Getting back on the rails - A new Christian Aid report on the private sector and development
Post submitted by Matthew Coghlan, Senior Trade & Private Sector Policy Officer, Christian Aid.
With private sector, government and civil society collaboration evolving so rapidly, Christian Aid has taken the time to reflect on the relationship between the private sector and development, and the role that government should play in strengthening the private sector’s contribution to development: http://www.christianaid.org.uk/resources/policy/Private-sector-and-....
In our new report, Getting back on the rails, we review the different ways that different private sector actors can contribute to development: jobs and wages, infrastructure, goods and services, amongst others. We find evidence of the contribution that multinational companies can make - especially in relation to jobs and wages - as well as the harm that they can cause, while more research is needed to understand fully the contribution of SMEs and microenterprises.
This line of inquiry gives rise to key questions that we have not answered in the report but would like to in future:
1. Which actors make the strongest contribution to development? How do they?
2. Should private sector development (PSD) strategies prioritise one actor or all? Which one?
We then look at the two main donor PSD strategies: the investment climate approach and inclusive markets approach. We are most concerned by the former, led by the World Bank, because it elevates the liberalisation of markets and business above the right of governments to govern them, particularly for the inclusion of small businesses and protection of vulnerable employees. We have much in common with the inclusive market approach, although we query the ability of markets to provide essential infrastructure and resources, and goods and services, to poor entrepreneurs and communities.
Our investigation here suggests the need to be more critical of the investment climate approach. Why should developing country governments succumb to pressure to harmonise their regulatory environment with the World Bank’s Doing Business Indicators, for example, when such measures close the space available to them to tailor their commercial, labour and tax laws to meet their basic development needs?
We conclude by arguing that developing country governments must be able to make the right policies, introduce the right regulations, and build the right institutions to strengthen the private sector’s contribution to development. Voluntary initiatives are not sufficient to ensure that growth eradicates poverty and development is sustainable. However, corporate social responsibility, and the new generation of business models that seek to contribute, can make a difference and provide ideas for new governance.
On page 17 of the report, we set out a package of policies that we believe is required:
1. Do you agree or disagree with them? Should there be more or less?
2. What should their form and substance be in law and/or in practice?
3. How can we integrate low carbon and climate resilience into them?
Christian Aid believes that economic growth is an important tool for the eradication of poverty and that the private sector is its engine, but that growth can be more, or less, beneficial to development. Governments should intervene to include the poor in markets and to protect them from harm, while supporting a dynamic and diversified private sector. And we welcome the opportunity to discuss how this can be achieved.
With private sector, government and civil society collaboration evolving so rapidly, Christian Aid has taken the time to reflect on the relationship between the private sector and development, and the role that government should play in strengthening the private sector’s contribution to development: http://www.christianaid.org.uk/resources/policy/Private-sector-and-....
In our new report, Getting back on the rails, we review the different ways that different private sector actors can contribute to development: jobs and wages, infrastructure, goods and services, amongst others. We find evidence of the contribution that multinational companies can make - especially in relation to jobs and wages - as well as the harm that they can cause, while more research is needed to understand fully the contribution of SMEs and microenterprises.
This line of inquiry gives rise to key questions that we have not answered in the report but would like to in future:
1. Which actors make the strongest contribution to development? How do they?
2. Should private sector development (PSD) strategies prioritise one actor or all? Which one?
We then look at the two main donor PSD strategies: the investment climate approach and inclusive markets approach. We are most concerned by the former, led by the World Bank, because it elevates the liberalisation of markets and business above the right of governments to govern them, particularly for the inclusion of small businesses and protection of vulnerable employees. We have much in common with the inclusive market approach, although we query the ability of markets to provide essential infrastructure and resources, and goods and services, to poor entrepreneurs and communities.
Our investigation here suggests the need to be more critical of the investment climate approach. Why should developing country governments succumb to pressure to harmonise their regulatory environment with the World Bank’s Doing Business Indicators, for example, when such measures close the space available to them to tailor their commercial, labour and tax laws to meet their basic development needs?
We conclude by arguing that developing country governments must be able to make the right policies, introduce the right regulations, and build the right institutions to strengthen the private sector’s contribution to development. Voluntary initiatives are not sufficient to ensure that growth eradicates poverty and development is sustainable. However, corporate social responsibility, and the new generation of business models that seek to contribute, can make a difference and provide ideas for new governance.
On page 17 of the report, we set out a package of policies that we believe is required:
1. Do you agree or disagree with them? Should there be more or less?
2. What should their form and substance be in law and/or in practice?
3. How can we integrate low carbon and climate resilience into them?
Christian Aid believes that economic growth is an important tool for the eradication of poverty and that the private sector is its engine, but that growth can be more, or less, beneficial to development. Governments should intervene to include the poor in markets and to protect them from harm, while supporting a dynamic and diversified private sector. And we welcome the opportunity to discuss how this can be achieved.
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Comment by Ruth Brännvall on October 4, 2009 at 1:15pm -
Thanks for a great report that well summarises the needs and issues associated with private sector development.
Since there is a call for states to have their right and freedom to determine their own policies, which seems obvious and the only way to move forward, we should nevertheless also consider the practical consequenses of the transition of foreign aid policy which has followed such recommendations to a 100%.
The Swedish International Development Agency, which is one of the larger bi-lateral donors in Africa, radically changed its foreign aid policy when the conservatives came into power 3 years ago. Instead of a programme driven aid it changed to a demand based model, where the poor countries could request aid to support their own budgets and programmes. According to senior specialists within SIDA, this means money now is used for traditional policies that "may even taking countries backwards". What is meant by such strong statements? As an interesting example in times of climate change debate, before the policy change SIDA was working on environmental projects in some 30 countries. Today, only two-three countries have requested that the donor would support such projects. The rest had scrapped or substaintially reduced budget allocated to environmental and sustainable development.
Naturally, accountability also becomes difficult with this approach, when no money can be marked for certain activites. This makes sense if the donor is spending its own money, but when the donor represents another country's tax payers this is questionable.
Just like Africa or Asia cannot be treated as single markets, not all poor countries can be given the same reccomendations. Some will be ready to make their own decisions and policies, but where corruption and demoncratic processes are still big issues, do we not need a mix of initiatives from both state and private sectors, but also civil society?
Best Regards,
Ruth Brannvall
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