Partnerships for development
Gelegenheid: Fair Trade WeekLadies and gentlemen,
I am grateful for this opportunity to speak about a subject that is certainly topical these days and perhaps the most often discussed in the International Cooperation department of the Foreign Ministry at this moment: partnerships between the government and private companies and the degree to which they can contribute to development cooperation, more particularly the MDGs.
I have been asked to deliver this speech on behalf of the Minister for Development Cooperation, Bert Koenders. He regrets that he could not be here today, but asked me to give all of you his warmest regards. He looks forward to hearing the outcome of today’s discussion, and welcomes suggestions.
Professor Van Tulder launched the discussion by raising a number of pertinent questions in his background paper for this afternoon and other speakers have already shed their light on this subject from the academic, commercial and ngo perspectives. I hope that I will be able to add some relevant elements to this discussion from the government’s point of view.
Before I go into detail about our approach to public-private partnerships and our thinking about them, let me say that we started our partnership approach not long ago, and every day we are still learning. So I would ask of you not to expect to hear from me all the answers to Professor Van Tulder’s questions today. What I will try to do, is share with you some of our experiences with public-private partnerships, outline some of the dilemmas that we face and propose a possible way ahead for the near future.
At the outset, I want to give you the wider context in which our policy-making about public-private partnerships evolves.
This conference is taking place in turbulent times. The past few weeks have been dominated by a financial meltdown, with an enormous, direct and indirect impact on banks, governments and individuals. Let me quote what Kofi Annan, Michel Camdessus and Robert Rubin wrote in the FT on 31 October, when speaking of the lessons taught by history and their personal experiences: ‘One [lesson] is that when crises occur, the least responsible are usually the worst affected and the least able to cope. The second is that crises can provide the momentum for reform and radical change.’ Indeed, there is a great risk that the weakest shoulders will bear the heaviest burden; the financial crisis is likely to hit the poor in Africa disproportionately hard.
However, as was stated by British PM Gordon Brown in his address to the UN HLE on the MDGs in New York a little over a month ago: this is no time to renounce on our previous commitments. Actually, the Netherlands government shares his vision that this would be the worst time to turn our back on the millennium goals.
In 2008, we are halfway towards the MDG target date. I was in New York exactly a month ago, with Prime Minister Balkenende, foreign minister Verhagen and Mr Koenders. 192 world leaders had gathered there to take a critical look at the progress made towards achieving the MDGs. The conclusion was that we have made some progress, but that we still have a long way to go.
Since coming to power a year and a half ago, the Dutch government has recognised that an extra effort is needed if we are serious about our commitment to achieving the MDGs. More specifically, the government is convinced that new, innovative partnerships are needed. In the words of Mr Koenders, as expressed in a policy paper published in October 2007: ‘in order to achieve the MDGs, contributions are needed from ‘thinkers, doers and providers’. At the ministry we are fully aware that these roles cannot and should not always be played by the government alone: other actors are needed, and their contributions are equally important. That is why the policy paper I just mentioned, speaks of development and poverty reduction as ‘our common concern’.
It implies also that we consider the Millennium Development Goals our shared goals, goals that cannot be achieved by governments alone. We have come to the conclusion that, in order to achieve them, we need to cooperate with the private sector, NGOs, universities and research institutes. We are looking for a variety of partners, conventional and less so. Even more so, we are especially interested in unusual partners – and we are looking for them in the commercial sector as well.
For the ministry, working with the private sector is no longer an issue that is open to discussion; it is part of the ‘acquis’ of development cooperation. We have embarked on partnerships as a means of achieving development. And we have already gathered some experience in doing so.
At the moment, the ministry is involved in various partnership agreements, which have resulted from an event held in a small place in the Netherlands, called Schokland, in June 2007. Companies, organisations, universities and individuals signed innovative agreements (we call them ‘Schokland’or ‘millennium’ agreements), adding a new dimension to existing partnerships between various public and private bodies.
Let us take a closer look at some of the agreements, since some of them definitely deserve your special attention.
