Finnish development policy –perspectives to innovation & private sector development Aki Enkenber, Senior Adviser Ministry for Foreign Affairs of Finland

Finland’s development aid focuses on four priority areas 1. The rights and status of women and girls have been enhanced 3. Societies have become more democratic and better-functioning 2. Developing countries’ own economies have generated more jobs, livelihood opportunities and well-being 4. Food security and access to water and energy have improved and natural resources are used sustainably Private sector development

Developing countries’ own economies have generated more jobs, livelihood opportunities and well-being

Human Rights Based Approach to Development (HRBA) HRBA in all development cooperation Based on international human rights treaties and obligations Private sector instruments funded projects have HRBA obligations Human rights due diligence Possible remedy and compensation Commitment to UNGP and UN Global Compact’s principles

UN Sustainable Development Goals New global Agenda 2030 for sustainable development and SDGs emphasize partnerships and multistakeholder cooperation Development aid is not enough. Private sector engagement enhances development impacts

International resource flows to developing countries FDI Remittances ODA Long-term debt Short-term debt Role of development finance is rapidly changing

Emerging markets offer opportunities

Private sector creates jobs >90% of all new jobs

BoP: Global markets and the poor This spending forms a huge market. Total size is some 5 trillion dollars (5 million millions) However, business logic is different – often large scale business, but requires inclusive and frugal innovation in order to target these markets. About 4 billion poor people ( 2/3 of world population) remains outside of commercially viable services as they can spend less than 5 € / day Purchasing power parity in USD Population estimates Level 1 75-100 million $3000-20 000 2 billion Levels 2-3 <$3000 Level 4 4 billion

A significant digital divide in access and capability remains… 6 BILLION without BROADBAND 4 BILLION without INTERNET 2 BILLION without MOBILE PHONES 0.4 BILLION without A DIGITAL SIGNAL SOURCE: WDR 2016 SOURCE: WDR 2016 team based on Research ICT Africa and ITU data

Imbalance of global R&D investments

MFA’s private sector instruments Strengthening existing initiatives Developing new initiatives PIF BEAM EEP FINNFUND FINN- PARTNER-SHIP PROJECTS Rapid action Long-term engagement

BEAM BEAM − Business with Impact Innovations for development program 2015−2019 Basics Supports development of innovations, research and knowledge that improves the welfare of low-income people in developing countries and creates new and sustainable business Aim Concretely New products, services, technologies, modes of operations, distribution channels, social innovations Development, piloting and commercialization Tekes administers MFA and Tekes finance 25 million € (both 12.5 million € ) and applicants finance 25 million € Fixed-term 2015−2019 www.tekes.fi/beam BEAM

BEAM − Business with Impact Innovations for development program 2015−2019 www.tekes.fi/beam

BEAM − Business with Impact Innovations for development program 2015−2019 For whom? No sectoral limitations E.g. education, health, communications, renewable energy, environmental protection related products and services Sectors Criteria Uses Finnish knowledge and technology Program doesn’t support exports nor traditional partnerships Finnish enterprises, education and research institutes, civil society organizations BEAM encourages to develop broader ecosystem involving different partners in Finland and developing countries www.tekes.fi/beam

− Supports early phases of a business partnership Services Aim Matchmaking: Identifying and matching of business partners Business Partnership Support: e.g. establishing a subsidiary or joint venture, subcontracting, importing from a developing country, other long-term business activity, piloting and demonstration project of technology or solutions, vocational education and training, and support services for a business partnership Advisory services Database on developing-country markets Supports sustainable business in developing countries through funding long-term for-profit business partnerships between Finnish and developing-country organizations www.finnpartnership.fi

− Supports early phases of a business partnership For whom? Sectors Criteria No sectoral limitations E.g. ICT, agribusiness and food industry, metal industry, services, construction, manufacturing, environmental products Support range: 30−85 % of project costs depending on the size of applicant and target country Max. 400 000 euros / project Not available for the actual investment nor exports Applicant can be a Finnish enterprise or other business-driven organization and an enterprise registered outside Finland with a significant Finnish interest Demand-driven www.finnpartnership.fi

− Supports early phases of a business partnership www.finnpartnership.fi Criteria For whom? Sectors No sectoral limitations E.g. ICT, agribusiness and food industry, metal industry, services, construction, manufacturing, environmental products

