The Private Sector Development Programme (the Programme) is part of Danish development assistance and is therefore subject to the general development objectives: poverty reduction; gender equality; environmental protection and democracy. These objectives are to be achieved by contributing to economic growth and social development through facilitating business-to-business co-operations between private companies in the developing countries and Danish companies.

The Programme was initiated in 1993 with a three-year test period (1993-1996) in India, Ghana and Zimbabwe. The total budget for Phase I was DKK 180 million. An “enabling environment” component was part of the original design.

A second phase, for a five-year period (1996-2001) was approved in 1996, adding three new countries, Uganda, Vietnam and Egypt and abolishing the “enabling environment” component. The total budget for Phase II was DKK 853 million, of which DKK 103 million were for administration of the Programme. In 1999, the Programme was expanded to cover an additional five countries, i.e. Bolivia, Mozambique, Nepal, Nicaragua and Tanzania. Later same year Bangladesh replaced India as a Programme country.

Business-to-business co-operations are supported with technical assistance and finance for the partners to initially visit each other, for special studies required for assessing the scope of the co-operation and for subsequent feasibility studies. A start-up facility can also be provided to further prepare the partners´ co-operation and for initial technology transfers of up to DKK 0.5 million. Further support can be received under a Partnership project facility, typically up to DKK 3 million.

A PS-Secretariat in the Ministry of Foreign Affairs has the overall management and implementing responsibility. PS-Coordinators manage the PS-Units located at the Danish Embassies in Ghana, Zimbabwe, Vietnam, Egypt, Bangladesh and Uganda.

Development Associates A/S was commissioned to undertake the evaluation, the purpose of which is “..to assess implementation processes and to document results of the Programme..”. Three countries were selected for field studies, Ghana, Egypt and Vietnam. The evaluation was undertaken during the period January through March 2001.

Conclusions

Overall Conclusion
In the perspective of the current design the Programme is reasonably successful. It is in general effectively implemented within the designed framework by a competent and dedicated staff. The Programme has succeeded in establishing itself as a recognised part of Danish development assistance and it appears to be highly appreciated by private enterprises, in Denmark as well as in the host countries.

However, the design is very narrowly focused on individual private business-to-business co-operations with limited concern for broader aspects of development of the private sector as a whole and for the role of private sector development in overall growth and development of the respective countries. Consequently, the development impact of the Programme is limited and less than optimal.

Conclusions along these lines are also arrived at in other studies, i.e. in a recent worldwide study by Canadian International Development Agency and in a study of a corresponding EU programme in Egypt. A recent report from the Danish Centre for Development Research also points towards similar conclusions.

Direct Programme Results
The Programme promotes and facilitates the business activities of Danish companies in the developing countries concerned. These countries are generally not the preferred countries for Danish private foreign investments. In spite of this, the Programme has succeeded in attracting a number of Danish business activities to these countries. The focus is on establishing Partnerships between a Danish and a local private company which are long term, mutually binding and commercially viable co-operations, involving transfer of technology to the local partner. The evaluation estimates that, in total, some 90 such Partnerships have been established by the Programme during Phase I and II.

In addition the Programme has financed a number of projects which do not in themselves entail a longer term mutual commitment. These projects have, however, facilitated transfer of specific technologies over a limited time period and are thus also results of the Programme. Some 115 such technology transfers have been implemented in total, in addition to the approximately 90 longer term and mutually more binding Partnership projects.

During Phase I a number of “enabling environment” projects were also financed under the Programme. Some of these are still in operation and some have been added during the second phase of the Programme. The “enabling environment” component of the Programme was cancelled after a 1995 Review, except for the loan facility, implemented in Ghana and Zimbabwe only. The Programme facilities have also in Phase II been used e.g. to support co-operations between local and Danish private sector support institutions, i.e. “twinning arrangements”.

Impact Assessment
Development impact of the Programme has been assessed at three levels: The immediate objective is improved local partner businesses, which is assumed to contribute to the intermediate objective: Private sector development, which in turn is assumed to contribute to the development objective of promoting sustainable and socially balanced economic growth.

In terms of the immediate objective, the Programme has been reasonably successful. The co-operations established have in general resulted in relevant technologies being transferred from the Danish to the local partner. Technology transfer is defined to include not only specific technical aspects, but also to a large extent organisational, marketing and management aspects. This has contributed to important improvements for the local businesses, though many of these face also other constraints limiting the effects and longer term sustainability of the technology transfer. From the point of view of the local partner the Programme, however, appears rather successful.

