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On engaging the private sector for development and the Kampala principles

Posted on 13 July 2019

Photo: Pixabay

IBON International Statement
13 July 2019

Today, principles for private sector engagement (PSE) through development cooperation are showcased by the Global Partnership for Effective Development Cooperation (GPEDC) at its Senior-Level Meeting in New York, through the Kampala Principles.

IBON International welcomes possibilities to make engagement with the private sector more effective, particularly with micro-, small and medium enterprises (MSMEs) and other small producers, towards development objectives.

The so-called informal sector, which includes MSMEs such as home-based producers and street vendors, forms 50 to 80% of urban employment in the global South. But they nonetheless face exclusionary cities. [i] Other small producers such as farmers produce at least 70% of the world’s food needs as of 2012. But they have faced landgrabs accumulating to 45 million hectares over the last decade, with adverse effects disproportionately affecting women. [ii] Through linkages with governments and international actors, private sector engagement (PSE) through development cooperation must include and support these small private sector entities to “leave no one behind”.

While we stress possibilities, we are nevertheless wary of certain assertions articulated in the Kampala Principles document.

Firstly, the document declares that “the private sector contributes to sustainable development in its own right,” such as in “sustainable value chains” and “responsible business models.” [iii] This is an assumption that has to be substantiated, with the burden of proof residing with certain private sector actors. The challenge for multinational corporations (MNCs) remains as they are central in unsustainable production practices. Fossil fuel corporations, such as BP, Chevron and Shell, spend significant amounts to lobby against climate policy amid a worsening climate crisis disproportionately affecting Southern peoples.

Outsourcing through value chains makes use of lower-cost Southern labour while sustaining high-income countries’ heavy extraction and material footprint from countries of lower income. MNC activity in extractive industries increased as Southern economies underwent neoliberal restructuring through tight links with governments and international finance institutions. The Kampala document admits that there could, indeed, be “negative effects of PSE” [iv] but settles in “predicting, avoiding and remedying” such “unintended” impacts. [v]

Secondly, the private sector’s “profitable solutions to sustainable development challenges” are lauded in the document. It views PSE in general in terms of achieving development objectives while “recognising the need for financial return for the private sector.”

We already see above how a confluence between private business interests and addressing inequalities is far from necessary. Treating profit seemingly on par with development objectives dilutes the centrality of eradicating poverty. Sustainable development must be about addressing poverty and inequalities–including structural drivers of these–first and foremost, instead of being on equal terms with the consideration of financial gain.

Thirdly, the document echoes the global drive, as seen in approaches of international finance institutions such as the World Bank, to mitigate risks for businesses. In particular, the Kampala document mentions addressing “commercial risks for the private sector—to invest in ways that help to reach the furthest behind first.” As part of the principle of “leaving no one behind,” development cooperation is seen as a way that can be “used strategically to offset risks”