Archive for the ‘Private Sector’ Category

Three rules for donors: making sure public-private development finance actually works

April 4, 2016

Last year’s Sustainable Development Goals (SDGs) and Paris Agreement on climate change represent a significant political shift away from a dependency on fossil fuels towards an era of development more in harmony with the environment. They broaden the previous focus of tackling poverty to include leaving no-one behind and tackling inequality.

Both will require billions, if not trillions, of pounds to implement.

With limited aid budgets, donor governments and global institutions have quickly set their sights on leveraging private sector investment as a way of plugging this finance gap. Aid budgets are increasingly directed towards participating in private sector projects, such as big infrastructure projects like roads, ports and hospitals; service provision such as schools; energy and healthcare.

But if public-private partnerships (PPPs) are to be used effectively to implement both the SDGs and the Paris Agreement, donors need to keep three key rules in mind. (more…)

Can we reach a principled approach to public-private finance?

April 10, 2015

In a year of major UN Summits on development finance, sustainable development goals (SDGs) and climate change, the topic that has dominated the discussions has been on the role of the private sector and the finance that it can provide and finance that can be channelled through it.

This is clearly controversial with some groups arguing that no development finance should go through the private sector, while others see it as the panacea to “crowd-in” as much private sector involvement as possible.

Whichever side you’re on (or somewhere in the middle), one thing is clear – that the role of the private sector is likely to increase significantly in all forms of development in the forthcoming years, and certainly within the lifetime of the new SDGs.

(more…)

Jobs and Livelihoods: What should we be focussing on?

April 9, 2015

Towards the end of March, the International Development Committee [1] report on ‘Jobs and Livelihoods’ was released. This inquiry looked at DFID‘s economic development strategic framework (EDSF) to determine what impacts it could make on increasing jobs.

The report noted the importance of ‘improving livelihoods’ rather than just focussing on formal sector jobs which, (even where there is success in creating these) may not be accessible to many women and men living in poverty. Most encouragingly, the IDC also focussed on the informal economy (more…)

Thinking small about inclusive growth  

September 8, 2014

TS & IGToday I’m posting my fourth and final blog in this inclusive growth mini-series (you can click here for the first, second and third blogs).

Working on economic justice issues here at CAFOD one of my main areas of work is on small businesses: the role that these play in economies and to the lives of the poorest women and men and the support that they need (you can see some of our other small business blogs here). So what’s the connection…? Do small businesses have a role to play in inclusive growth? (more…)

Inclusive Growth – some steps in the right direction

September 1, 2014

Last weeIG steps in the right directionk I emphasised the need for strong definitions when using ‘inclusive growth’ in strategies and work plans. I also highlighted some possible ingredients that should be considered for this.

But once we are clear what it is, what are the steps that we should be taking towards achieving inclusive growth?

Given the diffuse and varied definitions of inclusive growth, it is surprising that there is considerable consensus in the literature on how to achieve or operationalise it. As our working definition highlighted, growth will not automatically be inclusive. Proactive intervention and strategies are needed to ensure wider development outcomes. Briefly, these include 7 aspects: (more…)

Definitions matter

August 26, 2014

Attempting to pin down the (seemingly) secret ingredients of ‘inclusive growth’

IG recipe for success

When it comes to policies and strategies, definitions matter. They provide the boundary lines for what will be tackled. They set the objectives that will determine spending choices. Importantly, they are a vital step towards greater transparency and accountability.

Inclusive Growth is a widely used term. In 2014 the IMF, European Commission and DFID have all used this term in their work plans or strategies and the Open Working Group on Sustainable Development Goals has included it as a part of the post-2015 development agenda.

For such a ubiquitous term, the meaning of inclusive growth is incredibly hard to pinpoint. There are also surprising differences in approach amongst organisations and institutions. At times, the word ‘inclusive’ is inserted before ‘growth’ but the approach looks unexpectedly similar to a standard economic growth package.

(more…)

What’s so inclusive about growth?

August 18, 2014

Inclusive growth

Franklin Roosevelt once said “We are trying to construct a more inclusive society…. We are going to make a country in which no one is left out”.

