3 Geographical focus, sectors and partners

Perhaps more than in any other area of aid, support for private sector development raises difficult questions about geographical priorities. It is natural to start in some of the countries with which Norway already has extensive, long-term development cooperation: Ethiopia, Malawi, Mozambique, Myanmar, Nepal and Tanzania. In these countries, Norway’s efforts increasingly focus on good governance, inclusive and sustainable economic growth, and resource and revenue management.

At the same time, it is important to give priority to cooperation with countries that have a genuine desire to facilitate private sector development by providing a good environment for business. Unless countries show a willingness to do this, it is unlikely that aid will yield lasting results that are commensurate with the amount of support provided. If Norway’s dialogue with – or the practical follow-up of its cooperation with – a country reveals that the authorities in reality are not interested in addressing the challenges experienced by the private sector, this must have consequences for Norway’s cooperation with the country concerned.

The Government will consider the potential for scaling up its cooperation with selected countries in West Africa. In line with the Government’s stated intention to reduce the number of countries that receive aid from Norway, efforts will as a rule be limited to the list of 85 partner countries.

In some contexts, it will be natural to view efforts to promote private sector development in a regional perspective. There may be links between neighbouring countries or between countries within regions in certain areas, such as trade, value chains, infrastructure and institutional frameworks. In such cases, aid must be used to promote private sector development across borders by working together with the countries concerned, often by promoting South – South cooperation.

3.1 Priority sectors

Norway’s efforts to promote private sector development will cover a range of different sectors, especially if funding provided through the multilateral system is included. In the area of bilateral aid, efforts will be focused on sectors in which Norway has particular expertise.

In its business-oriented cooperation with developing countries, the Government will give special priority to the energy, ICT, agriculture, fish/marine resources and maritime sectors. Priority will be given to projects related to these sectors when allocating funds and in development cooperation dialogues, but it will also be possible to provide funding for projects in other sectors.

Cooperation will focus on projects that are given priority by the developing countries. Close cooperation between the diplomatic and consular missions, Innovation Norway and business actors to identify possible areas for Norwegian engagement will be crucial. Funds should only be allocated to private sector actors following a tendering process or some other form of competition, in accordance with the rules that apply in the country concerned and international standards.

3.2 Partners

Norway’s intensified efforts to promote private sector development will be directed through a number of channels using a range of measures. In order to achieve economic growth, increased investment and spill-over into the local economy, it is important to support measures that can mobilise the private sector at the local level. In addition, the Government intends to increase the use of public – private partnerships in specific development projects, for example improving infrastructure or delivering services.

Norwegian companies

Many Norwegian companies operate in, or are considering launching operations in, markets in developing countries. This can be of mutual benefit to the companies and the host country. The Government will therefore facilitate partnerships that meet the needs of developing countries, while being profitable for the companies involved. Achieving a good development impact generally requires cooperation on a large enough scale and a long-term commitment.

Close interaction between public and private actors will be important for identifying specific projects that are well suited for increased Norwegian private sector engagement in the various countries. In addition to carrying out their business operations, Norwegian companies will be able to play an important role as dialogue partners in the work to improve the environment for business activities.

Local spill-over effects

Many developing countries in Africa have managed to maintain a high rate of economic growth due to certain key sectors, such as raw materials and the extractive industries, which are important drivers for the economy. However, this high growth rate has not resulted in a corresponding increase in employment. The aim of Norway’s efforts to promote local spill-over effects will be to have a positive economic impact and foster inclusive growth. This includes job creation, the transfer of knowledge and technology, sustainable locally-based private sector development and revenue mobilisation. Efforts to promote private sector development at the local level will build on the diplomatic and consular missions’ existing portfolio, which includes education, agriculture, clean energy, good governance and the Oil for Development programme.

In countries that have substantial Norwegian investments, the Government wishes to cooperate with the private sector on development projects. The focus will be on finding solutions and models for cooperation that can maximise the development impact of Norway’s engagement and increase the local economic spill-over effects.

Norway’s efforts will primarily focus on two main pillars: 1) support for start-ups and for strengthening local businesses, and 2) vocational education and training.

Photo: Norfund.

Clusters and knowledge institutions

Cooperation on technology, innovation and research is of key importance for the companies, knowledge institutions and other partners that make up a cluster. Research shows that creating clusters makes a country or a region more attractive for business activities. Cluster creation can therefore be an important aspect of business policy in developing countries.

Just as business activities stimulate growth, Norwegian knowledge institutions can contribute to economic development through capacity-building and the transfer of expertise. The measures to internationalise Norwegian higher education and knowledge institutions should therefore also be seen in the context of development policy.

Civil society organisations

Civil society organisations play an important role in private sector development. Various civil society actors work to promote better governance, anti-corruption, infrastructure improvements and respect for human rights. Others work for improved access to credit and other financial services, better market access, favourable conditions for entrepreneurship, a qualified workforce and local economic spill-over effects. Civil society organisations usually have detailed knowledge about the local community, whether rural or urban. They have networks, a local base and often the benefit of a good reputation.

In many poor countries, the majority of the population works in the agricultural sector. A number of civil society organisations are working to strengthen the land rights of people in poor communities, with a particular focus on women’s land rights. Land rights create opportunities for local private sector development, particularly if they are combined with measures that provide access to credit.

Another important task for civil society is to hold public authorities and the private sector accountable for their actions. Many civil society organisations are working to ensure that both governments and private sector actors show greater transparency on contracts and capital flows. The Government wishes to promote greater transparency, and will strengthen its cooperation with watchdog organisations both nationally and internationally.

Multilateral organisations

Because of their expertise, capacity and local presence, multilateral organisations are important partners in many countries. Multilateral instruments often have greater risk-reducing potential than bilateral schemes, due to the size of the institutions concerned and their importance for the authorities in the host country. In addition, multilateral organisations have an important role to play in mobilising and coordinating resources for private sector development projects in developing countries. Moreover, they play an important part in the work of developing and maintaining standards, rules and an environment that is conducive to private sector development. Much of Norway’s support for private sector development is channelled through multilateral organisations.

Multilateral efforts can yield economies of scale that would normally not be achieved through bilateral measures. Most of Norway’s support for multilateral measures is given as core contributions. In addition, Norway provides ear-marked allocations for specific priorities or areas, when they are considered particularly well suited for Norwegian engagement. This may include developing new instruments and initiatives.