. Total bilateral trade with Kenya increased the least – but still by 28%.

A gravity model based regression analysis compared to expectations and data for bilateral trade with other trade partners of the Netherlands was conducted to further review the development of bilateral trade relations at macro-economic level and whether Dutch interventions may have had an effect. These findings conclude that any effect that has potentially occurred has not been visible at macroeconomic level.

At microeconomic level, the qualitative research revealed the positive effects of particularly embassy interventions. 

6. Limited coherence, coordination and alignment in interventions and policies

Implementation of the new agenda was marked by limited policy coherence and coordination. This was primarily caused by: the absence of clear overarching guidelines on how to effectuate the transition, the challenges encountered in integrating policy fields and the limited coordination between central and delegated interventions. The introduction of the multi-annual country strategy can provide a solution. It has the potential to improve information exchange and enhance coordination and integration of central and delegated programmes in all policy areas.

Recommendations

• Clarify the main objectives of the aid, trade and investment policy and set realistic time frames.
• Be more explicit about the potential synergies and trade-offs between policy goals.
• Promote and incentivise coordination of efforts and policy coherence for development.
• Build on IRBC accomplishments, to create the connecting bridge in the transition.
• Take care for the required staff capacity of embassies and thematic departments if partner countries are selected to transition.
• Strengthen collaboration of the embassies with RVO and FMO.