Role of private sector in Finland's development cooperation. Presentation prepared by Mika Vehnämäki (Ministry for Foreign Affairs of Finland) in July 2016.

1. Private sector, jobs and welfare
Mika Vehnämäki
Ministry for Foreign Affairs of Finland

2. New global Agenda 2030 for sustainable development and SDGs
emphasize partnerships and multistakeholder cooperation
Development aid is not enough. Private sector
engagement enhances development impacts
UN Sustainable Development Goals

3. International resource flows to developing countries
FDI
Remittances
ODA
Long-term debt
Short-term debt
Role of development finance is
rapidly changing

4. Agenda 2030 requires huge
resources: Where from?
International resource flows in
relation to the needs of Agenda 2030
Globalneedsofallcountries
Needsofdevelopingcountries

5. Emerging
markets offer
opportunities

6. Is GDP growth
all we want?

7. Basic commodities
vs. GDP

8. Modern Africa
innovates!

9. >90%
of all new jobs
Private sector
creates jobs

10. Goods / services
consumed by the poor
Transformative
innovations

11. Finland’s development aid focuses on
four priority areas
1. The rights and
status of women
and girls have
been enhanced
3. Societies have
become more
democratic and
better-functioning
2. Developing countries’
own economies have
generated more jobs,
livelihood opportunities
and well-being
4. Food security and
access to water and
energy have improved
and natural resources
are used sustainably
Private sector
development

12. Developing countries’ own economies have
generated more jobs, livelihood opportunities
and well-being

13. MFA’s private sector instruments
Rapid action Long-term engagement
Strengthening
existing
initiatives
Developing
newinitiatives
PIF
BEAM
EEP
FINNFUND
FINN-
PARTNER-
SHIP

14. BEAM − Business with Impact
Innovations for development program 2015−2019
Basics
Supports development of
innovations, research and
knowledge that improves
the welfare of low-income
people in developing
countries and creates new
and sustainable business
Aim Concretely
New products, services,
technologies, modes of
operations, distribution
channels, social
innovations
Development, piloting
and commercialization
Tekes administers
MFA and Tekes finance 25
million € (both 12.5 million
€ ) and applicants finance
25 million €
Fixed-term 2015−2019
BEAMwww.tekes.fi/beam

15. BEAM − Business with Impact
Innovations for development program 2015−2019
www.tekes.fi/beam

16. BEAM − Business with Impact
Innovations for development program 2015−2019
For whom?
No sectoral limitations
E.g. education, health,
communications,
renewable energy,
environmental protection
related products and
services
Sectors Criteria
Uses Finnish knowledge
and technology
Program doesn’t
support exports nor
traditional partnerships
Finnish enterprises,
education and research
institutes, civil society
organizations
BEAM encourages to
develop broader ecosystem
involving different partners
in Finland and developing
countries
www.tekes.fi/beam

17. An example of a BEAM project:
Funzi − mobile learning and information services
 Funzi aims at bringing education
to everyone’s reach
 Anyone can download Funzi app
for free and receive daily bite-size
lessons on livelihoods and
wellbeing
www.funzi.fi | www.funzi.mobi
www.tekes.fi/beam

18. Supports sustainable
business in developing
countries through funding
long-term for-profit
business partnerships
between Finnish and
developing-country
organizations
Aim
Services
Matchmaking: Identifying and matching of business
partners
Business Partnership Support:
e.g. establishing a subsidiary or joint venture,
subcontracting, importing from a developing country,
other long-term business activity, piloting and
demonstration project of technology or solutions,
vocational education and training, and support services
for a business partnership
Advisory services
Database on developing-country markets
− Supports early phases of a business partnership
www.finnpartnership.fi

19. For whom?
Applicant can be a Finnish
enterprise or other
business-driven
organization and an
enterprise registered
outside Finland with a
significant Finnish interest
Demand-driven
Sectors
No sectoral limitations
E.g. ICT, agribusiness and
food industry, metal
industry, services,
construction,
manufacturing,
environmental products
Criteria
Support range:
30−85 % of project costs
depending on the size of
applicant and target
country
Max. 400 000 euros /
project
Not available for the actual
investment nor exports
− Supports early phases of a business partnership
www.finnpartnership.fi

20. For whom? Sectors
No sectoral limitations
E.g. ICT, agribusiness and
food industry, metal
industry, services,
construction,
manufacturing,
environmental products
Criteria
− Supports early phases of a business partnership
www.finnpartnership.fi

21.  Namibia’s biggest waste management company
Rent-A-Drum started the licensed production and
use of Molok’s deep collection systems in
Namibia
 Molok was granted Finnpartnership’s Business
Partnership Support for market mapping,
feasibility study, business planning and training
of staff in Namibia
 Central target was to create profitable
sustainable business in Namibia and create new
jobs
www.molok.fi
www.finnpartnership.fi
An example of a Finnpartnership project:
Molok − deep collection systems

