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The Need For PPP Arrangements To Make Business Pro-poor And Green

By Mel Jones And Manuel de Vela,

Asian Institute Of Management
 

Background paper for Conference on

 
Targeting the Environments of the Poor in the Context of Climate Change and the Green Economy,
24-26 Nov 2010, New Delhi
Introduction
 This paper uses a series of case studies to learn
lessons about the role of the private sector in
reducing poverty in the context of environmental
constraints and climate change.
 Case studies were prepared by the Asian
Institute of Management (AIM) under the
project: Mainstreaming Poverty Alleviation
Initiatives among ASEAN-member Countries.
Introduction 2
 The project is funded by the ASEAN
Foundation through the Japan-ASEAN
Solidarity Fund,
 Developed in collaboration with the Asian
Development Bank’s Regional Technical
Assistance Report (ADB RETA) on Regional
Knowledge and Partnership Networks on Poverty
Reduction and Inclusive Growth.
Sustainable business with the poor

 Series of recent moves by business and

development practitioners recognize and
promote the role of business in tackling
poverty and environmental and climate
change issues:
Sustainable business with the poor 2
 Agenda 21 created by the Rio Conference on Environment and
Development to promote partnerships involving business (1992)
 Sustainability Reporting guidelines of the Global Reporting
Initiative (1997)
 World Summit on Sustainable Development, Johannesburg (2002)
 WBCSD Business for Development (2005)
 UN Commission on Private Sector and Development report:
Unleashing Entrepreneurship: Making Businesses Work for the
Poor (2004). Followed by: Growing Inclusive Business.(2008)
 Business Call to Action (2008)
Sustainable business with the poor 3

Two forces are driving commercial relations

between business and the poor:
1. Rising spending power in emerging economies;
and
2. Innovation on the supply side.
Sustainable business with the poor 4

However,
 Incorporating measures into the production and

supply process to protect the environment and

reduce the impact on climate change often
involves additional costs.
 Moreover, there are particular difficulties (and

costs) of doing business with the poor.

Sustainable business with the poor 5

Success is being achieved:

 bringing consumer goods within the spending

power of the poor,

 linking poor farmers’ production to commercial

agro-processors,
 Promoting more sustainable agricultural

practices.
Sustainable business with the poor 6

But challenges remain in finding ways of

delivering public goods, including environmental
services such as water and sanitation, to the poor
via the private sector.
Sustainable business with the poor 7
 There is great potential to be realized by harnessing the
private sector to efforts to reduce poverty.
 Nevertheless, private sector-led development is an
imperfect model for implementing government policy.
 Extra incentives may be needed to get private companies
to engage in environmentally-sustainable business with
the poor.
 There is, therefore, a case for governments to intervene.
Public Private Partnerships
 Public-Private Partnerships (PPPs) are one means
of government intervention.
 Have historically been used to finance public
infrastructure off-budget, thereby creating the
illusion of reducing public debt.
 Recently PPPs have been extending into new
areas like pharmaceuticals and biotechnology
with a view to tackling developing country
environmental health and food security issues.
Public Private Partnerships 2

There is now a wide range of ways in which

governments can support and encourage the
private sector to drive growth and pursue
inclusive and green business strategies:
 Public Private Partnerships 3
 Co-fund research and development
 Co-fund pilot projects
 Co-fund start-up costs (such as farmer awareness and education, early years
price guarantees)
 Facilitate stakeholder dialogue
 Build capacity of local SMEs
 Create conditions for development of a local (micro-) finance industry
 Invest in infrastructure
 Offer tax incentives
 Provide subsidies
 Establish national strategies
 Create strong national legal and regulatory framework
 Enter into international policy and practice frameworks.
Public Private Partnerships 4
Some observations on PPPs

 Measures should be chosen carefully so as not to

undermine opportunities for the private sector
(govt-subsidized schemes keep out private firms).
 Important to recognize that the partnerships often
include other actors, especially NGOs.
 Green growth is not necessarily pro-poor.
AIM case studies

In Sarawak, the Malaysian Agricultural Research

and Development Institute (MARDI) teamed up
with a multinational company (Nestle), a local
enterprise (Empire Rice Mills) and smallholder
farmers of indigenous, non-Malay, origins to
develop improved red rice for use in baby food.
AIM case studies 2
 In Vietnam, Green Energy has linked up with the government in a
variety of ways. It sits on the government’s National Jatropha
Programme Founding Committee and is working closely with the
government’s Center for Bio-technology in Forestry to produce
improved jatropha phenotypes.
 The government is reclassifying marginal and unproductive land
for jatropha cultivation. It has mandated that by 2015 petro-diesel
must include a 5% blend of bio-diesel and provided for test
planting of 300,000 hectares of jatropha by 2015.
 In addition, the Dutch International Development Agency, SNV,
has been advising GEV on “inclusive business” approaches and
its field staff on giving advice to farmers.
AIM case studies 3

In the Philippines, Solutions Using Renewable

Technology (SURE) partnered with the
Department of Energy, local government units,
NGOs and micro-finance institutions to deliver
affordable solar power to rural communities lying
beyond the reach of the electricity grid.
AIM case studies 4
 Sompo Japan Insurance in Thailand is piloting weather-
index insurance for rice farmers.
 It is working closely with the government-owned Bank
for Agriculture and Agricultural Co-operatives (BAAC),
which acts as distributor of weather-index insurance with
farmers.
 Government is subsidizing BAAC’s outreach work with
farmers to keep costs down.
 It is also playing a role through participation of Thai
Meteorological Department in the provision of rainfall
data and investment in new weather stations.
AIM case studies 5
 Yamaha Water and Sumadi Latrines both in Indonesia,
World Toilet Organisation in Cambodia, Sunlabob in
Laos all demonstrate the difficulties inherent in
designing products that promote environmental health
and environmental sustainability and are for sale to the
poor.
 The studies show poor people are reluctant to pay the
full cost for supply of clean water, sanitation (latrines)
and rural electricity.
 Promotion of environmental health will depend on
government subsidy.
Summary and conclusions
 The AIM case studies report on several successful, or
potentially successful, supply chain linkages between
commercial crop processing firms and poor farmers.
 They demonstrate the role that may be played by
PPPs to provide incentives for private firms to
address poverty and sustainability as part of core
business.
 They also highlight the problems of establishing
commercial relationships between businesses and the
poor for supplying public goods.
Summary and conclusions

 The AIM case studies only provide anecdotal

evidence.
 There remains a need for further research, pilots
and evaluations.
END