Private sector development

Private sector development

Private sector development


The private sector can be an engine of inclusive growth by generating decent jobs, contributing public revenue and providing affordable goods and services. If it invests in suitable innovation and business models, it can also improve poor peoples' lives by boosting their productive activities. The European Commission assists developing countries in their economic reforms and private sector development initiatives.

The impact that private sector actors can have on development is now widely recognised, and donors around the world are seeking ways to effectively engage with the private sector in creating jobs, providing incomes, goods and services, advancing innovation, and generating public revenues essential for economic, social and environmental welfare. Moreover, as public resources for development assistance are scarce, the private sector is increasingly looked at as an important additional source of external finance and domestic resource mobilisation.

At the Busan High-Level Forum on Aid Effectiveness in 2011, participants committed to ensure a sound policy and regulatory environment for private sector growth, and to explore ways to advance both development and business outcomes so that they are mutually reinforcing. The private sector is also seen as playing a key role in the transformation to a green economy as envisioned at the Rio+20 UN Conference on Sustainable Development, as well as in the formulation and implementation of a post-2015 development agenda.

These objectives have been reinforced by the EU in its 2011 Communication “Increasing the impact of EU Development Policy: An Agenda for Change", which outlines the new direction of EU development policy and identifies support of inclusive and sustainable growth for human development as one of its two priority areas for action. As part of this, the EU recognises that economic growth needs an enabling business environment and a competitive local private sector that is equipped to harness the opportunities offered by globally integrated markets. It also states that the EU should develop new ways of engagement, to leverage private sector activity and resources for achieving development goals, and should explore grant funding and risk sharing mechanisms to catalyse public–private partnerships and private investments. It further emphasises the role that the private sector can play in sectors like energy, infrastructure and agriculture.

The new EU Communication  "A Stronger Role of the Private Sector in Achieving Inclusive and Sustainable Growth in Developing Countries" has been adopted in May 2014 by the European Commission, setting out the role of private sector at the forefront of international development in its partner countries. It 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. These address better regulatory environments in partner countries, business development and access to finance, especially for job-creating micro, small and medium-sized businesses in the formal and informal sectors. It identifies other areas, including sustainable energy and sustainable agriculture, where we use tools like blending to catalyse private sector finance and engagement to complement EU development assistance effectively. It also encourages the private sector from partner countries, the EU and beyond, to engage in responsible investment, sustainable trade, inclusive business models and other strategies as part of its core business to enhance economic opportunities for the poor and thereby achieve development aims.


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