Towards the Agenda 2030: Will private sector engagement through development cooperation deliver?

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The private sector is in the spotlight of financing efforts for the 2030 Agenda for Sustainable Development. The prevailing narrative at the global level emphasizes the need to shift from ‘billions in ODA to trillions in investments of all kinds’ by using official development assistance (ODA) as leverage to tap the large potential of the private sector to fund the Agenda. This approach stems from the belief that ODA, and public finance in general, may be inadequate for the Agenda 2030’s enormous financing requirements.

 

While recognising the role the private sector can play in development, CPDE has consistently challenged this narrative, when such shifts the focus away from existing commitments on the quantity and quality of ODA. We believe that ODA is an indispensable resource for the alleviation of poverty and inequality in developing countries, and we carried this principle with us in different policy engagements, most recently when we joined the recent virtual conference of the Global Partnership for Effective Development Cooperation (GPEDC).

 

In the said event, which convened donor and recipient governments, civil society, the private sector, and various other constituents, GPEDC aimed to set the level of ambition towards the next High-Level Meeting (HLM) in 2022, which will gather world leaders to track the progress in the Agenda 2030. This was an important step in articulating tangible outcomes and activities for the Partnership’s plan of action, including its work on Private Sector Engagement (PSE) through development cooperation.

 

Using ODA to ‘subsidise’ and ‘catalyse’ private sector engagement in development has become a popular strategy for financing sustainable development, despite challenges around transparency, accountability, and lack of evidence of development impact. To address these, and with a view to improving and promoting PSE, the GPEDC developed the Kampala Principles for effective private sector engagement through development cooperation. The Principles include: inclusive country ownership, results and targeted impact, inclusive partnership, transparency and accountability, and leave no one behind.   

 

CPDE contributed to these Principles and, while not without flaws, appreciate that it reflects a balance of different priorities across the diverse constituencies that make up the GPEDC. The Principles were endorsed in the summer of 2019 during a Senior-Level Meeting of the GPEDC. This means the focus now must turn to the implementation of the Principles in the lead-up to the HLM. This, CPDE believes, should be the basis of the GPEDC work on PSE over the coming years.

 

We support the development of an initial set of soft guidelines to assist with the implementation of the Kampala Principles. We then welcome the initiative to draft this common framework to aid the implementation of the Principles, including the identification of good practices. However, we believe that this should not be a main activity in the GPEDC work programme. Although this is a cross-constituency effort, donor governments, as providers of development cooperation, will hold the greatest leverage when supporting their adoption in practice.

 

Concretely, the GPEDC could undertake a number of country-focused case studies on how donors are integrating the Kampala Principles in their engagements with private sector actors, especially where ODA or any other form of public financing is involved.  It could also examine the types of sustainable development in-country impacts resulting from the use of the Principles. Thus, the GPEDC should review towards revising its monitoring framework particularly the Private Sector Engagement Indicator to factor in the application of the Kampala Principles.

 

However, with our feet firmly on the ground, we believe that the Principles should not be expected to miraculously improve business behavior, or be used to justify further mobilisation of private sector investments through ODA. Efforts to catalyse and crowd in private sector financing through ODA can create incentives that do not necessarily align with the poverty alleviation mandate of development cooperation. This strategy presents clear risks and trade-offs for the optimal use of development cooperation in reducing poverty and inequality.

 

Numerous studies, including a GPEDC study of 919 PSE projects, document significant gaps in promoting country ownership, the participation of MSMEs and social enterprises, focus on development results, and other aspects of the Kampala Principles in partnerships with the private sector. CPDE believes that these challenges and stumbling blocks must be continually recognised and addressed as much as positive examples. 

 

Private sector engagement through development cooperation is still an emerging practice. This, CPDE believes, makes it important to look at the strategy as only one of the numerous tools in the development cooperation toolbox. In the absence of convincing evidence of its effectiveness, development stakeholders must refrain from treating private sector engagement as a panacea to get the Agenda 2030 on track. #

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