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Boosting private sector growth in developing countries - 14/05/2014

A fair trade coffee farmer picking organic coffee beans from the tree. ©iStock

Plans to encourage more private sector involvement in the EU’s development work in the world’s poorest countries were published this week by the European Commission.

The private sector already provides 90% of jobs in developing countries. But the EU believes that more private sector investment in businesses could be leveraged through a judicious combination of grants and loans or the use of innovative financial instruments, for example.

The 12-point action plan includes proposals to promote responsible investment in partner countries by:

  • improving the regulatory business environment
  • supporting business development
  • increasing access to finance, particularly for micro, small and medium-sized businesses.

The plan also sets out steps to engage the private sector in fields such as sustainable energy, sustainable agriculture and infrastructure and other areas where private sector involvement can complement the EU’s development work.

Guiding principles

The plan’s focus on job creation, poverty reduction and inclusive growth suggests that a differentiated approach should be taken to different types of businesses, bearing local conditions in mind. Support for start-ups, for example, should differ from that given to multinationals.

EU support to the private sector will be provided only if companies abide by environmental, social and fiscal standards, including respect for human and indigenous rights and good corporate governance.

Targeting support

A particular focus of the plan is to support private sector projects to help women, young people and the poor. It calls for 

  • business regulations that take account of the particular constraints facing women
  • training and other support  for women, who often encounter difficulties in finding jobs or setting up businesses. 

The EU also wants to channel more support to the informal or ‘shadow’ sector, which can account for up to 80% of businesses in developing economies. This could be done, the paper suggests, by providing training and expertise to producer associations, encouraging safer work places and improving access to markets, finance, infrastructure and social services.

Press release: EU to boost private sector's role in inclusive growth in developing countries

New EU communication on the private sector

European Commission - development and cooperation

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