As global Official Development Assistance (ODA) stagnates, several donor countries and aid agencies are struggling to mobilise private sources of financial capital but without the sufficient incorporation of human rights commitments. Under this scenario, private sector-led growth operates without regulatory mechanisms to ensure that human rights standards and democratic ownership of development outcomes are met.
Multiple challenges in private sector involvement to development persist. While the private sector is no doubt a major actor in creating economic opportunities for impoverished communities by generating employment, creating innovation and producing revenue for various sectors of society, it is however important to note that not all of these investments have positive impacts on poverty reduction and growing socio-economic inequalities. For instance, many corporate bodies and bilateral institutions are yet to adopt the UN Declaration on the Rights of Indigenous Peoples and to recognize inherent right of indigents to “free, prior, and informed consent” despite the private sector’s extractive and unwarranted operations in indigenous lands and territories.
PPPs and Priority Setting
In the case of Public-Private Partnerships (PPPs), which is one of the key tenets of promoting private sector participation, national development priorities become distorted due to the prioritization of profit over public services. Many countries around the world, like Mexico, India, and Bangladesh are developing policy frameworks that promote PPPs citing that such deals will facilitate greater investment in economic infrastructures.
Across the Asia Pacific region, economic infrastructures, such as transport are the preferred targets for PPP deals rather than focusing on more important social concerns such as in health and education. Private corporations, usually with high profit motives often favor the construction of roads, railways, ports and electricity lines because user fee charges (thus, profit) are more feasible in these kinds of projects. In addition, these projects have a market value that combines the profit in the actual construction as well as the profit gained in the provision of related services, such as the collection of toll fees among popular road projects.
Implementing Human Rights Standards
Private sector involvement in development can be more effective by reflecting and improving its performance in complying with human rights standards. Private sector involvement in the Asia Pacific is a cause of concern as it is usually linked with human rights issues across the region, ranging from exclusive decision-making, mis-prioritization, misinformation, limited public gains, and lack of accountability among others.
Various cases in India alone attest to this—the privatization of electricity and water in New Delhi have led to increased price hikes, therefore limiting quality access to such services. Many corporations failed to take free, prior and informed consent from communities affected by its extractive mining operations while major decision-making processes that affect the people are concealed from community participation.
Private Sector and Development Effectiveness Principles
The extent of integration of key aid and development effectiveness principles with private sector participation in development varies per country and requires urgent redress among the majority. Many donors and institutions have not sufficiently incorporated their commitments to human rights, development effectiveness principles and other international standards into their private sector strategies. As development and human rights standards progress, private sector participation must also keep similar pace.
Most donors have varying policies on aid while very few, like Spain and New Zealand, make specific reference to Paris or Accra in their regulatory policies and mechanisms. Needless to say, these principles must be integrated to national development frameworks in order for the private sector to adhere with previously agreed upon development effectiveness principles.
Our engagement with the private sector must therefore be guided by the principles of democratic ownership and human rights standards. Furthermore, CSO participation must be promoted and all decision-making processes must involve all stakeholders and communities affected to ensure that development is appropriately informed by the people’s demands and needs.
Governments in the Asia Pacific region should focus on domestic investors--Micro, Small and Medium Enterprises (MSMEs) which can promote livelihood and create jobs for more people. Governments should also promote inclusive development and poverty eradication based on innovative investments, such as Agrarian reform and establishment of cooperatives for domestic market development.
Defining development priorities should not be left at the exclusive domain of the private sector and financial institutions. The rightful participation of communities and civil society must precede all development decision-making processes. Securing check and balances to ensure compliance must be implemented to rightfully orient development towards peoples’ rights and environmental sustainability.
If private sectors are to be true partners in development, they must collaborate in ways that improve the social and economic rights of marginalized populations, focus on the economic empowerment of women, create conditions for decent work, and promote socio-economic inclusion and social protection. The private sector can only genuinely contribute to development if it maintains country ownership and delivers effective development outcomes to the poorest and most vulnerable populations.
This is an abridged version of Jiten Yumnam's presentation on private sector challenges last March 10 in the Pre-HLM Asia-Pacific Regional Consultation in Seoul, Korea.