Reply: Development efficiency and business collaboration go together

Business collaboration in development assistance is about taking advantage of the knowledge, experience and resources that the business community has at its disposal and to catalyze more, better and faster change. Penny Davies, Diakonia, is concerned that important principles for aid effectiveness will be thwarted when the OCED DAC now reviews which private sector instruments should be counted as aid. Sweden is working with full force to prevent this from happening, writes State Secretary Ulrika Modéer.

Penny Davies, Diakonia, writes on Bistå on 9 March that the private sector has a very important role to play in combating poverty, but that it is not obvious what role companies should play as partners in development aid. Davies is concerned that important principles will be thwarted when OCED Assistance Committee DAC now reviews the regulations for private sector instruments.

DAC has not yet presented a final proposal. The discussions are still about how the decisions from the DAC's high-level meeting in February 2016 will be implemented. It is extremely important that the process is open. Sweden works for both increased transparency and increased participation. Therefore, it is positive that DAC, among other things, invited several civil society organizations to a broad consultation meeting on 27 February this year. For example, representatives of Oxfam and Eurodad participated.

The Swedish government clearly stands for the principle of effective development assistance, which has a strong focus on development. We will review the forthcoming proposal from DAC and we will act to ensure that the business community contributes to the goals of development cooperation in the best possible way. Likewise when Sweden develops its own cooperation with the business community.

The aid will be used as a catalyst

The goal is the same as for Swedish development cooperation in general - to create conditions for better living conditions for people living in poverty and oppression. It is the development benefit that is crucial. It is about taking advantage of the knowledge, experience and resources that the business community has at its disposal and using development aid as a catalyst to achieve more, better and faster change. This means that development assistance must generate resources from other than traditional development assistance actors, and that development assistance must accelerate sustainable and lasting changes in systems and markets.

As Penny Davies writes, the use of development aid must have a clear added value, be additional. It must enable initiatives that would not otherwise have taken place or that would not have had an equally high development effect. Aid shall not subsidize companies' activities nor contribute to distorting competition or destroying a functioning market. All collaborations must involve a clear cost and risk sharing. The new regulations for what is to be counted as development assistance must ensure that the development assistance is truly additional. It is absolutely central to maintaining the credibility of the concept of development assistance, and Sweden has also worked hard for this in the DAC.

Cooperation with the business community must be based on the companies' core business. Companies must have a long-term interest in including poor people in different parts of the value chain and take responsibility for developing the market in a sustainable way. The collaboration takes place through Public Private Development Partnerships, which means that no aid funds are paid directly to the companies, but both parties' money goes to a non-profit third party that carries out the projects. An example is Sida's collaboration with companies in the textile industry for reduced environmental impact in a group of textile-producing countries. The collaboration has led to reduced use of water, energy and chemicals.

The majority of the collaborations with the business community, however, consist of support for small-scale entrepreneurs in Sweden's partner countries who have identified new innovative solutions to development problems. Support through so-called Challenge Funds takes place after an assessment of which activities have the greatest effect on local development and poverty reduction. Sweden also supports initiatives that specifically aim to get companies to integrate sustainability into their operations.

The business community wants clear rules of the game

I agree with Penny Davies that it is the recipients' needs and priorities that should govern, not commercial interests. That our assistance is unbound, ie not tied to companies in Sweden, is a basic principle and something we have been praised for, most recently last year by DAC. Tied aid is also no longer something that the business community runs. Instead, it is about working for clear rules of the game, functioning regulations and institutions, and fighting corruption.

It is important to point out that in times when the gap between humanitarian needs and available resources grows and new challenges such as climate change risk rolling back development, we must find ways to increase development and climate finance through responsible and sustainable investments.

And finally, procurement, used properly, can be a very powerful tool to steer towards better sustainability while contributing to the implementation of Agenda 2030. Considering sustainability criteria in procurement, such as life cycle costs and CSR, and not just the lowest price, can contribute to higher development impact . The potential is enormous as procurements worth hundreds of billions of kronor are carried out every year within the framework of international development cooperation. However, sustainability criteria must not be seen as a way of excluding companies in developing countries. As Penny Davies mentions, it is important to involve small and medium-sized companies in the partner countries, which can sometimes take place in collaboration with a larger local or international party.

Sweden is working with full force within the DAC to ensure that development aid's focus on development is respected. We welcome all the support we can get from both civil society organizations and companies in this matter.

Ulrika Modéer

This is a debate article. The author is responsible for analysis and opinions in the text.

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