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Binyam Afewerk Demena
PhD Researcher, International Institute for Social Studies (ISS) of Erasmus University Rotterdam (EUR)
The Netherlands, 04-03-2015

A glimpse at how the private sector can enable growth and reduce poverty


Through the development of vibrant private sector, the Netherlands policy for Foreign Trade and Development cooperation can contribute to local job opportunities, technology transfer, train and educate local employees, offer managerial and technical assistance, and serve as a bridge to foreign markets. It can also provide critical solutions to the problems of the poor in areas of food security, safe drinking water and infrastructure.

However, the role of private sector in developing countries that supposed to take the interest of the poor is a vast and complicated topic. Initiating the private sector to intervene across various business activities (i.e. multi-sector approach) such as livelihood, technology transfer, finance, education, infrastructure, health, supply chain practices etc… can be a good candidate to that end. In this case, in other words, intervention in one sector/business activity is not an end by itself, rather it should make it to allow and reinforce intervention in another sector/business activity. In all these interventions, essential and most important is to enable conditions more favorable towards labor intensive instead of capital intensive approach as the former most likely to reduce poverty much more in the context of developing countries.

I would like also to stress that the approach of the private sector needs to act as a football team that allow all actors of the private sectors to work together towards achieving inclusive growth and lifting people out of extreme poverty. In the view of this, our approach should take the concept of a football team that can be more effective and efficient when we add new actors (private sectors/business activities) to the existing team at about half time. Moreover, the private sector actors should strongly have the concept of shared values. In respect of this, linking business returns with social responsibility to improve the interest of the poor should be considered at the core of private business interventions and activities.

In line with the multi-sector and a football team approach, the role of aid should support governments’ of the developing countries to enable better provision of public services and shape the private sector’s playing field. In this way, aid can play a central role to foster greater private sector entry into the various sectors of these countries via providing enabling business environment, good governance, justice and security. This is known as catalytic funding approach. In other words, good institutions and enabling business environment will stimulate the private sectors to connect poor people to socio-economic activities as well as benefits. At a more macro level, at a longer time horizon, it can enable the various business activities of the developing countries to enter in to an increasingly globalized value chains.

In doing so, I believe that the private sector will be recognized as a possible engine of economic growth through incorporating enormous potential to take the interest of the poor and marginalized people much more as well as with longer investment time horizon.

 

TOPICS: Private sector

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Promoting inclusiveness in the Dutch policy agenda on trade and international cooperation

This contribution is part of a consultation for the Dutch Ministry of Foreign Affairs on how to promote inclusiveness in the Dutch policy agenda on trade and international cooperation.
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