Seminar “PRIVATE SECTOR’S INVOLVEMENT INTO DEVELOPMENT COOPERATION” Gediminas’ Hall,...

Seminar “PRIVATE SECTOR’S INVOLVEMENT INTO DEVELOPMENT COOPERATION”

Gediminas’ Hall, Ministry of Foreign Affairs of the Republic of Lithuania

Vilnius, 13 November 2014

Mr Roberto Ridolfi, Director for Sustainable Growth and Development, DG Development and Cooperation – EuropeAid, European Commission

New Commission Strategy on the Role of the Private Sector in Development

PRIVATE SECTOR COMMUNICATION

New Commission

Strategy on the Role of the

Private Sector in Development

Table of contents

12 PRIVATE SECTOR ENGAGEMENT

3 JOINT ACP-EU COOPERATION FRAMEWORK and EU REGIONAL BLENDING FACILITIES

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4 AGRICULTURE AND ENERGY OPPORTUNITIES

Why a Communication on the role of the private sector in development? The new EU development vision ('Agenda for Change') calls for making the

private sector a partner in development cooperation. The Communication formulates in more operational terms how this can be achieved.

The EU committed at the Busan High-Level Forum on Aid Effectiveness to more effective public-private collaboration for development. The Communication follows up on this commitment.

The last Communication on the private sector dates back to 2003. The new Communication updates our private sector development strategy in light of a changing world.

The private sector plays a central role in many areas of EU development cooperation. The Communication provides a strategic framework for mainstreaming private sector development and engagement across sectors.

Interactions between donors and the private sector have intensified and became more complex. The new Communication defines principles and criteria to guide the EU’s engagement with the private sector.

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Purpose and objectives of the Communication

Update the EU strategy for private sector development support in developing countries;

Identify ways to working closer with the private sector in development cooperation as announced in the 'Agenda for Change', and confirmed in the Busan outcome document;

Using the private sector as “delivery channel” for development in sectors such as energy, agriculture and infrastructure;

Propose a framework dialogue and joint action with business to harness the private sector as a driving force in achieving inclusive and sustainable growth;

Elaborate on the role of the private sector in the post-2015 framework, and in the transformation towards a green economy.

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Structure of the Communication

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Table of contents


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JOINT ACP-EU COOPERATION FRAMEWORK and EU REGIONAL BLENDING FACILITIES

AGRICULTURE AND ENERGY OPPORTUNITIES

Private sector Engagement (PSE)

Finding a common language…

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Private Companies

Donors,Public Sector

Watchdog of industry

Providing expertise on local situation

Implementation partner

Civil Society Organisations

Multi-stakeholder

alliances

CONVERGENCE OF ACTORS interests

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• 1 – Responsible Investment/Land Governance. Strengthening investment frameworks, public policies. Examples: VGGT, rai.

• 2 – Risk Management. Reducing price and yield risks. Risks are highest at production stage when values are low. Increased production and access to finance. Examples: PARM, GIIF, FARMAF.

• 3 – Agriculture Equity Funds. Risk sharing instruments. Guarantee schemes, interest rate subsidies. Example: AAF-TAF.

• 4 – Market Access/Value Chain Development. 'Traditional' PSD: PEP, EDES, BTSF, STDF.

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Strategic areas of Private Sector Engagement in agriculture


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Joint ACP-EU cooperation framework for PSD support: provisions on Intra-ACP

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The framework is articulated around 4 Pillars:

To support business-friendly national and regional policies.

To strengthen production capacities by providing micro-level support to the private sector and supporting key intermediary organisations.

To improve access to responsible and sustainable micro-finance services.

To increase access to finance for SMEs and catalyse private investments through blending operations.

National, regional and intra-ACP actions must be strongly interlinked:

To establish a platform for lesson-sharing, dissemination of good practices and dialogue with the private sector across the ACP regions.