Fast-forward to 2014 and it would seem that an ‘inclusive society’ is harder to achieve than hoped with US inequality levels soaring.

So back to the question – What’s so inclusive about growth?

Historically? Well as the case of the US shows(along with many other experiences from around the world) nothing really. As the OECD highlights, there are three problems that even the record levels of growth of the 1990s and decade of 2000s failed to tackle: poverty, unemployment and inequality. (more…)

Is access to justice for poor communities really so risky for British business interests?

April 8, 2014

justiceimagesIn 2011 and 2012 the UK Government submitted official briefings to the US Supreme Court in relation to two high profile legal cases alleging corporate involvement in grave human rights abuses in the Niger Delta and Papua New Guinea.

These briefings questioned the right of the affected communities to use the US Courts to bring cases against Shell and Rio Tinto respectively. On 7 April the Guardian reported on the backstory to this decision, including the links between Shell and Rio Tinto and the Foreign Office’s official intervention in relation to these US Court cases.

The article is based on documents drawn from the CORE corporate responsibility coalition’s freedom of information requests. http://www.amnesty.org.uk/sites/default/files/fs50487115_croser_kiobel_-_full_documents_following_ico_decision.pdf

They raise key questions about how and why the Government chose to prioritize what it saw as business interests in the Kiobel v Royal Dutch Petroleum & Shell case.  (more…)

Trademark Southern Africa – what could be done differently?

December 18, 2013

Paul Spray

 

By Paul Spray (Traidcraft) with inputs from Sarah Montgomery (CAFOD)

Paul is the Director of Policy and Programmes at Traidcraft. CAFOD and Traidcraft have been working together for a number of years on the aid for trade and small business agenda (see the footnotes below). It is great to welcome Paul as a guest

This month, DFID for the first time cancelled a programme as a result of a review by the government’s Independent Commission for Aid Impact (ICAI). It was a flagship programme called Trademark Southern Africa, whose purpose was “to improve southern Africa’s trade performance and competitiveness for the benefit of poor women and men”.

(more…)

What would ‘thinking small’ look like in global value chains?

July 9, 2013

sticky

The challenges I face are obviously affected by being a small business. Middlemen buy my product and sell it to the big company. They impose their price. (Jose Luis, Nicaragua)

Big business only rarely listen to our needs because they don’t need us (Abdul, Afghanistan)

Whilst it is never as simple as “big” versus “small”, small businesses do describe a view that they are often exploited in their supply chains. The above two views were expressed by small business owners that we talked to in our (second) Think Small research that’s currently underway (see our first Think Small research here). The question is, can Global Value Chains (GVC) ever be beneficial?

The promotion of GVCs has become a hugely popular approach to enterprise development and one which is becoming a bigger focus for donors. The argument for inserting small businesses into GVCs is that this will help them to develop as businesses and thus provide jobs and benefit the economy overall; and ultimately, be good for poverty eradication.

But, given the views of small and micro enterprise (MSE) owners, we think this enthusiasm needs some tempering. It is clear, that the lived experiences of small businesses in GVCs are not automatically positive. Fairtrade research, for example highlights how value does not reach the ‘bottom’, stating;

“…there is clear desire among some to get more value out of their product. From experience, this desire comes from producers’ experience of long-term declining farm gate prices, their sense of powerless in the face of this decline, and, for those with access to the information, a painful knowledge of how their income represents an ever smaller fraction of the final retail price.”

So the question should be how can GVCs be made to benefit MSEs (who generate most of the jobs and a significant proportion of the GDP of developing countries)? Our research has highlighted 3 things that are important to consider towards this end;

1) POWER

The relative power in GVCs can determine whether these will be a negative or positive experience for MSEs. All too often, small business’s lack of voice and power leads to market marginalisation or unfavourable terms on which to do business.

In Zambia small businesses often found that they had to do business on poor terms because they needed customers and had limited options. They were also in a precarious position when things went wrong as they lacked resources, (especially financial) skills and expertise to enforce contracts when agreements were broken. Ultimately, their lack of political, social and economic power kept them trapped in this weaker position.

