Engaging the private sector in international cooperation

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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Thank you

www.ecdpm.org

Bruce Byiers [email protected] www.slideshare.net/ecdpm

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