"FICHE CONTRADICTOIRE" Evaluation of the European Union's support to Private Sector Development in Third Countries ( )

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1 "FICHE CONTRADICTOIRE" 1 Ref. Ares(2014) /09/2014 Evaluation of the European Union's support to Private Sector Development in Third Countries ( ) Recommendations: Responses of EU Services: Follow-up (one year later) ON THE EU'S OVERALL ROLE IN TERMS OF PSD SUPPORT 1. Continue to be a provider of a wide range of Partially agreed different types of PSD support As a key partner of the countries in which it intervenes, the EU should continue offering a wide range of possible types of PSD support, so as to make sure it can answer to the priorities the partner country is facing In line with aid effectiveness and ownership commitments, the EU has strived to align to partner countries' priorities as much as possible. This has led to the EU offering a wide range of possible types of PSD support with strong implications in terms of human resources and expertise needed. In 2014, the EU will issue a strategy level document clarifying the role it intends to play with regards to private sector development support and private sector engagement. While alignment with partner countries priorities will certainly remain a sought-after element, some streamlining of PSD intervention will occur through more complementary use of the various available financial instruments (e.g. blending) and in line with division of labour. The Commission adopted on 13 May 2014 a new Communication 1 that sets out the future direction of EU policy and support for private sector development in partner countries. In line with the Agenda for Change, it also introduces private sector engagement as a new dimension in EU development policy and cooperation. The Communication proposes 12 concrete actions in areas where the Commission believes it can add value and effectively complement actions by Member States and other development partners. It also intends to provide guidance to the EU and its Member States on how best to engage with the private sector for achieving development outcomes. To this end, it proposes a set of principles for private sector engagement in EU development cooperation. Thorough discussion of these principles with EU Member States in the Council will take place in the 2 nd semester of 2014 to ensure support for, and endorsement of the principles by Member States. One purpose of this Communication is 1 COM(2014)263 "A Stronger Role of the Private Sector in Achieving Inclusive and Sustainable Growth in Developing Countries"

2 2. Continue to embed support in the wider context of cooperation and reserve the option not to align or not to intervene when the conditions are not right Embedding PSD support within the country context is in line with the current EU development policy agenda. EU development assistance should be allocated according to country needs. In some cases, it is not possible or desirable to align, notably when there is no strategy to align with or when there is a clear disagreement on the PSD policy to be followed or on overall policies in the country. The EU will continue to embed support in the wider context of cooperation and reserve the option not to intervene or align. This has been reaffirmed for the programming period , with countries graduating from development assistance and the use, wherever possible of national development plans as 'Country strategy papers' to plan our interventions. In addition, private sector development support will also be mainstreamed in other sector interventions (e.g. agriculture, energy), de facto guaranteeing that a wider context is taken into account. Finally, possibilities to support private sector development at regional 2 to foster implementation of the commitments made by the EU at the Busan High-Level Forum on Aid Effectiveness regarding effective public-private collaboration for development. One specific action proposed in it, and already carried out in July 2014, is to endorse the Joint Declaration Expanding and Enhancing Public and Private Co-operation for Broad-Based, Inclusive and Sustainable Growth that reflects a commitment by donor and developing country governments, companies and business associations for closer collaboration. As part of this, the Commission also intends to play a more active role in the "Partnership for Prosperity" that emerged from the Busan Private Sector Building Block. Two of the 7 Principles for strengthening the role of the private sector in EU development cooperation proposed in the Communication being: A differentiated approach to the private sector, and Account for different local contexts and fragile situations. Differentiating between country contexts in the design of private sector development support and setting priorities according to the needs and stage of development. Multiannual Financial Framework for was adopted. 16 middle-income countries will be graduated from EU bilateral aid. However support to these countries is still possible through regional programs. In current bilateral programming, there

3 3 level will also ensure that the wider regional context is taken on board. are fewer countries with the private sector as focal sector with respect to the previous exercise. The support to private sector will be mainly channelled through regional envelops. At regional level, in June 2014, the Council of Ministers approved a Joint ACP-EU Cooperation Framework for PSD under the 11 th European Development Fund. The national and regional programs will be complemented with thematic flagship in the DCI framework (adopted in July 2014). For the first time, the new thematic programme will have an envelope to support global interventions in the area of private sector development and engagement. ON THE CONTRIBUTION TO A MAXIMISED DEVELOPMENTAL IMPACT 3. Make sure that conditions for maximising the impact of PSD support are fulfilled: - Provide mechanisms to ensure that technical analysis and consultations have been conducted prior to providing support for specific PSD interventions; In principle, technical analysis and consultations are conducted during the identification and formulation of programmes. However, the EU recognises that this is not always done in sufficient depth or sufficiently well documented.. Mechanisms to ensure higher quality of prior analysis will be explored as part of the programming A further analysis and much deeper assessment of the context and sectors is being suggested in Quality Support processes. Trainings and e-learning courses are delivered and a major focus is put on lessons learned and dissemination of best practices. A metaevaluation on private sector interventions is under preparation to identify best practices and lessons learned. - Ensure support is prioritised, targeted, built on the EU s value added, and maximises synergies with other actors; Prioritisation will mainly be ensured at programming level: country strategies will as much as possible build on national development plans wherever they exist and can be used as programming basis. Donor Harmonization in support to PSD at country level is being reinforced. Through EU expert group on Private Sector Development, the Commission seeks to boost at EU level the Aid

