With the growing interconnectedness of business and foreign aid, donor-private sector relationships are extremely important. Recently, the World Resources Institute (WRI) and the International Institute for Environment and Development met for a round table discussion, in London, summoning 9 bilateral donor agencies and representatives from the private sector to strengthen their partnerships and relationships to become more effective.
Both sides depend on each other; donor agencies depend on the private sector as a partner for improving the efficiency of trade, while private sectors depend on consistent support and policy signals to help them better understand local politics.
Donor-private sector relationships, although necessary and mutually beneficial, can be complicated. There is a high transaction cost which comes with donor agencies because development projects take time, after-all they are “developing,” so the stretch of time can be discouraging to private sectors. In addition, a private sector’s diverse nature requires it to be flexible in its organization of different mechanisms to create better partnerships and thus deliver effectively. Although there was consensus during the round table discussion regarding the proper advancement of sustainable development in the face of scarce resources and climate change, there are three main issues that restrain progress.
1) A lack of mutual understanding since both parties, donor agencies and private sectors, have different “bottom-lines” and therefore, different strategies; and “mismatched mutual expectations can breed mistrust.”
2) With barely enough analysis and evidence to “inform better donor-private sector collaboration,” there is restricted knowledge regarding which implemented activities are happening and how they are working; this affects transparency.
3) Risk-aversion of donors due to “limited experience and capabilities in handling uncertainty.”
Thus, four key goals were set during the round table discussion to overcome the setbacks: there needs to be “more structured dialogue to improve mutual understanding and learning,” establishment of better analysis and evidence through connecting commercial and sustainable development success, more standard metrics to properly track progress, and more space and resources for experimentation and risk-taking. WRI and the International Institute for Environment and Development are working together to create a working and efficient program in order to meet their ambitious plans.
– Leen Abdallah
Source: WRI Insights