Engaging the Private Sector in International Cooperation
European Centre for Development and Policy Management (ECDPM)
October 2012
www.ecdpm.org/dp131
Common or Conflicting Interests?
Reflections on the Private Sector (for) Development
Agenda
www.ecdpm.org/dp131
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Push: Crisis, aid squeeze & “value for money”
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Push: job cuts, competition & “new models”
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Pull: Learning from the private sector
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“We want to engage the private sector”
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• UK: “bring private sector ideas, innovation and investment into the heart of what we do...”
• NL: “Dutch interests first, more so than in the past....PPPs, business instruments and economic diplomacy can lead to gains in both commercial profit and poverty reduction.”
• DK: ”… strategic priority in Danish development cooperation to work for a strong private sector…important that Danish business participates actively..."
“...and help our own…”
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“Many ways to skin a cat”
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Business level: International Large domestic SMEs Micro-household based Multinational enterprises State-owned enterprises National monopolies Informal traders Associations
Sectors: Agricultural smallholders Large-scale agricultural producer Manufacturers/processors Export-led industries Extractive sector firms Service providers
Business models: "Raw" capitalism Core business models Base of pyramid/social businesses Fair Trade Corporate Social Responsibility People-centered business Cooperatives
Business constraints: Credit access Infrastructure Capacity and education level Business linkages Labour regulations Market exclusion
Business climate
3 categories of Private Sector Engagement
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Private Sector Development … developing country businesses were able to startup and expand Private Investment for Development … there was a way to encourage more inwards investment to link with the local private sector Private Finance for Development …there was a way to bring in more finance for public investments and the private sector
If only…..
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• Economic transformation
• Regulatory reforms
• Making credit accessible to firms
• Industrial policy
Mixed results
• Endogenous and exogenous conditions
• The political economy of economic
transformations
Private Sector Development Category 1: Private Sector Development
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High Rent Competitive Exports Rentiers Magicians Domestic Powerbrokers Workhorses Source: Pritchett, 2012, OECD Conference, Paris 28 Feb 2012
Private sector characterisation
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• Less clarity on agenda and processes
• Definition of developmental additionality
• From CSR to "core business model"
• What donor tools available?
• How to identify tipping points – trade-offs
• Defining the developmental aspect?
• What do firms say?
Private Sector for Development
Category 2: Private Sector Investment for Development
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• Blending to bring in further private finance • Release public debt pressure and shared risk
burden • Various purposes e.g. PPPs or increasing finance
access • Challenges
- PPPs need to be commercially viable - Risk management and balancing - Legal environment - Capacity to use effectively - Primarily a lack of finance?
Private Sector for Development
Category 3: Private Sector Finance for Development
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Common or conflicting interests?
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• Private Sector: Image and reputation, CSR, risk absorption, high entrance costs, unfair competition from subsidised firms
• Donors: financial crisis and decreasing
ODA, new positive grand narrative • Partner governments: employment
creation, raised productivity, inclusive growth, improved business climate, new types of investment, debt burden, interest groups, rents(?)
• NGO's and CSO’s: people centred
business….
Common interests(?)
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• Tied aid and subsidies
• Risk-sharing balance
• Opportunity costs of finance
• Policy Coherence for Development (PCD)
• Profitability vs optimal developmental
outcome
• National ownership
• National vs local conflicts
• Impact assessments
Conflicting interests
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• Donor support evaluations
• Firm-level own evaluations
• Some diffuse criteria/measures (e.g. UN,
WBCSD, EIB, individual co.s etc)
• What purpose of such a measure?
• How balance development requirements
with "efficient business"?
• What incentives to prove developmental
impact?
How to gauge developmental impact?
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If development is the ultimate goal, then: • Potential to find synergies • Need to identify the trade-offs and cut-offs • Agree on better ways to measure & identify
impact
• Improve PS-donor-gov-CSO communication and mutual understanding
• Regulate expectations and understand the mandate and capacity of the other
Concluding remarks
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