From Wikipedia, the free encyclopedia Private sector development
Private sector development
Private Sector Development (PSD) is a strategy for pro- Business linkages and value chain devel-
moting economic growth and reducing poverty in devel-
oping countries by building private enterprises, member-
opment
ship organizations representing them, and competitive A value chain is a series of activities that enterprises un-
markets that are stronger and more inclusive. dertake when they produce a good or service, adding
value to the inputs at each stage. Value Chain Devel-
opment thus seeks to maximise the value of any given
Introduction type of product, whilst incurring the least possible cost to
Supporters argue that PSD is an important part of pover- the producers, in the places along the production chain
ty reduction[1]. Whether as workers, subsistence farmers that give the most benefit to poor people. One way is
or entrepreneurs, most poor people already participate to improve production processes. Another way is to in-
in markets. Strengthening these markets in ways that se- crease the commercial linkages between the businesses
cure higher incomes for the poor is therefore seen by that poor people own or work for, and businesses that
PSD advocates as a fair and efficient way to fight poverty. can offer them new and more profitable opportunities as
Earning a decent income in the private sector, it is ar- customers or suppliers.[6]
gued, is also more dignifying than relying on hand-
outs[2]. Business development services
As with all development interventions, PSD pro- This approach seeks to build markets in services that im-
grammes are under pressure to measure and report their prove the performance of individual enterprises. Some of
achievements, monitoring and evaluating their work in the most important BDS markets are in training, consul-
ways that are both credible and cost-effective. One tancy, marketing, market information, information tech-
source of further information about methodologies for nology and technology transfer. For many within the de-
measuring the results of PSD, including the approaches velopment community, donors should ideally not under-
currently used by different donors, is the Donor Commit- take BDS directly; instead they should facilitate commer-
tee for Enterprise Development.[3]. cial BDS providers to be self-sustaining, through the im-
provement of their techniques and the sourcing of new
Approaches to private sector clients,. BDS markets can be sustainable where providers
recover their costs via the fees they charge for ser-
development vices.[7] However, business development services are also
found in developed countries where the argument ad-
Business environment reform vanced is that the market for business development fails
and therefore the government should enable this market
Where entrepreneurship and markets are stifled by inap-
[8] Developed countries experience suggests that fees for
propriate regulation, excessive taxation, lack of fair com-
publicly supported advice was a policy that did not work.
petition, lack of voice or an unstable policy environment,
[9]. In fact, the evidence suggests that subsidised inten-
growth and poverty reduction are likely to suffer. Typ-
sive work with relatively few business clients works well
ically, donors first fund business environment analyses,
[10], which suggests the requirement for DBS to be self-fi-
such as the World Bank’s Doing Business Reports, iden-
nancing is too onerous.
tifying the major constraints to business growth. They
then work with government and other stakeholders to
implement reforms.[4]
Making markets work for the poor
The private sector itself can play an important role in The Making markets work for the poor/M4P approach
advocating for a better business environment. Many de- aims to understand how poor people interact with mar-
velopment agencies thus work to strengthen the capac- ket systems, and how these systems can be changed to
ity of businesses and business associations to engage in improve their lives. It aims for large-scale, sustainable
public-private dialogue with governments.[5] impact by focusing on overall markets, rather than tar-
geting individual actors within that market. In this sense,
an M4P programme may incorporate various elements
of value chain development, BDS and/ or business en-
vironment reform. Donors that have pioneered the M4P
1
From Wikipedia, the free encyclopedia Private sector development
approach include the UK’s Department for International ners in developing countries, or offer technical support
Development (DFID), the Swedish International Develop- and expertise. Through some PPP programmes, compa-
ment and Cooperation Agency (Sida) and the Swiss nies can directly contribute to donor and development
Agency for Development and Cooperation (SDC).[11] agencies’ development projects. [17]
Green growth Access to finance
A number of development agencies are engaged in de- Affordably access to finance is seen by most experts as vi-
veloping markets to channel finance raised for climate tal to private enterprises in the developing world. While
change mitigation and adaptation in industrialised coun- some development agencies therefore see it as part of
tries towards initiatives that reduce carbon emissions in Private Sector Development, many treat it as a separate
the developing world.[12] If managed appropriately, they field in its own right.
argue, the challenge of responding to climate change
could generate decent jobs and incomes for many milli- Private sector development in conflict-
ons of poor people.[13] affected environments
Conflict presents unique challenges and unique opportu-
Women’s entrepreneurship develop-
nities for Private Sector Development. One the one hand,
ment conflict disrupts the regular functioning of markets and
In many parts of the developing world, women are sys- in their place creates a war economy. PSD practitioners
tematically excluded from business opportunities. Dis- must be sensitive to the impact of their activities on the
crimination can disadvantage women in their access to conflict situation, e.g. effects on the distribution of re-
the knowledge and skills needed to be successful in busi- sources, as well as the impacts that conflict will have on
ness. At the same time, laws that disadvantage women in their activities. On the other hand, where it generates job
gaining access to property can make it hard for women creation and trade, Private Sector Development can play
to raise the necessary capital. Many donors actively sup- a vital role in peacebuilding.[18]
port programmes that help women to overcome these
and other barriers.[14] Industrial Policy
Industrial policy is broadly defined as selective govern-
Local economic development ment intervention to promote a specific economic sector
LED typically starts by analysing the economy of a par- and promote structural change [19]. It may target man-
ticular region or municipality, identifying opportunities ufacturing, agricultural or services sectors. If and how
to enhance its prospects. LED strategies may combine donors should promote industrial policy is much debated
any of the following: business environment reform, value in development circles.[20]
chain development, infrastructure development, innova-
tion and technology policy, planning and/ or skills devel- Innovation Policy
opment. LED programmes often involve local and region- New or improved products and processes are are impor-
al governments, the private sector and civil society in tant drivers of competitiveness, growth and employment
programme design and implementation. [15] LEDknowl- generation. In the context of private sector development,
edge.org is an open access database of publications on Lo- “innovation is understood as the commercially success-
cal Economic Development. In addition, the Donor Com- ful introduction or implementation of a technical or or-
mittee for Enterprise Development has a knowledge page ganisational innovation.”[21] Donor agency support to in-
on Local Economic Development and Clusters. novation covers a broad range of activities, including the
creation of appropriate framework conditions for inno-
Public-private partnerships vation, and the development of innovative capacities of
Many development agencies are now working directly companies. This may include business advisory and sup-
with businesses to deliver development impacts. Such port services, finance and skills development; business
public-private partnerships or public-private develop- incubators and technology extension services, as well as
ment partnerships cover a wide range of activities. A value chain and cluster approaches [22].
