Expanding Opportunities Through Private Sector Development: Canada Making a Difference in the World

A CCIC Review of CIDA’s Policy to Strengthen Private Sector Development

This past July, International Cooperation Minister Whelan launched CIDA’s policy to guide the Agency in its efforts to strengthen the contribution of the private sector "to pro-poor economic growth and improved standards of living for people living in poverty" (i). The policy follows a consultation process earlier this year and builds on the conceptual framework of February 2003 background document for that consultation, Expanding Opportunities: Framework for Private Sector Development. (note 1)

CIDA’s PSD Policy Objectives and Scope

The policy states that the objective for CIDA’s private sector development (PSD) support "is to create more, better and decent jobs and sustainable livelihoods" and will do so "by helping markets to function well and by stimulating growth of the local private sector". (1)

While there is no necessary or sufficient linkage between the stated objective and markets that function well or growth of the local private sector, CIDA will pursue "pro-poor economic growth" wherein "the poor are actively engaged in, and directly benefit from, the activities that generate economic growth as seen through a pro-poor, or poverty lens" (6). The policy supports this focus in its broad definition of the scope of the private sector, which "extends to rural and urban economic and market development, to a diverse range of enterprises and producers in the informal and formal economies, as well as cottage industries and cooperatives engaged in market activities." (1) It also recognizes the need for diverse and appropriate partnerships to achieve its objective.

These objectives and definitions retain the broad scope found in CIDA’s February Framework document. The policy’s elaboration of private sector development results and its implementation framework draw on both this earlier Framework and commentary during the consultation. But the policy also retains a number of quite significant potential contradictions and omissions that may undermine its stated objectives and the achievement of results that benefit the poor if they are not recognized by CIDA and explicitly taken into account in the elaboration of effective PSD programming.

Development Results

The PSD policy defines five quite broad and inclusive expected results at the outcome level and all PSD programming is expected to contribute to at least one or more of these area. While the result areas (and examples of initiative under each) integrate a strong gender-based analytical framework in both the definition of outcomes and programming initiatives, several of the result areas largely ignore a rights-based approach, which may also limit the policy’s impact on people living in poverty. (note 2)

For example, in the achieving "sustainable enterprise expansion and the equitable creation of more and better jobs" (9) the notion of "decent jobs" is inexplicably dropped, even though it appears in CIDA’s overall objective for the PSD strategy and is defined as a key concept in an appendix. The latter quotes the ILO definition of decent work as "productive work in which rights are protected and that generates an adequate income and adequate social protection" (23). The final chapter on accountability quite positively states that CIDA is "bound and guided by a variety of legal instruments and international agreements" including ILO core labour standards as set out in the ILO Declaration on Fundamental Principles and Rights at Work" (20). But the stated PSD policy results and outcomes do not seem to adequately reflect these obligations.

The policy constructively identifies potential initiatives to support capacity building for a broad cross section of social actors including labour/trade unions, self-employment associations and cooperatives, strengthening the rule of law (including benefits for informal sector workers) and "support for innovation and leadership in corporate social and environmental responsibility" (9). Yet there is no clear identification of CIDA initiatives in support of empowering workers rights (as defined by the ILO), implementing social standards and the participation of citizens’ organizations representing the vulnerable, particularly those affected directly by the implications of private sector/market initiatives. Again under the chapter on accountability, the policy positively suggests that CIDA "is committed to supporting the implementation of the OECD Guidelines for Multinational Enterprises", but Agency is seeking no explicit results in establishing concrete measures and requirements for assessing private sector development initiatives related to norms of corporate social and environmental responsibility.

An important result area is "increased participation in regional and international markets and institutions by developing countries and countries in transition" achieved through a number of initiatives to facilitate trade and improve policy capacities. Neither the result outcome, not the initiatives identified, speak to the important role that CIDA might play in strengthening developing countries capacities to advance their trade interests in the service of national development strategies and poverty reduction. How might citizens participate in the elaboration of developing country trade strategies? The policy’s focus on CIDA’s promotion of Canadian policy coherence in its trade and development agenda (18) is welcomed. However, this commitment must be informed by an analysis of the current impact of Canadian trade strategies on development options for the poor. CIDA will need to promote and take into account significant independent and diverse southern perspectives, including those from trade unions and other civil society organizations, on appropriate linkages between trade and national strategies to end poverty. These elements are missing from both the policy and the February 2003 background Framework.

