Can Private Sector Really Deliver Financing for Sustainable Development?

UN Financing for Development meeting – Private Sector Side Event – 13th July 2015

Key Note by Desire Assogbavi
Head of Oxfam Liaison Office to the African Union

First, on behalf of the Addis Ababa CSO Coordinating Group and the Women Working Group, I would like to welcome you to this event today.

Can Private Sector Really Deliver Financing for Sustainable Development? — Every word in this question must count!!!!

It is a timely event as we await the political momentum to agree on the way forward for financing for development.

We need billions, even trillions to achieve Sustainable Development …..

Governments across the world are increasingly looking at ways to work with the private sector to meet their development financing needs. — Not a bad idea as such —

The risk, however is that, this finance is not additional, and importantly, not targeted at reducing poverty, or improving equality. It may be simply a poor substitute for plugging the gap in public finance. That is what we want to avoid !!!!

Friends, We must not let the volume of the figures overwhelm us. Sufficient finance is available globally. It just needs to be allocated fairly, alongside systemic international change in policy areas that affect public and private finance, such as taxation, aid, trade, debt and climate change.

The challenge, in terms of the private sector as a whole is to direct its business models through greater transparency, accountability and rules with sustainable development.

My key concern is that, there is little evidence to back this shift to private finance. To date, we have not seen sustainable development outcomes resulting from public private partnerships. ……. Without this evidence, there’s no guarantee that using public finance to get private investors to improve people’s lives and support the sustainable development agenda actually works.

Unfortunately Addis has not created that opportunity to gain political agreement on a comprehensive set of clearly defined criteria, principles and standards that would govern the private sector’s contribution towards lasting and sustainable development outcomes.

Without this, there is a danger that too many examples of “leveraging” or “blending” do not deliver sustainable development impacts; —– do not really leverage additional money over and above that, which the private sector could have provided anyway; —– do not align with government and community needs; —– and in some cases do harm to people, and not encouraging business and investors to walk the extra mile towards better impacts.

The issue of the role of the private sector in development is also complex and I wanted to lay the scene out before you, so that we can approach this in the panel discussion today. I see essentially 3 interconnected domains:

The first is related to the business model and the need to redirect the dominant way of doing business to ensure its adherence to human rights and social, political and environmental imperatives.

Wealth and job creation too often, come at a cost to people and planet, and this cost is borne by the most marginalised communities and individuals.

There are plenty of business practises that are perfectly legal while being inconsistent with human rights, and are socially and environmentally un–sustainable.

In terms of the wider accountability we still do not have binding human rights treaties to protect communities and people against abuses by corporates.

Voluntary rules are not enough and are not compatible with sustainable development principles and human rights frameworks. It has been disappointing to see that in Geneva recently, we saw the same governments that are pushing the agenda on increased private finance for development, blocking any movement on adopting a legally binding instrument for business and human rights.

Secondly, there has been an increase in the private provision of public services and investments. It is important to acknowledge the difference with the first as here, the private sector enters the public domain either because it provides public services (i.e. education or health) or because it receives public resources for public investments (i.e. infrastructure).
This is where blended finance and PPPs materialize. Here it would be important that safeguards, criteria and post assessments be of a high quality in order to ensure the best use of public resources, protect the nature of the public services and the state’s responsibility as duty bearer, and promote and enhance public goods.
The existing evidence shows that PPPs have mixed development impacts. In some cases, PPP projects have not been successful, leaving lasting impacts in both developed and developing
An example of where this type of activity has had a detrimental effect is the case of the Queen Mamohato hospital in Lesotho, where now more than half the country’s entire health budget (51%) is being spent on payments to the private consortium that built and runs a hospital in the capital.
We also know what can go wrong when leveraging private finance fails to respect human rights and the environment.
Recently, several reports have been published that document the negative impacts on communities and the environment in many developing countries resulting from lack of oversight and poorly applied due diligence by the World Bank’s lending arm.

Lastly on the private sector engagement in public policy:, In many cases, we are concerned with what we see as an emerging corporate capture of the public space.

For instance, there is currently heavy corporate lobbying against public country-by-country tax and profit reporting in many countries, despite the public being keen to end tax dodging.
Just to reiterate: rules to protect workers or the natural environment are poorly applied. We therefore need legally binding sustainable development principles that all governments should apply to all projects where public and private finance is combined to ensure social and environmental justice and, we need governments to develop binding rules based on the UN Business and Human Rights Guiding Principles.

I thank you for your attention.