Photo: Department for International Development

A New Era Of Private Sector-Led Development Work

Speech by Andrew Mitchell, UK Development Secretary

A New Era Of Private Sector-Led Development Work
In a milestone speech last night, the UK International Development Secretary, Andrew Mitchell, placed the private sector at the heart of the new coalition government’s development agenda:

“I want this department to be the place that lives and breathes the new DFID culture of private sector-led development, an example for other development bodies to follow.

“Aid is a means to an end, not an end in itself. It is the private sector that creates the jobs, goods and services that the world’s poorest people so desperately need to lift themselves out of poverty. We will help them achieve this.

“I want DFID to learn from business. I want to explore how we might enrich DFID’s own talent pool with a series of short-term secondments from the private sector in order to inject new, business-savvy DNA into the department, devising bold and creative solutions to development challenges. That is, after all, what business does so very well”.

The Secretary of State outlined a set of measures that DFID has described as “heralding a new era of private sector-led development work”:

– The creation of a new Private Sector Department to pull together and bring renewed focus to DFID’s business engagement work.

– A greater emphasis on reducing the barriers to growth and improving the environment for doing business in developing countries, alongside a new attempt to restart and conclude the international Doha trade talks.

– Reform of CDC, the DFID-owned development finance institution, to increase the development-focus of their investment portfolio. DFID is launching a public consultation.

The Minister’s speech reflects a new and welcome emphasis in DFID’s work, and an opportunity for the Business Fights Poverty community to contribute and inform the discussion.

Post your comments below, and we will ensure they are passed on to officials at DFID.

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22 Responses

  1. This sounds very promising – DFID realising the centrality of the private sector in achieving development is definitely a move in the right direction.

    It will be interesting to see what comes of this in terms of practically supporting private sector investment and measures to improve conditions for the private sector to flourish in developing countries.

  2. This is very encouraging. As a current VSO volunteer in India who has come from a corporate background and can see the need for the private sector to partner in development, I hope this sees a new era of business getting much more involved in reaching the MDG targets and trade over aid.

  3. I agree- the problem is entrusting delivery of strategy to the vested interests within DFID who are more concerned with self preservation than results on the ground. The dialogue with the private sector is as much about infrastructure provision and strengthening local government in the rural areas of developing countries and monitoring impact in those communities to enable private sector creativity to take root – country risk options also need to be considered as a platform for encouraging business into difficult former conflict countries. Dialogue with other countries is desperately needed to get over this huge hurdle of each development agency seeking to stick a flag on its own insular little projects which tick boxes within the bureaucracy but are fundamentally unsustainable and do not survive beyond the expiry of the aid money. Budget support is inappropriate and sends the wrong messages for impact assessment. Make use of the private sector resources already paid for in terms of assisting with project management rather than development agency staff who do not understand the private sector at all nor do they want to except in the context of non agriculturals. Agriculture will deliver people out of poverty given proper support and unified action by collective development support from development agences working to country plans which involve and include civil society in the developing countries at local government (community level). Question why farmers do not invest in their own communities!!

  4. This is another testimony to DFID’s leadership in finding new ways of sustaining development aid. Its important that the private sector is more involved in development and in particular British multinationals should be at the forefront of this new way of doing business in international development. The success of Japanese and Chinese development aid in catalysing the Asian tigers growth and now driving growth in Africa. Its crucial that DFID supports the building of capacity of SME’s in particular and also advocate for fairer trade through the WTO and also through the EU EPA negotiations. Regional integration and the enhancement of regional trade should also be a key consideration.

  5. Yes. a new era of “a new era of private sector-led development work” as it is happening in the “re-construction” of Irak and Afganist’an. There are enough articles about that from French, German and Spanish journalists which I am not going to list here.

    It would be interested to see if that “private sector-led” approach does not end in a new form of economic colonialism de facto

  6. Very promising. However, our investments in Africa face major infrastructure challenges which end up increasing costs for exports and reducing competitiveness. If it takes months to hook up a factory to the grid, when Internet is constantly dropping and the postal service cannot seem to deliver mail, it is difficult to be competitive and create an environment that attracts business.

  7. I think the speech marks a very important development for DFID. As others have said, of even more significance will be how this is taken forward through concrete action. Will the new Private Sector Department make it easier for the private sector to engage with DFID? Will it have the influence to ensure that the private sector – and the broader wealth creation agenda for poor people – will be integrated across all of DFID’s activities and country offices, rather than be confined to a separate department at HQ? Will DFID build on the initiatives it has already successfully put in place – such as with the Business Call to Action, the Business Innovation Facility and the Africa Enterprise Challenge Fund? What will be included and left out of the new department, and how will DFID ensure in maintains a coherent policy approach to all of the issues that matter to business, from large international and national companies to small enterprises and small-holder farmers.

