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Sustainable economic development

Promoting private businesses

Bricklayer in South Africa. Copyright: bpa, FaßbenderPrivate businesses play a vital role in economic development. The private sector is usually the most dynamic economic sector, both in industria­lised countries and in developing countries. In view of the worldwide downward trend in the number of public-sector jobs, new jobs are being created almost exclusively in the private sector.

This is why German development cooperation applies a broad-based strategy to promote the private sector that fosters sustainable increases in jobs and income, also for poor and disadvantaged popu­la­tion groups. The strategy focuses on strengthening micro, small and medium-sized enterprises (MSMEs). German development cooperation employs an array of measures to enhance the competitiveness of these enterprises. Here are a few examples:

  • Dialogue between policymakers and the private sector
    Business associations, chambers of crafts and other professional associations can make a big contribution to improving the economic climate in developing countries. Germany uses its development cooperation to help these interest groups enter into a constructive dialogue with policymakers.

  • Business services for small enterprises
    MSMEs face big risks because they seldom have sufficient financial reserves, are exposed to strong competition and only have limited production capacities. External support from service providers - especially in the areas of in­for­ma­tion, networking and advanced training - can help reduce these risks. Germany promotes the development of a sustainable, functioning market for such services delivered by non-governmental, not-for-profit and private providers.

  • Local and regional business development
    Germany advises its partner countries in the process of introducing local and regional business development structures and procedures. These measures aim to systematically drive forward the local, and thus also the national, economy by facilitating cooperation between the public and private sectors.

  • Introducing international quality standards
    A functioning system of quality assurance, standardisation, and testing and metrology makes it easier for developing countries to participate in production processes that are based on the principle of the division of labour. This opens up and safeguards access to markets, boosts productivity, leads to foreign investments and creates jobs. This is why Germany supports the establishment of quality management and the infrastructure that this requires in developing countries. The focus here is on training specialists to introduce internationally recognised standards, and on supporting the relevant national and regional institutions.

  • Informal sector
    In many partner countries of German development co­op­er­a­tion only a fraction of the women and men capable of gainful employment actually work in the formal sector. Measures to promote the private sector should therefore focus not only on formal productive employment, but also on the informal sector. The productive potential of the informal sector, which in some countries is considerable, can be harnessed through appropriate measures. Most importantly these include building enabling frameworks, creating access to resources and developing business relations with larger companies – thus generating broad-based growth and creating jobs.

  • The supply of information
    Knowledge is just as important a production factor as human resources or capital. Access to modern com­mu­ni­ca­tion systems helps companies in developing countries to share information. This then enables them to operate jointly in order to present one face to foreign customers and get to hear about international business opportunities.

  • Environmentally sound production
    Many companies in developing and transition countries, especially micro enterprises, are unable to afford the switch to environmentally friendly production methods without external help. In addition, they often lack the necessary know-how. German development cooperation therefore advises both individual companies and entire sectors on how to introduce environmentally friendly technologies, and facilitates the necessary funding.

In order not to aggravate crises and conflicts in partner countries, a conflict-sensitive approach is applied to all activities undertaken in the area of private-sector promotion.

For further information on promoting the private sector - for instance on development partnerships with the private sector, cooperation with chambers and business associations and the promotion of Corporate Social Responsibility – please refer to Cooperation with the private sector.

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