Private sector, jobs and welfare

Private sector, jobs and welfare

Mika Vehnämäki

Ministry for Foreign Affairs of Finland

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

International resource flows to developing countries

FDI

Remittances

ODA

Long-term debt

Short-term debt

Role of development finance is

rapidly changing

Agenda 2030 requires huge

resources: Where from?

International resource flows in

relation to the needs of Agenda 2030

Glo

bal n

eed

s o

f all c

ou

ntrie

s

Need

s o

f develo

pin

g c

ou

ntrie

s

Emerging

markets offer

opportunities

Is GDP growth all we want?

Basic commodities

vs. GDP

Modern Africa

innovates!

>90% of all new jobs

Private sector

creates jobs

Goods / services

consumed by the poor

Transformative

innovations

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

Developing countries’ own economies have

generated more jobs, livelihood opportunities

and well-being

MFA’s private sector instruments

Rapid action Long-term engagement

Str

en

gth

en

ing

exis

tin

g

init

iati

ves

Develo

pin

g

new

in

itia

tives

PIF

BEAM

EEP

FINNFUND

FINN-

PARTNER-

SHIP

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

BEAM www.tekes.fi/beam



www.tekes.fi/beam



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

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

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

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


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



For whom? Sectors


E.g. ICT, agribusiness and

food industry, metal

industry, services,

construction,

manufacturing,

environmental products

Criteria



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


An example of a Finnpartnership project:

Molok − deep collection systems

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

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

www.finnfund.fi

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

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

Countries Basics • Mixed export credit instrument

• Tied aid

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


Kriteerit

Original concessional

credit project

Kenya Power and

Lighting Co. Ltd (KPLC)

ABB Finland Oy

24 million euros


An example of a potential PIF project:

Kenya Power’s Juja Station − concessional credit project

Leverage

PIF Public Sector

Investment

Facility

ODA Enterprise’s

own finance Private investments

+ =

Financial support from MFA’s fixed-term private sector & innovation programs

Challenge funds

TANZIS − Support to

Tanzanian Innovation

System

Cooperation with Slush

in 2014; 2015, 2016

Startup entrepreneurs’

bootcamp and Slush

S

Global Impact Accelerator 2016

Responsible business conduct

Finland encourages the enterprises to contribute to

sustainable development in a responsible manner

Responsibility makes good

business!

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

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

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.

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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Government & Nonprofit

Private sector, jobs and welfare