At the recent World Economic Forum in South Africa, Shanta Devarajan, the World Bank's chief economist for Africa, told a colleague of mine: "There is a palpable sense of optimism around Africa and the private sector at the Forum, with delegates referring to Africa as an investment destination."
The 2011 Africa Progress Report, launched at the forum, confirms this message, saying that private sector partnerships are experiencing a "well-deserved renaissance".
Optimism is usually a good thing in development, reinforcing belief in change rather than stagnation, but it is worth being cautious about this language. The perennial problem with statements like this about "the private sector" is the implication that the sector is homogenous. It isn't. While linked in myriad ways, the domestic private sector is a very different creature to international business. The needs of a small local business seeking to sustain itself or even expand and those of a large multinational looking to invest in a foreign country rarely have much in common, and are often diametrically opposed.
Take government procurement. Big international businesses have long been pushing developing country governments to liberalise procurement, which can account for well over half of all government expenditure, so that international businesses are not discriminated against. African countries including Sierra Leone, Tanzania and Uganda have introduced legislation, in response to World Bank aid conditions, opening up government procurement to international competition.
A Christian Aid report from three years ago gives the example of Ghana, where the new Public Procurement Act automatically allows for international competitive bidding for government tenders over a certain size. The government had wanted to restrict smaller projects to local firms, but it capitulated under donor pressure because, according to the World Bank, limiting participation by nationality "undermines the principle of transparency and equal opportunity and may be a cause of abuse".
As with most economic policy decisions, there are pros and cons, winners and losers. Opening up government procurement could reduce corruption and lower costs, and the participation of foreign firms could encourage technology transfer. But governments could lose a vital tool for intervening in the economy for the benefit of local firms, with consequent impacts on jobs, incomes and consumption.
In January 2007, a Chinese company won the contract to produce Ghana's 50th anniversary cloth. Abraham Koomson, the secretary general of the Ghana Federation of Labour, was disappointed. "If the government had approached local firms just three months earlier, they could have come together to produce all the cloth required," he said.
In this instance, favouring one part of the private sector, international companies, led to harm in another part, local firms. Jobs for Ghanaians in the textile industry have fallen from 25,000 in 1977 to 7,000 in 1995, to fewer than 3,000 by 2005, as the industry struggles against low-cost imports, smuggling and an influx of second-hand clothes.
Favouring national companies is the right thing to do in many contexts – and is what most rich countries do. So when people say "the private sector wants x" or "we need the private sector to invest in y", there needs to be an understanding about what part of the private sector they are talking about. They usually mean one very specific part of the private sector: big, and usually multinational, businesses.
In 2002 I was in Johannesburg at the World Summit for Sustainable Development launching the Southern Business Challenge, an initiative of Malini Mehra's Centre for Social Markets. All the talk was of "private sector partnerships" and the "private sector" was there en masse, led by the World Business Council on Sustainable Development (WBCSD), which seemed to have taken over an entire hotel.
The most striking feature of big business strategy was the immense pressure it put on national delegations to resist regulation. The WBCSD would commit to any number of voluntary principles, but any hint of regulation would see big business hitting the phones in the hotel lobby.
The WBCSD is an important organisation that should make its views heard. But it did not represent all business interests. It represented (and still does) about 200 massive global companies.
The Southern Business Challenge brought together about 20 small and medium-sized companies from countries as far apart as Brazil, Nepal and Zimbabwe, all with a commitment to sustainable development but with very different needs to the multinational corporations that were lazily identified with "the private sector". Such initiatives are few and far between, but have never been more necessary, as big business gains ever more power in the global marketplace.
One consequence of the huge lobbying power of multinational business networks, like the WBCSD, has been the growth of organised civil society lobbying networks to counter the pressure for deregulation and for narrow, rich-country business interests. Unfortunately, these campaigns have allowed themselves to be portrayed as anti-business because they have fallen into the same semantic trap of lazily associating business with big business.
So I was pleased to be handed a Cafod leaflet about its "Get down to business" campaign, calling for action and special policies to support small and medium-sized businesses. The policies needed are similar to the ones NGOs have been demanding for decades. But the messaging has matured: from bashing big business with posters of pigs in pinstripe suits to a resolutely pro-business message promoting small enterprises.
Free market ideologues have got away with casting NGOs as "anti-business" for way too long. Far from being anti-business, those campaigning against the growing power of multinationals, able to do as they please wherever they operate, are working to promote private sector growth and, crucially, the jobs that come with it.
