Transcript Document


A4T, PPPs and IBMs: What do they mean
for Australian Aid?

Introduction

Overview

Aid for Trade (A4T) is a broad initiative with the objective of helping
developing countries integrate into global trade and markets—
implicitly includes roles for public and private sector actors

A4T framework demands a focus on productive sectors

Internationally, donors have mainstreamed private sector
engagement throughout their programming, working with
companies and financial institutions

Overview (continued)

Australian government prioritizes A4T and private sector
engagement, however, companies have not yet widely bought in

Need for capacity building and private sector engagement
processes within Australian institutions

Australian officials need to be proactive in developing opportunities
with partners and use a variety of mechanisms for engagement

Aid for Trade

How has A4T evolved?

Technical assistance for trade
policy and regulations

Trade-related infrastructure

Building productive capacity

Trade-related adjustment

Other needs, as identified by
developing countries
Development
agencies
From production
to market linkages
Trade
institutions
From
policy/institutions
to removing real
constraints to trade

A4T funding for agriculture

Of productive sectors, agriculture has
received the largest amount of A4T
investments, especially for agri-business,
cooperatives, and agricultural financial
services

A4T in agriculture is aimed at Africa and Asia

Just 15% of A4T in Asia goes toward
agriculture

Main donors for A4T for agriculture: US,
Japan, EU, Germany, Canada, UK, Australia

Over 50% of A4T4A funding is in the form of
grants, 20% is loans
A4T ODA Disbursements in Agriculture in 2002–
2012, by Region (in millions of US$)
A4T Allocations in Agriculture by Type of Flow,
2002–2012 (in millions of US$)

Lessons of donor experience in A4T
1.
More focus on food security
6.
2.
Blended policy and
productive sector
programming
Trade facilitation (beyond
Customs)
7.
Greater appreciation for
investment-trade linkages
and supply chain integration
8.
Closer cooperation with the
private sector
9.
More multi-donor
collaboration
3.
Regional programming
4.
Focus on reaching the very
poor, women,
disadvantaged minorities
5.
“Demand-pull” over “supplypush”
10. Greater attention to M&E

Public-Private Partnerships
and Inclusive Business
Models

Why PPPs?

Private capital flows to developing countries are 5 times larger than
ODA (82% of capital to developing countries comes from the
private sector, or $410 billion)

Increasing private sector awareness of the benefits of linking
investments in developing countries to social objectives

Increasing private sector interest in reaching the BOP, as both
consumers and as a source of supply

Shift from CSR to embedding development objectives in core
business strategy, or inclusive business (Prahalad)

PPPs and IBMs

PPPs vary by structure, scope and reach, with the same underlying
objective: to share the costs and mitigate the risks of bringing
innovative, sustainable solutions to development challenges that
also have commercial benefits

Not all PPPs inherently benefit the poor, nor do they integrate them into
their solutions

IBM revolve around the population found at the “base of the pyramid” - not
as easily served by traditional PPPs, as they are not ‘market-ready’

IBMs expand access to goods, services, and livelihood opportunities for
the BOP and help companies turn the BOP into consumers as well as
sources of supply

IBM is not CSR, it is a commercial business model.

Types of partnerships
Operating
Company (link
to market)
Finance
Donor

Between donor and operating
partner(s) (e.g. USAID GDAs)

Between donor and financial institutions
(e.g. credit guarantees)

Triangulation of donor, strategic
partner(s) and finance

Includes multiparty alliances

Can involve any sector

Incorporates different types and
sources of finance (e.g. project
finance, working capital, leasing)

Partnership mechanisms
Donors currently employ a wide variety of mechanisms in their
partnerships with the private sector, both financial and technical:

Coordination and facilitation

Co-investment or matching grants (DFID’s Business Linkages
Challenge Fund)

Targeted financial instruments, such as credit guarantee funds,
insurance schemes (USAID’s Development Credit Authority)

Capacity building and technical assistance

Working with financial
institutions
Finance Partner
Partner role
Commercial
banks
Micro-finance
Short and medium term loans
Partner Objective
Access to new market
segments
Financial services for BOP
Reduce risk profile;
access capital
Impact investors Longer term equity or loans to Pipeline of high quality
address development goals
opportunities; TA
support
Equity funds
Expansion of anchor
Opportunities with large
organizations
upside potential
Investment
Structuring and issuing long
Earning revenue
Banks
term finance (debt and equity) through structuring
successful capital raises
Leasing/ Vendor New products for equipment, New products and
finance
input finance
market segments
Donor Objective
Access to finance for
SMEs and farms
Finance for poorest
segments
Integrated value chain
solutions
Strong business partners
w/ spin-off benefits
Source of significant
funding, while creating
saving opportunities
Financial options for
SMEs
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Key Findings on PPPs

Partnerships are most effective when used to promote whole value
chains or systems

Interventions should include a “blend” of mechanisms, for example
both technical assistance and grants, to be most effective

