By Judith Ugwumadu | 15 May 2014
The UK Department for International Development's attempt to stimulate private sector growth in poor countries is not working well and programmes are overly ambitious, the Independent Commission for Aid Impact said today.
ICAI reviewed the Department for International Development’s approaches to private sector development, which DFID sees as part of its work to reduce dependency on aid. The department’s private sector development work includes a range of programmes aimed at reducing the costs and risks of doing business, expanding markets and trade and pioneering and stimulating investment.
But ICAI found that in none of the countries it visited was there a plan for or assessment of the cumulative impact of programmes. ‘It was unclear how well DFID’s work overall is transforming the private sector as a tool for economic growth and poverty reduction,’ the watchdog said.
As a result, the aid watchdog has rated DFID’s private sector development work as ‘amber/red’, saying it was performing ‘poorly’ and ‘significant’ improvements needed to be made.
ICAI noted that the success of private sector development projects were often outside DFID’s control. For example, a review of the Business Environment Strengthening for Tanzania project, which ran in the country from 2004 to 2010, concluded that failure stemmed from its ‘breadth of ambition and the institutional problems of how a single project [could] address issues that cover and cut across the purviews of many government ministries and agencies’.
The watchdog said it was concerned that DFID had not yet turned its ambitions into clear guidelines to develop a ‘realistic, well-balanced and joined-up’ portfolio of programmes.
ICAI chief commissioner Graham Ward said: ‘DFID is respected amongst donors but still a very small player in the wider processes needed to develop the private sector.’
‘Moreover, much of what [DFID] seeks to achieve, such as transformational change through regulatory reform and relaxation of international trade rules, lies not only outside its control but also outside its core competencies as an aid agency.
‘DFID needs to identify and focus on its core strengths and the areas of private sector development work where it can add most value in its role as an aid agency.’
ICAI recommended that DFID clearly defines and articulates where it can add most value to private sector development and be realistic in its ambitions. The department also needs to work harder to understand the barriers and imperatives faced by the private sector in developing countries.
Responding to the report, a DFID spokesman said: ‘ICAI was right to recognise that very clear link between economic development and ending dependency on aid. That is why we have ambitious plans to create jobs, raise incomes, generate tax return and boost growth at the very heart of our work.’
But he agreed that the programmes should be appropriately managed. ‘[This] is why we set out a full strategic framework earlier this year and we are building DFID’s private sector skills,’ he said.
