Nine out of ten jobs in the developing world are in the private sector. Hum-drum enough, but for the development community this is something of an epoch. There is a growing consensus in international development that the private sector is the engine of development and donors and development stakeholders should design and plan around this major source of change. In 2011, CSIS and Chevron launched a five-year partnership—the Project on U.S. Leadership in Development—to review U.S. development and consider how the role contribution of the private sector to development. The center-piece of this effort is a year-long high-level Council that met over the course of 2012.
In particular, we focused at the changed environment for international development. Over the last forty years the paradigm of engagement between wealthy and poorer countries has shifted from one that is aid based to a growing trade and investment relationship. In the case of the United States, this is illustrated by the dramatic change in financial resource flows. At the time the Kennedy administration created USAID, 70 percent of all financial flows from the United States to the developing world were public, primarily official development assistance. That figure is now less than ten percent, the rest is private.
The Development Council concluded in its final report released in March 2013 that the United States needs to reorients its development policies around the private sector understanding that the private sector in partnership with a functioning government providing a constructive enabling environment and effectively delivering public goods such as education, health, and rule of law that are critical to development.
Please join us in discussing the following questions:
How can the United States government move beyond the traditional model of partnerships and engage more fully with the private sector?
What are the benefits of engaging more closely with the private sector in development?
Looking beyond simply engaging with the private sector, what role should trade and investment play in creating long-term development?
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Dan, it is great to have an opportunity for us to talk about our new report and new thinking on development.
CSIS is a nonpartisan foreign policy think tank in Washington. We are known for our work on security and foreign policy; however, we have worked increasingly on the role of development in US security and foreign policy. We look at development as an important component of U.S. "Smart Power."
A couple of years ago, in conversations with Chevron, which has been a long-time partner of CSIS, we discovered that both of our organizations were increasingly focused on development and its role in both policy and in business operations.
In partnership with Chevron, we set out to undertake a major initiative to change thinking on development, and look at the role that the business community, NGOs and other private actors have taken in improving lives and reducing poverty internationally.
We have published over a dozen reports, and in March we published this major report, the result of a year-long effort with a bipartisan group of private and public sector leaders.
Dan and Johanna - delighted to have you taking part in this discussion! Business Fights Poverty members will have seen the blog series we are running this week around your report "Our Shared Opportunity". To kick off the discussion, can you share what the report said around how the United States government can move beyond the traditional model of partnerships and engage more fully with the private sector?
Good afternoon! When I worked at Ashoka, we developed different programs to break the silos between civil society and private sector. We considered it as the only way to really scale up grassroots initiatives.
along with the important role of the private sector in spurring broad-based growth.
In our discussions, we really moved beyond the issue of partnerships to look at how business operations can be used to promote growth and development - from good accounting standards to environmental standards to workforce development. All of these need increased attention and focused for development.
We also placed a strong focus on the role of trade and investment, and urged the government and private sector to use these tools more creatively and deliberately to promote development outcomes.
But the group did repeatedly come back to the question of how to promote easier and better partnerships between the private sector and the government.
Thanks "AS"....we also came to understand the need for deeper cross sector collaborations. We recently hosted Catholic Relief Services looking at their shift as an international NGO and how they work with the private sector and through the private sector to achieve development outcomes.
In the US Government context, USAID and other parts of the US Government have worked hard over the last 10 years to improve its ability to partner with the private sector through initiatives like the Global Development Alliance and the Global Partnerships Initiative at the State Department.
Even after all of this, the US Goverment, especially USAID and the MCC, should make partnerships a core part of their strategies. In general, official donors need to understand that they are not the "largest wallet" in the room any more with the shift in resource flows in the last 50 years and that they should approach development as a catalyst, a convener, a knowledge broker and risk sharer. This will mean more co-planning with the private sector and third sector and governments "up front" and it will mean additional adjustments in how assistance is delivered and organized.
To your point on civil society, it is striking how many businesses rely on NGO partners to implement work in the communities where they operate.
In our discussion with CRS, which Dan mentioned, it was clear that the goals of both CRS and the company were complementary - in the ag sector especially, to promote growth and poverty reduction among smallholder farmers, it will be important to aggregate production so that many farmers can contribute to the same market; and to provide ongoing training and inputs so that farmers can produce in the quantity and quality that companies need for their stores and customers.
Agreed on co-planning with the private sector. Poverty alleviation cannot happen without the private sector. I read here about value creation.. I'm not sure everyone shares the same vision of how we create value. we need to ask various stakeholders what is valued and by whom? What can be achieved with given resources? Where and when should idealism take a backseat to pragmatism?
I've always seen the US Government ahead of the curve of engaging with the private sector - with programmes like USAID's Global Development Alliance and State Departments Global Partnership Initiative. Do you think this is an accurate representation?