In contributing to the overall development of the private sectors of the respective countries, the Programme is less successful. There are clear direct positive effects on employment and foreign exchange earning in a number of the individual local companies. There are also important cases of improvements in environment and gender aspects in partner companies. However, the project portfolios are generally somewhat dispersed with the projects thinly spread over many types and sub-sectors. There are very few synergy effects in the portfolios. Opportunities for demonstration and dissemination of experience, of providing “good examples” etc. are typically not exploited. Spin-off effects on other parts of the private sector are thus very limited.

The contribution to growth and social development is furthermore limited by a lack of concern for the type of private sector development required. Job creation and international competitiveness are important for a socially balanced economic growth to take place. Lack of priority criteria implies, however, that the project portfolios are less than optimal in these respects. Also the segments of the private sectors being supported are not necessarily those segments which have the highest growth potential or which would contribute most to socially balanced growth processes. The types of enterprises which are supported under the Programme are e.g., not in all cases among the small and medium sized. In the respective countries, there is no clear relation between this sector and the support portfolios of the Programme.

Positive effects on gender, environment and participation are observed in several projects. They follow from the individual technology transfers and are not the result of a systematic approach or policy in these areas. There is no explicit strategy for how to approach these concerns in the contexts of the individual countries.

Towards a New Programme Design
The conclusions above suggest that continuation of the Programme should be conditional on a major re-design to give it a clear development profile. Chapter 5 presents the evaluation findings in this respect, which are broadly in line with Danida’s new Action Plan for Business Sector Development. A new design must consider the appropriateness of the objectives and strategy in the contexts of the individual countries. It needs to include possibilities for a broader and integrated support to private sector development i.e. “enabling environment” components. More instruments should be available. A review of the current organisation and management is also required. Chapter 5 gives details concerning the recommendations made below but does not claim to be exhaustive.

Recommendations

It is recommended that Danida takes action towards:

The Programme Re-Designed

• Programme to become spearhead for Danish private sector support in countries where the Programme is well established. Though the Programme shall not itself address all constraints, it shall ensure that the Danish support provided in these countries is within a comprehensive private sector support framework.
  
• Country strategies to be developed for each of these countries as a means to designing the Danish support in relation to potentials and constraints for private sector development and in coordination with other donor support.

Objectives and Strategy Re-Considered

• Objectives reformulated, to include private sector development and overall development objectives and to ensure that the Programme has a clear development profile.
  
• Strategy formulated, to reflect the new design. The “from below” and business-to-business approach shall be maintained, but in a broader private sector development perspective.

Enabling Environment Support Re-Introduced

• Private sector institutions, supported to enable them to assist local private businesses, relieving the PS-Units from part of their present activities in this respect.
  
• Training institutions, supported to ensure sustainability and dissemination of effects. This can be visualised in sub-sectors, where a number of projects are implemented.
  
• Labour market institutions, supported to ensure appropriate labour market developments. Experience from individual business-to-business co-operations which are “good examples”, to be disseminated.
  
• Financial institutions, supported in country specific context of financial system. This is to address an often very important constraint of lack of long-term investment capital.

More Support Instruments

• Preparatory facilities expanded, to include enabling environment and context analyses, for developing the country strategies and to design the specific instruments in the respective country contexts.
  
• Start-up facility reviewed, to ensure adequacy and flexibility.
  
• Partnership support reviewed, to ensure adequacy and flexibility, building on past experience of the Programme.
  
• Loan facility in all countries, designed as support to, and in the context of, existing systems and in accordance with the Danida “Guidelines for Support to Financial Services”.
  
• New instruments developed, as part of overall Programme design for new intervention areas, but specifically designed for the respective countries in the country strategies.

Organisation and Management Reviewed

• PS-Coordinators, broader responsibilities towards private sector development and for ensuring the development profile of the Programme in the specific country context.
  
• Outsourcing, of parts of PS-Unit activities, e.g. to private sector institutions which provide private sector support of similar nature.
  
• Consultant support reviewed, to strengthen the project preparation process in order to increase the efficiency of the “dialogue” between the partners concerning the nature and modalities of co-operation.