Investing in the Business of Development: Bilateral Donor Approaches to Engaging the Private Sector

Added 31 Jan 2013

By Shannon Kindornay, The North South Institute, and Fraser Reilly-King, Canadian Council for International Co-operation, January 2013

The international development community is increasingly looking to the private sector as key partner for achieving sustainable development results. Despite this trend, donor policies for engaging the private sector have received very little comparative analysis. In January 2013, the Canadian Council for International Co-operation, in collaboration with The North-South Institute, released a new report which identifies emerging themes in bilateral donor policies around the private sector. It compares and contrasts donor approaches, unpacks old and new assumptions, and sheds light on the many ways in which donors are now seeking to partner with the private sector.

Donors from Organisation for Economic Co-operation and Development (OECD) countries are increasingly looking to the private sector as a key partner for achieving sustainable development results. Private firms and foundations are seen as a source of innovation, expertise and finance to be harnessed in addressing development challenges. At the same time, private sector actors are playing an increasing role in their own right both as funders of development interventions and as important business partners. The private sector is also playing a greater role in international discussions on aid effectiveness and in the establishment of the post-2015 framework that will follow the Millennium Development Goals (MDGs).

Donors have put their weight behind statements supporting the private sector at the United Nations (UN) Millennium Summit in 2010 and more recently at the 2011 Fourth High Level Forum on Aid Effectiveness (HLF4) held in Busan, South Korea. These trends signal an important shift where by the private sector is not only being afforded greater space to contribute to international and national policy discussions on development cooperation, but is also expected to serve as an important development partner. While donors have promoted private sector development for a number of years, the more recent focus on partnerships with the private sector, and its implications for development policy and practice, is an emerging trend.

Over the past few years, members of the OECD’s Development Assistance Committee (OECDDAC)-the forum through which donor countries coordinate their aid efforts—have renewed their focus on economic growth and the private sector as driving forces behind development.

Despite these trends, donor policies for promoting economic growth and the private sector have received very little comparative analysis. This paper seeks to address that gap with an initial mapping and exploratory assessment of bilateral donor strategies on the private sector and economic growth. The paper is based on an examination of publicly available OECD-DAC donor policies reviewed between January and June of 2012, including websites, strategy papers, policy documents, and donor commitments at HLF4 and in other multilateral fora. Taking a framework analysis approach, the objective of the paper is to identify emerging themes in donor policies around growth and the private sector by comparing and contrasting different elements of donors’ strategies. These elements include the visions and assumptions of donors’ strategies, the pillars of their approaches, areas of focus, and budget sizes. The research also examines how, in the context of growth and private sector strategies, donors see the role of the state, private sector actors, and other development actors. Finally, the paper looks at the extent to which donor strategies take into consideration development and financial additionality, international aid and development commitments, cross-cutting issues such as sustainability, gender, and human rights, and principles relating to aid effectiveness. While there has been much work looking at the role of the private sector in development, there has been less of a focus on the private sector in the context of aid effectiveness.