Memories of Busan: HLF-4 and the Private Sector

A new paper by the Canadian Council for International Co-operation and the think-tank the North South Institute, as well as an insightful Oxfam blog post have inspired this look back at what Busan got wrong with the private sector, and how to fix it.

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In November of 2011 I received the opportunity to volunteer at the Busan High Level Forum on Aid Effectiveness (HLF-4)…’s Global Civil Society Forum. It was a 3-day Forum bringing together the voices of civil society in preparation for the actual High Level Forum. Speaking English, French, Spanish and Korean with the participants, sitting in on plenary sessions, helping to translate the final document, or interpreting for a Guatemalan participant during his presentation were definitely some of the highlights for me.

Many different agenda were brought together in the plethora of plenary and splinter sessions, but two main ideas kept coming up. The first was the need to shift the aid paradigm to a discussion on ‘development effectiveness’ and not ‘aid effectiveness’. The second was born out of concern that further involvement of the private sector in bilateral aid could be dangerous to sustainable development and democratic ownership of the development process.

These concerns reflected an apprehension that the agenda set for the HLF, along with the blueprints for a ‘global partnership’ for aid and development were all really just an excuse for donor countries to justify ‘privatizing ODA (Official Development Assistance)’ and partnering with the private sector to offset their declining aid allocations.

“Effective Use of Declining Aid Resources”

me at busan

Me (far right) translating for a Guatemalan delegate during a Busan Civil Society Forum session

The result, after several days of meetings, was the Busan Global Partnership for Effective Development Cooperation, a mouthful of a name. But for all its good language, the actual High Level Forum’s final document did not take civil society’s concerns very seriously. There is certainly progress in the discourse and focus of the international aid community. Busan did make some positive steps:

  1.  It put forward the idea of a global partnership for development
  2.  It embraced a discourse of ‘development effectiveness’ and ‘democratic governance’
  3. It emphasized several core values and rights placing people closer to the center of development processes.

It really failed to impress on certain other counts, though:

  1. It failed to speak specifics about the nature of the partnership it was supposed to build
  2. It did not reach a clear conclusion on the nature of BRICS and NIC involvement in the new aid architecture
  3. It pushed for increased private sector participation in development aid without sufficiently defining the parameters and expectations, the dangers and safeguards that need to go along with it. (The non-binding, sidelined Joint Statement (pdf) was a good first step)

This last point struck me as the most important at the time; the private sector is the bulk of most economies, the driver of growth and creator of wealth, but is also a potentially harmful partner in a development context. Moreover the shift to the private sector seemed to be more about donor country funds shrinking with the onslaught of the financial crisis, and less to do with a sudden discovery of how awesome private sector actors were.

Evaluating the Private Sector in Development Since Busan

So this Canadian Council for International Co-operation report on bilateral donor approaches to development cooperation is certainly edifying in this respect. It discusses how top OECD donors have incorporated (‘partnered’ with) the private sector into their bilateral aid programs, and what this has come to mean for development effectiveness, especially in a post-Busan context.

The paper looks at the type of private-sector partnership and promotion aid, and notes that it focuses mostly on macro-level interventions (the famous business-enabling environment), on firm-level projects, including public-private partnerships. The conclusions it reaches speak to the fears that were present at the Busan Civil Society Forum, namely that partnering with private sector actors in development, in its current form:

  • Tends to favor economic shifts driven from outside the beneficiary country
  • Tends to forgo local capacity building and offers little incentive for funding mechanisms to favor the domestic private sector
  • Tends to confound private and public results
  • Does not lend itself well to evaluation due to a lack of data and to the various mechanisms though which private-sector aid takes place

A notable point that came out of the research: despite many references to rights, to sustainability and to gender, it is not clear at all that these issues were given special consideration on the aggregate.

IFC_Logo

Oxfam: “The World Bank’s private sector financing arm doesn’t know the environmental and social impacts of nearly half its portfolio”

Case in point: a recent audit released by the World Bank’s Compliance Advison/Ombudsman says that the World Bank’s International Finance Corporation (IFC) is very poorly informed about the environmental and social impacts of its financial market lending portfolio. The logic of lending to financial markets is very clearly not coupled with principles of sustainable development, social or environmental impact.

Questions

Erinch Sahan at Oxfam asks an important question “can aid money be a meaningful driver of growth?” That is, can bilateral assistance, partnering with the private sector, become part of the solution?

On one hand I think that we have yet to see a country in which aid, in general, has become a meaningful and sustained driver of economic growth (never mind equitable distribution of wealth). What we do have are countries that have successfully used growth strategies to achieve (more or less) inclusive growth.

Partnering with the private sector certainly has its benefits. But one of the more serious side effects that it comports is to evacuate the donor country from the aid process (take a look at how European multilateral public-private partnership funding mechanisms like the Africa Enterprise Challenge Fund are structured- it’s just layer after layer!). In so doing, this tends to also evacuate the recipient (‘partner’) state from the processes of its own development. This was the big argument brought against the World Bank’s PPIAF, that it put pressure on governments to do business with international firms, and then to concede to often disastrous changes in the provision of social goods, like water or electricity.

