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A new report, Private Sector Engagement for Sustainable Development: Lessons from the DAC was recently published by the Organisation for Economic Co-operation and Development (OECD). Despite presenting important and relevant reflections on working with and through the private sector to achieve development objectives in four member countries, the report does not adequately recognize that supporting the private sector through Official Development Assistance (ODA) should go beyond promoting (Global North) investments in developing countries. Consequently, this is yet another report about the private sector in development that fails to include the perspective of the private sector in and from the South, making it another case of ‘talking about them, without them’.

The Organisation for Economic Co-operation and Development (OECD) recognizes that Development Assistance Committee (DAC) member countries are increasingly developing partnerships with the private sector to achieve development objectives. The new report, Private Sector Engagement for Sustainable Development: Lessons from the DAC, published late November 2016, aims to identify good practices and lessons learned when working with and through the private sector from four DAC countries: the Netherlands, Germany, Finland and USA.

The report is not ground-breaking, as the role of the private sector in development has been recognized and practiced by many countries, including the Netherlands, for decades (see for e.g. Kazimierczuk 2015). Some earlier publications have also reviewed and compared policies linking development assistance with private sector development (see for e.g. Bieckmann, F. (2013)  and Magnetti, P. (2013)). However, the fact that the OECD is highlighting the role and importance of the private sector in development cooperation is an important signal to the international community that it is time to take this issue more seriously. Moreover, the report addresses a number of very relevant issues:

  • The lack of established provisions for monitoring, evaluation and reporting hinders the assessment of the effectiveness of the private sector in development.
  • Corporate social responsibility (CSR) activities should be incorporated into the business core activities and focus on creating shared value.
  • Private sector involvement in development cooperation should be sustainable and inclusive, and the public-private partnerships should result in proven development additionality.
  • Investing in and supporting the development of an enabling environment in developing countries is crucial.
  • Adequate planning and coordination is necessary. The Ministry of Development (and Foreign Trade) must prepare a clear development strategy first, and only then look for adequate partners (the private sector may not always be the best partner to reach certain development objectives). At the same time, the ministry should actively engage and listen to the private sector’s needs to develop strategies and programmes where the private sector can contribute and add value.
  • The role of micro, small and medium enterprises (SMEs) is very important in the process while their access to facilities, partners and funding is still difficult.
  • Adequate coordination and work between the embassies and economic diplomacy are of a high importance.
  • A lack of shared terminology and understanding of modalities for private sector engagement in development co-operation impedes effective joint discussions among stakeholders, particularly in terms of identifying gaps in current approaches.

Despite addressing these issues, the OECD report has failed to include the voices of the private sector, particularly from the private sector in and from the South. Furthermore, the report does not provide space to discuss failures of the private sector development policies. At this stage, assuming that all activities of the private sector are beneficial is rather naïve, as some practices have already been proven harmful. Very solid and clear regulations that enforce sustainable and inclusive business practices on national and international levels are extremely important, yet this issue is given no urgency in the report.

Furthermore, the report ignores the fact that promoting private sector through ODA should be more than merely promoting (Global North) investments in developing countries. We need to move a step further and ensure clear development outcomes that are feasibly linked to international and national poverty reduction strategies. For this purpose, greater attention must given to the following:

  • A lack of reliable mechanisms for monitoring and evaluation of private sector activities as well as a lack of reliable data in developing countries poses a problem when assessing the contribution of the private sector activities in development.
  • Funding for private sector development should not only promote new investments. There should be additional support to existing (international) companies in developing countries to become more responsible and sustainable.
  • Policy coherence is crucial: a sustainable private sector should be promoted through both development and non-development instruments and mechanisms available through different ministries.
  • Greater coherence should also be promoted among domestic policies in developing countries, with a focus on industrialization, regional trade and local content.
  • New financial vehicles are constantly needed to boost innovative solutions and to encourage private investors to share the risks in such processes. One suggestion could be to introduce ‘a first-loss facility’ where public donors take the first loss if the project goes wrong.
  • ‘Traditional’ CSR is passé. The private sector must work on creating a shared value instead by incorporating a living wage standard and intolerance for tax evasion into core policies.
  • Investments in infrastructure, both hard (roads, digital connectivity, harbours, etc.) and soft (boosting competitiveness of SMEs, improving productivity, packaging, labelling, etc.) are needed.
  • More work should be done with consumers to ensure mass sustainable consumption and production.