4 - Promote and facilitate coordination between EU support mechanisms for PSD; - Ensure that the expected results are well defined and targeted, baselines defined, and evaluations conducted, including for cross-cutting issues and the Decent Work Agenda. Wherever possible, joint programming with EU Member States is sought to better use the EU value added and maximise synergies. At country level, coordination with member states is a common thing and specific programmes have to detail the complementarity of their actions with regards to other EU and other donor cooperation activities. This will be reinforced in order to maximise synergies. The current programming process makes a strong focus on improving complementarity between the different instruments and levels of interventions. This should be reflected in the new geographic programmes. In addition, a study looking into the blending instruments and how these can also further support private sector development should provide recommendations regarding the articulation and complementarity of the different instruments. Regional workshops will be provided to disseminate the findings of the study. Partially agreed This key recommendation goes beyond private sector development. The EU has several mechanisms to try and ensure that this is the case. This should be improved with the implementation of the project monitoring and evaluation reform under discussion. These improvements are prerequisites to improve strategic evaluations and particularly more focused thematic evaluations that go beyond general findings and provide some conclusions and recommendations in terms of design of intervention per type of context, expected results and results chain. 4 effectiveness agenda by mapping the existing priorities of MS at country/regional level and also by type of intervention. This will identify potential joint EU (and others) activities. Continued work with member agencies is also followed via the DCED platform Besides the already mentioned on-going coordination, the programming exercise has provided donor matrix, and other tools to reinforce this complementarity. The study on blending instruments and private sector development is on-going and should be finalised before the end of Early 2014, DEVCO adopted a first draft of a Corporate Results Measurement Framework, including a set of TPSD indicators. New programmes and projects should be aligned to it. The Corporate Results framework should be updated end ON EXPERTISE FOR IMPLEMENTATION 4. When providing support to PSD, the EU should make sure that it uses as much as possible the expertise that is already available in-house, but also that it uses expertise available Various mechanisms are being put in place in order to facilitate the The idea of the Thematic Hubs in

5 elsewhere: - Provide mechanisms and tools to ensure that existing knowledge of PSD support in EU DGs and in EUDs is shared and made available; - Devise and apply a specific HR policy to ensure that EUDs have sufficient staff with the required technical knowledge; sharing of knowledge between the different EU constituencies. - Regionalisation of certain expertise through thematic hubs is being designed with a view to improving the availability of expertise in the field. - At the level of collaboration with other DGs, DEVCO participates in a number of inter-service groups for policy coordination; at project level, relevant DGs are invited to participate in the quality support process (e.g. ENTR, SANCO, TRADE ). This will continue and, if possible be reinforced, to increase cross-fertilisation. 5 regions was abandoned for the moment. Interservice consultation groups will continue and cross-fertilization will be sought. For instance on CSR, close collaboration with DG ENTR and DG EMPL is in place, since the external dimension of the EU CSR strategy will be strengthened. DEVCO participates in the Steering Group of the "Social business initiative". - Build on the expertise of partners where they have a clear comparative advantage. - 3 thematic workshops are proposed every year (in HQ and in the regions). These are important events that enable to share common approaches and recent evolutions in policy and cooperation approaches as well as to share experience among colleagues in delegations. DEVCO Private sector thematic Unit will make sure of concrete and relevant participation of the colleagues in delegations. - An e-learning training programme for 'beginners' is being developed and shall be available in This would further enable to provide the basics training through e-learning while reserving the regional seminars for more advanced knowledge and experience sharing. - Case studies to share good practices and lessons learnt from EU experience are also being drawn up and shall be disseminated to colleagues working in delegations. - Capacity4dev platform should be more widely used to sharing relevant information. Current reflexions are evolving in that direction, with a recognition that closely managed strategic partnerships with other donors and external 'centres of expertise' could be instrumental in both increasing the impact of programmes as well as raising the level and availability of strong technical knowledge for the purposes of EU cooperation. Mechanisms to ensure availability of outside expertise are being developed for the programming period In 2013, two trainings on private sector and trade were delivered. In 2014 a thematic workshop will be delivered in November The English version of the e-learning training programme is ready and available to EU staff since 1 st September. The French version is still under development. The metaevaluation exercise will be very focused on extracting best practices and lessons learned. The use of Capacity4dev is being adviced to all colleagues in EU Delegations, and more use is being done of this platform from HQ to inform and exchange.