common characteristic of most PPPs is the aim to lever-
age the development impact of companies’ core business Private sector development following
activities. One increasingly common approach is to cre- the financial crisis
ate a Challenge Fund, whereby companies bid for donor
For many people, the Global Financial Crisis has raised
funding, competing to maximise the development im-
questions about the ways in which markets should be
pact of the grant money made available.[16] Other PPP
regulated in order to ensure long-term, sustainable de-
programmes assist companies in finding business part-
velopment. At the same time, with many countries now
2
From Wikipedia, the free encyclopedia Private sector development
faced with slower growth and higher unemployment, re- [3] Donor Committee for Enterprise Development,
viving economies by kick-starting the private sector is Measuring Results
seen by many as at the heart of a global response. [4] Further information on business environment
reform programmes can be found at
See also [5]
www.Business-Environment.org.
For more information on this topic, visit
• Aid www.PublicPrivateDialogue.org.
• AusAID [6] For more information on this topic, visit
• Canadian International Development Agency www.Value-Chains.org.
• Corporate governance [7] For more information on this topic, visit
• Corporate social responsibility www.Value-Chains.org.
• Danish International Development Agency [8] Mole, K. F. and Bramley,G. 2006,``Making policy
• DFID choices in nonfinancial business support: an
• Deutsche Gesellschaft für Technische international comparison Environment and Planning
Zusammenarbeit C: Government and Policy vol 24 pp 885 - 905
• Dutch Ministry of Foreign Affairs [9] Bennett R.J. (2008) SME policy support in Britain
• Economic Development since the 1990s: what have we learned?
• Entrepreneurial ecosystem Environment and Planning C: Government and
• Federal Ministry of Economic Cooperation and Policy, 26(2): 375-397
Development [10] Mole K.F., Hart M., Roper S., and Saal D. (2011)
• French Development Agency "Broader or Deeper? Exploring the most effective
• Food and Agriculture Organization intervention profile for public small business
• Foreign direct investment support" Environment and Planning A 43(1) 87 –
• International Development Research Centre 105
• International Finance Corporation [11] Springfield Centre. (2008) A Synthesis of the Making
• International Fund for Agricultural Development Markets Work for the Poor Approach’, Bern: Swiss
• International Labour Office Agency for Development and Cooperation, October
• Ministère des affaires étrangères 2008;Swedish International Development
• Norwegian Agency for Development Cooperation Cooperation Agency, Making Markets Work for the
• Organisation for Economic Co-operation and Poor: Challenges to Sida’s Support for Private
Development Sector Development, Stockholm: October 2003
• Poverty reduction [12] Donor Committee for Enterprise Development,
• Swedish International Development Cooperation Green Growth
Agency [13] International Labour Organisation, Towards decent
• United Nations Development Programme work in a sustainable, low-carbon world, Geneva:ILO,
• United Nations Industrial Development Organization 2008.
• USAID [14] Some examples of development agencies’ policies
• World Bank and initiatives related to Women’s
Entrepreneurship Development can be found here
External links [15] International Labour Organization website, Local
Economic Development
• The Donor Committee for Enterprise Development [16] The multi-donor Africa Enterprise Challenge Fund
(DCED) provides one such example.
• USAID--PSD strategy for Iraq [17] DCED directory of public-private partnership
• PSD projects in Afghanistan, China, Laos programmes, categorised by different types of
• DFID-Private Sector Development Strategy support, target regions and countries
• UNDP-Creating Value for All [18] Dr Naoise MacSweeney, Private Sector Development in
• Private Sector & Development, PROPARCO’s Conflict-Affected Environments: A Review of Current
magazine Literature and Practice, Cambridge, UK: DCED, 2008.
[19] e.g. Pagg and Saggi (2006) The case for industrial
References policy: A critical survey
[20] DCED: Five major debates in Industrial Policy
[1] See for example DFID, Prosperity for all: making [21] BMZ Working Group on Promoting Innovation
markets work’, London: 2008.’ Systems
[2] See for example Michael Fairbanks et al, In the River [22] e.g.World Bank (2010): Innovation policy. A guide
They Swim, Templeton Press for developing countries and GTZ
3
From Wikipedia, the free encyclopedia Private sector development
(2009):Innovation and Technology Policy in the
Context of Technical Cooperation
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