Private Sector Development and Markets

The World Bank estimates that 80 per cent of poverty reduction is due to economic growth. It is the private sector that is the engine of economic growth – 9/10 jobs in the developing world are in the private sector. The private sector consists of not only formal, large businesses, but also informal enterprises, family-run farms and self-employed people. Achieving pro-poor growth requires a focus on developing opportunities and markets for individuals – male and female and informal enterprises.

While private sector development is central to economic growth, the way the private sector develops influences the pattern of growth – whether it is broad or narrowly-based, and whether it is more or less inclusive of the poor. Therefore, while there is a strong interest in fostering a business environment that enables the private sector to flourish, in the interests of sustainable, long-term development, it is essential that it is pro-poor. This means recognising and facilitating the role of individuals and households as private economic actors when they produce and/or sell goods, sell their labour, and when they consume goods or services. It also means understanding the systems within which individuals and households operate, and therefore the barriers to participating in local markets and hence the wider economy.

In the majority of developing countries agriculture is at the centre of private sector development. Between 50 and 70 per cent of the population in these countries is primarily engaged in agriculture and this provides the basis of their economic activity. The challenge lies in ensuring indigenous production is fully utilised; property rights are secure (for women as well as men); and that business models promote inclusiveness. Encouragement of producer co-operatives that can pool farmers’ resources for market promotion and investment, often securing longer-term price stability through initiatives like Fair Trade, is also important. These approaches share the aim of changing the rules of the game to open up markets to participation from marginalised and low income segments of the working population and ensure economic risks are borne more equitably, to the direct benefit of the poor.

Through our experience of working with the private sector, HTSPE has developed an approach based on six key interlinked factors that need to be in place if the private sector is to deliver pro-poor growth:

Incentives for entrepreneurship and investment.
Competition and innovation that leads to increased productivity.
Removal of barriers to formalisation.
International economic linkages through trade and investment.
Functioning markets with good access for both men and women as individuals, and for all enterprises, both large and small.
Minimising of risks and vulnerabilities to man-made shocks and natural disasters.

HTSPE has worked with both the formal and informal sectors to promote private sector development, and at all scales – from the local to national and regional. The scope of our work has included:

making markets work for the poor by analysis of value chains, enterprise and consumer surveys and assessment of the potential for business development services and programme design;
improving women’s access to markets;
assessment of the potential for and implementation of business development services;
identifying and developing opportunities for income generation amongst the poorest of the poor;
investment promotion, identifying the investment needs of a sector or company, and the design and implementation of strategic investment promotion programmes;
designing and building financial support facilities for both micro and meso enterprises;
advising governments on and implementing restructuring and privatisation programmes;
developing linkages and dialogue between the public and private sectors; and
developing institutional and policy frameworks for private sector development.

Pakistan: Preparing the Agricultural Market Infrastructure Project in Punjab

Punjab is the most productive province in Pakistan as far as agriculture is concerned. Of the 22.2 million hectares of cultivated land in Pakistan, 72 percent is located in Punjab. The main constraints to growth are the fragmentation of production among smallholdings, the lack of market infrastructure for perishable commodities, and the high disease incidence. There would also be significant export opportunities if phyto-sanitary and quality standards were introduced alongside the up-grading of market infrastructure. HTSPE supported the Government of Punjab to design an investment project that addressed the limitations of the existing agricultural commodity marketing infrastructure and the systems that were constraining agribusiness growth in Punjab.

The project, financed by the Asian Development Bank, upgraded and expanded the agriculture marketing network and developed an environment that will enable the Government of Punjab to leverage additional investment from the private sector through public-private partnerships (PPPs). The work was undertaken in two phases.

Phase one focused on preparing:

An assessment of agricultural commodity marketing infrastructure and systems covering existing market infrastructure, value added/processing, existing and future commodity growth and demand;
A sector strategy and policy framework;
Recommendations on priority market infrastructure interventions based on market assessment and development of investment prioritisation criteria programme framework;
An examination of the role of key private sector agents and companies and their value chain operating modalities, feasible options, including innovative approaches for private sector partnerships and financing PPPs.

Phase two involved preparation of an investment project with:

Prioritised list of investments for the core component of the agriculture marketing network.
Implementation arrangements including methodologies and modalities for sub-project selection and preparation, project management, procurement and financial management in line with Multi-tranche Financing Facility modality with supporting social, environmental and economic assessments.
A project investment and financing plan and terms of reference.

Nepal: Seed Sector Support Project

The goal of this programme was to improve the livelihoods of hill families by supporting opportunities for income generation through the production of fresh vegetables and sale of temperate vegetable seeds. The programme worked with all major stakeholders in the vegetable and vegetable seed industry from grower to retailer. The majority of beneficiaries were women who traditionally have responsibility for care of vegetable crops. The programme established farmer groups, and trained a cadre of technicians in each of the three areas. These technicians worked together with the farmer groups, extension service and private dealers, and help to link producers with the market.

At the national level, support was given for the drafting of legislation for international vegetable seed quality standards, and also for training and equipping of government seed testing and quality control laboratories.

Two impact studies of the programme highlighted the following major achievements:

The income and spending capabilities of participating households increased substantially.
Significant benefits to women in terms of both direct participation and alternative farm employment.
The programme contributed to a significant increase in seed production (from 20mt to 147 mt over 4 years).
Establishment of the SEAN Seed Service Centre, a private company owned by seed traders that provides services to seed producers and works towards the development of new varieties (mainly hybrid) of seed.
Effective assistance to government in developing its regulatory role in the seed sector through institutional and legal developments.

Zambia: Private Sector Development Programme

The purpose of this programme was to strengthen entrepreneurial capacity within the private sector in Zambia. HTSPE worked in partnership with the Ministry of Finance to provide:

support to micro enterprises through a non-financial facility working through intermediary service providers;
support to small and medium enterprises (SME) through a line of credit administered by five commercial banks;
assistance to SMEs wishing to restructure and incorporate new technology;
institutional capacity building in non-financial intermediary or support organisations; and
foreign investment promotion through a framework contract implemented by the Zambian Investment Centre.

Thailand: Social Support Project

The purpose of this project was to assist the Bank for Agriculture and Cooperatives (BAAC) implement models for improved quality of micro-finance models. The end result of the project was a sustainable Wholesaling Strategy incorporating two main products: the Microfinance Development Programme and the Community Enterprise Development Programme. These new products work on a participatory planning and feedback process that allows the BAAC to directly tap into client needs and develop more demand driven services. The new strategy was directed at community enterprises, occupational groups and micro-finance intermediaries. The intermediaries are primarily for smaller and poorer rural clients who are dealt with in their existing group configurations e.g. Village Fund groups, occupation groups and savings groups. These target groups have benefitted from the strengthened capability of their management and discipline of members, improvements to the profitability of the micro-businesses through technology and marketing improvements, higher total income and savings services and also through access to loans. Target groups also benefitted from direct participation with the BAAC in goal setting and planning of necessary strengthening activities and also through feedback and evaluations given on completion of goals. Group size increases were also emphasised to promote economies of scale for service delivery as well as production and marketing.

To view more detail or additional projects please click on the links below:
Canadian Contribution to the UK Closed Nuclear Cities Partnership/Centres Programme
Fragile & Conflict Affected States Framework Agreement (FCAS)
Agricultural Market Infrastructure Project