EU Strategy for private Sector Development in Developing Countries Antonio García Fragio Head of Economic Development DG DEV EC Tripoli, 26 th November 2010 DG Development and relations with African,Caribbean and Pacific States

Where are we coming from Revising of the EU Strategy Study of the Role of Private Sector The Green Paper on Development Policy EU Vision on Private Sector

Where are we coming from The five areas of EU intervention for PSD Actions/programmes 1. Enabling environmentBizclim, NIP’s 2. Investment and inter-enterprise co-operation promotion ProInvest, RIP’s 3. Investment financing and development of financial markets European Investment Bank’s Investment Facility 4. Business Development ServicesCDE, Strengthening Food Safety Systems, NIP, RIP 5. Support for micro-enterprisesEU/ACP Microfinance Programme, Global Index Insurance Facility, NIP Indicative amount: €300 million + €3,7 billion (Investment Facility)

IF and other joint instruments with EDFI’s Overall Focus Infrastructure (IF, ITF, WF & EF) Financial Sector (IF) Projects that foster: Regional integration Sustainable development (environmental projects) “Finance for growth” triggering “finance for all”

Our profile European Commission: a Political Partner, not just a Donor Major Grant Donor: Moving into the EU Platform for Cooperation and Development Long tradition and proven capacity to act at regional level Lead interlocutor in a wide variety of sector dialogues at country level

Revising of the EU Strategy Since 2003 (Communication COM (2003) 267 on assistance from the EU to the private sector), the context, the EU strategy and the ACP countries awareness on the importance of business have significantly evolved: ODA and no-ODA flows new ODA actors financial crisis MDGs Are all factors that must now be considered

Related activities Study on "The role of the private sector in development" Evaluation on "Private sector development" Other relevant studies and evaluations Consultation on Development Policy EU-Africa Business Forum and CEO's Round Table for Africa European Development Days – Panel discussion Communication on Enhancing Growth and Investment in Developing Countries Revision of the EU Strategy: The timetable

The Study on the role of Private Sector in Development -Highlights Partnership with new actors is often a difficult process : a) Differences in Business Culture and Administrative practices b) Relations amongst Partners and roles Importance of flexible and pragmatic collaboration : a) a) Definition of the “Private Sector actors” b) b) Status, size or origin of the partners c) c) Untied nature of the ODA collaboration d) d) Acceptance of non-ODA project leadership

The Study on the role of Private Sector in Development - Recommendations Options for engaging with the private sector through: a) a) Consortium Model:   COM as a political broker   Bringing together diverse actors   “Piggy backing” on the initiative of the private sector to enhance development results b) b) Challenge Fund:   Targeted projects   Open competitions   Focusing on specific expected outcomes

The Green Paper is focused on four key questions: 1. How to ensure a High Impact development policy 2. How to facilitate more inclusive growth 3. How to promote sustainable development as a driver for progress 4. How to achieve durable results in the area of agriculture and food security The Green Paper on Development Policy

A consultative process – encouraging the participation of the public by answering specific questions Three crucial dimensions for an inclusive and sustainable growth: Partnerships for inclusive growth – higher involvement with the private sector – Sustainable investments, access to capital and affordable credit, regulatory framework, innovation, decent work and social protection Fostering regional integration Ensure trade for development The Green Paper on Development Policy

Involving the Private Sector to increase development impact The objectives Private Sector Development, through Foreign Direct Investors, Local Private Sector, Financial Sector, Commercially viable public entities Economic growth Poverty reduction & Millenium Development Goals

Governance and Enabling Environment: Providing a general framework Local markets and enterprises & Large-scale PPP’s Pro-Poor Dimension: Services, income and jobs EU Vision on Private Sector Policy dialogue Blending grants with long- term finance e.g. Interest rate subsidies, equity, guarantees, financial sector support Grants, micro-finance funds, pooling, regional development

EU Vision on Private Sector The pro-poor dimension. An opportunity? Foundation for long term growth by meeting basic needs: food, water, sanitation, health services, etc. Expanding value chain Increasing productivity and incomes Enhancing knowledge and skills Expanding access to financial products and services

Local markets and SME’s & Large-Scale PPP’s How to use our grants to facilitate private investments contributing to development objectives Issues under consideration: 1.The diversity of private investors. 2.The graduation from informal to formal business. 3.Global value chains and clusters 4.Risk mitigation and Instruments? Interest subsidies/equity and quasi equity /guarantees etc. 5.Channels? Financing institutions,intermediaries, micro finance funds,… EU Vision on Private Sector

Governance and Enabling Business Environment Policy dialogue: using leverage of EU as political player to achieve a level playing field with fair rules 1.Peace and Security Initiative 2.Marco economic stability – IMF, COM with general budget support 3.Sector policy and regulatory frameworks – continental, regional and national: Ease of doing business, coping with barriers to investment and factors of competitiveness (access to goods and services). Link with the Regional economic integration process - harmonisation of standards, business law, regulatory frameworks, etc.

DG Development and relations with African,Caribbean and Pacific States Thank You!

What has been done so far Infrastructure SectorExtent of private participation ICT Mobile technology Fixed telephony Mobile operators licenses in 90% of countries Divestiture of SOE telecommunications incumbents in 60% of countries Power Power generation Power distribution 34 IPPS, MW new capacity ($2,5 billion) 16 concessions and 17 management or lease contracts in 24 countries Transport Airports Roads Railroads Four airport concessions ($0,1 billion) 26 container terminal concessions ($1,3 billion) 14 railroad concessions ($0,4 billion) Water 26 transactions, mainly management or lease contracts