Inputs for a CSO brainstorm on "People Centred Business for

Development" European Centre European Centre for Development

and Policy Management (ECDPM)

September 2012

Common or Conflicting Interests?

•  ECDPM Discussion Paper: "Common or Conflicting Interests? Reflections on the Private Sector (for) Development Agenda”

•  Changing Context

•  3 broad categories of PS&D agenda

Introduction and Overview

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•  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

Donor commitments to Private Sector Development

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•  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

Donor commitments to Private Sector Development

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•  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..."

Donor approaches...

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•  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

Changing context

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

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Three indicative categories of Private Sector Engagement

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•  Economic transformation •  Regulatory reforms •  Making credit accessible to firms (DFIs) •  Mixed results •  Endogenous and exogenous conditions

Category 1: Private Sector Development

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•  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

Private Sector for Development Category 2: Private Sector Investment for Development

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•  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?

Private Sector for Development Category 3: Private Sector Finance for Development

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Additional: Common or conflicting interests?

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What is the private sector?

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Business level: International Large domestic SMEs Micro-household based Multinational enterprises State-owned enterprises National monopolies Informal traders Associations

Sectors: Agricultural smallholders Large-scale agricultural producer Manufacturers/processors Export-led industries Extractive sector firms Service providers

Business models: "Raw" capitalism Core business models Base of pyramid Fair Trade Socially-inclusive business models Corporate Social Responsibility People-centered business Cooperatives

Business constraints: Credit access

Business climate Infrastructure Capacity and education level Business linkages Labour regulations World market exclusion

•  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

Common interests(?)

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•  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

Conflicting interests

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•  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?

How to gauge developmental impact?

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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

Concluding remarks

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•  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

Topics for further analysis and discussion

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•  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

Topics for further analyse and discussion, cont...

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Thank you www.ecdpm.org

Bruce Byiers bby@ecdpm.org Anna Rosengren ar@ecdpm.org

www.slideshare.net/ecdpm

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