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How the EU’s blacklist is wreaking havoc in developing countries

European policy-makers are attacking some of the most exemplary countries in the developing world at a make-or-break juncture when international solidarity is needed above all else to fend off the COVID-19 pandemic.

Satya V. KapoorSatya V. Kapoor | Updated: 19-06-2020 13:41 IST | Created: 19-06-2020 13:41 IST
How the EU’s blacklist is wreaking havoc in developing countries
Image Credit: Pexels

Even though the EU is the epicentre of the global coronavirus pandemic, it continues to provide emergency support to vulnerable countries, particularly in Africa. The European Investment Bank announced €5.2 billion of emergency funding, most of which is slated to go to Africa in support of local healthcare systems and small companies as coronavirus is spreading across the continent.

There's no doubt that these cash injections are much needed in this time of crisis – one that so far seems to have spared Africa from the worst, just as WHO officials are raising concerns about a long-lasting, steady increase across the region. However, an analysis of the primary recipients of the EU's financial support reveals a distinct selective bias in applying this generosity. Indeed, the focus is on countries that have traditionally been relying on Brussels' continued goodwill for pursuing economic development, without having a lot of progress to show for it. An example is Nigeria, which has depended on European investments for decades, but still ranks 152 of 157countries in the World Bank's 2018 Human Capital Index.

At the same time, some of the weakest but politically most promising countries are not only left out of the EU's considerations, but are actively being punished. This is most blatantly evident in Brussels' decision to place Mauritius, Ghana and Botswana on its latest money-laundering blacklist. All three have developed solid democratic foundations and boast increasingly stable political systems, yet this very stability could now be undermined at a crucial moment where their political and social systems are coming under pressure from diminished international trade and investment.

Double trouble for Mauritius

For Mauritius, this blacklisting comes at a particularly bad time. Because its economy is deeply embedded globally and highly reliant on commodity prices and tourism, the coronavirus pandemic has suffered at the hand of the coronavirus pandemic. This triple whammy is expected to lead to a doubling of the unemployment rate to 17.5 percent, as well as push the economy deep into the red.

Against this backdrop, the EU's blacklist is only set to make matters even worse. The Government and independent experts fear the place on the list will deter global investors and bankers from conducting their business in Mauritius for fear of clashing with the EU – a fact that only adds insult to injury given that the Financial Action Task Force (FATF), on whose methodology Europe's assessment was based, concluded in its most recent country report that "Mauritius has made significant overall progress" in increasing its financial safeguards. This includes the "Big Six", generally regarded as key stepping stones.

Ghana faces a downward spiral

While Mauritius is looking at a costly and protracted path towards recovery, Ghana, which used to be the poster child of the EU's Africa policy, faces similar problems even if the stakes are even more serious. Although the country's stability and economic management has been internationally recognized, lingering ethnic conflict is becoming to the fore again and is slowly developing into a threat to Ghana's future. Community leaders have made it clear that a lack of education is to blame, along with economic hardship that stands to be exacerbated by Covid-19 – and by European moves to disrupt much needed FDI flows into the country.

FDI into Ghana has been on a mild yet steady decline since 2017, and it shouldn't surprise that the severe adverse reputational impact from being placed on the EU blacklist at a vulnerable time like this will only cause FDI to dry up quicker. Studies have consistently shown blacklisting to be highly effective at shattering investor confidence and curbing foreign investments into an economy. Even worse, it also makes it harder for affected countries to receive grants from international organizations like the IMF. By placing Ghana on its blacklist, Brussels essentially severed Ghana from the global financial system, potentially trapping the country in a downward spiral as socio-economic hardship exacerbates without a way to escape it.

The need for fairer funding distribution

None of this is to suggest that the EU shouldn't provide money to international programmes aimed at African countries who rely on these funds to maintain basic functions of the state. However, this should not come at the expense of those who might be pushed over the edge as a result. The economies of Mauritius and Ghana are buckling under pressure as well, with much graver, systemic consequences if they were to eventually crack. After all, these countries have democratic structures – the very same ones the EU is usually always so quick to support elsewhere. Instead, Brussels is nothing but weakening them by creating an investment environment that international businesses are meant to be made weary of.

This is not merely doing injustice to all the progress made over the years. It's highly tone deaf in these extraordinary times as well. European policy-makers are attacking some of the most exemplary countries in the developing world at a make-or-break juncture when international solidarity is needed above all else to fend off the COVID-19 pandemic.

(Disclaimer: The opinions expressed are the personal views of the author. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)

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