Economic development, growth and employment
Private sector promotion
Private businesses provide jobs and generate income. The taxes they pay lay the foundations for ensuring a viable public sector. Private sector promotion offers vitally important leverage for structural poverty reduction, employment promotion and the mobilisation of indigenous resources.
In many cooperation countries the private sector has a comparatively low level of productivity, competitiveness and diversification. A large percentage of the private sector is accounted for by small and micro-enterprises operating in the informal sector. A productivity gulf separates small and large enterprises, a gulf far wider than that seen in industrialised countries. Few small enterprises manage to expand and become medium-sized or large businesses.
Their lack of competitiveness is thanks partly to shortcomings in the countries' infrastructure and education systems, as well as the enterprises' lack of access to credit. Unfavourable political and legal conditions on the ground, corruption, the lack of access to state and private services and the inadequate interaction between the state and industry are all obstacles to businesses.
In private sector promotion, German development cooperation aims to strengthen private businesses in cooperation countries. There is a special focus on micro, small and medium-sized enterprises, which account for the lion's share of private businesses in cooperation countries, and offer poor sections of the population employment and income opportunities. Over and above this a few measures, such as improving the business environment, can also attract more investment on the part of foreign businesses. This too can boost the domestic economy.
To further increase the impact, private sector promotion measures are linked with complementary programmes in the fields of economic policy, financial systems development, (vocational) education, infrastructure and good governance.
The following measures are at the heart of the German private sector promotion strategy.
Germany supports state actors, enabling them to work with the private sector to analyse the opportunities for and constraints to private sector development, and to draw up reform plans. Together the two sides devise strategies to improve legislation and bureaucratic procedures, and put these improvements into practice. This might, for instance, involve procedures for registering companies or issuing licenses. German development cooperation aims to achieve "good regulation" that also takes into account social and environmental values and standards.
Moves to put in place a more enabling environment for cross-border economic activities include dismantling barriers to trade and investment, and simplifying and harmonising the pertinent legislation and standards. At the same time, within the scope of aid for trade, cooperation countries are enabled to play an active part in shaping the international terms of trade.
In many cooperation countries, structural changes are needed if the private sector is to develop or build on competitive advantages.
Within the framework of sectoral economic promotion, Germany supports the development of specific branches of the economy that offer good prospects in terms of economic growth, value added and employment. Local and regional economic promotion approaches aim to improve the competitiveness of selected locations and economic areas.
Germany also supports cooperation countries in their efforts to put local private industry on an environmentally sustainable footing. Important aspects of activities in this field include adjustment to climate change and the identification of the potential in "green" branches of industry. To support ecologically sustainable production procedures, the Federal Ministry for Economic Cooperation and Development (BMZ) is working to help industry make more efficient use of resources, and to ensure compliance with environmental standards.
Robust systems that foster innovation enable businesses to boost their productivity and competitiveness, and allow them to gain a toehold on new markets. The Federal Republic of Germany advises cooperation countries on how to develop and implement strategies and promotion programmes of this sort. The capacities of essential institutions in an innovation-promoting system, including research and development facilities with close links to industry, are established and developed with German support.
German development cooperation also helps develop the institutional environment that is needed to represent the interests of private businesses and to deliver the services that these businesses need. Chambers of commerce, industry and skilled crafts, and business associations can play a key role in representing the interests of the private sector and shaping reform processes, as well as acting as service providers for private enterprises.
The German government would like to better harness the potential offered by the private sector in the interests of achieving sustainable development. Cooperation arrangements with private businesses help mobilise private funds that can then be used for development purposes, while also mainstreaming socially and environmentally sustainable business practices.
Germany provides long-term financing for sustainable investment projects of private businesses provided they are environmentally and socially sound. This is often flanked by advisory services that ensure compliance with the principles of sustainability and good corporate governance.
The promotion of inclusive, broad impact business models encourages businesses to adopt approaches geared to resolving social and environmental problems. Approaches of this sort often offer financially sustainable ways forward to boost development and reduce poverty, by focusing on integrating poor individuals in value chains as consumers and clients, but also as employees, producers and entrepreneurs.
By promoting corporate social responsibility and establishing pertinent initiatives and networks, the Federal Ministry for Economic Cooperation and Development (BMZ) helps develop awareness and private-sector commitment in areas such as environmental protection, resource efficiency, labour rights, human rights, health and safety, and training.
Special rules apply to private sector promotion during conflicts and in post-conflict scenarios. Special attention must be paid to making measures conflict sensitive (in line with the "do no harm" principle), so as to avoid aggravating existing conflicts. At the same time, private sector promotion in countries like this can help build market structures and stimulate economic cycles. Jobs and income provide the population at large and the (former) parties to the conflict with a "peace dividend".
- Good work worldwide – Vision paper by Federal Minister Dr Gerd Müller and Federal Minister Andrea Nahlesnew window, PDF 1.5 MB, accessible 02/2015 | pdf | 1.5 MB | 12 P. | accessible
Forms of Development Cooperation Involving the Private Sector
BMZ Strategy Paper new window, PDF 190 KB, accessible 03/2011 | pdf | 190 KB | 18 P. | accessible
Developing markets, creating wealth, reducing poverty, taking responsibility – The private sector as a partner of development policy
BMZ Strategy Paper new window, PDF 265 KB, accessible 04/2011 | pdf | 265 KB | 15 P. | accessible
- Fighting Poverty More Effectively – Worldwide | Cross-Sectoral Strategy on Poverty Reduction new window, PDF 1.7 MB, accessible 11/2012 | pdf | 1.7 MB | 16 P. | accessible