Statement by Ms. Hilde F. Johnson, Norway’s Minister of International Development and Human Rights

Speech on the 10th Anniversary of the Nordic Development Fund

Helsinki, 1 February 1999

"The NDF and Nordic Development Cooperation"

Ministers,

Your Excellencies,

Ladies and Gentlemen,

Introduction - The Nordic Perspective

Helsinki is the home of a number of successful Nordic institutions. Today we are gathered here to celebrate the tenth anniversary of one of the youngest. Over time, we - the Nordic governments - have established close political cooperation in many fields. So also in the area of development cooperation.

It is therefore a great honour for me to address you on this occasion on behalf of the Nordic ministers responsible for development cooperation. I do so with due respect for the wealth of experience assembled here today, experience in development work as well as in Nordic cooperation.

Nordic cooperation is a political expression of the needs and aspirations of our peoples. It is based on values and perceptions that are, to a large extent, genuinely shared by our citizens and by their governments. There are many factors shaping what we can call a common Nordic identity: geographical location, climate (a rather cold common factor I would say, considering the last days’ weather conditions!), language (for many of us), long democratic traditions, mixed economies, the welfare state, gender equality - and many others. We also share a common cultural heritage, which brings to mind that the Danish poet Pia Tafdrup will be receiving the 1999 Nordic Literature Award here in Helsinki next Monday.

I believe that many of these identity factors - not the least the cultural and geographical - influence the way Nordic countries approach and deal with issues related to foreign policy and development cooperation. This does not mean that we always make the same choices. There were people who believed that when three Nordic countries joined the European Union, while two decided to stay outside, Nordic cooperation would lose its raison d’être or its vitality. They were proved wrong. Our unique practical regional cooperation in many fields is very much alive, as we can see here today.

The Nordic perspective has not caused us to look inward. We have open economies and we have a broad international involvement. Our high level of development assistance is one expression of the values of international solidarity and responsibility that we hold very dear. We share a common vision.

For all Nordic countries, Africa is very much at the centre of development cooperation policy. It is therefore very appropriate that this anniversary celebration is being used as an opportunity to focus on Africa’s development. The previous speakers have given us an excellent presentation of the challenges we face in our attempts to improve the everyday life of the peoples of Africa.

I myself have just returned from a visit to Sudan, a country that has been rent by civil war for three decades. A society where human misery seems to have no end and where political solutions to the conflict seem very far away. I led a delegation of the IGAD Partners Forum, of which all the Nordic countries are members, to reinvigorate the peace process, to try to give the people a chance of changing.

Every time I visit one of the least developed countries and see the plight of the people, I am reminded of my own country's privileged position as a member of the Nordic family, in the richest and most peaceful corner of the world. It confirms my conviction that the struggle to eliminate poverty is all the more important. It must be fought with every means in our power. This is my duty and this is our duty. We must use our advantages to support the efforts of those who are less fortunate. Their lives are our lives, in today’s global society.

Our Nordic values not only represent an important motivating force to this end, they also shape our views on major development issues. We want to see peaceful and prosperous countries with healthy populations, with children at school and people in jobs. We want to see a civil society where the people are free to enjoy their rights as human beings. We want to see poor countries coping with their debt burden and their poverty problems within a sustainable environment. The fundamental basis for our work is the recognition of the value of the human being - the equal value, the fundamental value - of each and every human person.

This is the basis for our close cooperation. These are the goals we share.

I very much appreciate the contact I have with my Nordic colleagues and how easily we agree on common views and priorities. In multilateral development organisations the Nordic group is a concept. The policies the Nordic countries pursue within UN organisations, the World Bank and the regional development banks are usually closely coordinated and harmonised. The UN reform initiatives of the 1990s, which are intended to strengthen the UN and make it more effective in the economic and social fields, is another good example of Nordic cooperation.

But we must be frank. There is not always harmony. Nor are all Nordic undertakings successful. In the history of our development cooperation there is at least one area where we have often encountered problems. This area is the joint Nordic implementation of concrete development assistance projects. There is no need to cite examples. Many of you know them only too well.

Ten years with the NDF

Ladies and gentlemen,

The birth of the NDF was not without pain and it illustrates my point that there is not always immediate harmony of views within the Nordic group. There were very divergent opinions on the need for such an institution and indeed on what kind of institution the NDF should be. Mr. Jónas H. Haralz, who has done such excellent work on the ten-year report, will be giving us an account of the NDF’s history in a moment. So I shall not preempt his presentation.

