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INTRODUCTION
The Commission believes that any approach to private sector development—and the policy and action recommendations that accompany it—should be grounded in the realization that the savings, investment and innovation that lead to development are undertaken largely by private individuals, corporations and communities.
The private sector can alleviate poverty by contributing to economic growth, job creation and poor people’s incomes. It can also empower poor people by providing a broad range of products and services at lower prices.
Small and medium enterprises can be engines of job creation—seedbeds for innovation and entrepreneurship. But in many poor countries, small and medium enterprises are marginal in the domestic ecosystem. Many operate outside the formal legal system, contributing to widespread informality and low productivity. They lack access to financing and long-term capital, the base that companies are built on.
The Commission believes that the primary responsibility for achieving growth and equitable development lies with developing countries. This responsibility includes creating the conditions that make it possible to secure the needed financial resources for investment.
Those conditions—the state of governance, macroeconomic and microeconomic policies, public finances, the financial system and other basic elements of a country’s economic environment—are largely determined by the actions of domestic policymakers. Their challenge is to capitalize on advances in macroeconomic stability and democracy and to launch reforms that bring about further changes in institutional frameworks to unleash and foster the private sector.
Most of the recommended actions involve more than one of the actors working together.Where governments are implementing policy change, it is often with the direct support and involvement of multilateral development institutions. Where the private sector is taking a more active stance on sustainable development, it is often with civil society raising the profile of this issue.Where governments are implementing regulatory reform, it may be in direct consultation with representatives of the private sector. The individual actions identified here should be seen in the framework of this broader cooperation—needed even more to reduce poverty.
Our interest lies in three areas:
- In the public sphere, promoting the reform of laws, regulations and other barriers to growth.
- In the public-private sphere, facilitating cooperation and partnerships between public and private players to enhance access to such key factors as financing, skills and basic services.
- In the private sphere, encouraging the development of business models that can be scaled up and copied and that are commercially sustainable.
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ACTIONS IN THE PUBLIC SPHERE: CREATE AN ENABLING ENVIRONMENT
Creating an enabling environment involves steps to reduce the share of the informal sector in an economy, through reform of the overall enabling environment for the formal economy.
For developing country governments
Reform regulations and strengthen the rule of law. Developing country governments have to make a strong and unambiguous policy commitment to sustainable private sector development—and combine that with a genuine commitment to reform the regulatory environment by eliminating artificial and policy induced constraints to strong economic growth.
Formalize the economy. Developing country governments need to focus on creating the conditions to reduce informality and change the composition of the private sector ecosystem over time.
Engage the private sector in the policy process. Governments need to create a real partnership with representatives of the domestic private sector to implement changes and ensure that the voice of the private sector includes small and medium enterprises and microenterprises.
For developed country governments
Foster a conducive international macroeconomic environment and trade regime. Increasing the flow of development aid and reforming the global trading system to provide fair economic opportunities to producers from developing countries are essential for promoting rapid growth in domestic private investment.
Redirect the operational strategies of multilateral and bilateral development institutions and agencies. In encouraging sustainable private sector development developed countries need to ensure that the collective actions of these agencies are better coordinated—to improve their efficiency and to reduce the pressures on the administrative capacity of developing country governments.
Untie aid. Changes in the administrative rules controlling tied funds would permit more effective use and delivery of technical assistance to stimulate private sector development.
For multilateral development institutions
Apply the Monterrey recommendation of specialization and partnership to private sector development activities. The extent of overlapping activities is counterproductive and needs to be urgently addressed.
Address informality in developing countries. Some pioneering work is underway to map the structure ofthe informal sector, and a global effort to expand the coverage of this work is likely to yield significant benefits.
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ACTIONS IN THE PUBLIC-PRIVATE SPHERE: PARTNER AND INNOVATE
The Commission believes that all stakeholders need to make concerted efforts in finance, skills and public-private partnerships for the delivery of basic services.
Facilitate access to broader financing options. We envision continuing development of domestic financial markets coupled with skill-building for regulators and private financial institutions.
Assist skill and knowledge development. Skill-building activities could range from programs for top public and private leadership to training microentrepreneurs to joint efforts with public authorities and unions to improve workforce skills.
Make possible sustainable delivery of basic services, particularly energy and water. The Commission sees the need to develop innovative models for partnerships of governmental service providers, multinational companies and local companies.
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ACTIONS IN THE PRIVATE SPHERE: MOBILIZE CAPABILITIES AND RESOURCES
The Commission believes that the private sector, particularly large local companies and multinational corporations, must realize that it can contribute to accelerated economic development and to poverty alleviation.
For the private sector
Channel private initiative into development efforts. We believe that the private sector has tremendous potential to contribute to development through its knowledge, expertise, resources and relationships.
Develop linkages with multinational and large domestic companies to nurture smaller companies. Linkages between different types of firms in developing countries provide an effective channel for local companies to gain access to markets, financing, skills and know-how.
Pursue business opportunities in bottom-of-pyramid markets. Recognizing the needs of bottom-ofthe- pyramid markets (the 4 billion people who are earning less than $1,500 a year) and creating innovative solutions to meet these needs are other vital actions required from the private sector, both domestic and international.
Set standards. The private sector needs to make a genuine commitment to sustainable development—with a sharp focus on corporate governance and transparency.
For civil society and labour organizations
The Commission believes that civil society and labour organizations have to continue as critical observers of the development agenda—and as facilitators and supporters of innovative approaches for meeting the Millennium Development Goals and improving the quality of life for poor people.
Increase accountability in the system. This is a core part of the work of civil society organizations, as is their leadership in pushing forward the concept of sustainable development. This work should be strengthened.
Develop new partnerships and relationships to achieve common objectives. Civil society organizations are closest to the base of the pyramid. They also are often proxies for experimenting with new technologies for solving problems.
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LOOKING FORWARD
To promote progress, the Commission recommends that the United Nations sponsor the tracking of private sector development. An annual progress report would maintain the prominence of the Commission’s overall recommendations and ensure the commitment to addressing the many issues identified here.
The Commission is assembling a first set of actionable initiatives to facilitate transformations in individual countries and to provide the tools for governments and the private sector to supplement available resources and begin rapidly implementing a programme of change. These first actions are intended to stimulate a collaborative response from potential partners who read this report. Our message to all of you is: join us.
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