To conclude, the OECD succeeded in reminding the international community that the private sector has played an important role in development and if adequately regulated, can positively contribute to achieving development objectives. However, the voice of the private sector, especially the private sector in and from the South, is blatantly missing. Are we not yet fed up of constantly ‘talking about them, without them’?

 


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Comments

Marcel Vernooij

2017-01-16 17:01


We appreciate your article highlighting the recently published OECD report on working with the private sector in development cooperation. The Netherlands has actively contributed to this report and a valuable set of related documents, available at the OECD website:http://www.oecd.org/dac/peer-reviews/private-sector-engagement-for-sustainable-development-lessons-from-the-dac.htm . We hosted the team of colleagues from the OECD, Australia and Denmark that conducted the peer learning analysis of the Netherlands. I took part in the team that visited Germany for a week (also see my blog: http://www.ondernemeninontwikkelingslanden.nl/nieuws/private-sector-development-cooperation-germany-and-netherlands-compared). The Netherlands furthermore participated in thematic sessions on innovative finance in Copenhagen and on additionality in Luxemburg.
The purpose of the peer learning has been to gather and distribute experiences of OECD member countries in private sector development and private sector engagement. Contrary to the regularly conducted OECD country reviews on development cooperation, the objective of the peer learning is not to assess or rank performances against a benchmark, but to share lessons learned and built upon a common language on the basis of such experiences.
Whereas failures have indeed not been explicitly listed, the documentation results from all lesson learned in working with the private sector. On the OECD website there is also a valuable overview of evaluations: http://www.oecd.org/dac/peer-reviews/Inventory-2-DAC-Member-Evaluations-of-Private-Sector-Engagements.pdf
Finally, the teams conducting the peer learning in the 4 countries have spoken to a wide range of government officials, and representatives of civil society, science and the private sector. The private sector has not at all been ignored, there voices have been heard and taken into account in the reports.
Given the objective of the learning among the peers in OECD countries, the teams did not visit developing countries, but the heart of the matter is that the four OECD countries involved in the peer learning actively engage with the private sector in developing countries in further developing and implementing their policies.

Comment
Agnieszka Kazimierczuk

2017-01-26 19:01


Thank you Marcel for your reaction. I still claim that this is an important report that voices many relevant issues related to the (working with the) private sector in development cooperation. Nevertheless, the peer review process included consultations with the DAC members, DAC member development agencies, bilateral development finance institutions, international financial institutions, academia and the OECD (Report, p.17). I understand that these stakeholders are very much in contact with the private sector in both: their respective countries as well as in the developing countries but the voices of the private sector are not heard directly, especially of those coming from the South. And that would be a valuable addition, especially that the Report (p. 23) also states that the majority of the DAC members’ private sector engagement mechanisms are still tied to their own private sector. Furthermore, even in the countries where such links with the domestic private sector is not compulsory, the DAC members have a tendency to work with and through their own private sector to minimalize the risks of such collaboration. This shows that the main motivation behind these initiatives is purely the domestic commercial interest, which is in contradiction with the assumed development outcomes.

I do acknowledge though that it is very difficult to identify the important (private sector) partners and to decide who should be represented and by whom. Should this be the existing African business networks, Chambers of Commerce, individual companies (and then which ones), or someone else? I will very much appreciate your thoughts on this matter too. Please join our discussion on the current INCLUDE Question of the Week (http://includeplatform.net/question/question-week-22/) that is exactly about this.

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