However, I would like to make some observations on how I see the NDF's response to changing policies.

The different and somewhat conflicting perceptions about the NDF’s main objectives in the first years of its existence took some time to overcome. But through policy discussions by the board and in connection with capital replenishments, the NDF has been brought into the mainstream of Nordic development policies. It now has a clear main objective to promote social and economic development in the poorer countries. This corresponds very well with the Nordic aid profile, which is the basis for all activities initiated by the Fund.

Today the NDF is one of the most successful instruments for enhancing practical project cooperation between the Nordic countries. In many ways, it is perhaps the most concrete manifestation of Nordic development cooperation that exists at present. It is a multilateral financial institution with a distinct Nordic profile. It has gained recognition as a valuable member of the family of international multilateral development funds.

I would like to draw your attention to four observations related to how I see NDFs response to changing policies.

Firstly - an understandable and perhaps the most controversial issue at the inception of the NDF - was its emphasis on promoting exports from the Nordic countries. Thus the goods and services financed by the Fund are procured in the Nordic countries on the basis of Nordic competitive bidding. Nordic expertise and technology combined with our development priorities often represent a constructive contribution to specific projects in developing countries. External evaluations of NDF have shown that Nordic deliveries of goods and services have been of a high standard and obtained at competitive prices. I am especially pleased that the development impact and relevance of the projects were highly rated.

However, we should not forget that 20 per cent of the NDF’s funding can be used for procurement other than Nordic, primarily at the local level. This is a flexible option which seems to be disappointingly under-utilised. I would strongly recommend making a special effort to promote local procurement wherever this is adequate and feasible, and to make active use of local expertise and local deliveries whenever possible. This would also be in tune with Nordic values.

Secondly, the NDF has been heavily involved in infrastructure projects, but I am pleased to note its active, positive response to the growing Nordic emphasis on social sector development. The attention being paid to education and health is beginning to show results in the form of an increased share of total lending. No investment is in fact more important than an investment in primary health and education. No investment yields a higher return. World Bank studies even show that educating girls is the single most profitable investment of all.

The initiative taken by the NDF in 1997 to study the availability of Nordic expertise in education and health is a demonstration of this emphasis. I am fully aware of the complex issues involved if the NDF expands further into the social sector. However, it is important that the Fund continues to play an active role in this context.

Thirdly, the NDF made environmental assessments a requirement from the start. Environmental protection and sustainable resource management are an important element in Nordic development cooperation. I would have liked to see the Fund financing more environmental projects itself. I have been informed that the Fund has explicitly sought to channel financing to project components which have a positive environmental impact. The NDF’s participation should also be used to improve the environmental impact of initiatives. And I understand that this has been the case in certain projects.

Finally, the debt relief issue is another area of common Nordic concern, which has also been addressed by the previous speakers. Today, when such a large part of the government budget in so many countries is spent on servicing huge foreign debts - as all of us here know - there is a need for special debt relief measures to assist the poorest countries. For this reason, Norway has recently launched its own comprehensive debt relief strategy. The Nordic countries have strongly supported the HIPC initiative launched by the World Bank and the International Monetary Fund in 1996. The NDF has decided to participate in this initiative. I am pleased to note that it became one of the first multilateral institutions to allocate resources to this end.

Future challenges

In summing up the first ten years of the NDF’s existence, I would say that the child has become a mature member of the development community. We need now to look at the challenges ahead. All participants in Nordic development cooperation need to adapt to a changing world. We do not necessarily wish to remain “constant as the northern star”, as Shakespeare says.

Poverty alleviation is at the core of Nordic development policy, and also of Nordic human rights policy, I would like to add. Poverty alleviation will continue to be the ultimate objective of everything we do. It should guide our choice of regional focus and our development strategies. It should guide our choice of countries, partners, projects and programmes. Combating poverty is a question of solidarity. It is a question of promoting fundamental human rights.

In general, the main policies and priorities of the NDF are in place. I have referred to the main objectives of Nordic development cooperation and to the integration of the NDF into the mainstream of Nordic policies. This principle should continue to guide the NDF’s activities, and I need not repeat these objectives. We should also maintain the NDF as an efficient and cost-effective institution.

I would, however, now like to highlight two main challenges facing the NDF.

The first is the question of the untying of aid.

