Overview of CAPE Conference – Conference Note 3 – Investing in Private Enterprises
Since the private sector has been highlighted as having a significant role to play in reaching the Sustainable Development Goals (SDGs), there have been growing efforts to integrate it into international development financing activities. In my last post, an overview of DE principles used to guide key players in official development assistance (ODA) was provided. This post will focus on development finance institutions (DFIs) and similar entities that invest public funds into private enterprises.
Public international development agencies make up the majority of donors. Now that donors are able to contribute to DFIs through ODA routes, the claim can be made that DFIs should also be required to follow DE principles as they invest in private enterprises. Although DFIs are able to operate similarly to ODA, the overall goals and methods of these streams of funding are not perfectly aligned. One reason for this is that DFIs are focused on creating jobs and receiving a return on investment, while ODA focuses on poverty-alleviation. Additionally, each DFI has individual operating guidelines and procedures. The chart below includes items that were discussed at the 2016 CAPE Conference as DE supporters considered whether DFIs should be required to adhere to DE principles:
As a result of this discussion, the recommendations below were compiled and will be presented at the Second High-level Meeting of the GPEDC on November 28th:
- DFIs and other donor-backed investment vehicles should commit to supporting national development strategies. The GPEDC should track whether donors incorporate country preferences into their investment strategies. Attempts to achieve wider ownership of investment decisions would be impractical.
- Countries and donors should commit to harmonising the relevant elements of country results frameworks with those used by DFIs and other donor-backed investment vehicles. No indicator is necessary.
- Donors should commit to putting in place rigorous procedures for identifying groups at risk, consulting affected communities and handling grievances. Monitoring could be based on an independent rating of these.
- Donors should commit to a process that will establish shared transparency requirements when investing public money in private enterprise (PPP). Indicators could include the percentage of PPPs that conform to Open Contracting Partnership data standards, and the percentage of investments where: full beneficial ownership information is available; the upfront investment case is public; some indication of the degree of concessionality is stated.
- Partnership and accountability should apply when formulating investment strategies and monitoring their execution, and in ensuring that those making day-to day investments take full account of the consequences of their decisions on local communities.