It’s essential to consider voice and power when inserting MSEs into GVCs to avoid exploitative relationships. Initiatives which seek to improve the bargaining position of MSE suppliers, to reinforce their rights to land and water or to tackle social and political exclusion rather than simply ‘integrating’ them into supply chains have lead to greater benefits for those participating in these GVCs.

2) RISK & VULNERABILITY 

Being included in global markets and supply chains can result in higher risks for MSEs (as the example from Zambia highlights). MSEs are often the most risk sensitive and vulnerable and short term risks can have long term impacts for them. Unfortunately, in some cases, buyers are able to pass risk down the chain, so that the MSE can bear the majority of risk in the bad times, whilst reaping a smaller portion of the gains in the good times. (Vorley & Fox write an interesting, if slightly dated, paper on this).

Initiatives which consider risk and vulnerability, on the other hand, can mean that GVCs can have a much more positive impact on MSEs. There are various activities which could help people cope with risk and so mitigate their vulnerability, for example;

  • Social protection schemes can provide a safety-net when times are difficult.
  • Macro-economic policies can reduce risk and decrease vulnerability of small-scale traders and businesses. Small scale producers and traders in our research talked about the importance of price stability as a tool to help in managing and planning their finances.

3) SUPPLY and DEMAND
Demand is a key consideration which is often neglected in livelihood development programmes but which our research found is a major issue for many MSEs. GVCs can potentially be a really good mechanism in addressing this demand challenge by providing stable and good buyers for MSEs (provided issues of risk and power have been addressed!).

However, GVCs are not the only solution and other, often more appropriate options, should not be neglected.

Focussing on local and regional markets can bring more widespread benefits. MSEs often produce goods and services that are more locally appropriate and are better able to compete at a local than global level. Inserting small businesses into global markets requires intense efforts to meet standards and other demands, and only benefits a small proportion of MSEs. Improving access to and conditions in local and regional markets is more likely to have more widespread benefits more easily. A critical problem in many of these is a lack of demand – quite simply it is harder to sell when most of your customers are poor. Again, social protection can be a way of injecting cash and boosting demand in these local markets. [See footnote: 1] 

Another useful tool in this regard would be encouraging countries to use public procurement to support local businesses or encouraging countries or localities to develop trade and investment strategies that support MSEs and have a local and regional focus and which prevent enclave development.

Supply issues are also a major concern for small businesses. The supply constraints that most MSEs face can make it difficult for them to be inserted into GVC as they can’t provide the goods or services in sufficient quality or quantity to meet the demands of the buyer. Helping MSEs to meet these supply constraints requires comprehensive and proactive support, based on local needs and context. This is often inadequate or neglected in favour of size-blind policy reforms.

These three considerations are essential to making sure that the effects of GVC are positive for small businesses.

With these three considerations in mind, the role of Government can’t be ignored; government needs to play a proactive role if we’re going to see GVCs being more positive for MSEs. They need to play an important role in guiding national development and trade and investment strategies so that MSEs are able to benefit. They also need to play a role in supporting MSEs and facilitating discussions between big and small business to ensure that MSEs are not marginalised.

And so we come back to the voice of a small scale entrepreneur…

Those representing small-scale fishing to the government are the big companies, not us fishermen… and that’s when the fisherman loses. (Edmundo, Nicaragua)

For GVCs to work for small businesses there needs to be change around the three issues raised here. The role and contribution of MSEs in these systems needs to be valued and rewarded fairly. Power, risk and vulnerability need to be addressed and strategies to include them fairly need to consider issues of supply and demand. The benefits of GVCs may not be automatic; but with some work and careful consideration the benefits can be there.

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[1] These can be beneficial because that injection of money into local markets is likely to stay within that local economy – through people buying local goods and services.  These transfers can stimulate and support the local economy during difficult times and also have significant multiplier effects – the cited Malawian study for example, found that for every $1 transferred; at least an extra $2 was generated within that community. (Davies, S & Davey, J. 2008. “A regional approach to estimating the importance of cash transfers on the market: the case of CTs in Malawi.”)