The reason why aid is tied to the purchase of goods and services from the respective donor country is not out of development policy considerations. It is rather on the basis that business and industry in one country should be given the same conditions of competition as business and industry in other countries. The OECD started a process last year aimed at untying all aid to the least developed countries. Norway and the other Nordic countries are active participants in this process.

Among the OECD member countries there is growing acceptance of the view that the tying of aid reduces its effectiveness. The tying of aid also has a number of negative consequences for recipient countries. The Helsinki Agreement some years ago, on the regulation of mixed credits, has already resulted in a major reduction in tied credits. In fact, they have been reduced from 52 per cent of all aid credits in 1992 to 17 per cent in 1996.

We seem to be getting close to OECD agreement on this issue, although some hurdles remain. This means that the possibility of untying many existing schemes for stimulating exports to developing countries will need to be reviewed. This means that increased international competition and that the use of local goods and services from the South should be encouraged. The implications for the NDF are something we shall have to consider more closely later, and this is therefore the first main challenge we have to deal with. An immediate step should be to increase the amount of local procurement in the NDF’s partner countries.

The second challenge facing the NDF is the unresolved issue of direct lending to private sector enterprises. A pilot scheme has been in place since 1994 and is still being tried out. In spite of several studies of the scheme, we have not been able to make a decision on the future role the NDF should play in this kind of activity. With the recent establishment of NORFUND, all the Nordic countries have similar institutions. This has created room for increased cooperation. It is important to improve schemes aimed at increasing investment in developing countries and the NDF is cooperating with the national institutions in this respect. However, we need to decide which role the NDF is to play in such private sector schemes, particularly in relation to the role of our national institutions.

The broader challenge is to find out how we can contribute to the development of a viable business sector in developing countries in the most efficient and beneficial way. The overall aim is always to maximise the effects of aid to private sector development in poor countries. Therefore, I am firmly convinced that there will have to be increased focus on investment in these countries and less emphasis on our own business interests.

Our results should be measured in the field and not at home. This involves a major change in terms of incentive schemes, local ownership and partnership, and a clear shift of emphasis from export-oriented to investment-related schemes.

Because strengthening the productive sector - and indeed the private sector as a whole - in our partner countries is a crucial contribution to poverty alleviation. This emphasis in international development policy is closely related to the strong focus on public sectors such as health and education. Without a dynamic business sector to generate income and jobs, support to the social sector will not be sustainable. It can rapidly lead to increased dependence on development assistance or increased debt.

Another requirement if local business and industry ventures are to succeed in developing countries is to improve the overall framework within which they work. Priority should therefore be given to efforts to enhance predictability and reduce legal, institutional and political barriers to private sector development.

The current global economic and social crisis clearly illustrates that the free play of economic forces does not always deliver equality of opportunity. However well the market forces allocate resources, they do little to promote equity or to respond to common needs, the needs of everyone. Such needs can only be articulated and met by the governments. Globalisation has left weaker groups of societies, both in the South and the North, more exposed and vulnerable to painful social change. In the least developed countries, which have seen a widening gap between the ‘haves’ and ‘have-nots’, it is difficult to talk about globalisation without being confronted with the effects of marginalisation.

In the wake of globalisation and its effects we do need to increase the opportunities available to developing countries for taking more advantage of this development of world trade, and to utilise it to their own benefit.

These are only a few of the questions we have been looking at in the new Norwegian strategy for private sector development that I will be launching in Oslo in a few days.

It is important that all the major actors, like the multilateral development banks, the WTO and UN organisations, take part in a renewed effort to promote private sector development in the South. The NDF is well placed to support this effort, as its main co-financing partners are the most influential of the international multilateral development funds and the Nordic aid agencies. This offers the Fund an excellent opportunity to be a partner in joint international efforts and to offer services complementary to those of other development agencies. In addition, the Fund provides a unique opportunity to influence the type of projects being implemented and to strengthen the poverty-oriented and environmental perspective.

In a globalised, rapidly changing world we have to think in terms of global partnerships. Cooperation and coordination between donors are of vital importance for all development aid. This is an essential condition for making our shared Nordic vision a reality. In a global partnership with other development institutions and not least with the countries concerned, I am sure the NDF will continue to contribute to the realisation of the Nordic vision and to adapt itself to a changing world.

Let me end by congratulating the NDF on its achievements in the first ten years of its existence.

Thank you for your attention.