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    The Evolving Links Between Business and International Development Agencies in PPPs


    International Trade Forum - Issue 4/2009

    The private sector has never played a greater or more influential role in international economic development than it does today. While 20 years ago the public sector delivered the majority of foreign assistance, today we are faced with a very different reality. Individual remittances, civil society organizations and business developers play an instrumental and important role in how aid models function.

    As international development strategies continue to rapidly evolve, the challenge for both public and private sector leaders is in how to adapt their thinking. The big question isn't about if they should partner together, but how to do it better.

    Depending on how in-kind contributions are counted, the private sector at present contributes approximately US$ 3.5 billion in overseas development assistance. Companies are currently investing more than US$ 150 billion directly in emerging markets and contributing another US$ 3 billion in social dollars and in-kind contributions. At this level of giving, multinational companies as a country would rank among the Organisation for Economic Co-operation and Development's top overseas development providers. The top ten international development agencies all have some kind of formal private sector engagement policy and/or office.

    Just as the role of the private sector has increased in emerging market development, so other aspects of the development equation have changed. There is an increasing focus on "bottom of the pyramid" (BOP) economics, microfinance, entrepreneurship and business skills development. Countries are also increasingly concerned about the environment and sustainable development. Instead of concentrating power in the hands of a few state agencies or national companies, policy-makers are increasingly studying diversification, local empowerment and the role of women in business and public policy roles.

    This paralleled transition from a top-down public sector aid approach to a more localized partnership agenda coupled with the growing role of the private sector in delivering international aid, spurred BCLC to think about how and why the private sector engages in partnerships. How does it work? Who is most receptive to working with companies? Why do organizations want to engage the private sector? Why and how do public institutions engage the private sector? These are some of the questions that prompted our study Partnering for Global Development: The Evolving Links Between Business and International Development Agencies.  

    Key findings from the report include:

    • The international development agency (IDA) sector outreach to multinational corporations (MNCs) is a relatively new phenomenon
    • Public-private partnerships are becoming an increasingly important strategy for emerging market development
    • IDAs are motivated by both development and the business agendas
    • IDAs still have significant "growing pains" in terms of developing public-private partnerships
    • IDA approaches to partnership process are evolving
    • Partner identification is a key issue
    • IDA programmes often support and build upon existing multilateral initiatives
    • There is often a disconnect between countries with the greatest need and where MNCs invest. There are success stories.

    While the agencies featured in the report are in different stages of incorporating the private sector into their development agendas, there are some agencies that have made great progress over the past ten years. The German, UK and US international aid agencies (respectively, GTZ, DFID and USAID) were among the first agencies to begin working with the private sector in the mid-1990s and have engaged in large partnerships that have proved to be beneficial for all stakeholders involved.

    Some of the success stories examined in the report include GTZ and the German Coffee Association and USAID and Chevron Corporation. And while how we measure success can be debated, both of these partnerships have provided all stakeholders with positive outcomes, which without a partnership model, would be unachievable.

    In particular the USAID and Chevron Alliance focused on rebuilding Angola's agricultural industry following the 27-year civil war that destroyed the infrastructure to sustain growth in the industry. The alliance focused on four key links: finance, production, processing and marketing. Among other benefits of the programme, this particular alliance generated US$ 1.2 million in revenues for local suppliers.

    The alliance evolved from a simple donor alliance into an innovative partnership. Both organizations worked as equal partners in programme development and implementation, lobbying for support and participation from the Angolan Government, and implementing new practices such as USAID's approach to evaluating proposals. 

    Engaging the private sector as an equal partner in development can prove to be very powerful and deliver significant benefits. However there are steps that need to be taken in order to systematize the way in which such partnerships work: 

    Reduce redundancy: It is imperative that the international development community understands who is doing what and where. There are a number of business, NGOs and government programmes in place in a given community but they don't always necessarily communicate with each other.  
    Increase efficiency: Partnerships often work because there is a clear sense of the competencies of each partner, and a willingness to create a well-defined division of labour.

    Maintain equitable status: As referred to previously in the article, partnership models only succeed when each partner comes to the table with a sense of mutual respect and shared value.

    By mapping needs and competencies, creating open communication channels, and developing templates for division of labour and desired outcomes, public, private and civil society organizations are continuing to improve their capabilities to contribute to global development. We are optimistic that the next 20 years will bring even more improvements in the way all of these actors work together to enhance economic growth and social progress. 

    The Business Civic Leadership Center (BCLC) is a non-profit affiliate of the US Chamber of Commerce. The BCLC addresses social issues that affect business, including corporate social responsibility, philanthropy, non-profit and social service effectiveness, globalization, community investment and disaster assistance. The US Chamber of Commerce is the world's largest business federation representing more than 3 million businesses and organizations of every size sector and region.

    Partnering for Global Development: The Evolving Links Between Business and International Development Agencies

    Conducted by the BCLC in partnership with Corporate Citizenship, the report focused on investigating ten IDAs and how and why they partnered with the private sector. The Chinese development agenda was also included and there is a special section dedicated to it. The ten agencies examined in the report are IDAs of Denmark, France, Germany, Japan, Netherlands, Sweden, Switzerland, UK and US, as well as the Millennium Challenge Corporations.

    A full copy of the report can be downloaded athttp://www.uschamber.com/assets/bclc/09partneringreport.pdf