Working with and through the private sector to promote PSD – Highlights and fresh perspectives from the DCED Annual Meeting, 3-4 July 2013

Harnessing and leveraging the financial resources, knowledge and outreach of companies to achieve development results – including the creation of economic opportunities – is at the top of the agenda of most aid agencies. The Donor Committee for Enterprise Development (DCED) therefore dedicated the first day of its Annual Meeting this July to the topic of ‘working with and through the private sector to promote private sector development (PSD)’. 25 donor and UN agencies were present, joined by special guests from the private sector, academia and civil society.

The discussions encouraged us to reflect on ways to enhance existing approaches to partnering with companies, but also to think ‘outside of the box’ when it comes to choosing partners and areas of collaboration.

Develop partnerships for success, but don’t just focus on the successes

Shannon Kindornay of the North-South Institute presented key findings of her widely-cited report ‘Models for trade-related private sector partnerships for development’. Shannon made clear that donors willing to support innovation need to acknowledge the risks involved, and develop programming accordingly through appropriate incentives, clear guidelines on what is required from partners and sensible monitoring and evaluation systems. Sensible reporting requirements also imply that donors should reduce the paperwork involved for partner companies, noted Fazlul Hoque, the President of the Bangladesh’s Employers Federation.

More generally, Shannon encouraged donors to look beyond the ‘hero model’ of supporting individual, successful private sector actors only. Donors should link their trade-related partnerships to market access initiatives, address non-tariff barriers to trade, and actively share knowledge and lessons on business models that could be replicated elsewhere. Jan Maarten Dros of Solidaridad highlighted the need for donor support to companies before they were ‘ready’ to enter partnerships with donors.

Business as usual? Partnering to promote trade in global value chains vs. new opportunities for ‘micro-multinationals’

One partnership model described by the North-South Institute are multi-stakeholder coalitions, in which a number of public and private partners co-fund and co-implement the development of entire value chains. Esther Bosgra presented on how such coalitions are facilitated by the International Trade initiative (IDH). IDH focuses on promoting sustainable production methods and high-quality of certified exports of agricultural commodities, and has improved livelihoods for 700,000 smallholder farmers.

The integration of smallholders in (global) value chains is a widely established approach to create economic opportunities in partnership with companies. Hanne Melin’s presentation, in contrast, introduced us to a whole new set of emerging opportunities and potentials for collaboration: eBay International found that small traders in developing countries increasingly use its online marketplace, often through mobile internet technology, to export manufactured goods and services internationally. These new ‘micro-multinationals’ are potential drivers of economic growth, and represent an alternative model to integration into global value chains. Trade costs on eBay are about 60% lower for companies and consumers than in traditional trade. eBay is interested in collaborating with donors on options for scaling up this type of commerce and addressing its binding constraints, such as in the area of trade logistics. You can read a blog post by eBay on the event here.

Creating a ‘safe space’ for dialogue

Huge opportunities exist in partnerships with companies, but there is also a need to understand the sometimes inevitable conflicts in culture and interests between partners, as well as tensions faced by company staff championing commercially risky projects in developing countries. Zita Schellekens of Heineken stressed the importance of incentives and rewards by senior company management for such activities, but also the need for donors and NGO to allow for a safe space, where open dialogue could be held, and constraints and lessons be freely shared.

Next steps for the DCED

The Annual Meeting discussions provided a lot of food for thought, but also led to concrete avenues of action. Exciting work is already in progress as the DCED is currently developing guidelines for measuring results in challenge funds, based on the DCED Standard and with inputs from a range of practitioners.

Another aspect that featured prominently in the discussions was how to assess the additionality of donor support before formalising a partnership with a company. For example, a partner company of the Netherlands PSI programme, Muta Sportswear, encouraged participants to not only think about whether a business project would have happened anyway, but whether donor funds were likely to accelerate development outcomes. A DCED review of experience with partnerships for PSD outlined such different ways to look at additionality, but found that assessment strategies by many donors in this area could still be enhanced. The DCED will therefore work to develop good practice guidelines for additionality assessments, and is currently forming a task force with a number of interested member agencies to support this process.

The Donor Committee for Enterprise Development promotes economic opportunity and self-reliance through Private Sector Development in developing countries. It is the forum in which 24 donor and UN agencies share practical experience of PSD, and agree guidance on effective practice. It is also a leading source of knowledge about PSD. Find out more at www.Enterprise-Development.org, including a wide range of resources on partnerships and inclusive business.