Bruce Byiers and Anna Rosengren, ECDPM CSO meeting on private sector (for) development Cooperatives Europe 20 September, Brussels

1. Common or Conflicting
Interests?
Inputs for a CSO brainstorm on
"People Centred Business for
Development"
European Centre European Centre for Development
and Policy Management (ECDPM)
September 2012

2. Introduction and Overview
• ECDPM Discussion Paper: "Common or
Conflicting Interests? Reflections on the
Private Sector (for) Development Agenda”
• Changing Context
• 3 broad categories of PS&D agenda
ECDPM Page 2

3. Donor commitments to Private
Sector Development
• Busan 4th High Level Forum on Aid
Effectiveness
• EU's Agenda for Change
• G20 Fora
• Aid for Trade
• Individual donors: DfID, SIDA, Danida,
USAID, The Netherlands MoFA
ECDPM Page 3

4. Donor commitments to Private
Sector Development
• Busan 4th High Level Forum on Aid
Effectiveness
• EU's Agenda for Change
• G20 Fora
• Aid for Trade
• Individual donors: DfID, SIDA, Danida,
USAID, The Netherlands MoFA
ECDPM Page 4

5. Donor approaches...
• UK: "to bring private sector ideas,
innovation and investment into the heart of
what we do...”
• Dutch: "putting 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.”
• Danish: "...it is a strategic priority in Danish
development cooperation to work for a
strong private sector. For Danida, it is
important that Danish business participates
actively..."
ECDPM Page 5

6. Changing context
• Economic crisis!
o Declining aid resources
o Greater need for aid accountability to EU
voters
o Need for EU employment
• Increasing engagement of "new players"
o Competition with EU private sector firms
ECDPM Page 6

7. Additional: FDI inflows and ODA
flows to LDCs, 1990-2010 ($bn)
ECDPM Page 7

8. Three indicative categories of
Private Sector Engagement
ECDPM Page 8

9. Category 1: Private Sector
Development
• Economic transformation
• Regulatory reforms
• Making credit accessible to firms (DFIs)
• Mixed results
• Endogenous and exogenous conditions
ECDPM Page 9

10. Private Sector for Development
Category 2: Private Sector
Investment for Development
• Less clarity
• Definition of developmental additionality
• From CSR to "core business model"
• Donor methodologies (?)
• How to identify tipping points
• Defining the developmental aspect
• Impact assessments
ECDPM Page 10

11. Private Sector for Development
Category 3: Private Sector
Finance for Development
• Increased access to private finance (blending)
• Release public debt pressure and shared risk
burden
• Challenges
- PPPs need to be commercially viable
- Risk management and balancing
- Legal environment
- Capacity
- Primarily a lack of finance?
ECDPM Page 11

12. Additional: Common or
conflicting interests?
ECDPM Page 12

13. What is the private sector?
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
Business climate
Base of pyramid
Infrastructure
Fair Trade
Socially-inclusive business models Capacity and education level
Corporate Social Responsibility Business linkages
People-centered business Labour regulations
Cooperatives World market exclusion
ECDPM Page 13

14. 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
• Developing country: employment creation,
raised productivity, inclusive growth,
improved business climate, new types of
investment, debt burden, interest groups
• NGO's and CSO's
ECDPM Page 14

15. Conflicting interests
• Tied aid and subsidies
• Risk sharing
• Opportunity costs of finance
• Policy Coherence for Development (PCD)
• Viability versus optimal developmental outcome
• National ownership
• National vs local conflicts
• Impact assessment - how to measure
ECDPM Page 15

16. How to gauge developmental
impact?
• Donor support evaluations
• Firm-level own evaluations
• Some diffuse criteria/measures (e.g. UN,
WBCSD, Nestlé, EIB, etc)
• What purpose of such a measure?
• How balance development requirements with
"efficient business"?
• What incentives to prove developmental
impact?
ECDPM Page 16

17. Concluding remarks
If development is the ultimate goal, then:
• Potential to find real synergies
• 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
• Regulate expectations and understand the
mandate and capacity of the other
ECDPM Page 17

18. Topics for further analysis and
discussion
• Distinction between impacts from "inclusive
business" and from subsidised business
• Infrastructure and financing, particularly at the
regional level
• Linkages between donor FDI promotion and
developing country industrial policy
• Linkages between international investments and
the local private sector
• Sharing bilateral donor experiences to improve
public-private dialogue
ECDPM Page 18

19. Topics for further analyse and
discussion, cont...
• Lessons on improving the investment climate
for new investors
• The role the EC and/or the EEAS could or
should play in involving the private sector
• The political trade-offs between tax incentives
and aid-assisted investments
• The degree to which we can embrace
experiments and failures in using donor-country
taxpayer money
ECDPM Page 19

20. Thank you
www.ecdpm.org
Bruce Byiers bby@ecdpm.org
Anna Rosengren ar@ecdpm.org
www.slideshare.net/ecdpm
Page 20