A Framework for Implementation

The overall framework of Canada Making a Difference in the World on strengthening aid effectiveness guides the implementation of the PSD policy. However, interestingly, the policy suggests that CIDA PSD programming will align with not only "locally owned poverty reduction [strategies]" but also "economic development strategies of developing countries". The distinction (and linkages) between the latter and effective poverty strategies for CIDA’s programming orientation, given the commitment above to support economic growth "that actively engages and directly benefits the poor", is not clear.

The policy retains its commitment to subject all PSD initiatives to three analytical lens – a pro-poor lens, a business lens and a governance lens. It pro-poor lens "is rooted in the livelihood strategies of the poor, enabling more productive uses of their assets and capabilities" (12). The elaboration of these lens will be set out in a series of practitioners’ analytical tools that will be developed by CIDA and make available on CIDA’s web site. Hopefully these tools will address the critical issue of how these lens relate to each other. A livelihoods approach is a tool that is equally important for the business and governance lens.

The policy significantly compromises its commitment to promote pro-poor growth, by stating that "CIDA will generally not take leadership of infrastructure projects, efforts in privatization, public expenditure management, reform of macro-economic policy or of the investment climate for foreign investment, recognizing the expertise and resources of the international financial institutions (IFIs) and other multilateral organizations in these areas".(3) These are policy areas that have been central to donor conditionalities in support of a market approach to development in the past decade. They have come under intense critique by independent policy analysts and academics, social movements and NGOs in developing countries for their direct and negative impacts on CIDA’s stated objectives to improve the livelihoods of the poor and contribute to "more, better and decent jobs". (note 3)

While these IFI policies have often been characterized as a "one size fits all" approach, CIDA’s PSD policy suggests that it will avoid this approach in that "development assistance must be rooted in the realities of the local market and thus address that market’s particular mix of challenges and opportunities" (5) Nevertheless, if CIDA is to channel its resources through multi-donor programs lead by the IFIs and other large donors, it is difficult to imagine how CIDA plans to contribute to appropriate poverty and country sensitive PSD programs in the context of these largely IFI-determined macro-economic frameworks. (note 4)

The PSD policy recognizes that the private sector can be an important actor in many conflict-threatened or -affected societies. But "investment that is not conflict-sensitive can worsen fragile situations". The policy commits CIDA’s PSD initiatives to "demonstrate an awareness of their socio-political implications as they relate to peace and stability of a country or region".(4)

The PSD policy suggests that the Agency will identify "PSD Focus Countries" "that have made PSD, or more broadly, economic development, a priority" (15), although no criteria or implications, are set out beyond this statement. CIDA will strengthen its capacities and knowledge through a "focal point team" on PSD in CIDA’s Policy Branch and "building a multistakeholder knowledge network that will seek to engage the Canadian private sector and civil society" among others in collaborative learning and sharing of knowledge (14). It will over time increase "the number of staff with business education or background". How the latter will improve the Agency’s capacity to implement PSD through the poverty lens, let alone a rights based approach, is not elaborated. Finally the policy and its results will be reviewed in five years time.

Brian Tomlinson
CCIC Policy Team
September 2003

Endnotes

1. For a detailed analysis of the Framework document and recommendations for CIDA’s policy, see Canadian Labour Congress and CCIC, "A Commentary on Expanding Opportunities: Framework for Private Sector Development", March 2003 available on CCIC’s web site, www.ccic.ca. 
   
2. Towards the end of the policy CIDA recognizes that "much work remains to be done on devising ways to improve coherence not merely among economic instruments and institutions, but also social and environmentally mandated instruments and institutions in areas such as human rights, core labour standards, gender equality, global and cross boarder environmental issues, migration, peace and security and corporate responsibility" (18). Yet its only commitment is for more research. Perhaps the intentions of research, much of which is already available in great quantities, should have informed a number of important gaps in the definition of the result areas to be pursued.
   
3. For one recent example see the Canadian Halifax Initiative ’s "Water, Land, and Labour: The Impacts of Forced Privatization in Vulnerable Communities" and background material for the October/ November 2003 cross-Canada public education tour of southern civil society representatives on the implications privatization for the poor at www.halifaxinitiative.org.
   
4. Towards the end of the policy statement, CIDA suggests that it will seek to influence approaches to PSD initiatives funded by IFIs, UN organization and the WTO (18), but offers no policy framework or goals for influencing the approach of these key players in the macro-environment for PSD.