  8. Great approach!

    If only internal and external conspiracy will not be exhibited.

    For a while development practitioners have not be very transparent to activities in the low income Countries. More so accountability and tracking mechanism has not been practicable in poor Countries.

    We wish a new era of global specialization in handling development across all sector.

    Africa continues to fail by a large measure to satisfy the essential development litmus test of creating enough jobs.

  9. The key phrase in the speech”DFID can learn from business”. I think DFID as international development agency could learn from a need expressed by by most of developing country’s private sectors : Entrepreneurship Culture Development among youth (high school and university) and Access to financial products (capital).

    The “Business savvy DNA” is crucial for the new era of private sector led development could be important for a country as Haiti in the reconstruction process after the disaster (last January earth quake). But with an other approach: dynamic private sector teached to youth mainly..in a new business environment, new incentives….

  10. The International Development Secretary will recast DFID as a government department that understands the private sector and brings the wealth, knowledge and creativity of the world of business to support the UK’s development efforts.

    I have just read some more of the detail of the speech last night:

    “The new direction is aimed at stimulating the private sector to become a much bigger engine of growth in the poorer countries of the developing world, bringing new enterprise and more investment. “
    The new measures will include:

    “More private investment. A new Private Sector Department will be established in DFID to boost the role of private enterprise in the poorest developing countries, with business experts seconded in to advise the Government on how best to do this. “

    “These reforms will herald a new era of private sector-led development work in DFID to create wealth and mobilise more private investment into and within developing countries.

    The new department will be built to comprise around 20 specialist staff with private sector and economic expertise. In addition to developing new approaches to invest in the legal, financial and physical infrastructure in the poorest countries, it will work with international companies to develop new business models that contribute to development and bring commercial returns.

    As an early initiative of the new private sector department, business executives will be invited in on short-term secondments to work with DFID to help develop new and creative approaches to stimulating wealth creation and providing jobs for poor people.”

    I think we have heard all of this before if packaged somewhat differently.

    We have all submitted comments to DFID or in response to Development White Papers or on waste and effectiveness in the aid process. Whilst the old guard remains in place blocking progress with the “Yes Minister” responses and dead batting constructive thought – then progress will be thwarted again – Secretary of State – those now at the helm of DFID are part of the problem and not part of the solution – they are responsible for £6 billion a year or so of aid spend and wih little to show for it in terms of sustainable benefit – unfortunately this is mirrored around the world and we need to play a part in changing the appraoch. “A New Paradigm in ODA” I hear you say – that is exactly what Agence France Development heralded 2 years ago but continued then to do very little.

  11. This is encouraging. It is probably one of the most effective ways of fighting poverty and to sustainably take communities out of the cycle of poverty. Does anyone how commercial businesses in the emerging markets that are structured with social development in mind get access to partners/investors to implement what the minister mentioned last night?

  12. I have been exploring the area of increasing efficiency in existing infrastructure, especially electrical power infrastructure, as I see this as essential in supporting business and development efforts. Reliable power supplies means that business, manufacturing can all run efficiently, be more productive and more profitable, meaning more job opportunies and growth. The business community needs to start talking to the engineering community as a first step. Engineers are needed to drive development in Africa. I would like to suggest this, electrical power infrastructure and skills training in women, as an area for investment for CDC, however I would also like to see an introduction of policy to ensure that local communities are not exploited. The poor need to be empowered themselves, and one way of doing this so that it lasts for the long term, is by educating women. Teach women to teach their children about the importance of learning to build things themselves, learning to invent through engineering, science etc. It would be great if the local communities in developing countries had the education, skill, experience and backing of organisations such as the DFID, so that they can exercise their own ideas for development.

  13. As a private sector employee running a small NGO in Uganda I think this is a wonderful opportunity to combine the professionalism, knowledge and experience from the business world with the passion, knowledge and first hand experience from the field – and in the areas that DFID are supporting. This combination is certainly missing today. I would like to know how this could work in reality…?

  14. Edited Post

    It’s marvelous to know that there is a reorientation with respect to aid focused development activities. In order for this strategy to work, I believe that the private sector must have good corporate governance and be open to innovation driven change.

    The private sector (in developing countries) must also be willing to establish sustainable partnerships with “in country” research institutes as well as Universities. These bodies possess a wealth of knowledge that could be transferred and embedded within the private sector which could promote growth the sector through improvment of its operations, diversification of its products and services etc. (Such activities exist in Nigeria through the British Council initiative – Africa Knowledge Transfer Partnerships (which s omdelled on the UK’s highly successful Knowledge Transfer Partnerships)).

    These are indeed exciting times.