First: Green Light for Africa. The main objective of this partnership is to provide ten million people with access to sustainable light by 2015. In its first stage, this activity is being carried out in Ghana. The ministry and Philips are each investing €3 million; Philips are putting their money into the design and the development of a high-quality, rechargeable solar lamp, and also into training and distribution. The ministry is investing in raising awareness, training small entrepreneurs, setting up micro-credit institutions and establishing a sustainable, open trading system that benefits small traders most of all, while at the same time being accessible to other suppliers as well.
We see this as a valuable contribution to the Millennium Development Goals, because the lack of light means that millions of people in rural Africa cannot work in the evening and children cannot do their homework. Hospitals, factories and other businesses can barely operate effectively. Access to modern energy is a precondition for development.
So, through this partnership, we are jointly investing in creative solutions, combining the creativity and entrepreneurship of Philips with the experience of African organisations and the expertise available at the ministry and our embassy. I want to underline that the ministry’s contribution to this activity does not take the form of a subsidy to bring down the price of the lamp. Granted, the price of the lamp has been an issue. But Philips have shown themselves willing and able to redesign their product and come up with a cheaper version that better suits the needs of people in rural areas.
Another example of a partnership with huge potential is the Health Insurance Fund. This public-private partnership consists of two key elements. The first of these is the establishment of a fund to promote private healthcare insurance for the poor. Premium payments are temporarily subsidised for low-income groups who would otherwise be unable or unwilling to take out insurance. At the same time, the Fund is helping to improve the private healthcare infrastructure through the creation of a private investment fund, taking the pressure off public healthcare services and generating a new source of healthcare funding.
The Health Insurance Fund offers low-income groups basic healthcare insurance that also covers treatment for HIV/AIDS. The Fund’s main beneficiaries are people who were previously uninsured but who nevertheless spent part of their income on health care that was often of poor quality. They now spend the same amount on an insurance premium, subsidised by the HIF. The result is a more efficient healthcare system with a sustainable source of funding, enabling hospitals and private clinics to respond to insurance-backed demand.
Like in the case of Green Light for Africa, we could not have set up this partnership without the expertise and experience of the private sector; nor do we think it could have taken off without our own contribution.
The examples of public-private partnerships I just gave, show that PPPs come in different shapes and sizes. Any partnership is a voluntary agreement between actors from the public and private sectors. But how they are set up and how they work may differ enormously. It is important that we keep this in mind as we go on.
At the ministry, we are definitely very pleased with these examples of PPPs. But I will make no secret of the fact that assessing and executing these public-private partnerships has sometimes been a rocky ride for the ministry. Innovation sometimes meets with resistance. This is not strange, since it requires a new way of thinking and working. From all partners probably, but certainly also from the Foreign Ministry.
Questions have been raised about the sustainability of partnerships, but also about whether PPPs are suitable for all sorts of development activities. We also have to keep an eye on the capacity of the ministry and its embassies. Do we have the required technical knowledge at our disposal? Is it cost effective? At what point do we risk crossing the line between financing development aid and subsidising companies?
Despite these dilemmas, we decided to extend our experience in this field and to encourage these types of agreements by earmarking €50 million from the development aid budget for what we have labelled the ‘Schokland fund’. The underlying idea is that one euro from the public sector would generate the same or double that amount from the private sector. Meaning that additional funds would be generated and – possibly – create a multiplier effect. And this is ultimately what we need to achieve the MDGs by 2015.
It is too early to present you with an evaluation of this Schokland fund. That does not mean, however, that things have come to a standstill. Or that we have stopped thinking about our partnership approach; are we attracting the right partners? Are we getting the best proposals? How can we be sure that we are not faced with ‘second best’ ideas? How many of the applicants view us merely as a source of funding? These are some of the questions we continue to ask ourselves.
Ladies and gentlemen, while working on development cooperation, and engaging with the private sector, we must never forget one thing: companies always have one main objective: profit. Whatever the involvement of companies in developing countries, it is generally not for ethical or moral reasons.
Some of you may say: what about Corporate Social Responsibility, something that more and more companies worldwide are engaging in? We welcome companies’ growing interest in being socially responsible in their business activities. But at the same time, one should not turn a blind eye to the fact that CSR may also be inspired by the desire for positive PR, especially ‘at home’. In other words: being socially responsible is not necessarily the same as engaging in business activities that contribute to MDGs.