Blending Using grants strategically to unlock additional public

and private financing to meet development challenges

LEVERAGE

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FINANCIAL CONTRIBUTION

SFrom the EU budget and Member States into the

blending facilities

NIF: € 789 million from ENPI & € 78 million from Member States, 2007 – 2013

ITF: € 638 million from the EU (including SE4ALL) and € 161 million from Member States

LAIF: € 197 million, 2009 - 2013

IFCA: € 85 million, 2011 - 2013

CIF: € 70 million, 2012-2013

AIF: € 60 million, 2011 - 2013

IFP: € 10 million, 2012-2013

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LEVERAGED RESOURCES

Since 2007 in ITF, NIF, LAIF, IFCA, AIF

Until end 2013

At least €15 billion are provided by eligible public finance institutions

€1.6 BILLION

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Sectors covered

Figures since 2007

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BLENDING FACILITIES – EXPERIENCE

OF PPPs

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• 12 PPP projects have been financed by EU blending facilities

• 10 in Africa (9 ITF, 1 NIF)• 1 Latin America• 1 Caribbean

• Strong emphasis on renewable energy

• 7 in Energy (most renewable)• 3 ICT (undersea cables)• 2 Transport (ports)

UNLOCKING PRIVATE

INVESTMENTWith the facilities the

needed tools are in place

Currently the blending facilities mainly support public investment projects. However, they also provide the means to catalyse private investments – particularly by using more innovative financial instruments such as risk capital and guarantees.

•Risk capital can help address the lack of equity capital in some countries, particularly for new sectors such as renewable energy (e.g. GEEREF fund)

•Guarantees are particularly useful in more liquid markets where the perceived risk of certain activities is high among local investors or banks (e.g. SME Guarantee Facility)

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Our plans for the Agriculture sector:

The EU has undertaken high level political commitments

1. Support partner countries in reducing the number of stunted children by 7 million by 2025

2. Build resilience and enhance crisis prevention & management

3. Agriculture for growth & job creation, enhancing private sector activities and agribusiness

4. Promote a sustainable agriculture through its sustainable intensification & linking farmers to markets

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Result of evidence based programing:Countries with Food Security focal sector 2014-2020

Djibouti

Ethiopie

Kenya

Somalie

Tanzanie

Ouganda

Benin

Burkina Faso

Côte d'Ivoire

Gambie

NIP approved NIP expected

Erythrée

Ghana

Guinée Bissau

Libéria

Mali

Mauritanie

Niger

Nigeria

Sénégal

Sierra Leone

BurundiCameroun

RDC

Rwanda

Sao Tomé & P.

Tchad

AngolaMadagascar

Namibie

Malawi

Mozambique

Swaziland

Zambie

Zimbabwe

Afghanistan

Bangladesh

Népal

Myanmar Cambodge

Laos

Bhutan

Pakistan

Sri Lanka

Timor Oriental

Yémen

Kyrghyzstan

TajikistanUzbekistan

Azerbaijan

Georgie

Moldavie

Cuba

Haïti

Suriname

Vanuatu

Fidji

Colombia

GuatemalaHonduras

Nicaragua RCA

Total for the FNS/SA Sector: €8bn (80%geographic, 20% thematic)

Total for the FNS/SA Sector: €8bn (80%geographic, 20% thematic)

CFS Principles for Responsible Investment in Agriculture and Food Systems

Agreement formally endorsed mid-October in Committee on world Food Security plenary meeting, Rome

CFS coordinated the RAI process

Voluntary and legally non-binding principles (international soft law).

12 page document contains a set of principles to promote investments in agriculture that contribute to food security and nutrition.

It also sets out the roles and responsibilities of all involved in agricultural investment.

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10 Principles1) Contribute to food security and nutrition

2) Contribute to sustainable, inclusive economic development, poverty eradication

3) Foster gender equality and women’s empowerment

4) Engage and empower youth

5) Respect tenure of land, fisheries, forests and access to water

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10 Principles (cont.)

