Engaging the Private Sector for Development

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Dr. Bruce Byiers, ECDPM
Development and the Private Sector Meeting
Ministry of Foreign Affairs and Ministry of Employment and the Economy
14-15 February 2013, Helsinki
Bruce Byiers gave a presentation at this meeting as keynote speaker.

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  • Purpose: "The private sector and development - best practices," for TEAM FINLAND - innovation and entrepreneurship to stimulate development seminar: 1) The need to focus on Finnish added value: what is needed in the emerging markets and on specific know-how Finland can offer?; 2) Increased co-operation between academic, business and non-governmental organizations; 3) Development Financing in Social development cooperation and business in the emerging markets - check DAC peer review doc of Finland
  • Motivation for paper- lack of clarity among stakeholders, discussion at cross-purposes, overlapping areas of interests, analysis etc., “common or conflicting interests’ captures dome of the main concerns/debates Paper not the final word and not presenting any new analysis- more a reorganisation of existing knowledge Changing context familiar to most but worth summarising- may have implication for how the PS4D agenda is approached Need clarity given lots of actors, interests and challenges for development policy (& opportunities)
  • Suddenly it’s all about the private sectorSeoul Development Consensus for Shared GrowthUN Millennium Summit in 2010, 11 bilateral donorsxvii issued the Bilateral Don␣␣␣␣␣ Statement in Support of Private Sector Partnerships for Development at the UN Private Sector ForumUN Millennium Summit in 2010, 11 bilateral donorsxvii issued the Bilateral Don␣␣␣␣␣ Statement in Support of Private Sector Partnerships for Development at the UN Private Sector Forum
  • So this isn’t necessairly a new story, just one of donors trying to fit into something that is happening anywayAlthough mut also say that in general this is highly focused on resource-rich countries…
  • So, when we are talking about engaging with the private sector, who do we mean?
  • Also, incumbents and newcomers
  • The latter two can feed the first but not necessairly for finance…
  • Germany’s develoPPP.de, the US Global Development Alliance Program (GDA), and Sweden’s␣IAP program, all of which seek to leverage private sector funding and innovation, are open to firms from any country. The Netherlands Programme for Cooperating with Emerging Markets (PSOM) followed a similar model. The Private Sector Investment programme, which replaced PSOM in 2009, includes a list of tied countries for which only Dutch firms can apply. Denmark’s␣DANIDA Business Partnerships program and the United Kingdom’s Food Industry Retail Challenge Fund are only open to national firms.
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  • Engaging the Private Sector for Development