Sources of capital (MNCs, domestic firms) vary by region which
determines partnership opportunities

Large gap exists between available FDI and financeable projects –
facilitators can “bridge” this gap

Key Findings on IBMs

Concentration of poor in agriculture sector - critical to use IBM in
agriculture and agribusiness to reach poor

Supporting ecosystems are critical to the success of IBMs

Reaching scale remains a challenge for most IBMs

Successful IBMs often target the ‘whole of pyramid’ not just the
base, mitigating some risk

IBMs often only reach the top segment of BOP, and the poorest of
the poor remain unreached

Implications for Australia

Key Findings for Australia

Australian government is already focusing programming on A4T and
private sector engagement

However, there is a lack of knowledge by both government and
private sector about partnering which can lead to misunderstandings

Need for proactive approach toward partnership that is well
articulated and consistent


Opportunities for Australia
In the Asia-Pacific, Australia is a primary agricultural exporter to regional
developing countries and already has market-based linkages and
relationships

Presents significant opportunities to further integrate Australian agribusiness
into regional value chains

Build on Australia’s strong expertise in research and development

Leverage unique local placement of project officers to pursue PPP
opportunities

Removal of protectionist trade policies in Asia would support increased
regional trade in agriculture

Develop the capacity of officials in Australian ODA agencies to construct
and implement PPPs

Engaging the Private Sector
1.
Critical to establish or reinvigorate dialogue between public and
private sector to identify common interests
2.
Identify mechanisms that can be used to generate PPPs and IBMs
3.
Develop a central funding mechanism
4.
Concentrate engagement work and funding at the Mission level
5.
Utilize international donors’ best practices on IBMs
6.
Identify other mechanisms to leverage (insurance schemes,
export guarantees)
7.
Set realistic expectations for all partners

Building Australian PPPs
ID
opportunities
• Tap into and harness private initiatives already underway
• Motivate private interest in new approaches
• Ensure continuous engagement with the private sector
Structure
Solutions
• Develop detailed solutions to key constraints (roles, phases, etc.)
• Determine direct v. indirect donor involvement
• Relationship building and aligning interests
Implement
• Provide governance and oversight
• Learn and adapt programming based on lessons & successes
• Develop exit strategy

Practical approaches for
partnerships

Project driven (reactive): dictated by project terms

Opportunity driven (proactive): discussions with lead firms
Structure
new PPPs
Design ‘PPP
engine’
project
Develop
projects with
PPPs as key
intervention
tool
Leverage private sector through new
projects or mechanisms
Use
convening
power
Create
bridges
with
existing
projects
Redirect
existing
projects
Leverage
synergies
with other
gov’t
programs
Leverage private sector through existing projects or
mechanisms

Basics of partnership design
When structuring a new mechanism to solicit partnership
opportunities, build off the basic process, as tested by other donors:
1.
Prepare and release solicitation or request for expressions of
interest, outlining the driving principles and criteria (matching
funds, etc.)
2.
Short-list proposals according to selection criteria
3.
Invite finalists to submit full proposals
4.
Select a subset of final proposals as winners to enter into final
negotiations before award

Capacity building for ODA officials

Constructing PPPs requires skills and active facilitation

Topics for building the capacity of ODA officials include:


Outlining the role of ODA officials

Identifying high-potential opportunities

Finding common ground and win-win situations
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Recognizing different vocabularies

Acknowledging different investment and impact horizons
Technical PPP/IBM training topics include:

Segmenting private sector partners
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Triangulating among financial and operating partners
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Establishing partnership-specific M&E systems
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Utilizing third-party facilitators

Change management and buy-in
considerations
Several key change management factors can influence the success
or failure of the PPP/IBM adoption process:

Ensure government development officers are a part of the strategy

Clearly demonstrate the experiences of other donors

Remind the audience that Australia has been working with the
private sector for decades

Context-based approach
•Outward looking companies
•Capable consultants
•Capable consulting firms
•Organized BDS market
•Strong linkages with international markets
•Domestic investment potential
•Strong banking sector
Business Environment
www.carana.com
•Uncompetitive companies
•Inward orientation
•No horizontal/vertical organization in value
chains and clusters
•Few consulting firm/BDS providers
•Companies unaccustomed to paying for TA
•Limited domestic investment/savings
Strong
Weak
Proactive
Reactive
Thailand
Colombia
•Focus on mobilizing/leveraging domestic
resources
•Remove bottlenecks
•Agnostic about industries and TA emphasis
•Intermediaries provide TA, identify
opportunities
•Project focuses on processes, M&E and
international expertise
Ghana
Project Structure
PNG
Grenada
Timor-Leste
•Role for FDI
•Need to identify industries, create visions,
do “call to arms”
•Need direct TA, help firms identify their
needs and organize their projects
•Transformation of entire value chains
•Targeted policy/regulatory environment
improvement

Thank you.
www.carana.com