6 5. Facilitate collaboration with private sector organisations Tailor support instruments to facilitate more direct involvement of private sector organisations as implementing partners, including by simplifying rules and procedures for dealing with enterprises. Partially agreed - A note to staff from the DG was sent in 2010 to clarify/confirm the eligibility of private sector entities in calls for proposals as long as the action was not delivering a profit for the enterprise. - The EU has also recently adopted a new financial regulation relaxing some rules related to profitability, recognising that this is sometimes needed to ensure the future financial sustainability of certain actions. - As called for in agenda for change, the EU is exploring options to work more directly with the private sector. However, the EC considers that supporting private sector through public sector may not be the most effective and efficient way of supporting private sector development. Working more with private sector operators and organisations is not only a question of procedure but also a question of policy dialogue about the role of various stakeholders, including convincing public authorities in a given country to open the door to private sector organisations. 6 The Commission s new private sector development strategy, introduces private sector engagement as a new dimension into EU development cooperation. This means the Commission will look beyond public support to improving the business environment and framework conditions for private sector development in partner countries to also harness the potential of closer engagement of the private sector for development, both as a financing and implementing partner in EU development cooperation, and by encouraging the positive development impact which comes from companies' engagement in development as part of their core business strategies. The development of a structured framework for Public Private Dialogue and joint action with the Private Sector, preferably by reinforcing existing initiatives, including the recently established Policy Forum on Development (PFD) is also one of future priorities. Moreover, the Communication contains criteria to be applied when supporting directly private sector actors. ON SUPPORT IN MIDDLE INCOME COUNTRIES AND TRANSVERSAL ISSUES 6. Review support to middle-income countries to enhance differentiation and adapt to challenges presented by different income levels Partially Develop specific guidance for EUDs in middle- In the programming period , upper middle income countries are being graduated from bilateral cooperation, conformingly with the Agenda for Change. Partnerships with these countries will be based on The principles for strengthening the role of the private sector in EU development cooperation two Principles proposed in

7 income countries which could include: - Consideration of the specific opportunities faced by the private sector in these countries; - Consideration of the specific challenges, notably in terms of poverty reduction; - Various types of aid projects that have greater potential impact in middle-income countries 7. Ensure employment impact is considered through each stage of the project life-cycle: - Where appropriate, employment effects of PSD support and employment needs resulting from trade agreements and changes in the international environment should be both factored into project identification and design. - Specifically employment targets, where used, should be constructed with baselines and verifiable indicators to allow monitoring of employment evolutions over time. mutual interests. For lower middle income countries, the level and type of interventions will depend on the broader context (trade or association agreement, strategies and policies of the country, size of informal sector, export profile ). However, although the EU will disengage from bilateral programmes in a number of middle income countries, these will remain eligible for regional programmes and other types of instruments more tailored to their development status. In particular the blending mechanisms will remain available to support the development of private sector, financing mechanisms, essential investments, with possible complementary work to build the capacity of partner countries to better negotiate poverty reducing investment deals. In the next financial period ( ), the foreseen partnership instrument will also be available to support projects of common interest, including in the area of private sector promotion and trade. Employment related results should be more systematically included where relevant at the identification and design stages and monitored during its implementation.to. To support a stronger focus on results and indicators, a guidance note proposing indicators for sectors including for TPSD interventions is currently being prepared to help delegations define results and performance indicators already at the programming stage. The EU will continue its joint work with other donors, notably through the Donor Committee for Enterprise Development, in the area of results measurement with a strong focus on PSD contribution to development that includes employment creation. In addition, a study/project aiming to develop a methodology for assessing the impact on employment of other sector programmes such as infrastructure and private sector development has been recently 7 the Communication take these into account: A differentiated approach to the private sector, and Account for different local contexts and fragile situations. The Communication puts a clear focus on employment/ decent jobs creation, inclusiveness and poverty reduction as the main objective of all partnerships and programmes in support of private sector development. The first Principle for strengthening the role of the private sector in EU development cooperation proposed in the Communication refers to: Focus on employment creation, inclusiveness and poverty reduction. The joint work with other development agencies on Results measurement through the DCED continues to be strengthening. The project mentioned in the second column has been signed with the ILO in July It also includes further

8 8. Improve communication on the EU s strategy with respect to PSD support The EU should improve its communication on the role it wishes to play in terms of PSD support and on the instruments that are available in this respect. This communication should target EU representatives and wider stakeholders. approved. It is led by the unit in charge of employment with the active participation of the unit for PSD and should provide tools to identify and measure employment results. In the programming , the EU intends to articulate in a much clearer way what should be targeted at which level by which instruments (national, regional, continental, thematic). Once agreed this shall be communicated to delegations and should contribute to generating a better common understanding of the complementarities between the different instruments. In 2014, the EU will issue a strategy level document clarifying the role it intends to play with regards to private sector development support and private sector engagement. 8 analysis on the impact of trade policies and trade agreements on employment, not only to assess "needs resulting from trade agreements" but also the qualitative impact of such agreements on decent work The preparation of the PS Communication was informed by extensive stakeholder consultations with European and local private sector representatives, NGOs, partner governments, EU Delegations and relevant Commission services. As part of this process, close to 200 written contributions have been received and analysed. Member States have been consulted during the preparation of the Communication through the EU Expert Group with Member States on Private Sector Development. Information and communication efforts will remain important elements in the process of the follow-up.