Economic growth accounts for 80% of the poverty reduction globally achieved since 1980. The private sector is an engine of growth which benefits the poor. It generates economic opportunities and tax revenues, creates jobs, goods and services for the poor, and introduces technology and innovation. But business can do more than drive growth. It has an enormous potential to play its part in solving major global challenges and improve the quality of people’s lives in developing countries.
"Trade, wealth creation and job creation are the only routes to long term prosperity." (Gordon Brown, the United Nations, 2007)
DFID works to maximise the role of business in development, to tackle poverty and achieve the Millennium Development Goals in three main ways:
DFID encourages companies to stretch their core business practices and develop innovative business models. This should generate profits for themselves and advantages for developing countries. In addition DFID has pioneered innovative funding mechanisms to help the private sector meet the needs of the poor.
It is because the private sector has the potential to help change the lives of people in developing countries that the UK Government, alongside the United Nations, launched the Business Call to Action. To find out more contact enquiries@business-call-to-action.com. Watch video messages from some of the companies involved about doing business in the developing world. Watch video messages from some of the companies involved about doing business in the developing world.
Collaborative partnerships between companies, governments, civil society and others can push the boundaries of business models by creating new relationships that help economies deliver what the poor need. These include tackling inefficiency, poor governance and corruption.
DFID initiatives to increase transparency
DFID has also pioneered and supports numerous public-private partnerships (PPPs):
National and international businesses keen to invest in developing countries can be put off by potential risks to their investments. These can be caused by red tape, poor legal systems and other barriers to business operations. DFID is supporting business by working to overcome these hurdles in order to create a more business-friendly environment. This helps keep costs down and creates more freedom for business to operate.
Our Challenge Funds offer grants to businesses, on a competitive basis, to help cover part of the cost of getting new commercial ventures going. We’ve designed them to stimulate business activities that particularly benefit the poor but which are commercially viable and capable of expansion. Examples include the Food Retail Industry Challenge Fund and the multi-donor Africa Enterprise Challenge Fund.
A range of international facilities are available that encourage businesses to invest in roads, hospitals and other public infrastructure projects in developing countries, and to streamline the investment process. Between 2000 and 2006 DFID spent $120 million on private sector infrastructure projects, paving the way for $2.6 billion of private investment in the infrastructure of poorer developing countries. DFID is funding a number of such facilities like the Private Infrastructure Development Group, to lessen the risk to investment in infrastructure projects.
In December 2008 DFID launched the International Growth Centre (IGC) with a commitment of £37 million. The IGC aims to deliver world-class research and demand-led analytical and policy support to developing countries on growth.
While business is a critical partner in development, companies cannot help to achieve the Millennium Development Goals while their operations have negative impacts on social and human rights or the environment. DFID therefore expects companies to show leadership in corporate responsibility, managing the social, environmental and economic risks in their areas of operation.
DFID promotes responsible business standards by supporting several schemes such as:
On 20 January 2009 DFID launched its Private Sector Development Strategy. The strategy outlines how DFID will work with business beyond the Corporate Social Responsibility agenda to mobilise their core business for development impact. It includes three pillars - Access, Competition and Engagement. Business needs access to markets, finance and skills while the poor need access to economic opportunities. Competitive markets are also essential for strong businesses - markets that reward hard work, new investment and entrepreneurial spirit. We also need to engage more effectively with the business community – from multinationals to stall holders - to work together better.
Throughout 2009 DFID is running a series of meetings with the Overseas Development Institute and Business Action for Africa to examine the role of the private sector in development. It will provide UK and international business with a forum to share experiences about investing, growing and creating development impact in developing countries.
If you want to find out more about how DFID works with business, or if you run a business and want to know what DFID schemes and initiatives might be relevant to you, email us at business@dfid.gov.uk.
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