Making policies work

Blog

The impact of European Commission support to private sector development (PSD)? We’re still none the wiser

03-05-2013

Share Button

Bruce Byiers blogs about an evaluation that is heavy in terms of pages, but light on recommendations

With ever-increasing pressure for donors to “show impact” for their aid programmes, there was a lot of interest in last week’s presentation of the Evaluation of EC Support to Private Sector Development in Third Countries from 2004 to 2010. But what can the European Commission (EC) actually take from this evaluation?

The report estimates that the EC spent €2.4bn directly on PSD over the period (plus €4.5bn if you count indirect support through general budget support and the EIC-managed ACP investment facility). The Agenda for Change also laid out a strong case for promoting and working with the private sector for development in the future. As such, there were expectations that this evaluation would get to the heart of where PSD support has been channelled across countries and regions, to what sectors and countries, through what types of instruments, and to what effect. But it didn’t.

Despite 3kg’s worth of project data and discussion, collected in three tomes (yes, we weighed them), the evaluation provides very little to chew on. Even for the EC.

Too much to evaluate?

This is not all down to the evaluators, as the EC recognised, but partly stems from broad the scope of the work. To evaluate all types of private sector support across all countries and then draw lessons is no mean feat. And this clearly wasn’t the place to discuss detailed project-level impact evaluations.

The conclusions are consequently vague and uninformative. There are mentions of the “heterogeneous package of activities”, “different types of value added”, the EC’s “generalist approach” and the difficulty of obtaining “a clear and complete picture of the observed results”, with little on how or where support was spread within regions. So there is little in the way of learning opportunities.

One clear conclusion

Of the 15 conclusions made, the clearest and most striking is the “very distant” linkage between PSD and job creation in EU support. This is especially surprising given that PSD is to a certain extent all about promoting job creation by creating the conditions for investment and firm expansion. How could it not be linked?

In fact this is down to the EC’s institutional division of labour between employment, considered a social issue, and PSD, an economic issue – so strengthening that institutional link could make sense. “Jobs”, has after all, become a key mantra of the development agenda following the Arab Spring, and recognition that this is really what people want and need, particularly youth and women.

Apart from this, the main conclusions presented related largely to EU “visibility” and “stakeholder awareness” – the EU was not seen as a major player in supporting the private sector – as though this was really the impact being sought.

And recommendations?

So apart from a need to “raise the visibility of EU PSD support”, what lessons did the evaluators draw for implementing the Agenda for Change?

They suggest that the EC “build on its value-added”. This makes sense, but at the same time requires you to judge where the value-added is. The EC’s value added for PSD support lies, according to the presenters, in i) the large scale of finance for PSD relative to other donors; ii) a long-term presence and iii) the untied nature of the support. Building on that kind of value added may not be easy.

It’s not easy

This is not to underplay the difficulty of measuring the impact of development policy for PSD or otherwise, a major and ever-growing preoccupation of academia and the development community. The challenges were made apparent at our December meeting on measuring impact, where we also discussed tools to support donor efforts such as the DCED Standard for Results Measurement. While not providing the answer, it nonetheless does provide guidance to help ensure that support can be better evaluated.

Other recommendations for the EC’s future support could relate to:

  • Drawing more specific lessons from the use of different types of instruments and support mechanisms across different groups of countries and for different segments of “the private sector”
  • Learning more from and building on bilateral donor support to the private sector;
  • Getting a private sector perspective on PSD support programmes;
  • Getting partner country views of how support programmes have supported their own strategies for investment, industrial and enterprise development policies (rather than ex-ante policy “alignment”).

Evaluations are a key part of the policy cycle, allowing governments and policy makers to adjust policy according to the lessons learnt. But that only happens if an evaluation provides concrete analysis. Here was therefore a missed opportunity.

More broadly, a key recommendation would be to “ensure the conditions are in place for an effective evaluation of all future programmes”. Then we might be a little wiser in five years’ time.

Dr. Bruce Byiers is Policy Officer Trade & Economic Governance at ECDPM

Picture
Copyright European Commission 2012.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Comments

David Sogge

|

2013-06-15 11:58:22

Evidence of public-private partnership effectiveness is simply very weak, says the IOB on the basis of a large literature review. It would be interesting to read ECDPM's views of this English-language report, which can be downloaded from: http://www.rijksoverheid.nl/onderwerpen/ontwikkelingssamenwerking/documenten-en-publicaties/publicaties/2013/06/13/iob-studie-nieuwsbrief-13-07-publiek-private-partnerschappen-in-ontwikkelingslanden.html

Bruce

|

2013-06-14 12:14:44

Thanks for pointing that out - interesting article. But if employment is the goal, as is the growing conventional wisdom? The last line of the article says "our study is silent about other potential effects of FDI. For example, FDI may generate employment, provide capital, and improve risk sharing and consumption smoothing. FDI may generate healthy competition in the labour market and FDI might even have growth-enhancing indirect benefits by impacting on structural policies." Productivity growth is clearly necessary to be competitive, but mining is a pretty high productivity activity. I guess the question is how much productivity vs employment are we looking for?

David Sogge

|

2013-06-04 11:41:36

One more PSD myth busted: FDI brings =no= productivity growth in lower-income countries, and may even lower it slightly. See the results of a major study, summarized on VOX as 'How big are productivity gains from FDI?' at: http://www.voxeu.org/article/how-big-are-productivity-gains-fdi

Michel Lavollay

|

2013-05-22 08:12:03

I am the founder of PPP Europe, working on Private Sector and Partnership issues for the past six years in Brussels. The conclusions of the evaluation essentially confirm that the PSD strategy must evolve to include a Public Private Partnership component. PPPs have brought very interesting results in sector work in health and nutrition and are being developed in agriculture and climate change. This is the way to link PSD and Development Goals.

Economic Transformation and TradeEuropean external affairsBusiness and DevelopmentEU Development Policy and PracticeAgenda for ChangeEuropean Commission (EC)European Union (EU)Private Sector Development (PSD)