Peter Davis: Donors Should Engage Private Sector to Make Aid More Effective

Donors should recognize their complementary role with the private sector and collaborate more strategically with them. By doing this, donors will be able to leverage their limited resources and demonstrate that they genuinely contribute to pro-poor growth, advised Peter Davis, research fellow at the Overseas Development Institute

Davis cites the experience of India and China, where dramatic economic growth in the past decade has been driven largely by the private sector.

Value chains of international investors are also a powerful tool for broad-based development. Davis cites Dutch nonprofit group Center for Research on Multinational Corporations, which says that such value chains may contribute positively to the economic, social and environmental aspects of a country’s development. In fact, the amount U.K. mining company Anglo American spends each year on procurement from emerging market economies is comparable with the aid budgets of the U.K., France or Germany.

Yet, Davis notes private sector development has largely been “peripheral” to most donor activity despite mounting evidence of its huge impact.

Davis recommends the following for more strategic engagement among donors and the private sector:

  • Rethink the U.N. Global Compact. The U.N. Global Compact was originally conceived to be an initiative to bring companies together with U.N. agencies and civil society, but has since “become a U.N. institution in its own right.”

  • In the formulation of comprehensive development plans, donor agencies should not only involve the host governments, but the corporate sector as well.

  • Donors should make the corporate sector “more central” to their operations.

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About the author

  • Che de los Reyes

    As a senior staff writer, Che focuses on international development breaking news coverage as well as interviews and features. Prior to joining Devex, Che handled communications for local and international development NGOs and government institutions in the Philippines.