Engaging the Private Sector for Development

Presentation at the Flemish Parliament

Bruce Byiers

Brussels, 01.02.2016

• Objectives

• Context

• Narratives

• Instruments

• Challenges

• On-going ECDPM research

Overview

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• Private sector development?• Private sector engagement for

development?• Private sector financing for development?

Focus here: How to engage the private sector to promote economic transformation towards more and better jobs

…from policies to practice

Objective?

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Context: Financial crisis, aid squeeze & “value for money”

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Context: Jobs, competition & “new models”

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Pull factors: Learning

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Source: DIE, ECDPM, ODI – European Report on Development

Context

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• The private sector is going there anyway…

Push & pull – flows to Africa

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…but largely to mining and minerals…

4 Main Narratives

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• “Africa Rising”Next investment frontier, risks &

rewards

• Win-win-win in a post-2015 world Development, econ. & comm. diplomacy

• ExploitationLand-grabs, human rights abuse,

neocolonialism

• Jobs-jobs-jobsEconomic transformation, more and better jobs, indust. policy, + value added

4 Main Narratives

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• Business – Big/Small, Int’l/Domestic, Formal/Informal, Food/extractive/services etc, BoP/impact inv., constraints, m’kt structure

• Developing country governments – Presidency, Min. Fin., Commerce, Line ministries, Tax, agencies

• Donor country governments – aid agencies, Foreign Ministry, Min. Industry/Biz, DFIs

• CSOs/NGOs – humanitarian/relief, market-oriented, FairTrade,

Many actors

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• 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

3 Agendas & Assumptions

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• Regulatory reform• Access to finance• Public-private dialogue• Value-chain integration• Business development services, training• Making markets work for the poor• Industrial policy• Innovation policy

Challenges• Complexity• The PE of economic reforms

PSD Agenda

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• Foundations, investment/pension funds• Leveraging private finance• Blending grants, loans & private finance• Various purposes e.g. infrastructures, equity

fundsChallenges • Need to be profitable• Risk management and balancing • Legal environment • Capacity to use effectively • Primarily a lack of finance?

Private Sector finance for Development (Next frontier?)

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• Engaging business interests• 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• Challenges…

Private Sector Investment for Development (All 4 narratives!?)

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• Public-led• Challenge funds• Development impact bonds• Coalition models e.g. GAIN• Blending mechanisms (fin. & investment)• What criteria?

• Private-led• With MNCs - IDH model• SAGCOT Corridor• Equity funds• Business-CSO partnerships• Fairtrade?

Who’s leading whom?

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…but are they CRITERIA? or goals or objectives:

1. measurable development impact; 2. additionality; 3. market neutrality; 4. shared interest & co-financing; 5. demonstration effect; 6. social, environmental and fiscal

standards.

6 EC Criteria for PSE

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…how to put into practice?

1. focus on employment creation and poverty reduction

2. take a firm-level differentiated approach; 3. create market-based opportunities; 4. follow clear criteria for support; 5. allow for local contexts and fragile

situations; 6. put strong emphasis on results; 7. observe policy coherence in areas affecting

the private sector in developing countries.

7 EC ‘principles’

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CSO criteria

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SAGCOTPrivate led agriculture PPPPrinciples therehow do you enforceinclusivity questioned - large firms too powerful?

Lesotho Queen Mamohato HospitalPublic led health PPPDifficulty in negotiating along the linePolitical interest?Misadvised? 

Better Factories Cambodia - Garments branded firms EXPECTED to payenforcement cost pushed onto supplierslimited transparency

Beyond aspirations…?

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• Maximising benefits vs minimizing harm• Profitability vs development outcomes?• Eligibility criteria vs corp. track record?• Time & money of impact evaluation• Scale vs depth• Big firms (better jobs?) vs SMEs• Public vs Private risk-burden• Regulation vs guidelines• National vs local conflicts• Tied aid, subsidies vs PCD • Unfair competition?• Are businesses interested?

Many challenges…

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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

Are businesses interested?

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• Business environment reforms• Regulatory/tax application• Firm selection for support• Partners and partnership formation• Int’l business vs local business• EU MS competition?• Local impacts?• Policy leverage?

Winners and losers => Politics

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• Roles for ODA and non-ODA in working with the private sector

• MNEs and linkages with SMEs – local content

• Understanding business-CSO partnerships?

• Governing global value chains• Regional value chains and

corridors• PE! Incentives and politics!!!

Ongoing ECDPM research…

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Thank youwww.ecdpm.org

Bruce Byiers bby@ecdpm.org

Twitter: @brucebyiers

www.slideshare.net/ecdpm

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