22. Basics
Supports economic and
social development in
target countries by
offering long-term risk
finance for profitable
sustainable investment
projects
Aim Sectors
E.g. renewable energy,
financial services,
construction, electronics,
forestry, metal industry,
tourism
75 % “climate projects”
Finnfund is a state-owned
development finance
company
Equity 251 million euros
Portfolio 355 million euros
Self-sustaining (excl.
“special risk finance”)
Capital increases from
ODA
www.finnfund.fi

23. Services
Commercially viable
projects
Looks for ”Finnish
interest” but not a strict
requirement and
interpreted flexibly
Criteria
• Equity investments
• Risk loans
• Mezzanine finance
• (Guarantees)
• Advisory services
Investments range
between 1−20 million
euros
Projects
• Greenfield projects
• Ongoing business
projects
• Funds
www.finnfund.fi

24. www.finnfund.fi

25. An example of a Finnfund project:
Lake Turkana Wind Park
 Finnfund has invested in Sub-
Saharan Africa’s largest wind
park
 Project increases significantly
access to affordable and clean
energy in Kenya
 Project also offers direct and
indirect jobs for Kenyans
www.finnfund.fi

26. Public Sector Investment Facility (PIF)
– Funding for developing-country public investments
formin.finland.fi/investmentfacility
www.finnvera.fi
Supports economically
viable but commercially
non-viable public sector
investments in developing
countries
• LMIC + LDC/LIC
• Meet principles of
sustainable lending
• No HIPC/MIDR
• Can access Finnvera’s
guarantee
E.g. Vietnam, Kenya, Egypt,
Philippines, Honduras,
maybe Tanzania, Ethiopia
Aim Actors
• Public sector entity
• Finnish enterprise
• MFA
• Finnvera
• Financial institution in
EEA
CountriesBasics
• Mixed export credit instrument
• Tied aid

27. Finland’s development policy program
Uses Finnish equipment, technology,
expertise and services
Procurement according to legislation in
developing countries
Eligible for export credit
Eligible for Finnvera’s guarantee
• (Commercial loan)
• Interest subsidy
• Guarantee subsidy
Grant equivalent (45 % LIC, 15 % LMIC)
Projects (subsidy) ranging between
2−30 million euros
MFA and a developing country
cofinance the project
Criteria Funding
Public Sector Investment Facility (PIF)
– Funding for developing-country public investments
formin.finland.fi/investmentfacility
www.finnvera.fi

28. Kriteerit
Original concessional
credit project
 Kenya Power and
Lighting Co. Ltd (KPLC)
 ABB Finland Oy
 24 million euros
formin.finland.fi/investmentfacility
www.finnvera.fi
An example of a potential PIF project:
Kenya Power’s Juja Station − concessional credit project

29. Leverage
PIF
Public Sector
Investment
Facility
ODA
Enterprise’s
own finance
Private investments
+ =

30. Financial support from MFA’s fixed-term private sector & innovation programs
Challenge funds
TANZIS − Support to
Tanzanian Innovation
System

31.  Cooperation with Slush
in 2014; 2015, 2016
 Startup entrepreneurs’
bootcamp and Slush
S
Global Impact Accelerator 2016

32. Responsible business conduct
Finland encourages the enterprises to contribute to
sustainable development in a responsible manner
Responsibility
makes good
business!

33. Human Rights Based Approach to
Development (HRBA)
• HRBA in all development cooperation
• Based on international human rights treaties
and obligations
Private sector instruments funded projects
have HRBA obligations
 Human rights due diligence
 Possible remedy and compensation
 Commitment to UNGP and UN Global Compact’s
principles

34. International guidelines and initiatives
The key elements of responsible business conduct:
 United Nations Guiding Principles on
Business and Human Rights
 OECD Guidelines for Multinational
Enterprises
 United Nations Global Compact
 ISO 26000 standard
 ILO Declaration on Fundamental Principles
and Rights at Work

35. Business in humanitarian and
crisis situations
Humanitarian assistance, reconstruction and disaster risk reduction require
innovative, technology-focused and holistic solutions in various sectors:
Shelter & housing, water & sanitation, hygiene, education,
health, logistics, warehousing, fuels, ICT, energy etc.

36. International organizations procure annually goods
and services for more than 100 billion USD
UNITED NATIONS
Funds, programs & special agencies:
UN procurement 2015:
17.5 billion USD
INTERNATIONAL FINANCE
INSTITUTIONS
World Bank procurement
2015: 7,6 billion USD
$ 10 million
$ 0,045 million
$ 7,9 million
$ 565 million

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