This looks like an important report and interesting to see this shift in US development thinking. I think that making a clear distinction between business as a partner in development and the need to create an enabling environment that allows the private sector to thrive is key to unlocking its potential.
Whilst significant attention at the international level focuses on the role of public-private partnerships, the real potential for creating private sector-led development impact lies with Small and Medium Sized Enterprises (SMEs) that make up the bulk of the productive economy in Sub Saharan Africa. An estimated 95% of African businesses and 85% of all jobs in Sub-Saharan Africa are in the SME sector.
From an Africa perspective, the region is struggling to translate growth in to jobs. SMEs will play a key role in absorbing the estimated 10 million increasingly educated and urbanised young people that are expected to join the workforce each year.
SMEs are also key drivers of economic diversification and innovation, especially in African countries largely dependent on their natural resources. Many of these businesses reside in the informal economy and encouraging them to formalise remains a key challenge for governments.
Despite their critical role, SMEs face a broad range of constraints in the enabling environment that smother their potential. These constraints include poorly functioning hard and soft infrastructure and regulatory environments, alongside a lack of access to finance, skills and markets.
As the High-Level Panel on the 2015 Development Agenda notes, the priority for policy makers must be to continue to prioritise action in support of the enablers that will release the potential of SMEs, whilst continuing to work with large companies through partnerships to amplify and scale the development impact of their investments and value chains.
Dan, also where you mention "it will mean additional adjustments in how assistance is delivered and organized"... this takes education of those in need... there are still age old expectation of the "handout" in many developing countries. This mentality will not change without education at the youngest ages on collaborations across societies, financial, political and social collaborations-- to add community empowerment to the delivery and organization element.
When talking with corporations, what do you find to be the most compelling language on this topic? Does "public-private partnership for development" resonate? Is "shared value" a concept known outside of Cambridge and DC?
Zahid, yes it ahead of the curve and the 2011 (?) OECD DAC's peer review of US Development Assistance confirmed this. However, partnerships and the approach to partnerships is still done in some ways as a "work around". It depends on the leadership of USAID, it depends on local USAID people and how they plan their work. I do think that DfID has done some interesting things in the arena of challenge funds and the IADB through the "MIF" has some interesting partnership approaches. I will say that regarding Johanna's comment about NGO partners that most multi sector partnerships are often "knitted together" by NGOs or other implementing partners who have a broad set of relationships. I do think that donor agencies that "only" or "prefer" to work via "budget" or "sector" support have a hard time working across sectors...something to keep in mind
To Daphne's point on creating value and determining who sets the agenda, we in the U.S. operate within our existing framework and programmatic priorities. This creates challenges in that a company may wish to invest in a particular country, but in a sector that does not match the U.S. development programmatic priorities in that country (eg, in Tanzania we have a strong focus on food security and health; so a company that may wish to invest in another sector may struggle to develop a partnership with the government in that country).
What our group discussed at some length was how embassies may have greater flexibility to integrate USAID, MCC and other development efforts with the commercial section of the embassy - because ultimately, if growth and poverty reduction are the goal, we want to encourage investment and job creation within the country. That will require conversations and integration across development and commerce functions.
This isn't necessarily easy, but should be a goal.
Things have clearly moved a long way in terms of donor thinking about the benefits of engaging with business. Dan, Johanna, and others, what do you see as the benefits of engaging more closely with the private sector in development? Do you think these are adequate understood, and backed up with evidence?
I see in the report you have launched “Our Shared Opportunity” that the goal is transformation. I agree that Government and business have to work together in order to achieve this transformation.
Not only does business have to work effectively with ‘northern’ Governments but also work with Governments in emerging economies.
I also agree that business is well placed to promote growth and development. However if we are to move from pilots to scale, many of the activities should be embedded at an institutional level, so the country moves as a whole.
We have seen this in the cocoa sector in Ghana, where Government and national research institutions are driving future standards and common approaches.
Many companies assume that we are just talking about "partnerships" when we raise this topic. But the private sector members of our group (Chevron, Coke, Hess, Abbott Labs, and others) were very clear about the fact that their future is in developing countries, and their growth and success will hinge on thoughtful engagement in these markets.
The way they do business, through training, workforce development, focus on building capacity to meet phytosanitary standards, etc, will be a core part of whether they are successful in international growth or not.
So to really appeal to corporations, we don't talk about partnerships, and we don't talk about CSR; we talk about the role that workforce development and training plays in their international operations; we talk about the markets that are growing in developing economies; and we talk about the investments that are yet to be made by developing countries in infrastructure and other big-ticket areas.
These are all market opportunities that will exist, but that will require a different approach to business than would be needed in the United States or Europe, for example.
This is why we titled the report "Our Shared Opportunity" - because the group clearly saw the opportunity in international growth and markets, and saw that U.S. engagement internationally is good for American economic growth, and can have a serious and long-term impact in developing economies.
