D+C Development and Cooperation (No. 4, July/August 2002, p. 12-14)

For the Carl Duisberg Gesellschaft, a joint endeavour of industry and government which goes back more than 50 years, the discussion on the role of public private partnerships (PPPs) in development cooperation is a welcome enrichment of the developmental debate. Indeed, the CDG with its more than 1,000 members - mostly institutions, companies and individuals in the private sector - saw itself as a public-private partnership long before the term was coined.

In line with this perception of itself, the CDG has long made its cooperation with the private sector in its many different forms a distinguishing feature of its worldwide programme offer, including in its concrete work. We also attach great importance to our programme work covering not only German industry but also that of our partner countries.

The private sector is involved in the CDG’s programme work in different ways:

Public private partnerships

The discussion about PPPs in development cooperation, as it has been conducted in recent years, adds a new variant to previous models of cooperation between government and the economy. Here it is about purposeful joint ventures at programme level in which developmental institutions and companies are to identify and design development projects. Company projects are to be designed in such a way that they also contribute to developmental goals. In reverse, it is of course also about designing genuine developmental measures so that they make good business sense for companies to participate in them.

The CDG has taken up this challenge with an open mind. At the same time, four basic positions have defined our approach from the start:

1. Do not instrumentalise the private sector for development cooperation

In the early days of the debate on PPPs in development cooperation there were quite mistrustful reactions from companies. They feared that in the final analysis they were to be involved in developmental work without due consideration being given to their actual business interests. In view of the - to put it mildly - not particularly business-friendly sentiments in many institutions these fears also were not unjustified. The institutions often asked how the business sector could be included in the interests and goals of development cooperation. But such an objective is unrealistic. Companies do not need to allow themselves to be instrumentalised for development cooperation. After all, the German debate on PPPs arose not from the inability of commerce and industry to earn money in developing and threshold countries, but from the problems of official development assistance in achieving significant results on its own due to diminishing funds, in both absolute terms and relative to private sector direct investment. Therefore, development cooperation must open itself to the question of the interests of commerce and industry and move towards the companies in such a way that better results can be achieved together than was possible in isolation in the past.

2. Accept the private sector’s interests

Companies do not enter into a public private partnership for developmental motives - at least not first and foremost. The interests of a company prepared to invest are entrepreneurial and oriented on the goal of earning long-term profit. This is now often accepted - but more in the sense of regret that there is no alternative. Perceiving this entrepreneurial orientation on profit not as a necessary evil but as a welcome potential for sustainable development is one of the most important preconditions for making the PPP approach successful. In this regard, all institutions still have a lot of in-house work to do in convincing themselves that this approach is right. Specifically, this area of tension between acceptance and mistrust is expressed in the debate on windfall effects. In the developmental discussion these are always ascribed to the companies’ side - but the CDG has also already realised such effects in projects. Their possibility should be accepted on both sides. Decisive for implementing a project is not the question of whether the other partner would if necessary realise it alone, but the assessment of whether the positive external impacts (from the development cooperation viewpoint) or the business effects justify one’s own investment.

3. Identify synergy potential in the core business

PPP programmes in many cases tend to run alongside the "normal" programme work of the implementing agencies. This is all the more so when PPPs are financed and implemented out of their own budget appropriation. But using synergy potential means tying PPP work to "normal" work and avoiding building up a portfolio of special projects. In the end, only such "mainstreaming" of PPPs (from the viewpoint of both the developmental organisations and the companies) can use the huge potential of cooperation between the public and private sectors on development cooperation. But this implies a new kind of conception of programmes and projects: they can no longer be derived solely according to classic developmental logic. As a partner, the private sector - both the German and the local - must also show some initiative from the start. This will result in changed project conceptions which will systematically create synergy potential.

