Select Committee on International Development Fourth Report


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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