Remarks at Highlevel Norway Visit- Roundtable on Engaging Private SectorNov 7, 2017
Remarks by UNDP Country Director, Louise Chamberlain
Roundtable on Engaging the Private Sector in Development and Humanitarian work in Ethiopia in honour of the visit of HRH Crown Prince Haakon and HRH Crown Princess Mette-Marit of Norway to Ethiopia
Mr Chair, Ladies and Gentlemen,
- Thank you for allowing me to make a few remarks challenges and demands in Ethiopia with regards to development and opportunities for private sector partnerships and specifically Public-Private Partnerships in Ethiopia.
- The is yet to endorse the framework for PPP in Ethiopia, which means that the experience so far in Ethiopia of large scale private investment in the public sector is limited. Based on experience from other countries, there is now awareness of its potential and relevance, and we think this area has potential to grow steadily in coming years. The government of Ethiopia has shown interest and commitment to pursue PPP, typically for infrastructure investments.
- There are of course constraints to the acceleration to PPP. At the institutional level, the legal and regulatory enabling framework is not yet in place; there are limited systems for risk management and risk guarantees; and Government capacities to facilitate and support the emergence of PPP is of course still developing – there is a need to support the identification and exploration of opportunities and entry points, as well as instilling confidence in the relevance and applicability of PPP, gaps that all partners can help to bridge. On the financial side, feasibility studies and financing may be available, but there are also structural and policy limitations on the Government’s ability to access financing, which need attention.
- One of the most important promises of PPP is the opportunity to generate sustainability of public services on the basis of revenue generation. However, the management of revenue and achieving a quality level of services are major challenges in an environment where government has significant institutional capacity gaps at the local level. Risks include not only corruption but also operationally in achieving sustainability and quality of services over time.
- Therefore, as PPPs emerge, it will be important for the government, investors and development partners to place emphasis on technical assistance to the set up and governance of new institutions such as utilities.
- For Ethiopia, the gap between public service delivery, on the one hand, and public service demand, on the other, highlights the urgent need for PPP especially in sectors such as water, energy, education, and health. Among many objectives, we hope and expect that PPP can help address the issue of resilience; by providing systems and infrastructures that help communities and families to cope with shocks – this is particularly relevant in the areas that are affected by frequent droughts, which are also becoming more severe.
- Here in Ethiopia, the United Nations Development Programme (UNDP) is working closely with key ministries such as environment and climate change, industry, agriculture, livestock, and urban development to promote inclusive growth and development. We are also supporting Ethiopia to develop approaches to resilience and coping with drought, which means developing adaptive capacities and the ability of people and communities to withstand climatic and other shocks.
- In a number of our projects, this means fostering a practical and hands-on engagement of the private sector as an active contributor to development progress. Let me take three quick examples of three Sustainable Development Goals areas where the private sector, by simply engaging in their core business, can make a significant impact in the achievement of development goals:
- Firstly, in partnership with the Governments of Norway and Sweden, UNDP is bringing about transformation in the forest sector, by connecting farmer cooperatives with large scale investment. The aim of this sustainable forest management and timber production effort will help to achieve the national target of a forest cover of 20% by 2027. Forest is not only a growth sector with a promise of equitable benefits, but has huge benefits for resilience and conservation of natural resources, and the potential for future access to carbon finance.
- Secondly, in the area of access to affordable energy, UNDP is promoting the adoption of a market-based approach towards adoption of renewable energy technologies and climate resilient, green cities. We engage the private sector by leveraging investments in business, market, and technology development. Here, the private sector offers much-needed financing but also much more than that; it contributes in skills development, entrepreneurial and business management training for enterprises involved in the manufacturing, supply and distribution of technologies; start-up financing and small grants for innovative enterprises to overcome bottlenecks to growth. Businesses support in creating an enabling environment and business development services, employment generation and poverty reduction; they supply start-up financing and small grants for innovative enterprises to help the growth of business.
- So these are two examples of how improved natural resource management can contribute
- Thirdly, in the area of governance and achieving peaceful, inclusive, and just societies, UNDP works closely with the Government to strengthen inclusion and capacities of key institutions to deliver on their mandates. Here, the private sector can play a catalytic role in bringing innovation to strengthen accountability, transparency, rule of law and justice, and play an important role in creating platforms for empowering citizens to actively participate in decision-making processes, thereby promoting social cohesion. The Ethiopian local private sector can also help to give a voice to citizens, similar to civil society.
- At the macro-economic level, we see huge investment potential for PPP to increase the efficiency and productivity of the agriculture sector as a key driver of growth and food security; this can enhance labour-intensive economic growth and improve adaptation to climate change and; crop and livestock insurance schemes can also help resilience to drought-induced shocks.
- Moreover, in an environment of weak external-sector competitiveness and trade imbalance, Ethiopia needs to accelerate its industrial transformation process towards producing and exporting high value goods; private sector investment is required to accelerate this transition.
- As Ethiopia pursues an industrial transformation agenda, there is scope for PPP in building and expanding the industrial parks and clusters to encourage agglomeration of economic growth in industrial parks and clusters. The Government will need to develop regional plans for urban and industrial development where those synergies emerge, and PPPs will form a key component of those long term plans.
- Ethiopia must also take note of its demographic trends, undergoing a huge increase in its population which is putting pressure on resources. Particularly the share of youth and children have increased remarkably. Even though general unemployment is low, youth unemployment in urban areas remains high at 22 percent and the youth bulge could have serious political and economic implications, unless Ethiopia harnesses the demographic dividend by creating jobs also in the service and manufacturing sector to absorb the rural to urban migration and mitigating the loss and degradation of natural resources.
- In closing, the opportunities for private sector investment in Ethiopia’s development are considerable although there are few quick wins and a sustained engagement is important for achieving results. I end by suggesting some key actions that can be taken by development partners to promote more private sector investments:
- Provide risk guarantees and other forms of upfront financing to give investors more security and increase the time tolerance for engaging successfully in Ethiopia;
- Offer in-kind contributions of expertise to help the set up and functioning of large utilities companies;
- Emphasise the implementation of labour laws to ensure quality investors come to Ethiopia and that companies offer decent work;
- Support and encourage companies to finance vocational training, to overcome skills gaps and increase the competitiveness and relevance of Ethiopia as an investment market;
- Offer mechanisms for Ethiopian diaspora to engage in investment; there is a lot of interest in these populations which can help accelerate market development.
Thank you, Ladies and Gentlemen.