Parliamentary inquiry announced on role of private sector in development

Hot on the heels of the announcement of an inquiry into the human rights of women and girls in the region, the newly formed Foreign Affairs and Aid Subcommittee of the Joint Standing Committee on Foreign Affairs, Defence and Trade (JSCFADT) is holding an inquiry on the role of the private sector in promoting economic growth and poverty reduction in the Indo-Pacific.

It has been requested by the Minister for Foreign Affairs Julie Bishop, who is nothing if not consistent about her interest in both private-sector-led development and the empowerment of women and girls. According to the press release announcing the inquiry, it will have a strong focus on ‘the issues surrounding aid and trade, an area receiving more attention globally’.

The terms of reference for the inquiry cover:

  • The current role of the private sector in accelerating the pace of economic growth and in reducing poverty in poor countries in the Indo-Pacific region.
  • Current Australian Government support for private sector development through bilateral and multilateral investments.
  • Legislative, institutional, social and policy constraints that may reduce the ability of private sector agencies to engage in development.
  • Additional partnerships, activities or financial instruments the Australian government could use to enhance the role of the private sector in development in the Indo-Pacific region.
  • The role of public-private partnerships in leveraging private sector investment in developing countries.
  • Risks related to current and possible future approaches to enhancing the role of the private sector in development, and their management.
  • The role Australian and international businesses could play to support development and inclusive growth in partner countries.

The Foreign Minister suggested that the committee pay particular attention to:

  • What other donors (new and traditional) are doing in this area.
  • The particular role of women in ensuring a thriving private sector.
  • The possible return on investment to Australia of private sector partnerships and specific financial instruments.

Submissions are invited, with a closing date of Thursday May 8. More details are available on the inquiry website.

The scope of this inquiry is of necessity very broad, covering two overlapping and complex areas: (i) promoting the growth and diversification of the private sector in developing countries, and (ii) building non-contractual poverty reduction partnerships between aid agencies and (mostly multinational) business organisations. It is difficult to tell just how much and what kind of weight will be given to the last point mentioned above: the ‘return on investment’ to Australia of various types of partnerships and financial instruments. Perhaps submissions from DFAT and other government agencies will shed some light on what policies or programs might be in the wings here.

Overall, however, the inquiry is a welcome exercise in consultative policy development, and demonstrates the value of having an explicit and ongoing focus on the aid program in the work of a major parliamentary committee.

Ashlee Betteridge

Ashlee Betteridge is the Program Manager (Research Communications and Outreach) at the Development Policy Centre. She was previously a Research Officer at the centre from 2013-2017. A former journalist, she holds a Master of Public Policy (Development Policy) from ANU and has development experience in Indonesia and Timor-Leste.

Robin Davies

Robin Davies was appointed Head of the Indo-Pacific Centre for Health Security at the Australian Department of Foreign Affairs and Trade in September 2017. Previously, from 2013, he was the Associate Director of the Development Policy Centre and from mid-2014, concurrently an Honorary Professor at the Crawford School at ANU.

2 Comments

  • This is a very timely article on this increasing trend to fast-track the participation of the private sector in “aid” delivery or development. First of all, let me make it clear that I have nothing against the role of the private sector in development.

    I find this interesting for many reasons. I was just teaching a module on international cooperation for students in Cali Colombia who are doing a specialization on Public-Private Partnerships. We are a few miles away from the reach of Australia’s priorities but Colombia’s economic growth is also focused on the extractive industries and the increasing role of the private sector in development. There are human rights violations coming from all over the place but little is done to correct the situation…..some court hearings….some financial compensation but the laws are hard to apply when it comes to the legal system’s ability to apply outside of their own jurisdiction. I think that the work that is being done in Bangladesh after the accident that killed a group of workers hired by Loblaws (a Canadian company) should also be used during the inquiry…there are good examples of why many companies still refused to sign the accord on Human Rights…not that they don’t believe in human rights…but it just exposes them to more legal pursuit.

    It’s also interesting to note that the three countries that are generating the most wealth in Latin America…are home to 60% of the poverty for the whole region — that should take care of the first assumption in the Terms of Reference. The counter argument would be — well things would be worse without the private sector. (But maybe there is another way to stimulate growth and respect human rights).

    There is no mention of John Ruggie’s Guiding Principles on Business and Human Rights. This would be a good place to start for the inquiry. Developing countries are still having difficulties making sense of what the 26 OECD donors are doing when it comes to impact….how do we expect them to make sense of this hyper-individual approach to development? Growth normally comes from a local approach to development; there are no cookie cutter approaches to development.

    I also think that the Inquiry should look at the Open Private Sector work of the World Bank. Once these tools are in place…maybe there will be a fair chance to measure impact. Clearly….there are no risks for Australian’s private sector to go abroad and definitely no long term commitment outside of their ability to remain profitable….if there are any signs of economic slowdown, it’s not hard for a foreign company to close its doors and let the communities deal with their needs. Maybe Australia could help developing countries implement strong disclosure on lobbying activities by foreign companies.

    I could probably write the final report before the inquiry starts but maybe I am wrong and we will see something exciting, innovative and thought-provoking come out of this!

    Keeping my fingers crossed here!

  • The inquiry into the role of the private sector in development is an important step to ensuring accountability and transparency. This will unearth the reality of private sector impact in the Indo-Pacific region, and inform government policy directions. This process could also be an entry point for other countries to learn from. Lessons from this inquiry could be relevant for Africa, where several non-governmental organizations use donor funds in the name of poverty reduction in poor African communities. More often than not, the non-governmental organizations in Africa are left on their own to manage donor resources leaving out national governments. Overhead and administrative costs sometimes far outweigh the actual funds put in development projects among beneficiaries; hence development workers get richer at the expense of poor communities rather than alleviating poverty — the purpose for which donor countries use their taxpayers’ monies. Though it is not a bad concept to allow non-governmental organizations and private sector directly to implement projects in poor communities, it is important to ensure that such interventions are aligned with host governments’ key priorities such that private sector interventions are targeted in areas where government has less comparative advantage to invest. Although this inquiry is happening in the Indo-Pacific region, its outcomes could be very important as lessons learned for other regions like Africa, hence the need to share such outcomes at the end of the inquiry.

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