What happens if the coronavirus hits developing countries, where healthcare is a luxury? Find out from our development expert
Our lives have changed with the coronavirus crisis in a multitude of ways. But have they changed for good? And have they changed for the better? In this episode of Does This Change Everything? we ask what the impact will be in developing countries – and for development finance.
We’re speaking with Christian Elias, the European Investment Bank’s head of unit for public sector operations in East and Southern Africa.
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Has the coronavirus changed everything for development finance?
That is the question of the day, and my short answer is no. It has changed a lot for the moment: in the short term, we see lots of activity, and we see a big focus on mitigating the short-term effects of the virus, including on the economy. In the long term, however, development finance will need the same attention that we have seen it receiving over the last few years, and that’s something that I don’t expect to change.
Let’s look at the short term first. What are the fast reactions that are necessary in the developing world due to the coronavirus?
What we see in the developing world is the same that we also see in Europe. Countries are shutting down and economies are slowed down, so lots of corporates and lots of institutions are running out of cash. So the first and the most important bit that countries in the developing world are trying to achieve is to keep their companies afloat and to get cash out to them – through financing, grants, deferrals of taxes, payments of employment schemes. There is a lot going on and that is attracting all of the attention in the very, very short term. The contribution from development finance institutions like ours, but also the World Bank, is therefore very much trying to help these economies with cash. Be it through accelerating disbursements, refocusing projects that were already out there, or through frontloading wherever we can, in order to get liquidity into the system.
The overall effect of the coronavirus seems fairly similar inside and outside EU on a micro-level. Businesses are experiencing disruptions in demand, supply chain shocks, seeing a lot of their employees stay at home and thus not able to produce and provide services. Are there any big differences in the impacts to businesses the coronavirus is having between the developed world and the developing world?
We can differentiate between two types of organizations here.
First, in the normal economy, if I can call it that way, the effect that we see is very similar.
But for health-related companies, hospitals for example, what is important to highlight, is that the number of confirmed coronavirus cases in the developing world is currently not that high. It is a few hundred in many countries, so it is not an urgent priority to finance and seek financing for those health-related organizations.
It is more a question of getting it done in the long run, on the economic resilience, on health resilience, and less on the immediate response. If I had to point out one difference between the developed and developing world as a whole, this would be it.
What about the healthcare systems – given that the virus hasn’t spread very extensively in the developing world as of yet, should investments into healthcare be a priority at all?
It is certainly a priority, a huge priority, and becoming even more of a priority. Healthcare systems are underdeveloped in the developing world at all levels. And it starts with testing facilities.
One of the reasons why there are not so many cases recorded in the developing world is that people are simply not tested in the way they are tested in Europe. So the support from development institutions like ours starts with getting the relevant diagnostics systems in place. Here the EIB is doing a lot. We are working on a project together with the Bill and Melinda Gates Foundation, under the External Investment Plan of the European Commission that aims at improving diagnostic services and laboratory services, through public-private partnerships in the developing world. We have accelerated the roll-out of this program due to the crisis, because if people don’t get tested they don’t get treated. So investing in and supporting the diagnostic system of the healthcare system of the country is very important and a priority for the EIB.
We also observe that health in Africa is really a luxury good. Only the wealthy part of the population has access to medical treatment as we know it here in Europe, and the poor part of the population is left out. So one of the challenges is to make sure that also the poor part of the population gets the access to medical treatment and medical services they deserve. And the EIB in its response in the current crisis—but also in the long run—is very much focusing on making sure that health for all, access to treatment for all, will be addressed in these countries.
Are there other areas beyond testing and diagnostics that we’re paying specific attention to?
Sure. The magic word here is the closed loop. The closed loop includes the cycle from testing to treatment and the follow-up with the patient, once they are hopefully safely treated. The EIB is financing that at all levels. At all levels, huge investments are required in the developing world.
One thing that is important in development finance is that you never go alone. You team up with partners at all levels, and the EIB is teaming up with financial players, be it the World Bank, be it KfW, be it the Agence française de développement. And in the current crisis we work very much also with UN agencies. Amongst them is the World Health Organization.
The EIB is signing a memorandum of understanding with the WHO that addresses various topics in the developing world, but it also looks at how we can best provide the answer to the current crisis. We are very much looking forward to implementing this collaboration and to working together on the ground with their technical expertise and our financing expertise in order to deliver the response to the urgent and the most burning problems that these countries are currently facing.
You said in the beginning that, in the long run, development finance priorities will not change. What are the long-term development finance priorities that continue to be important to us, despite the crisis?
I don’t expect development finance to change in the long run, because the fundamental needs that bring us all there to provide for the developing world will not change. People need access to energy, they need access to water. They need liquidity to run their business, they need infrastructure that is reliable and functioning. And the traditional contribution from development institutions like the EIB is to make sure that there is enough funding. Be it for the roads, be it for energy, where we are now very much supporting the renewables sector, be it for access to water, and now more and more also for digitalization. These needs will still be there, so I say that once we have taken care of the response to the crisis, they will need to be addressed. And the EIB will be there to play its part in financing them.
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