This document discusses engaging the private sector for development. It outlines three related but distinct agendas: private sector development, private sector finance for development, and private sector investment for development. It also discusses the various actors that make up "the private sector", instruments and tools used to engage the private sector, and ongoing debates and questions around balancing private sector interests with developmental goals.

1. Engaging the Private Sector for
Development
European Centre for Development and Policy
Management (ECDPM)
Dr Bruce Byiers
Helsinki February 2013

2. Overview
• Policy Context
• The “private sector”
• 3 agendas in 1
• Instruments and issues
• Implications
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3. In the beginning…growth & the
private sector
• Until at least the mid-1990s, Africa had
“inclusive, sustainable, pro-poor, shared
stagnation”.
• Growth is necessary but not sufficient for
poverty reduction
• The elusive quest for growth…
• aid for investment
• education
• health & population
• conditional loans…
• debt relief… Incentives matter!!
• Need jobs, and therefore investment – need
private sector!
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4. From pscyho to BoP and
“shared value”
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5. “We want to industrialise”
AIDA
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6. “We want to engage the private
sector…”
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7. “...and help our own…”
• UK: “bring private sector ideas, innovation
and investment into the heart of what we
do...”
• NL: “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.”
• DK: ”… strategic priority in Danish
development cooperation to work for a
strong private sector…important that Danish
business participates actively...”
• FL…
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8. Push factors: Fiscal crisis, aid
squeeze & “value for money”
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9. Push factors: job cuts,
competition & “new models”
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10. Pull factors: Learning from the
private sector
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11. Large FDI flows anyway!
• The private sector is going there anyway…
…but largely to mining and
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minerals… Page 11

12. So who is the“private sector”
we want to engage with?
And what policy tools do we
have to be “transformative”?
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13. ECDPM Page 13

14. “Many ways to skin a cat”
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
Market structure
Informal traders
Domestic/export
Associations competitive/oligopolistic
New entrants/incumbents
Business models: Business constraints:
"Raw" capitalism Credit access
Shared value Infrastructure
Core business models
Capacity and education level
Base of pyramid/social businesses
Fair Trade Business linkages
Corporate Social Responsibility Labour regulations
People-centered business Market exclusion
Cooperatives Business climate
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15. Three related but distinct
agendas :
• 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
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16. Assumptions – development
would happen if only…..
Private Sector Development
… developing country businesses were able to
startup and expand
Private Finance for Development
…there was a way to bring in more finance for
public investments (and the private sector)
Private Investment for Development
… there was a way to encourage more inwards
investment to link with the local private sector
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17. 1. Private Sector Development:
Issues
• How to promote structural transformation?
• How prioritise & implement reg. reforms?
• How to increase credit access?
• What role for FDI and industrial policy?
• How to promote innovation?
• How to make it “inclusive” – SME linkages?
• Big firms, better jobs?
• How to build “capabilities”
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18. PSD Instruments
• TA for regulatory reform
• Value-chain development
• Business development services
• Making markets work for the poor
• Industrial policy
• Innovation policy
• Access to finance
• Management skills – vocational training etc
Mixed results
• Endogenous and exogenous firm conditions
• The PE of economic reforms
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19. 2. Private Sector finance for
Development
• About inputs – private finance for development
ends
• 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?
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20. 3. Private Sector Investment for
Development
• 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?
• What best value-added of donors here?
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21. PS Investment
Tools/instruments
ODA
• Public-private dialogue
• Challenge funds
• Match-making
• Multi-stakeholder partnerships
• Corridors approach etc
Non-ODA – under-analysed!
• Domestic industrial policy
• Outward FDI promotion
• State-aid?
• China – includes SEZs, export credit, etc
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22. Debates: Common interests(?)
• Private Sector: Image and reputation, CSR,
risk absorption, high entrance costs to new
markets, unfair competition from
subsidised firms
• Donors: financial crisis and decreasing
ODA, new positive grand narrative,
financial sustainability
• Partner governments: employment
creation, raised productivity, inclusive
growth, growing capabiities, improved
business climate, new types of investment,
debt burden, interest groups, rents(?)
• NGOs and CSOs: people centred
business….
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23. Debate: Conflicting interests
• Profitability vs optimal developmental
outcome (or people vs profits!)
• Risk-sharing balance
• Opportunity costs of finance
• National ownership
• National vs local conflicts
• Impact assessments
• Eligibility criteria or corp. track record?
• Tied aid, subsidies, PCD!
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24. Ongoing questions…
• To what degree does the new agenda
promote structural change?
• What roles for aid and non-aid in working
with the private sector?
• What approaches for working with MNEs to
promote linkages with SMEs?
• What factors for successful
public/private/CSO partnerships?
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• Organisational settings and institutional Page 24
factors for donor engagement with PS?

25. On-going questions…
• How to link donor agenda with local
industrial policy and country ownership?
• What about beyond global value-chains?
Especially informal trade and women?
• Focus on impacts – is this the key?
• Data availability and analysis of levels of
donor PS engagement?
• Role/usefulness of international
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commitments (e.g. UN Global Compact etc)? 25
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26. In sum…
If development is the ultimate goal, then:
• Potential to find synergies – but also need
care
• Need to identify the trade-offs
• Agree on how to identify & measure impact
• Regulate expectations and understand the
mandate and capacity of the other
• Improve PS-donor-gov-CSO communication
and mutual understanding
• Focus on how to boost transformation, no
matter the financing!
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27. Thank you
www.ecdpm.org
Bruce Byiers bby@ecdpm.org
www.slideshare.net/ecdpm
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