    1. 1. Engaging the Private Sector for Development European Centre for Development and Policy Management (ECDPM) Dr Bruce Byiers Helsinki February 2013
    2. 2. Overview • Policy Context • The “private sector” • 3 agendas in 1 • Instruments and issues • ImplicationsECDPM Page 2
    3. 3. In the beginning…growth & the private sector • Until at least the mid-1990s, Africa had “inclusive, sustainable, pro-poor, shared stagnation”. • Growth is necessary but not sufficient for poverty reduction • The elusive quest for growth… • aid for investment • education • health & population • conditional loans… • debt relief… Incentives matter!! • Need jobs, and therefore investment – need private sector!ECDPM Page 3
    4. 4. From pscyho to BoP and “shared value”ECDPM Page 4
    5. 5. “We want to industrialise” AIDAECDPM Page 5
    6. 6. “We want to engage the private sector…”ECDPM Page 6
    7. 7. “...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...” • FL…ECDPM Page 7
    8. 8. Push factors: Fiscal crisis, aid squeeze & “value for money”ECDPM Page 8
    9. 9. Push factors: job cuts, competition & “new models”ECDPM Page 9
    10. 10. Pull factors: Learning from the private sectorECDPM Page 10
    11. 11. Large FDI flows anyway! • The private sector is going there anyway… …but largely to mining andECDPM minerals… Page 11
    12. 12. So who is the“private sector” we want to engage with? And what policy tools do we have to be “transformative”?ECDPM Page 12
    13. 13. ECDPM Page 13
    14. 14. “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 Market structure Informal traders Domestic/export Associations competitive/oligopolistic New entrants/incumbents Business models: Business constraints: "Raw" capitalism Credit access Shared value Infrastructure Core business models Capacity and education level Base of pyramid/social businesses Fair Trade Business linkages Corporate Social Responsibility Labour regulations People-centered business Market exclusion Cooperatives Business climateECDPM Page 14
    15. 15. Three related but 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 finance for development Input side – promote and leverage private sector finance • Private sector investment for development New agenda: international, partnering with developed country firms, offset risk, link producers & suppliersECDPM Page 15
    16. 16. Assumptions – development would happen if only….. Private Sector Development … developing country businesses were able to startup and expand Private Finance for Development …there was a way to bring in more finance for public investments (and the private sector) Private Investment for Development … there was a way to encourage more inwards investment to link with the local private sectorECDPM Page 16
    17. 17. 1. Private Sector Development: Issues • How to promote structural transformation? • How prioritise & implement reg. reforms? • How to increase credit access? • What role for FDI and industrial policy? • How to promote innovation? • How to make it “inclusive” – SME linkages? • Big firms, better jobs? • How to build “capabilities”ECDPM Page 17
    18. 18. PSD Instruments • TA for regulatory reform • Value-chain development • Business development services • Making markets work for the poor • Industrial policy • Innovation policy • Access to finance • Management skills – vocational training etc Mixed results • Endogenous and exogenous firm conditions • The PE of economic reformsECDPM Page 18
    19. 19. 2. Private Sector finance for Development • About inputs – private finance for development ends • Foundations, investment/pension funds • Blending grants, loans & private finance • Various purposes e.g. infrastructures, equity funds • Challenges - Need to be profitable - Risk management and balancing - Legal environment - Capacity to use effectively - Primarily a lack of finance?ECDPM Page 19
    20. 20. 3. Private Sector Investment for Development • Less clarity on agenda and processes • Different underlying approaches/ideology • From CSR to "core business model” • Partnerships - public-private cooperation models and CSO-business • DFIs, ODA, non-ODA • Promoting outwards FDI? • What best value-added of donors here?ECDPM Page 20
    21. 21. PS Investment Tools/instruments ODA • Public-private dialogue • Challenge funds • Match-making • Multi-stakeholder partnerships • Corridors approach etc Non-ODA – under-analysed! • Domestic industrial policy • Outward FDI promotion • State-aid? • China – includes SEZs, export credit, etcECDPM Page 21
    22. 22. Debates: Common interests(?) • Private Sector: Image and reputation, CSR, risk absorption, high entrance costs to new markets, unfair competition from subsidised firms • Donors: financial crisis and decreasing ODA, new positive grand narrative, financial sustainability • Partner governments: employment creation, raised productivity, inclusive growth, growing capabiities, improved business climate, new types of investment, debt burden, interest groups, rents(?) • NGOs and CSOs: people centred business….ECDPM Page 22
    23. 23. Debate: Conflicting interests • Profitability vs optimal developmental outcome (or people vs profits!) • Risk-sharing balance • Opportunity costs of finance • National ownership • National vs local conflicts • Impact assessments • Eligibility criteria or corp. track record? • Tied aid, subsidies, PCD!ECDPM • Tax revenues! Page 23
    24. 24. Ongoing questions… • To what degree does the new agenda promote structural change? • What roles for aid and non-aid in working with the private sector? • What approaches for working with MNEs to promote linkages with SMEs? • What factors for successful public/private/CSO partnerships?ECDPM • Organisational settings and institutional Page 24 factors for donor engagement with PS?
    25. 25. On-going questions… • How to link donor agenda with local industrial policy and country ownership? • What about beyond global value-chains? Especially informal trade and women? • Focus on impacts – is this the key? • Data availability and analysis of levels of donor PS engagement? • Role/usefulness of internationalECDPM commitments (e.g. UN Global Compact etc)? 25 Page
    26. 26. In sum… If development is the ultimate goal, then: • Potential to find synergies – but also need care • Need to identify the trade-offs • Agree on how to identify & measure impact • Regulate expectations and understand the mandate and capacity of the other • Improve PS-donor-gov-CSO communication and mutual understanding • Focus on how to boost transformation, no matter the financing!ECDPM Page 26
    27. 27. Thank you www.ecdpm.orgBruce Byiers bby@ecdpm.org www.slideshare.net/ecdpm Page 27

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