  15. Its all very well saying that a private sector led approach will help development (in Africa) but you have to eliminate the core problems – corruption at all levels of government, undemocratic election processes and a supply of sustainable and safe drinking water for everyone. Water can never be the responsibility of the private sector.

  16. In response to Paul Shaw – part of the process in terms of improving governance is for our taxpayers funds to be used where the man or woman in the street can say – “yes I can accept this application”. If we hand over money under budget support against policies which the recipients “say” will benefit the rural poor but in practice do not and no-one on our behalf checks up on this and if sharp practice is discovered no-one is prepared to take people to task then we will never overcome the cynicism.

    A useful start point is to look at the infrastructure deficit within rural agricultural villages and measure how the budget support is actually flowing to them (or not) compared to the cities and government departments whose “capacity” is allegedly being strengthened and just see whether we like what is happening. If there is a public private collaboration which “insists” on investment in the infrastructure needed to get business moving including diversification away from single crops, including decent schools and medical centres then we start to address rural poverty and urban drift.
    There was a report last year about waste in the EU development regime – euros 60 billion spend and something like euros 7 billion wasted. Part of the process withi DFID and Andrew Mitchell is to start to get a grip on this situation such that the investment in the village communities is shared amongst funders and not as is generally the case now a series of disjointed, infrequent and usually irrelevant individual projects. I am speaking from experience by the way.
    Taking the cocoa market we have 3 million small holder farmers to produce 3.6 million tonnes of cocoa and so productivity is low. The income from cocoa is therefore spread too thinly. At the same time globally I estimate somewhere in the region of $10 billion is generated in taxes in the cocoa consuming countries – chocolate sales etc. $4 billion is in VAT alone. I am not making an economic argment for all that to be put in the development pot but even a fraction would enable PPPs to work effectively by strengthening local governemt within a national plan in the cocoa prodcuing countries and would be just one exampe of blending public and private funds.

  17. A strong economy is vital to sustainably lifting people out of poverty.

    For example, the typical social benefits of boosting the economy of Kenya by USD 100m are:

    95,500 more people with a proper water supply
    66,200 more people surviving past age 40
    41,600 fewer people undernourished
    28,300 more people with proper sanitation
    13,200 people lifted out of poverty
    3,070 fewer children underweight
    1,910 more children attending secondary school

    These numbers highlight the social imperative to develop economies and come from the Sequoia on Sustainability website;
    http://www.sequoiaonsustainability.co.uk

  18. When business is invited to help with development in poor countries it is especially important to keep human health in mind. What business produces and sells in poor countries can either assist in improving people’s health or not. It can in fact undermine the best development efforts if products or production methods are damaging to either humans or the environment. What the economy gains in economic growth can easily be taken out in health care costs down the road. How might the DFID address this concern as it moves into this new development approach?

  19. Firstly to David’s post – yes boosting the economy is the answer but where, how and by whom are big big questions and is the boosting exercise one which is sustainable by developing business and infrastructure or is it ploughed into some of the less helpful areas of the public sector and when the $100 million runs out another $100 million is required and have we asked the question why.

    I have met with a senior guy from the African Development Bank at Chatham Hoouse a couple of years ago and whilst he was showing some positive growth rates the reality was that it was very patchy – rural area development factors were hidden in the headline figures and his report was an early warning that MDG objectives would not be met.
    We need to understand where the poverty is, where the opportunities to improve livelihoods will attract sensible PPPs and free up funds for those areas where business development is extremely tough. Not sure DFID talks to the right people on these issues.

  20. Nancy – you highlight a huge dilemma. On the one hand we see highly priced pesticides which are approved by the EU via a pesticide regime dominated by and largely driven by a few giants who to be fair have huge costs of registration. On the other side these compliant substances are out of reach of poor farmers with poor orgainsation who then are exposed to counterfeit or obsolete substances.

    We can do our best to educate via websites and sensitisation but pesticides are necessary for many diseases despite the utopian objective of organic farming.

    But the wider issue of health is very much connected with water, sanitation and health centres and there have been several ODI meetings which attracted the focus of NGOs and not the private sector. The mechanics of capital accumulation for poor communities blessed with natural resources but thwarted by poor governance and infrastructure does have a role to play and we can have PPPs which work to identify gaps in services and opportunities to develop income streams as well as making a positive contribution to food security by increasing productivity and freeing up land to develop other crops.

    By working together on a problem which sees farmers not investing in theri communities (reasons are not always lack of cash) to create a situation where increased incomes complement community services but do not replace the role of the state (and its development partners) then the health concerns can be addressed as local governance is strengthened within the community and there is a sense of purpose of being a community leader – but things needs to get done and be seen to be getting done.

  21. I note that BFP orgainsers commit to pass on these comments to DFID. I would prefer that the comments also went to the Secretary of State for Development.

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