11Dossier: Doing business to fight poverty?

Biodossier EngelsThe private sector is playing an increasingly important role in development cooperation.

Many people feel somewhat uneasy about that. They assume corporations are only in the game for profit, at the expense of poverty reduction and sustainable development.

On the other hand enterprises and companies contribute to development. Healthy companies provide people with jobs and stable incomes and authorities with additional tax revenues. The private sector is so diverse, in developing countries as well as in donor countries, that its value for sustainable development depends largely on the nature of the business, the sector, the market, etc.

ODA is increasingly spent on the private sector in developing countries. In 2010 the European 'Development Finance Institutions' had over EUR 21 billion in portfolio and were growing by 10% annually. Over 10 years ago Belgium, following most other European countries, established a separate institution to invest in the private sector in the South: the Belgian Investment Company for Developing Countries (BIO).

The tenth birthday of BIO was an opportunity for 11.11.11 to make a critical evaluation. One question guides this evaluation: Do BIO's investments really contribute to poverty reduction and sustainable development?

11.11.11 and BIO have a different vision on development and the role of the private sector. In the view of 11.11.11 economic growth as such is not a synonym for development. Economic growth must be sustainable, pro-poor and inclusive. From this angle, our assessment is not an altogether positive story.

If you look at BIO with the idea that growth as such is enough, you will draw different conclusions. In this evaluation we focus on the failures of BIO, but that does not mean that we do not believe in the instrument as such. Investing in the private sector may on certain conditions be a good track for development. In our view however, development should be the measure of all things and not financial outputs. This report aims to inspire BIO and decisionmakers, that things can and should be done in a different and better way.

11.11.11 has evaluated BIO's activities and instruments in a completely independent way. BIO granted access to documents and staff. Unfortunately because of 'confidentiality' we were denied access to various documents.

Since its publication in Dutch (February 2012) BIO has released several management responses at different occasions. Some of BIO's remarks and additions have been included in this version. Based  on our findings and recommendations we have set up a dialogue with different stakeholders including our political decision makers. Ultimately, they hold responsibility for reforming BIO into an institution that is fully living up to its mission.

BIO is just as good as its shareholders (the Belgian state and hence we all) want it to be.

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