Bruce Byiers, ECDPM Drivers to engage the private sector in development Human Security Finland 10 October 2012, Brussels

1. Engaging the Private Sector in
International Cooperation
European Centre for Development and Policy
Management (ECDPM)
October 2012
www.ecdpm.org/dp131

2. Common or Conflicting
Interests?
Reflections on the Private
Sector (for) Development
Agenda
www.ecdpm.org/dp131
ECDPM Page 2

3. ECDPM Page 3

4. Push: Crisis, aid squeeze &
“value for money”
ECDPM Page 4

5. Push: job cuts, competition &
“new models”
ECDPM Page 5

6. Pull: Learning from the private
sector
ECDPM Page 6

7. “We want to engage the private
sector”
ECDPM Page 7

8. “...and help our own…”
• 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..."
ECDPM Page 8

9. ECDPM Page 9

10. “Many ways to skin a cat”
Business level: Sectors:
International Agricultural smallholders
Large domestic Large-scale agricultural producer
SMEs Manufacturers/processors
Micro-household based Export-led industries
Multinational enterprises Extractive sector firms
State-owned enterprises Service providers
National monopolies
Informal traders
Associations
Business models: Business constraints:
"Raw" capitalism Credit access
Core business models Infrastructure
Base of pyramid/social businesses
Fair Trade Capacity and education level
Corporate Social Responsibility Business linkages
People-centered business Labour regulations
Cooperatives Market exclusion
Business climate
ECDPM Page 10

11. 3 categories of Private Sector
Engagement
ECDPM Page 11

12. If only…..
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
ECDPM Page 12

13. Private Sector Development
Category 1: Private Sector Development
• Economic transformation
• Regulatory reforms
• Making credit accessible to firms
• Industrial policy
Mixed results
• Endogenous and exogenous conditions
• The political economy of economic
transformations
ECDPM Page 13

14. Private sector characterisation
High Rent Competitive
Exports Rentiers Magicians
Domestic Powerbrokers Workhorses
Source: Pritchett, 2012, OECD Conference, Paris 28 Feb 2012
ECDPM Page 14

15. Private Sector for Development
Category 2: Private Sector Investment for
Development
• 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?
ECDPM Page 15

16. Private Sector for Development
Category 3: Private Sector Finance for
Development
• 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
ECDPM
- Primarily a lack of finance? Page 16

17. Common or conflicting interests?
ECDPM Page 17

18. Common interests(?)
• 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
ECDPM business…. Page 18

19. Conflicting interests
• 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
ECDPM Page 19

20. How to gauge developmental impact?
• 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?
ECDPM Page 20

21. Concluding remarks
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
ECDPM Page 21

22. Thank you
www.ecdpm.org
Bruce Byiers bby@ecdpm.org
www.slideshare.net/ecdpm
Page 22