Bilal, S. 2016. 2030: Smart engagement with business - Editorial. GREAT Insights Magazine, Volume 5, Issue 5. October/November 2016.
Engaging the private sector has become a common motto for the development community. This, in itself, is a major evolution, as private forces have too long been dismissed, when not chastised, by many development actors! It is now well recognised that the vast majority of employment is provided by the private sector, which plays critical roles in production, investment, innovation, technology, services and finance provision. It can also be a major social actor, which can contribute to accelerate sustainable development and prosperity for all.
But engaging the private sector cannot be an end in itself. It is only one of the means, albeit a most important one, to achieve development, as embodied in the 2030 Agenda for Sustainable Development.
To do so successfully requires public and private actors to adhere to some key principles regarding issues such as responsibility, accountability, transparency, mutual respect, equity and sustainability. Such principles must guide the framework, instruments and modalities for engaging the private sector and promoting its activities towards sustainable development goals (SDGs).
There are numerous initiatives towards such endeavours. The challenge is to learn from such experiences, better understand the contextual issues and environment in which they operate, pay more attention to the interests and incentives at stake, and better assess their impact, including unintended consequences. One question is thus, how to do better?
One emerging lesson seems to always relate to local contexts. There is no “one-size-fits-all” approach. Build on local initiatives, from individual actors, companies, public authorities, and government. The role of the business environment matters a great deal. But it cannot be viewed in isolation from broader governance dynamics and policies, including health and education. Perceptions also matter a great deal. Take risk assessment in Africa for instance, which is generally perceived as much higher by outsider companies than by those companies already operating in Africa. Taking explicitly self-interested and profit-making motivations is also a key condition for a constructive engagement with private sector. Also from a partner country perspective, as in the case of economic diplomacy, which is gaining increasing attention and recognition, including in development circles. The challenge there is to balance – and often reconcile – different incentives, in the pursuit of economic and financial sustainability, combined with developmental, social and environmental sustainability. This requires attention not only to the design of interventions and policies, but also greater efforts in implementing, monitoring and assessing such private and public initiatives.
To achieve the SDGs also requires a leap forward in terms of scale and scope. Therefore, a major question relates to what should be done differently to better leverage and scale-up engagement with the private sector to achieve the SDGs.
While anchored in local realities, the challenge is to think big, including in terms of frameworks and initiatives. In terms of resources flows, this relates to the stated ambition of moving from mobilising billions to trillions of dollars to achieve the SDGs, following the call by international financial institutions (IFIs).
The European Union (EU) is initiating a first significant response, with the launch of the European External Investment Plan (EEIP). Focused on the EU’s neighbourhood countries and on Africa, the EU will dedicate €3.35 billion from its budget and the European Development Fund (EDF) to the EEIP by 2020 in the hope of leveraging €44 billion from development finance institutions, institutional and private financiers. That may go up to €88 billion if EU member states also chip in. Besides the aim of leveraging additional billions, the true EU ambition is to establish one single coherent framework for its investment support, which has been conducted in a rather uncoordinated and segmented manner so far. Next to the new European fund for sustainable development (EFSD) and its much needed guarantee mechanisms, the EEIP will provide technical assistance and promote a better business environment, seeking greater efficiency under a stronger political drive to stimulate sustainable investment.
Such initiatives can only be effective, though, if they come in support of development endeavours at local, national and regional levels in developing countries. There is no substitute for domestic dynamics towards structural transformation for sustainable development. This includes moving away from a commodity-based economy to more productive and diversified activities, with the aim of stimulating decent and sustainable jobs and improving social well-being in a sustainable and inclusive manner. That is, it is about industrial development, in the broad sense. Oddly enough, the term is still out of fashion, when not taboo, in many circles. It shouldn’t be. Private sector engagement for sustainable transformation requires industrialisation, in a strong multi-stakeholder partnership, with key roles for state, other public actors, as well as civil society actors.
Last, but not least, engaging the private sector must lead not only to more wealth creation, but also to more sustainable and inclusive outcomes. Next to poverty and under-development, the major challenge faced by our societies, in developing, emerging and developed countries alike, is the rapidly rising inequality. Only through shared prosperity can private sector engagement become meaningful.
This issue of GREAT Insights brings together many perspectives and insights on the many innovative approaches pursued to rise to these challenges. As always, we hope you enjoy them, and welcome your comments and suggestions.
This article was published in GREAT Insights Volume 5, Issue 5 (October/November 2016).