So, we know the dangers. We can see the evolution of the involvement of private sector actors in bilateral aid (more of them, with ever more diverse mechanisms of action, centered on macro and firm-level interventions).

postbusan seoul civsocfor

The 2nd Seoul Civil Society Forum, one of the many Post-Busan evaluation conferences

Busan’s HLF-4 was one step on the road to consolidate and legitimate what evidently turned out to be an ad-hoc appeal to new sources of money, or new ‘partnerships’ to use the pretty term. It reached out to Chinese and other emerging economies’ capital, just as it did to companies, in order to buttress lagging ODA numbers. In its haste to create the semblance of unity in the form of a partnership, it gave no more than lip-service, non-enforceable, if-you-don’t-mind-sir recommendations on how to properly integrate these new sources of funding. And even those didn’t make it into the final document.

Before the Private Sector Party Jumps Off…

Okay, but what are the responses? What specific private sector funding mechanisms have worked and in what context? How can governments preserve policy coherence all while harnessing the financial power and access to financial markets that private sector partners can provide?

Answers to questions like these are needed, like, yesterday. Because for one, the Post-Busan Partnership Framework is proving to be a slow, slow process. Another reason is that new and emerging donors like South Korea are more and more eager to jump on the private sector bandwagon, but not as conscious of its pitfalls.

A year and a bit after Busan, I can’t help but regret that the Civil Society Forum’s voice was given so little weight.

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‘Resilience’ Worries at Davos World Economic Forum

The World Economic Forum

-Robert Scoble

The 2013 Davos World Economic Forum’s vision, articulated by its founder and executive chairman Klaus Schwab in a recent Project Syndicate article, leaves me with a couple furrows on my brow. Not that I am unfamiliar with the rather single-minded nature of the Davos discussion agenda, or with the criticisms that are leveled against the Forum. This time though, the issue with the Forum’s large frame/theme is rather subtle.

There are, we are told, two main objectives to this year’s forum:

First, the economic crisis has created a more defensive, more self-centered, and – at the level of states – more protectionist attitude. Grand unifying visions are missing, and the pressure for separation, not union, continues to increase. This has stalled progress on many of the issues – including reducing carbon emissions, establishing global financial regulatory measures, and concluding the Doha Round of global trade talks, to name a few – that require global attention.

The first objective is then to foster further global cooperation, under the idea that combined solutions (a “grand vision”?) to economic and financial problems are needed to bring the world economy into a new growth dynamic. Discursively speaking, nothing new. The second point is as follows:

The Forum has always promoted the notion of corporate social responsibility – or, expressed differently, of business leaders being accountable not only to their employees and shareholders, but also to their communities and society at large. So, my second objective for Davos this year is for all leaders to recognize that along with their economic responsibilities come moral as well as social obligations.

The second objective is slightly newer (but not really) in that it puts forward a social responsibility for the private sector, specifically mentioning (later on in the text) corporate social responsibility. Ultimately the idea is probably to pose the question of the ill-effects of austerity and adjustment policies in countries hit by the global financial and Eurozone crises.

Objectives Properly Addressed?

The talk always sounds great. But there is no indication that any of this is actually going to happen, beyond words, at Davos. When you look at the response of states and companies to the financial crisis in terms of cooperation (here mainly in Europe) it is clear that not only is there much to be desired, that which is being decided comes from a logic of relative economic influence, political clout (and interestingly enough, discursive identity) within the EU’s echelons of power. The WEF will probably not have an impact significant enough to change the way European countries interact in their own playground.

Second point of worry: even a layperson can see that objective number one is going to overpower objective number two without any special consideration for this latter one. How are French companies coming together with the government and labor to solve competitiveness problems and factory closings? Answer: They’re not. The order of the day, much to the chagrin of French minister Arnaud Montebourg (holder of the most unenviable title of ‘Minister of Industrial Renewal’) is for companies to argue that, affected as they are by the crisis, they have no choice but to lay off workers and have the remaining workforce take on longer or more irregular hours for less pay- or else the company closes up shop and moves to Morocco. The French government has an active hand in promoting these sorts of flexibility deals- anything to put a band-aid on the employment situation. The companies may become slightly more protected, but it’s not at all clear that the workers who get laid off or those who slip into poverty gain much in resilience.

Third point: while corporate social responsibility (CSR) is a nifty model which can and has demonstrated that win-wins are possible, most interestingly in developing economies, the question is less if CSR should be promoted, and more how to ensure CSR design that contributes to sustainable development. How to ensure that CSR is carried out in coherence with existing development agenda? Will proper attention be given to the failures and the lessons of profitable but not social viable CSR projects at the forum? This is one point I continue to watch with interest.

It is right to bring resilience to the table- it is yet another way that the traditionally very… economic WEF can inject a little social in its veins.

But in rushing to pose the question of resilience, Davos may have forgotten to ask ‘whose resilience?’

Chris Blattman

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