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Can Euro Firms Do Well by Doing Good?

DW staff (jen)February 20, 2005

The European Union wants German industry to get into a new line of business: development aid.

Africa has cheap labor, natural resources -- and huge problemsImage: AP

Despite millions of dollars in development aid, Africa is still economically far behind the international standard. Now, the European Commission is using a new program called Pro-Invest to try and get private industry aboard the development train.

Just last week, the president of Tanzania was in Berlin, trying to convince German businesses to set up shop in his country. Tanzania has a lot to offer: natural resources, cheap labor, and a bureaucracy that is easy to navigate -- or so the pitch went.

Ölraffinerie in Nigeria
The Odidi Delta is the economic lifeblood of Nigeria, but despite its natural wealth, it remains mired in povertyImage: AP

But subsidiaries of European firms in developing countries often go under due to problems in basic infrastructure: water failures, electricity blackouts, crumbling streets and a lack of railways to transport goods -- things that are usually provided by the government.

Seeking partners

But Eckhard Hinzen, the representative of the EU program Pro-Invest, sees a different way out of this Catch-22 situation.

"We want to institute a change, and we are inviting private companies to be our partners," he said. "It is new, in that until now private firms have mostly kept to the role of delivering goods and services. Now, we want them to be our (development) partners."

To help his cause, Hinzen has a lot of money to distribute: €110 million ($144 million) of European development funds are available to support partnership programs between Europe and some 70 developing countries in Africa, the Caribbean and the Pacific.

His simple message to the companies: Developing African nations are a huge, untapped market. Better supplies of electricity, gas and water, more streets, etc, mean more growth. In many countries, these areas are currently being privatized. And on top of that, there is financing available for companies that want to take part.

Shaaban Said Kayungilo, an economics student from Tanzania, agreed with Hinzen.

"We come from a system where the government had a monopoly on the economy, and that led to many problems," he said. "Now we need to look to the private sector to develop our country."

Combining private and public

More investment by private firms would lead to a new way of thinking in the wealthier nations, Hinzen added.

"There shouldn't be a strict separation of financing for public investment and for the private sector," he said. "We want to combine these things, use public monies to create a sensible leverage for the private sector."

Those are already active in these developing countries also said they agree with the plan.

Peter Teschemacher, who works with the German construction firm Bauer Spezialtiefbau, has invested in Africa for the last 10 years.

"This kind of support would be really helpful," he said. "Even a positive attitude would be the first step in a good direction."