By Bruce Byiers, Sebastian Große-Puppendahl, Huib Huyse, Anna Rosengren and Sarah Vaes
While private sector development and job creation are not new aspects of development policy, there is growing recognition that global development challenges are multi-faceted and complex, requiring collaborative, multi-stakeholder alliances between all sectors of society. This has been bolstered by pressure on public budgets for development cooperation and the need to complement these with private resources to finance the future development agenda.
This study looks at some of the main sets of criteria or principles that have been proposed to ensure more ‘developmental’ engagement with the private sector; and at three prominent PPP examples from the health, agriculture and textile sectors, looking at what can be learned from the experiences. The array of sectors is in itself useful for comparison of how sectoral considerations may influence the lessons learned.
A majority of bi- and multilateral donors now have some form of collaboration with the private sector as part of their development strategies while economic growth, job creation and market development are now considered key factors in most donors’ support to developing countries. A study by ITUC found that 19 of 23 donor development strategies had private sector development as a main priority (Oxfam, 2015). The aim to collaborate and engage with the private sector is increasingly also
reflected in the institutional organisation of development agencies.
With rising interest in PPPs, the budgets for partnerships have increased accordingly, with two investment ‘waves’ identified: one in the early 90s and one starting around mid-2000. That said, there is limited information regarding donors’ spending on PPP investments, particularly as PPPs are often implemented through a wide range of departments, (i.e. development, trade, DFIs etc.). The OECD highlights several problems related to donors’ reporting systems, resulting in poor transparency.
Some major institutions do not report their private sector activities separately, and several members fail to provide descriptive information regarding their DFI programmes and activities.
Beyond generating private returns to ensure financial viability and sustainability, a ‘successful’ partnership must generate public returns in terms of wider social, political and environmental issues. The challenge for partnerships is then to balance these dual objectives. This plays out even at the level of country selection, where commercial interest would suggest investing in more developed and stable markets, but where developmental needs are in poor, and often fragile countries. From the figures that are available, 60 percent of PPP investments are targeted to upper-middle income countries (UMICs).
The burgeoning array of sets of development principles governing private sector engagement in development reflects a degree of convergence on what is appropriate private sector behaviour, though challenges remain in ensuring compliance and enforcement. However, to ensure compliance, donors must find a balance between legally binding regulations and softer measures aimed at motivating enterprises into compliance – while it might be easier to incentivise private firms to sign up to voluntary principles, they may be less effective than mandatory principles.
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