At the end of May, Sigrid Kaag, Minister for Foreign Trade and Development Cooperation, launched her new policy memorandum. I was allowed to attend and give my reaction in the panel. I am pleased with the memorandum and I am also very pleased with our Minister. What a power woman! She wants to invest in prospects, which is good for the world and good for the Netherlands.
During the launch Minister Kaag presented a nice piece of work and I was also impressed later, after reading the ‘Investing in prospects’ policy memorandum. Choices have been made and there is a clear focus. She wants to combat the root causes of poverty, migration, terror and climate change and keep the Netherlands in the top 5 most competitive economies.
Sustainable development goals
She links her budget article to the sustainable development goals (SDGs) and formulates concrete targets for the Netherlands to achieve impact. She talks about her ambition with charisma and she has good knowledge of what’s going on. Approachable, well thought out and with humour. This radiates confidence; this is what we are going to realise together!
Innovation in development cooperation
It seems as if the minister had read my earlier blog of May 2017 in which I argue for more innovation in development cooperation. I mean, it's actually there in the new policy document! Innovation is everywhere. Sustainable inclusive growth will be achieved by marketing Dutch knowledge and skills and international innovation cooperation.
“It seems as if the minister had read my earlier blog in which I argue for more innovation in development cooperation”
5 million for innovative capacity
Particular mention is made here of technological innovation and digitisation by SMEs and start-ups. Every year, 5 million is being released to boost our innovative capacity. We don’t yet know exactly how and what will drive this fund. I hope it will focus on real innovation with room for product development, social innovation and new business models.
Different market, different strategy
Up to now, there has been a call to make existing technology applicable in a new context of developing countries. Absolutely nothing new could be developed. This is odd, because a different market and consumer group also demands different products and a different marketing strategy. The old policy encouraged the push of Dutch products that developing countries did not always want.
Start with local market demand
In my opinion, we should start in the local context with the local market demands and develop new products and services. The innovation then becomes a logical next step in the system, with a greater chance of a successful market launch and impact on and for the poorest. Especially if this is done by a local company. It is cool that Foreign Trade and Development Cooperation is taking this path. Because if you do innovation, beautiful pearls will be created even though some will fall short. And you have to manage these risks well and learn to deal with them, then this will require something from the governance of this innovation fund! TNO is experienced in orchestrating innovation. Think of our efforts in Kenya and Uganda for the protein transition, where we are setting up new value chains with affordable, tasty and healthy insects. Or the sustainable bricks in Malawi, which combats deforestation and gives employment to small, local entrepreneurs. We like to collaborate with you! Learn from other countries, because the Scandinavians, English and Canadians have been doing this for years.
“SMEs are crucial for economic growth and job creation in developing countries. The Netherlands can help here by bridging the pioneer gap”
SMEs are crucial for economic growth and job creation in developing countries. But they often lack the capital. In successful innovation, bridging the pioneer gap for a start-up and SMEs is the biggest challenge. The pioneering gap is the phase of high start-up costs for a company without revenues. These high costs go to product development, market research and starting up production. Institutional investors avoid this high-risk phase and only enter the market once the commercial launch is complete and scaling opportunities are on the horizon.
Scope to fail
I really hope that the innovation fund will focus on bridging this pioneer gap. My advice: Don't start immediately with programmes whose millions need to be budgeted in advance. Instead, work in tranches with a relatively cheap feasibility study first. Use and accept innovative ways of funding to ensure there is scope to fail. Start with subsidies and shift to loans in later phases. Always be sharp in selecting the next round.