Basics Aim Sectors www.finnfund.fi Supports economic and social development in target countries by offering long-term risk finance for profitable sustainable investment projects Aim Sectors E.g. renewable energy, financial services, construction, electronics, forestry, metal industry, tourism 75 % “climate projects” Finnfund is a state-owned development finance company Equity 251 million euros Portfolio 355 million euros Self-sustaining (excl. “special risk finance”) Capital increases from ODA www.finnfund.fi

Services Criteria Projects Commercially viable projects Looks for ”Finnish interest” but not a strict requirement and interpreted flexibly Criteria Equity investments Risk loans Mezzanine finance (Guarantees) Advisory services Investments range between 1−20 million euros Projects Greenfield projects Ongoing business projects Funds www.finnfund.fi

www.finnfund.fi

Public Sector Investment Facility (PIF) – Funding for developing-country public investments Supports economically viable but commercially non-viable public sector investments in developing countries LMIC + LDC/LIC Meet principles of sustainable lending No HIPC/MIDR Can access Finnvera’s guarantee E.g. Vietnam, Kenya, Egypt, Philippines, Honduras, maybe Tanzania, Ethiopia Aim Actors Public sector entity Finnish enterprise MFA Finnvera Financial institution in EEA Countries Basics Mixed export credit instrument Tied aid formin.finland.fi/investmentfacility www.finnvera.fi

Public Sector Investment Facility (PIF) – Funding for developing-country public investments Criteria Funding Finland’s development policy program Uses Finnish equipment, technology, expertise and services Procurement according to legislation in developing countries Eligible for export credit Eligible for Finnvera’s guarantee (Commercial loan) Interest subsidy Guarantee subsidy Grant equivalent (45 % LIC, 15 % LMIC) Projects (subsidy) ranging between 2−30 million euros MFA and a developing country cofinance the project formin.finland.fi/investmentfacility www.finnvera.fi

Challenge funds / bilateral programmes Financial support from MFA’s fixed-term private sector & innovation programs Challenge funds / bilateral programmes TANZIS − Support to Tanzanian Innovation System

Examples of bilateral/regional programmes IPP2 – an innovation partnership with Vietnam: innovation policy, start-up ecosystem support (2nd phase) SAIS2 – regional innovation programme in Southern Africa (Namibia, Botswana, Zambia, Tanzania, South Africa): regional innovation cooperation enhanced TANZIS – national innovation programme in Tanzania – entrepreneurship and localised innovation support mechanisms BioFISA – biosciences innovation in Southern Africa – regional cooperation for research commercialisation Forthcoming: start-up ecosystem programme for Zambia Energy and Enrivonment Partnership – renewable energy, feasibility, innovation, scaling

+ =  Leverage PIF ODA Enterprise’s own finance + expertise Public Sector Investment Facility ODA Enterprise’s own finance + expertise Private investments + = 

Example of multilateral cooperation: World Bank’s Infodev

Example of multilateral cooperation: World Bank’s Infodev

Learning from Finland as a Knowledge Economy 2.0 A 2014 publication of the World Bank Institute A “cookbook” for innovation practitioners for designing, implementing and evaluating innovation policy to support the development of Knowledge Economy Points to the importance of a shared national vision as well as policy coordination and management mechanisms to achieve it

Tanzania – Results from Country Programme 2015-2016 Capacity of 5730 entrepreneurs enhanced through 26 business service / start-up hubs 68 new innovative companies established Tanzanian ICT policy renewed 73 new products or services brought to market Over 6 million users have benefitted Number of partnerhsips in the higher education sector, active start-up cooperation through Slush Ease of Doing Business up 12 places to 132 in 2017, downward trend on innovation indices

Case BEAM - why partner with Tekes? Need for innovation: Innovation crucial for tackling development problems and fostering sustainable growth Directing R&D investments into dev. challenges important – countries’ own resources scarce Stimulating collaboration: Complex development problems require collaboration and partnerships between academia, businesses, civil society and governments North-South axis: Setting joint agendas and building equal cooperation mutually beneficial

Case BEAM - why partner with Tekes? Role of private sector in development The Global Development Agenda calls for more private sector involvement in development: expertise and investments direly needed Market-based approaches promise sustainability in scale difficult to reach otherwise Argument for public funding Need for risk-sharing by the public sector: developing countries still pose significant risks over traditional markets Private sector interest and competence can be better harnessed for development through improved incentives