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ECDPM Economic Transformation and the role of the Private Sector



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  • Decent job creation, social equity,integration into regional and global value chains, effective regional markets, diversification away from overreliance on natural resources, conducive trade and economic policies both on national and regional levels. Private sector is paramount to this!
  • Suddenly it’s all about the private sector
  • So this isn’t necessairly a new story, just one of donors trying to fit into something that is happening anywayAlso a story
  • So, when we are talking about engaging with the private sector, who do we mean?Business level:International,Large domestic,SMEs,Micro-household based,Multinational enterprises.State-owned enterprises,National monopolies,Informal traders,AssociationsBusiness models:"Raw" capitalism,Core business models,Base of pyramid/social businesses,Fair Trade ,Corporate Social Responsibility,People-centered business,Cooperatives Sectors:Agricultural smallholders,Large-scale agricultural producer,Manufacturers/processors,Export-led industries.Extractive sector firms.Service providersBusiness constraints:Credit access,Infrastructure, Capacity and education level , Business linkages , Labour regulations, Market exclusion, Business climate
  • The latter two can feed the first but not necessarily for finance…
  • Securing supply chains, competition with subsidised firms from BRICS, reputational risk among western consumers, expanding consumer markets in developing countries, and a desire to “do good”.


  • 1. Economic Transformation and the Role of the Private Sector Anna Rosengren 25th October 2013, ECDPM, Maastricht
  • 2. I. Outline of presentation • Context • Which private sector? • 3 agendas in 1 • Implications and issues for development policy • What are we currently doing at ECDPM? ECDPM Page 2
  • 3. Economic transformation, governance, integration and trade for inclusive growth • Until at least the mid-1990s, Africa had “inclusive, sustainable, pro-poor, shared stagnation”. • Growth necessary but not sufficient condition for long-term development and poverty reduction. • Need to be accompanied by economic transformation where inclusive, sustainable, propoor, shared growth is key objective • So what does mean? And how is it achieved? ECDPM Page 3
  • 4. “We want to engage the private sector…” ECDPM Page 4
  • 5. “...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 5
  • 6. Push factors: Fiscal crisis, job cuts, aid squeeze & “value for money” ECDPM Page 6
  • 7. Push factors: competition & “new models” ECDPM Page 7
  • 8. Pull factors: Learning from the private sector ECDPM Page 8
  • 9. …and the private sector is “doing development” anyway….! • The private sector is going there anyway… ECDPM Page 9
  • 10. So who is this “private sector”? And what are the implications of “engaging” with it? ECDPM Page 10
  • 11. ECDPM Page 11
  • 12. Three distinct agendas • Private sector development Old agenda: domestic, enterprise growth, value-addition, exports, access to credit, business climate, firm-level skills, industrial policy etc. • Private sector investment for development New agenda: international, partnering with developed country firms, offset risk, link producers & suppliers • Private sector finance for development Input side – promote and leverage private sector finance ECDPM Page 12
  • 13. Assumptions – development would happen 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 13
  • 14. 1. Private Sector Development: Issues • How to promote economic transformation, trade and value-chain integration? • • How to make credit accessible to firms? • What role for FDI and industrial policy? • How to make it “inclusive”? • Mixed results • Endogenous and exogenous firm conditions • ECDPM How prioritise & implement reg. reforms? The PE of economic reforms Page 14
  • 15. 2. Private Sector Investment for Development • Less clarity on agenda and processes • What donor tools available? DFIs, ODA, non-ODA • What about tied aid/PCD? • From CSR to "core business model” • Defining the developmental aspect/additionality/opportunity costs? • ECDPM What do firms say? Page 15
  • 16. 3. Private Sector finance for Development • About inputs – bringing in private finance for development ends • Blending grants and loans & private sector finance • Public-Private Partnerships • Challenges - PPPs need to be commercially viable - Risk management and balancing - Legal environment - Capacity to use effectively ECDPM Page 16
  • 17. If development is the ultimate goal, then: • • Need to identify the additionality of engaging PS- trade-offs • Create better tools to measure & identify impact • Fully engage national and local governments • Improve stakeholder communication and mutual understanding • ECDPM Potential to find real synergies Regulate expectations and understand the mandate and capacity of the other Page 17
  • 18. What are we currently working on? • Informal donor sessions • Cluster • Private sector approaches to nutrition • Development corridors • Emerging economies impact on African Agriculture ECDPM Page 18
  • 19. Questions for discussion 1. Do you agree with the distinction between the three “agendas”? 2. What challenges are there to working on this agenda? Is there a “good” versus “bad” private sector? 3. What is the link between this agenda and your programme/theme? 4. What are the key opportunities for the future? ECDPM Page 19
  • 20. Thank you Anna Rosengren Page 20
  • 21. Common or conflicting interests? ECDPM Page 21
  • 22. Common interests (or at least nonconflictive) • • • • ECDPM Private Sector: Image and reputation, supply chains, competition, consumer markets, “do good” Donors: financial crisis and decreasing ODA, value for money, new positive grand narrative Partner governments: employment creation, raised productivity, inclusive growth, improved business climate, new types of investment, interest groups, NGOs and CSOs: people centered business…. Page 22
  • 23. Debate: Conflicting interests • The corporation as a “psychopath” • Profitability vs optimal developmental outcome (people vs profits!) • • Risk-sharing balance • Opportunity costs of finance • National ownership • National vs local conflicts • ECDPM Tied aid, subsidies, PCD! Impact assessments Page 23