4. Partnership instead of application process

Furthermore, based on experience of our cooperation with companies it is important that we do not put companies into long "holding patterns" of application and scrutiny processes, and so on. There must be clear, transparent, no-red-tape and above all fast cooperation mechanisms. Incidentally, a partnership always ends and bureaucracy begins where an application form has to be filled out. The CDG has no application forms for companies interested in PPPs - we are happy to accept proposals in an informal way. When in reverse we take the initiative and propose a PPP measure to a company we, too, are loath to file an application.

Consistent alignment on the
concept of sustainable development

Since the beginning of the PPP debate we have been approached with very dissimilar proposals for designing such measures. In order to make a significant input with limited funds here as well, we also orient our PPP activities on our concept "Training for sustainable development". Therefore PPP activities should make contributions to an ecologically, economically and socially sustainable form of doing business. We focus our PPP measures on those sections of commerce and industry that are committed in this innovative sense.

This alignment is shown by the following examples of project approaches we are currently pursuing:

• Sustainable energy supply from wind power in Brazil and Argentina
• Sustainable water supply management in Jordan
• Waste, sewage and mining rehabilitation in Vietnam
• Reconstruction of the port system in China
• Management of private road maintenance companies in Ghana
• Alternative energy concepts for tourist facilities
• Qualification of black South African tourism guides
• Quality assurance and environmental management for Mexican suppliers
• Contact exchange for technology transfers in the biotechnology sector

PPP benefits companies
in several respects

We participate in PPP measures which from the companies’ viewpoint can have varying functions, such as:

Observance of international environmental and social standards has long not been a luxury for big companies. Rather, it is a precondition for access to big international markets. The situation still is more complicated in many developing countries, especially for small to medium-sized businesses. Even greater efforts are required here. Frequently, national industry associations and chambers and foreign trade institutions are the first to see the need to secure the international competitiveness of their industry by also fulfilling such standards. This business interest clearly matches the political interests of development cooperation in sustainable development based on ecological and social aspects.

For instance, the CDG cooperates with the German-Peruvian foreign trade chamber (Camperal) and the export promotion institution Asociación de Exportadores (ADEX) in a project on "Social standards and social responsibility of companies in Peru".

Local, export-capable companies in selected product sectors are supported by sensitisation and the transfer of know-how in the social management systems area in introducing in their companies the social standards demanded in Europe, and/or developing their own codes of conduct, and thus increasing their international competitiveness.

PPP - more than pure co-financing

The CDG implements advanced training projects with private sector partners when:

• they tally with developmental objectives of the BMZ;
• the project goals can be achieved by advanced training;
• the project’s target groups fit our mandate (executives and young managers); and
• the private partner can provide its own funding contribution.

But our engagement in these measures goes far beyond pure co-financing. Unlike pure investment projects or the promotion of feasibility studies, our activities in the PPP sector focus on drawing up and formulating a joint advanced training project with the partners in commerce and industry. We develop joint goals, content and design of advanced training measures and, with our developmental orientation, secure via intensive cooperation in the planning phase the compatibility of the objectives of the respective private partners. This means that going beyond the financial aspect of the cooperation, our private partners also benefit from our regional and sectoral know-how and our experience of many years in designing advanced training.

PPP- from experimental field
to paradigm change?

The debate on PPP in German development cooperation was from the start conducted with great demands. PPP was not to be one of the many "fads", but lead to a completely new alignment of developmental action. The reality of implementation still lags behind such demands. The following points appear to me to be central for a stronger anchoring of PPP in daily practice:

Development cooperation with the private sector is a subject whose opportunities have so far been realised only in its beginnings. The creativity, knowledge and financial resources of the business world can be used not only for developmental goals in the narrower sense. The private sector is an actor in all matters to do with the designing of global general conditions; this is shown not least by the United Nations Global Compact initiative. Business was always the central actor in the sector of international human resource development. Therefore including the private sector in global training policy for sustainable development is a top subject for the Carl Duisberg Gesellschaft and the new institution InWEnt which in the next few months will come into being with the merger of the CDG and DSE.