6) Conserve and sustainably manage natural resources, increase resilience, and reduce disaster risks

7) Respect cultural heritage, traditional knowledge, support diversity , innovation

8) Promote safe and healthy agriculture and food systems

9) Inclusive, transparent governance structures, processes, grievance mechanisms

10) Assess and address impacts and promote accountability

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EU Investment in agriculture in General

Approximately € 8.2 billion for period 2014-2020

Different instruments:- National, Regional, Intra-ACP- Global Public Goods and Challenges Programme, DCI- Specific Initiatives on Horn of Africa (SHARE) and Sahel (AGIR)

New initiatives

G7 New alliance on Food Security and Nutrition

SUN – Scaling up Nutrition

Current specific opportunities for private sector

All ACP Commodities Programme (2014-2017, € 18 million).

AAF/TAF – African Agriculture Fund (2012-2016, EU TAF contribution of € 10 million; Fund itself approx. € 150, multi-donor).

PIP - Pesticides Initiative Programme (2010-2014, € 32.5 million).

GIIF – Global Index Insurance Facility (2009-2016), €24.5 million

Various programmes at national level. Mostly targeted at smallholders, SMEs, inclusive business. EU Delegations are in the lead. Examples: Uganda, Tanzania, Malawi, Papua New Guinea.

The African Agriculture Fund (AAF) andthe Technical Assistance Facility (TAF)

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What: provides technical assistance to agri and food related businesses that receive investment through the AAF:

• capacity building for SMEs invested in by the AAF through its SME Fund• improve linkages between smallholder outgrowers and the companies invested

in by the AAF and• enhance rural financing opportunities in areas where AAF invests

Funded primarily by EC, managed by IFAD and implemented by TechnoServe. It is also co-sponsored by the Italian Development Corporation, UNIDO and AGRA.

• As of November 2013, 11 TA projects were approved with a value of €975,000

• AAF

• Who: A pool of European and African DFIs• What: Support private sector companies to enhance• and diversify food production and distribution in Africa. • How: By providing equity funding and strengthening

management and company structure• The AAF has raised $243 million in investment. AAF is

managed by Phatisa.

• TAF

Empowering Development - the EU Energy Policy

1. What? Creating an enabling environment that allows for transparency, cost-recovery and reinvestment.

2. How?

- Reforms: Technical Assistance Facility - Investments: Blending (regional blending facilities, GEREEF, EDFIs);

- Rural Electrification: Calls for Proposals;- New Business Models for Rural Electrification; - Missing Link: Utilities.

Regulatory framework Catalysing private sector investment

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Rural electrification project - example

Activities:

•Electrification of households, businesses, public services and lighting;

•Support the development of new businesses, particularly in agriculture;

•Transformation of the project into a sustainable and profitable Micro Utility

Expected results: more than 81 000 people in rural Tanzania will get access to reliable electricity mainly from renewable sources in mini grids.

Implementing actors: private sector bodies and one University

EU grant: € 7,4 millionTotal estimated cost of the project: € 16 million

Micro-Power Economy Tanzania Roll Out

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Rural electrification project - example

Activities:

•Rent-to-own finance scheme for solar home systems and inclusion of mobile money

•Distribution of business kits to support economic activities

Expected results: more than 49 000 households and 1 000 schools in rural Rwanda will get access to reliable electricity through solar PV systems.

Implementing actors: one private sector body and one public authority

EU grant: € 6 millionTotal estimated cost of the project: € 22 million

Rent-to-Own Solar Home Systems - Rwanda

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USEFUL LINKS

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http://ec.europa.eu/europeaid/where/latin-america/regional-cooperation/laif/index_en.htm

http://ec.europa.eu/europeaid/where/neighbourhood/regional-cooperation/irc/investment_en.htm

http://www.eu-africa-infrastructure-tf.net/

More info

[email protected]

http://ec.europa.eu/regional_policy/sources/docgener/guides/ppp_en.pdf

http://ec.europa.eu/europeaid/what/economic-support/private-sector/documents/psd-communication-2014_en.pdf

Thank you!

Sustainable Growth and Development DirectorateEuropean Commission, DG DEVCO – EuropeAid

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