The challenge for my ministry, therefore, is to get companies to develop a greater sense of the need for economic growth in developing countries and to convince them of the opportunities that it will bring them.
Starting from the key concept that partnerships respond to our objective of innovative financing and having a multiplier effect, where does that lead us?
It may very well lead us back to an increased focus on the core activities of companies. The best public-private partnerships may very well turn out to be those where a company, taking its core activities as a starting point, identifies opportunities on, for example, the African market. Seeing Africa as a market, and being inspired by the problems and opportunities that it presents, is very likely to be the most promising way to develop public-private partnerships.
This may not be as hard as it seems: the government’s policy agenda on poverty reduction and the objectives of the private sector are more similar than is often believed. Even those with very little purchasing power can still be potential customers: it is up to business to develop products that will appeal to these potential clients. And we know from experience that companies often have enough reasons – and a very good sense – for doing exactly that; think of Philips and the insurance companies involved in the HIF.
This does not mean, however, that the government is always aware of this. There are a lot of activities undertaken by companies in developing countries – some of them extremely interesting and worthwhile – that we are not involved in. Would we like to change that? Not necessarily. The ministry does not wish to be involved if there is no need.
What it does mean, however, is that in a changing, globalising world, governments need to re-think and re-define their roles in development. Government budgets alone will not solve global poverty. Instead of coming up with one-way, ready-made solutions, we have to be more creative and, together with our partners, come up with tailor-made solutions for development. We need to look at the problems and the main causes behind them. We need to decide whether a given problem is related to the market, or to energy or capacity and then find the right partners to solve it. We need to develop a different mindset. Government policy must adapt to a new reality, and adopt a more integrated, flexible and project-based approach.
Actually, the need for a creative and flexible approach on the part of both governments and businesses is also underlined by the wide-ranging consequences of the financial crisis in the United States and other parts of the world. The enormous stress on worldwide financial systems has encouraged governments in the developed world to take on an activist role. For development cooperation, the agenda is to help maintain investment and capital flows to Africa and elsewhere. We have to be anticyclical. Wherever possible we have to cooperate with the private sector to maintain economic growth and job creation at the levels we have seen over the past decade. This will not be easy.
But we see, once again, the need to take the problem as the central issue to deal with and not the institutions, or existing rules and procedures.
Ladies and gentlemen, we are not blind to the idea that this may require a different way of going about development cooperation. Partnerships and millennium agreements should be clearly understood for what they are: they are investment agreements of some kind; they represent a joint investment in development. We need to adapt our thinking and our way of operating to bring this concept more in line with our ‘traditional’ development aid and policies. Preferably, we should carry out this process of adjustment and adaptation together. Since we are dealing with partnerships, our review should take into account the perspectives of the different partners. Let us share our understanding of partnerships, and find a common language. Several attempts are now being made to do this and I would like to take this opportunity to thank Prof. Van Tulder for his involvement.
In this respect, I should like to mention that the Minister for Development Cooperation has recently announced plans to set up a ‘Business club for MDGs’, consisting of people from different walks of life: multinationals, but smaller and medium-sized companies as well. From different sectors, including agriculture and finance, and from different levels: CEOs and people who actually have experience of working at grassroots level.
Conclusion
In order for the MDGs to be achieved, we need to stimulate economic growth and equity in developing countries, and we need to do this together, in partnership. Governments have to admit that companies are the source and the engine of economic growth. At the same time, as in any good business relationship, we need to remain critical of each other. We do not form partnerships for their own sake. Partnerships are not the aim, they are a tool. They are a means to the end of development – and a mindset.
We should use existing examples and look at their assets: ideally, their ability to create leverage by involving non-traditional (private) partners and to generate additional resources and their potential to be upscaled and to multiply results. And we must develop more modern ideas to deal with this. Simply because that is what modern development cooperation requires from us and that is how it will look in the future. Let me end by borrowing one more quote from the FT article by Annan, Camdessus and Rubin: ‘Big problems are the opportunity for big thinking’. That should inspire all of us.
Thank you.