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

2. 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

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

4. 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

5. 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

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

7. Emerging markets offer opportunities

9. Private sector creates jobs
>90%
of all new jobs

10. 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
million $
2 billion
Levels 2-3
<$3000
Level 4
4 billion

11. 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

12. Imbalance of global R&D investments

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

14. 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
BEAM

15. BEAM − Business with Impact
Innovations for development program 2015−2019

16. 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

17. − 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

18. − 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 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

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

20. 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

21. 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

23. 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

24. 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

25. 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

26. 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

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

28. Example of multilateral cooperation: World Bank’s Infodev

29. Example of multilateral cooperation: World Bank’s Infodev

31. 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

32. 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

33. 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

34. 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