Targeting ‘Fragile States’: EU’s New Plan for Developing World

Written by | Tuesday, October 4th, 2016
@Eubulletin

The European Commission has announced a new initiative on Africa – the EU External Investment Plan (EIP) – with the aim to support investment in partner countries throughout Africa and the European Neighborhood region. This scheme is designed to boost these partnerships, support a new model of participation of the private sector and contribute to sustainable development. The initiative seeks to meet the UN Sustainable Goals of 2015, as the EU believes that traditional development assistance cannot achieve them on its own.

The objective of the EIP is to boost the local economies to help them recover from the financial crisis of 2008 as economic growth in developing countries has now reached its lowest level since 2003. The EU’s as well as the world’s foreign direct investment (FDI) to developing countries has been declining since the crisis of 2008. In 2012, the world’s combined FDI to the so-called “fragile states” was € 34.6 billion, which is about 6 percent of the total. From all the target countries, almost three-fourths of the investment is absorbed by 10 resource-rich countries. This goes hand in hand with the fact that the cost of doing business in fragile African countries is about three times the cost in non-fragile states.

The EIP consists of a European Fund for Sustainable Development (EFSD), which will combine contributions from the EU, Member States, and the private sector. The EU’s contribution will be €3.35 billion and further €44 billion should be mobilized through guarantees. The main goals of the EIP is to contribute to achieving sustainable development, mobilize investment and leverage funds, target socio-economic sectors, assist in attracting viable projects, help to improve the business environment and contribute to addressing the root causes of migration.

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