Sharing is caring? Making public-private partnerships more sustainable

There is growing recognition that global challenges are interconnected and complex, requiring multi-stakeholder alliances between all sectors of society. Increasing pressure on public budgets for development cooperation calls for using scarce public aid to leverage private resources that together can finance the United Nation’s 2030 Agenda for Sustainable Development.

Current state of play

Almost all donors engage with businesses in one form or another as part of their strategies to trigger economic growth, job creation and market development, all now agreed to be fundamental factors for development cooperation. While generating private returns for financial viability is important, a ‘successful’ partnership must generate public returns in terms of wider social, political and environmental benefits for the society. Balancing commercial and development interests also relates to the investment destination, as developmental needs are rather in poor, and often fragile countries, while investment returns and low levels of risk are to be found in more developed and stable markets. Hence, the challenge for partnerships is to balance these dual objectives. Thus, the question arises: can sustainability principles and criteria make those public-private alliances more ‘developmental’ so that sharing really means caring?

Principles and criteria

The burgeoning array of sets of development principles governing private sector engagement in development reflects a degree of convergence on what is appropriate private sector behaviour, though challenges remain in ensuring compliance and enforcement. However, to ensure compliance, both donors and host country institutions must find a balance between legally binding regulations and softer measures , aimed at motivating enterprises to comply - while it might be easier to incentivise and push private firms to sign up to voluntary principles also due to consumer interests, they may be less effective than mandatory principles. In a recent study for 11.11.11, ECDPM together with KU Leuven took a closer look at some of the main sets of criteria or principles applied to make private sector engagement more ‘developmental’ and sustainable. To do so, the study also looked at three prominent examples of PPPs to identify lessons learnt across various sectors.

Lessons learnt from the cases

The study covers three PPPs highlighting different factors: the roles of and interplay between the actors comprise i) a private sector driver in the agriculture sector for SAGCOT , ii) public health sector in the Lesotho case , and iii) a civil society-led cooperation on textiles in the case of the Better Factories Cambodia programme. Purposes and objectives for each of the cases differ from leveraging private investments, provision of health care as a public good, to addressing and influencing business practices. The Lesotho healthcare case showed that a key factor determining the course of a PPP is the capacity of the public partner to adequately negotiate, renegotiate, manage and monitor the deal throughout its entire contract term. Photo courtesy of UNMEER/Martine Perret via Flickr For SAGCOT, similar conclusions emerge from the controversies over land-titling and the power balance among different actors, where large agribusinesses may outplay smallholder farmers. In the Better Factories case, there were positive developmental effects on the most important industrial sector of Cambodia (garment sector) in terms of improved working conditions. However, it remains questionable whether the enforcement cost is not largely pushed onto the suppliers, with buyers remaining reluctant to take the full cost of a garment that is produced under fair conditions. The BFC process also seems to be designed in such a way that it guarantees international brands secrecy about the interactions with their suppliers. Photo courtesy of ILO via Flickr

Elephants in the room? Additionality and transparency!

The two concerns raised most frequently regarding development public-private partnerships (PPPs) are additionality and transparency. The first concern regards defining, ensuring and measuring the additional impact that is being achieved due to the public finance component. The latter relates to the availability of reliable information on the negotiation, the design, the implementation and the actual results of PPPs. Overall, the analysis reflects a wide and widening definition of PPPs, and difficulties of finding data on these. Hence, two basic questions need to be addressed when evaluating a PPP:

1. is the PPP the best tool to address the identified needs in a specific context, in comparison to the alternative options?
2. does the PPP deliver what it promised to deliver?

To do so, a better understanding of the PPPs’ distribution of costs and benefits is required. This calls for greater transparency, while the underlying design of the PPP must take into account the likely power imbalances of private sector actors negotiating with public ones in often institutionally weak environments. It therefore seems that finding answers to these questions and challenges seems more pertinent for the PPPs’ success and ability to become more ‘developmental’, than the criteria and principles of sustainability defined in the examined cases, as they are often broad and enforcement and monitoring mechanisms are rather weak. For more on this topic and related issues, read out our September/October 2016 issue of GREAT Insights: 2030: Smart engagement with business (to be released 29 September). The views expressed here are those of the author and not necessarily those of ECDPM.