Driving Inclusive Economic Growth: the Role of the Private Sector In
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DRIVING INCLUSIVE ECONOMIC GROWTH: THE ROLE OF THE PRIVATE SECTOR IN INTERNATIONAL DEVELOPMENT Report of the Standing Committee on Foreign Affairs and International Development Dean Allison, M.P. Chair NOVEMBER 2012 41st PARLIAMENT, 1st SESSION Published under the authority of the Speaker of the House of Commons SPEAKER’S PERMISSION Reproduction of the proceedings of the House of Commons and its Committees, in whole or in part and in any medium, is hereby permitted provided that the reproduction is accurate and is not presented as official. This permission does not extend to reproduction, distribution or use for commercial purpose of financial gain. Reproduction or use outside this permission or without authorization may be treated as copyright infringement in accordance with the Copyright Act. Authorization may be obtained on written application to the Office of the Speaker of the House of Commons. 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Additional copies may be obtained from: Publishing and Depository Services Public Works and Government Services Canada Ottawa, Ontario K1A 0S5 Telephone: 613-941-5995 or 1-800-635-7943 Fax: 613-954-5779 or 1-800-565-7757 [email protected] http://publications.gc.ca Also available on the Parliament of Canada Web Site at the following address: http://www.parl.gc.ca DRIVING INCLUSIVE ECONOMIC GROWTH: THE ROLE OF THE PRIVATE SECTOR IN INTERNATIONAL DEVELOPMENT Report of the Standing Committee on Foreign Affairs and International Development Dean Allison, M.P. Chair NOVEMBER 2012 41st PARLIAMENT, 1st SESSION STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL DEVELOPMENT CHAIR Dean Allison VICE-CHAIRS Paul Dewar Hon. Dominic LeBlanc MEMBERS Lois Brown Romeo Saganash Bob Dechert Gary Ralph Schellenberger Nina Grewal Dave Van Kesteren Hélène Laverdière John Williamson Ève Péclet OTHER MEMBERS OF PARLIAMENT WHO PARTICIPATED Hon. Mark Eyking Jinny Jogindera Sims Peter Goldring Jean-François Larose Sadia Groguhé CLERK OF THE COMMITTEE Miriam Burke LIBRARY OF PARLIAMENT Parliamentary Information and Research Service Allison Goody James Lee Charlotte Landry iii THE STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL DEVELOPMENT has the honour to present its SIXTH REPORT Pursuant to its mandate under Standing Order 108(2) the Committee has studied the role of the private sector in achieving Canada's international development interests and has agreed to report the following: v TABLE OF CONTENTS DRIVING INCLUSIVE ECONOMIC GROWTH: THE ROLE OF THE PRIVATE SECTOR IN INTERNATIONAL DEVELOPMENT .......................................................... 1 Overview .................................................................................................................... 1 CHAPTER 1: BACKGROUND — THE CHANGING LANDSCAPE OF INTERNATIONAL DEVELOPMENT ............................................................................... 3 A. An Increasing Emphasis on the Role of the Private Sector in Development ......... 3 B. Bilateral Aid Agencies and the Private Sector ....................................................... 8 USAID .................................................................................................................. 8 DFID .................................................................................................................. 10 CHAPTER 2: PRIVATE RESOURCE FLOWS TO DEVELOPING COUNTRIES ......... 13 CHAPTER 3: INCLUSIVE ECONOMIC GROWTH—THE PATH TO POVERTY REDUCTION ................................................................................................................. 17 CHAPTER 4: THE ROLE OF THE PRIVATE SECTOR IN DEVELOPMENT .............. 23 The Actors ............................................................................................................... 23 The Activities ........................................................................................................... 24 Core business operations and inclusive business models .................................. 25 Tax revenues ...................................................................................................... 29 Delivery and manufacturing ................................................................................ 30 Expertise, ideas and innovation .......................................................................... 31 Concluding Remarks on the Role of the Private Sector ........................................... 33 CHAPTER 5: THE ROLE OF THE PUBLIC SECTOR IN DEVELOPMENT ................. 35 Public Goods and Public Accountability ................................................................... 36 Capacity and Institutions .......................................................................................... 37 The Enabling Environment for Private Sector Activity .............................................. 40 Start-up Financing .................................................................................................... 44 Concluding Remarks on the Role of the Public Sector ............................................ 45 CHAPTER 6: PUBLIC-PRIVATE PARTNERSHIPS ..................................................... 47 The Concept ............................................................................................................ 47 The USAID Model .................................................................................................... 50 Key Lessons and Challenges .................................................................................. 54 vii CHAPTER 7: CASE STUDIES ..................................................................................... 59 Financial Services for the Poor ................................................................................ 59 The Need for Financial Services ......................................................................... 60 From Microcredit to Microfinance ....................................................................... 60 Strengthening Microfinance ................................................................................ 63 After Microfinance: the Formal Sector and Sustainable Development ....... 64 Mobile Banking and Knowledge Transfer ................................................... 65 Natural Resources ................................................................................................... 68 Natural Resources and Development ................................................................. 69 The Central Importance of Institutional Capacity ................................................ 71 Resource Governance and Revenue Transparency ........................................... 74 The Growing Body of Disclosure Requirements ................................................. 76 Corporate Social Responsibility .......................................................................... 79 Natural Resources and Public-Private Partnerships ........................................... 83 CHAPTER 8: AREAS REQUIRING FURTHER WORK ................................................ 89 Remittances and the Role of the Diaspora .............................................................. 89 Facilitating Remittances ..................................................................................... 90 Broader Partnerships .......................................................................................... 92 Innovative Financing Mechanisms ........................................................................... 94 CHAPTER 9: RECOMMENDATIONS FOR CANADIAN POLICY................................ 97 APPENDIX A: LIST OF WITNESSES ......................................................................... 103 APPENDIX B: LIST OF BRIEFS ................................................................................. 107 REQUEST FOR GOVERNMENT RESPONSE ........................................................... 109 DISSENTING OPINION OF THE NEW DEMOCRATIC PARTY OF CANADA ........... 111 SUPPLEMENTARY OPINION FROM THE LIBERAL PARTY OF CANADA .............. 117 viii DRIVING INCLUSIVE ECONOMIC GROWTH: THE ROLE OF THE PRIVATE SECTOR IN INTERNATIONAL DEVELOPMENT Overview Over the past year, the House of Commons Standing Committee on Foreign Affairs and International Development (“the Committee”) has conducted a study on the role of the private sector in achieving Canada’s international development interests. During that time, the Committee heard the views and recommendations of a wide range of Canadians and others on what is a vast, complicated and important subject. While the testimony covered a broad range of specific topics, the Committee has focused this report on core thematic