Source: http://www.guardian.co.uk
The 2011 Africa Progress Report, launched at the forum, confirms this message, saying that private sector partnerships are experiencing a "well-deserved renaissance".
Optimism is usually a good thing in development, reinforcing belief in change rather than stagnation, but it is worth being cautious about this language. The perennial problem with statements like this about "the private sector" is the implication that the sector is homogenous. It isn't. While linked in myriad ways, the domestic private sector is a very different creature to international business. The needs of a small local business seeking to sustain itself or even expand and those of a large multinational looking to invest in a foreign country rarely have much in common, and are often diametrically opposed.
Take government procurement. Big international businesses have long been pushing developing country governments to liberalise procurement, which can account for well over half of all government expenditure, so that international businesses are not discriminated against. African countries including Sierra Leone, Tanzania and Uganda have introduced legislation, in response to World Bank aid conditions, opening up government procurement to international competition.
A Christian Aid report from three years ago gives the example of Ghana, where the new Public Procurement Act automatically allows for international competitive bidding for government tenders over a certain size. The government had wanted to restrict smaller projects to local firms, but it capitulated under donor pressure because, according to the World Bank, limiting participation by nationality "undermines the principle of transparency and equal opportunity and may be a cause of abuse".
As with most economic policy decisions, there are pros and cons, winners and losers. Opening up government procurement could reduce corruption and lower costs, and the participation of foreign firms could encourage technology transfer. But governments could lose a vital tool for intervening in the economy for the benefit of local firms, with consequent impacts on jobs, incomes and consumption.
In January 2007, a Chinese company won the contract to produce Ghana's 50th anniversary cloth. Abraham Koomson, the secretary general of the Ghana Federation of Labour, was disappointed. "If the government had approached local firms just three months earlier, they could have come together to produce all the cloth required," he said.
In this instance, favouring one part of the private sector, international companies, led to harm in another part, local firms. Jobs for Ghanaians in the textile industry have fallen from 25,000 in 1977 to 7,000 in 1995, to fewer than 3,000 by 2005, as the industry struggles against low-cost imports, smuggling and an influx of second-hand clothes.
Favouring national companies is the right thing to do in many contexts – and is what most rich countries do. So when people say "the private sector wants x" or "we need the private sector to invest in y", there needs to be an understanding about what part of the private sector they are talking about. They usually mean one very specific part of the private sector: big, and usually multinational, businesses.
In 2002 I was in Johannesburg at the World Summit for Sustainable Development launching the Southern Business Challenge, an initiative of Malini Mehra's Centre for Social Markets. All the talk was of "private sector partnerships" and the "private sector" was there en masse, led by the World Business Council on Sustainable Development (WBCSD), which seemed to have taken over an entire hotel.
The most striking feature of big business strategy was the immense pressure it put on national delegations to resist regulation. The WBCSD would commit to any number of voluntary principles, but any hint of regulation would see big business hitting the phones in the hotel lobby.
The WBCSD is an important organisation that should make its views heard. But it did not represent all business interests. It represented (and still does) about 200 massive global companies.
The Southern Business Challenge brought together about 20 small and medium-sized companies from countries as far apart as Brazil, Nepal and Zimbabwe, all with a commitment to sustainable development but with very different needs to the multinational corporations that were lazily identified with "the private sector". Such initiatives are few and far between, but have never been more necessary, as big business gains ever more power in the global marketplace.
One consequence of the huge lobbying power of multinational business networks, like the WBCSD, has been the growth of organised civil society lobbying networks to counter the pressure for deregulation and for narrow, rich-country business interests. Unfortunately, these campaigns have allowed themselves to be portrayed as anti-business because they have fallen into the same semantic trap of lazily associating business with big business.
So I was pleased to be handed a Cafod leaflet about its "Get down to business" campaign, calling for action and special policies to support small and medium-sized businesses. The policies needed are similar to the ones NGOs have been demanding for decades. But the messaging has matured: from bashing big business with posters of pigs in pinstripe suits to a resolutely pro-business message promoting small enterprises.
Free market ideologues have got away with casting NGOs as "anti-business" for way too long. Far from being anti-business, those campaigning against the growing power of multinationals, able to do as they please wherever they operate, are working to promote private sector growth and, crucially, the jobs that come with it.
Source: http://www.guardian.co.uk
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