‘Be social, make profit

Toespraak | 20-04-2010

Your Royal Highness, ladies and gentlemen,

There was a time when banking was a highly respectable profession. But since the crisis, bankers are often regarded as unreliable. Many people even feel that mistakes made by bankers are symptomatic of the perceived failings of capitalism as a whole.

My view is different. Within certain limits, capitalism is essential for development. Research shows that economic growth accounts for 80% of poverty reduction worldwide. When income per head increases, the poorest 20% of the population profits as well. And the higher the growth, and the longer it lasts, the faster the fall in poverty rates.

In his book The White Man’s Burden, the famous economist William Easterly wrote ‘The rich have markets, the poor have bureaucrats.’

Let’s change that.

Banks play a pivotal role in making growth possible. Building a financial infrastructure, opening up markets, granting access to financial services: they can help out in so many different ways. But I don’t have to remind you that bankers are not philanthropists. Understandably, investing in developing countries is often regarded a risky business. Whether Dambisa Moyo likes it or not, to get economic growth into gear, the private sector in those countries needs a helping hand.

That’s why my government is proud to participate in FMO.

In a recent report, the Advisory Council on Government Policy emphasised the importance of economic growth for development. I quote, ‘Without growth there is nothing to share out in developing countries.’ I agree with the Advisory Council that the private sector deserves more attention. So your development bank, still going strong after forty years, is in my view a key player in Dutch development cooperation.

I realise the importance of investment by development banks in the private sector. They can serve as catalysts in mobilising private capital for developing countries. Capital much needed for creating jobs, and for generating tax revenues so that local governments can invest more in education or health care.

We all know that ‘local ownership’ is crucial if developing countries are to become self-reliant. It is important to help people to help themselves. I feel this is a key principle. Not only in a bilateral, but also in a multilateral context. The Dutch government has always taken the position that the development dimension should take precedence in the European Partnership Agreements between the EU and 77 developing countries. And that’s just one of many examples.

Your Royal Highness, ladies and gentlemen,

I said it was essential to help people to help themselves. The history of FMO proves there is a lot of truth in that. In 1991 the Dutch government provided FMO with equity capital. In return, your organisation became fully responsible for its financial results. After considerable losses in the eighties, FMO now makes a substantial profit. Even last year, despite the unstable economic climate, results were good. In 2009, 50% of new investments were directed to low income countries. The net profit was €60 million and FMO’s investment portfolio increased to €4.6 billion.

I have to say, I am impressed. And there’s more good news.

Last month FMO won the Africa Energy Award. I feel this award also acknowledges the innovative partnership between FMO and the Dutch Ministry of Foreign Affairs in getting sustainable energy projects in Africa off the ground. In its report, the jury praises FMO’s role in the early stages of those projects, by covering development costs and giving support on social or environmental issues. Congratulations!

I applaud FMO’s good work. That should be clear. But politicians can never be satisfied. So let me give you two priorities for the years to come.

The first is investing in rural development.

Poor people often live in rural areas. But lately, those areas have not been on the radar of donor countries and local governments. That’s more than unfortunate. In times of uncertain market prices, the supply of food in developing countries must be intensified. Together, we must support farmers with new technologies and a better infrastructure, with market access and financial services.

The second priority is gender.

In developing countries the economy is often driven by women. Investing in them sets the economic and social development of those countries in motion. Because women often don’t have equal rights – property or inheritance rights for example – and have limited access to credit or bank accounts, they in particular will profit from microfinance and lease constructions.

I would ask FMO to get even more involved in rural development and gender issues. That’s where the challenges and the opportunities for development banks are. And in both cases I strongly believe FMO can make a difference, especially since your organisation has been a pioneer so many times before.

SME finance may be a big issue in the G-20 now, but FMO saw its importance many years ago. And nowadays it is a key element of its portfolio in the financial sector. The local currency fund, TCX, which was developed in cooperation with the Dutch Ministry of Foreign Affairs, proved to be a true trailblazer in financing for development. And the Access to Energy Fund is additional proof of your pioneering role.

It is a special pleasure to introduce the Infrastructure Development Fund, a renewed partnership between FMO and my Ministry. Its forerunner was evaluated last year and the results were positive. That’s why I have decided to continue on a larger scale and with a broader scope. In the years to come, the government will invest in this fund. I feel that investments in infrastructure for the private sector are crucial for economic growth in developing countries. Sustainable, privately funded infrastructure projects are an important weapon in the fight against poverty.

The fund will invest its money in high risk projects in countries with limited access to financial markets. For me this is the special value of the fund. Aside of course from the leverage effect, that is to say that investors are less afraid to participate in large infrastructure projects, knowing that they have a sound, public-private financed institution as their partner.

The Ministry of Foreign Affairs looks forward to working together with FMO yet again!

Your Royal Highness, ladies and gentlemen,

They say that life begins at forty. I’m sure that FMO in any case will go from strength to strength. I congratulate you on this anniversary and wish everybody present a rewarding session.

Thank you.