This document discusses engaging the private sector for development. It outlines 5 main actors, 4 main narratives, and 3 broad agendas related to private sector engagement. There are also 2 distinct models that are driven differently. The overriding issue is politics. The document analyzes challenges and tradeoffs around maximizing benefits versus minimizing harm when partnering with businesses for development goals. It questions where the current approaches and discussions fit within the outlined narratives.
Engaging the Private Sector for Development: 5 Main Actors, 4 Narratives, and Political Realities
1. A Countdown for
Engaging the Private Sector for
Development
European Centre for Development and Policy
Management (ECDPM)
Dr Bruce Byiers
Lisbon 28 April 2014
2. 5 Main Actors
4 Main Narratives
3 Broad Agendas
2 Distinctly driven models
1 Overriding issue!
Many impact tradeoffsECDPM Page 2
3. • Business sector
• Developing country governments
• Donor country governments
• CSOs/NGOs
• Academia
5Main Actors
ECDPM Page 3
4. • Business – Big/Small, Int’l/Domestic,
Formal/Informal, Food/extractive/services
etc, BoP/impact inv., constraints, m’kt
structure
• Developing country governments
• Donor country governments
• CSOs/NGOs
• Academia
5Main Actors
ECDPM Page 4
12. • The private sector is going there anyway…
Push & pull – flows to Africa
ECDPM Page 12
…but largely to mining and
minerals…
13. • Private sector development
• Private sector finance for development
• Private sector investment for development
3related but distinct agendas
ECDPM Page 13
14. • 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 & suppliers
3related but distinct agendas
ECDPM Page 14
15. • Private Sector Development
… if only developing country businesses were
able to startup and expand
• Private Finance for Development
…if only there was a way to bring in more
finance for investments
• Private Investment for Development
… if only there was a way to encourage more
inwards investment to link with the local
private sector
3Agendas & Assumptions
ECDPM Page 15
16. • Regulatory reform
• Access to finance
• Public-private dialogue
• Value-chain integration
• Business development services
• Making markets work for the poor
• Industrial policy
• Innovation policy
• Management skills – vocational training etc
Challenges
• Complexity
• The PE of economic reforms
3i) PSD – (Jobs jobs jobs?)
ECDPM Page 16
17. • Leveraging private finance
• 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?
3ii) Private Sector finance for
Development (Next frontier?)
Page 17ECDPM
18. • 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
• Links to PSD and finance
• Who’s leading whom?
3iii) Private Sector Investment for
Development (All 4 narratives!?)
Page 18ECDPM
19. • Public-perspective
• Challenge funds
• Development impact bonds
• Coalition models e.g. GAIN
• Blending mechanisms (fin. & investment)
• Private-perspective
• With MNCs - IDH model
• SAGCOT Corridor
• Equity funds
• Business-CSO partnerships
• Fairtrade?
2Partnership perspectives
ECDPM Page 19
20. • Public-perspective
• Challenge funds
• Development impact bonds
• Coalition models e.g. GAIN
• Blending mechanisms (fin. & investment)
• PIDG
• TradeMark East Africa
• Private-perspective
• With MNCs - IDH model
• SAGCOT Corridor
• Equity funds
• Business-CSO partnerships
• Fairtrade?
Are firms interested anyway?
2Partnership perspectives
ECDPM Page 20
21. External
• Supply chain security (food, extractives)
• Consumer pressure
• New (risky) markets
• Finance & gov. backing?
• Trade and industrial regulations!!
Internal
• CSR – defensive, charitable, promotional,
strategic, transformational (Visser, 2011)
• Motivate staff?
• Do good?
…depends on sector, size, inwards/outwards
orientation, new/incumbent etc
Business drivers? (regardless of donors!)
ECDPM Page 21
24. Politics• Business environment reforms
• Regulatory/tax application
• Firm selection for support
• Partners and partnership formation
• Local impacts?
• Policy leverage?
1Overriding issue
ECDPM Page 24
25. • “Africa Rising”
Maximising benefits vs minimizing harm
Profitability vs development outcomes
Eligibility criteria vs corp. track record?
Time & money of impact evaluation
• Win-win-win in a post-2015 world
Scale vs depth
Big firms (better jobs?) vs SMEs
Public vs Private risk-burden
Opportunity costs of finance
• Exploitation
Regulation vs guidelines
• Jobs-jobs-jobs
National vs local conflicts
Tied aid, subsidies vs PCD
Unfair competition?
Many Impact Tradeoffs
ECDPM Page 25
26. • Private investment a key engine
• Roles for ODA and non-ODA in working with
the private sector?
• MNEs and linkages with SMEs?
• How to build on domestic
policies/strategies?
• What factors for successful
public/private/CSO partnerships?
• What about beyond global value-chains?
Especially informal trade and women?
• How to limit harm & maximise benefits?
• Expectations and impacts
• Incentives and politics!!!
Where are we in the narratives?
ECDPM Page 26
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
So, when we are talking about engaging with the private sector, who do we mean?
So this isn’t necessairly a new story, just one of donors trying to fit into something that is happening anyway
Although mut also say that in general this is highly focused on resource-rich countries…
The latter two can feed the first but not necessairly for finance…
The latter two can feed the first but not necessairly for finance…