Thoughts? EU seeks input for its private sector development work

European Union flags fly in front of the European Commission's Berlaymont building in Brussels, Belgium. The bloc is seeking input on the development of a new communication on its private sector development work. Photo by: Kevin White / CC BY-NC-ND

The European Union is seeking input from various stakeholders before February 14 regarding the development of a new communication — or action plan — on its private sector development work, a clear sign of the bloc’s increasing interest in engaging and building the private sector in partner countries as a key part of its poverty eradication efforts.

This comes amid skepticism — and even outright opposition — from many aid groups to the trend of an increased focus on economic growth among major donors, most recently seen in the pledge by the U.K. Department for International Development’s Justine Greening to spend 1.8 billion pounds of its budget on “growing emerging frontier economies to end their dependency on aid” in 2015-2016.

Under the working title “Strengthening the role of the private sector in achieving inclusive and sustainable growth in developing countries,” the European Commission communication will underline the critical role the private sector plays as a source of external finance and domestic resource mobilization, Devex has learned.

It has been 10 years since the EU last defined how it plans to engage and integrate the private sector into its development strategy. Now, following a review of its work in 2012 that recommended the bloc “improve its communication on the role it wishes to play in terms of PSD support and on the instruments that are available,” Brussels intends to adopt the new communication in June.

In a recently released issue paper the Commission’s stated aim is to strengthen its focus on job creation, having been told that linkages between its previous support — some €2.4 billion ($3.3 billion) within the period 2004-2010 — and employment generation have “often remained distant.” In addition, the Commission also plans to create specific private sector windows, although as yet there are no concrete details on their structure or mode of operation.

The paper — the first step towards the elaboration of a new communication — also listed questions aimed to guide stakeholders interested in providing input into the communication. Here are the top 10 that caught our attention:

  1. Do you agree that the EU should use its political weight more in policy dialogue, trade agreement negotiations, and through budget support to encourage business environment reforms in partner countries?

  2. What actions should the EU pursue to address constraints for women and youths in developing countries that limit their capacity to participate in the economy as entrepreneurs or workers?

  3. How can private sector development contribute to improve productivity and conditions of firms and workers in the informal economy, allowing them to move up the formalization path?

  4. How can disaster risk management be better mainstreamed in PSD activities, thus contributing to building the resilience of populations exposed to risk and reducing their structural vulnerability and poverty?

  5. What best practices in SME support are available in the EU that could be relevant in development cooperation?

  6. How can EU sectoral support programs be designed to generate local business and employment opportunities for the local private sector?

  7. What strategy should the EU pursue in providing microfinance and supporting financial inclusion? What areas of interventions should be targeted, or left to other partners (e.g. access to capital, technical assistance or a combination of both) and what delivery channel should be used, like global loans to financial intermediaries, investment funds or impact investing?

  8. What would the EU have to change to make its blending mechanisms more relevant and attractive for private sector investors? What criteria would have to be met when combining EU grants with private sector resources to achieve development goals?

  9. What risks or constraints deter companies from investing or scaling up inclusive business models? What role can there be for donors and/or CSOs in working with companies to mitigate these risks and constraints?

  10. Should the international and local private sector be given a responsibility to meeting post-2015 goals in areas such as sustainable consumption and production, decent job creation, greenhouse gas emissions, resources efficiency, food security or energy?

The paper notes that future EU support to the private sector “will ultimately be the local private sector in partner countries,” and will cover “all regions” under the Commission’s development cooperation directorate, although there will be particular focus on low-income countries. European businesses, meanwhile, will increasingly be seen more as development partners. 

While still far from being adopted, the paper provides a preview of what the Commission’s private sector development communication will look like. Devex Associate Editor Richard Jones, whose expertise covers development cooperation in Brussels and other key European aid hubs, said the issue paper should be seen as a “draft zero” consultation, still subject to impact assessment and the allocation of financial resources. “Nonetheless,” he said, “it provides a good indication of what may become EU policy in the coming years.”

What’s your opinion on how the EU should engage and support with the private sector? Anything that you think should be taken into consideration in developing this communication? Share your thoughts with us by leaving a comment below or join our LinkedIn discussion.

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About the author

  • Jenny Lei Ravelo

    Jenny Lei Ravelo is a Devex Senior Reporter based in Manila. She covers global health, with a particular focus on the World Health Organization, and other development and humanitarian aid trends in Asia Pacific. Prior to Devex, she wrote for ABS-CBN, one of the largest broadcasting networks in the Philippines, and was a copy editor for various international scientific journals. She received her journalism degree from the University of Santo Tomas.