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Multilateral Development Organisations’ Engagement with the Private Sector

Client: Department of Foreign Affairs and Trade (AusAID)

Background: The Australian Government’s approach to international assistance emphasised growth, development and trade as key drivers of international prosperity, with the private sector key to all three. In 2014, approximately a third of Australia’s aid program was delivered through Multilateral Development Organisations (MDOs). This is through core funding (voluntary, untied funding provided to organisations to support their mandate and strategic plans) and non-core funding (to support a specific project or program).

In 2014, the Department of Foreign Affairs and Trade (DFAT) wanted to better understand the role of the private sector in promoting economic growth and reducing poverty in the Indo-Pacific region.  DFAT wanted to test whether MDOs may be better positioned than non-MDOs to leverage financial and non-financial input from the private sector because of the MDOs’ scale and reach, capacity to invest long-term, negotiating/influencing power, and credibility as partners. Consequently, Sustineo was commissioned to undertake research into how Australia’s MDO partners engage in private sector development.

Approach: The subject matter for this research project was wide and deep, beginning with an extensive desk-based literature review of material on MDO engagement with the private sector. Given the broad range of actors captured in the ‘private sector’, Sustineo developed a bespoke analytical framework. This involved differentiating between private sector development (including activities by government organisations and development organisations geared toward creating an enabling environment for business to flourish), the private sector in development (including the roles of and activities carried out by the private sector as part of its regular core business operations that affect development outcomes and economic growth), and private sector engagements for development (including instances when engagement with the private sector goes beyond the traditional impacts of the private sector in development).

The analytical framework was used to assess specific case studies to demonstrate the engagement of MDO’s with different aspects of the private sector. This included assessments of PIDG, UN Women, the International Finance Corporation, International Labour Organization, and World Food Programme. The investigation of case study experience provided a range of lessons learned regarding successful private sector engagement. Throughout the project, close consultation with DFAT assisted in identifying the Department’s core interests, which were the focus of the final report.

Outcome: Sustineo produced a final report that provided a comprehensive assessment of MDO engagement in the private sector, within an ambitious timeframe. The final report provided review of the MDOs engaging with the private sector, the methods for doing so, the financial instruments used to facilitate this engagement and their relative success, and the identified a broad spectrum of MDO interest in supporting private sector growth. Within this, the report findings highlighted the diversity of the private sector and its varied role in development, noting that this diversity makes it difficult to summarise trends and generalize findings. This final report provided DFAT with an easily readable synthesis of the complex and varied subject matter of this project and was presented to DFAT at a workshop.