CONCLUSIONS
209. We have conducted this inquiry at a time when
PSD represents a relatively new area for DFID. Considering that
DFID's PSD approach is in its infancy, the breadth and innovation
of the policies it has already developed is impressive. DFID is
seen as a leader amongst other donors in regard to PSD. The Department
is showing intellectual leadership is pursuing a hybrid approach
that unites the investment climate work currently being led by
the World Bank Group, and the Making Markets Work Approach favoured
by a number of other bilateral donors. This ensures that the wider
constraints to PSD, such as poor enabling environments, are addressed
in conjunction with pro-active efforts to support poor people's
capacity to participate in markets and the benefits of growth.
210. Broadly, we commend the policies and financing
mechanisms that DFID is using in support of PSD. However, we have
some quite serious reservations concerning whether DFID's organisational
and operational capacities have 'kept up' with the Department's
rapid proliferation of policy interventions towards PSD. We believe
that DFID needs to take a step back and map out the strategic
plan that unites its multiple responses to PSD. There is a degree
of the Department trying to 'run before it can walk', with a set
of policies that are not necessarily underpinned by specific objectives
or appropriate resource allocations.
211. Ensuring that DFID's organisational design supports
a coherent approach to PSD is of key importance here. Going back
a step and developing — and clearly communicating —
a co-ordinated PSD strategy, with accompanying measures of re-organisation
and re-deployment, will greatly assist the achievement of DFID's
ultimate goal of poverty eradication. DFID's wider administration
needs to rapidly 'catch up' with new policy directions towards
PSD, and to build a co-ordinated, Department-wide PSD strategy.
The 2006 DFID White Paper
212. DFID published its 2006 White Paper, Eliminating
World Poverty: Making Governance Work for the Poor[398],
shortly before we agreed this report. The White Paper devotes
Chapter 5 to private sector development and we are pleased that
the Chapter accords high priority to growth as a means towards
poverty reduction: it states, "Economic growth is the single
most powerful way of pulling people out of poverty." The
Chapter sets out many of the PSD policies described in this report.
It spells out the hybrid approach to PSD discussed in the introduction
to this report, addressing both the stimulation of growth through
the investment climate approach and the creation of opportunities
for poor people to participate in growth through the Making Markets
Work approach. The White Paper makes several key announcements
in support of both approaches. On the investment climate approach,
DFID pledges to work with partners through the Africa Infrastructure
Consortium to provide US$10 billion per year for infrastructure
in Africa by 2010, and to increase support to private sector investment
in infrastructure by at least £40 million over the next three
years. In support of the Making Markets Work approach, DFID undertakes
to improve property rights[399]
and support microfinance initiatives. We were particularly pleased
that DFID recognised the need to increase support to the private
sector in difficult environments.
213. However, our primary conclusions regarding DFID's
PSD approaches remain unchanged following the publication of the
White Paper. The impressive array of policies and financing mechanisms
set out in the Paper remain just that - a collection of initiatives
that are not necessarily adequately linked by a clear PSD strategy.
We reiterate our conclusion that innovation is not a panacea for
sustainable, long-term PSD policies that are coherent with other
areas of DFID's work and underpinned with appropriate resources.
DFID must take time out from innovation to develop a clear PSD
strategy, together with
deliverable, practical and time-bound plans for the full implementation
of existing PSD policies, so that it has the blueprint it needs
to be a global leader in driving private sector development.
398 DFID, Eliminating World Poverty: Making Governance
Work for the Poor, Cm 6876, July 2006. Back
399
It should be noted that improving property rights isa feature
of both the investment climate and Making Markets Work approaches
to PSD. Back
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