Early this week development policy makers, executives and social entrepreneurs gathered in Aspen, Colorado, for the 10th Annual Blum Roundtable on global development. For the first time, the event focused on the role of the private sector in solving global challenges.
Speakers include heavy-hitters like Partners in Health co-founder Paul Farmer, former Irish president and U.N. human rights commissioner Mary Robinson and former Secretary of State Condolezza Rice, among others.
To shape the debate, Brookings published three policy briefs. The first of these, “Reimagining the Role of the Private Sector in Development,” tackled the toughest issues at the heart of the new involvement of business in development.
Authored by Homi Kharas, a Brookings senior fellow and former World Bank economist who penned the report of the U.N. Secretary General’s High-Level Panel, the paper articulated what many others working at the intersection of business and development have expressed: That existing modes of partnership don’t fully harness the potential power of the private sector to address global challenges.
“Every high-level development report and project now has private sector involvement,” wrote Kharas. “The time is ripe to systematize this approach and experiment with new forms of partnerships.”
Taking it as a given that major financial investments in development will come from the private rather than public sources, he called on development agencies to coordinate mega-partnerships that significantly increase private sector investment in key areas.
He praised the newly unveiled Power Africa initiative, which uses $7 billion in U.S. government spending to leverage $9 billion in promised private-sector investments, but noted that the involvement of so many government agencies made the partnership needlessly complex and, therefore, more risky.
Kharas called on public development leaders to “force” their agencies to adapt to the new world of development finance by setting leverage ratios, so that, for example, every dollar of taxpayer money would leverage five private-sector dollars.
Secondly, Kharas called for private sector-led innovation to solve the problems of scarcity of water, energy and food. The massive increase in farm productivity required to meet the food needs of a growing population, for example, requires significant technological and scientific breakthroughs.
Kharas praised the rapid innovation model in use by the U.S.-based nonprofit Innovations for Poverty Action but argued that uncertainties around commodity subsidies and financing structures will continue to the private sector’s ability to innovate. He pointed out, for example, that World Trade Organization rules currently prohibit many public subsidies for private sector innovations.
Finally Kharas called on the private sector to proactively win over skeptics in the development community through greater accountability, writing that today’s company need to “overcome the legacy of socially damaging behavior by a few companies in the past.”
He encouraged companies to voluntarily disclose their social and environmental footprints – including the footprints of their supply chains – through a recognized reporting system like the Global Reporting Initiative.
“Finance, innovation and accountability can all be advanced through public-private partnerships that lay out expectations for firms and governments in a transparent way,” wrote Kharas.
“This is a strong incentive to start to develop a new language of business impact that recognizes the broader contributions that the private sector makes to development and poverty reduction.”
How do you think private sector involvement in development can be improved and accelerated? Add your suggestions below in the comments section.
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