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Supporting the private sector - EU, CDE and ACP enterprises: A growing role for a changing institution

by Viktor Rousseau

The new partnership Agreement between the ACP States and the European Community sets out new guidelines aiming first and foremost to combat poverty while also helping to anchor ACP countries to the world economy. To meet these objectives, it has been agreed that the 9th European Development Fund (EDF) will be given a budget of €13.5 billion over seven years, plus the remaining funds carried over from previous agreements - approximately €10 billion.

Both parties see the private sector as the starting point for economic growth, and an important link between the strategic and operational structure of the new partnership. Substantial resources have been allocated to ensure its promotion and expansion. The Cotonou Agreement provides €3.5 billion for this, mostly in an Investment Facility of €2.2 billion administered by the European Investment Bank (EIB), which will replace the risk capital and the interest rate subsidies of LomV. To this is added another € 1.7 billion in loans from the EIB. The aim of the Facility is to fund private enterprise as long as it is economically and commercially viable, and also to finance public enterprise, as long as it fulfils the same criteria. It will also serve to support the privatisation process and stimulate internal and external savings investment by helping to develop the capacities of financial institutions and local financial markets, and by increasing investment. The Centre for the Development of Industry/Enterprise (CDI) can steer businesses towards access to these various investments made by the EIB in local financial institutions.

The CDI should no longer limit itself to industry, but evolve to become a greater support to companies in general

In its document presented to the Council and the European Parliament, Strategy of the European Community for developing the private sector in ACP countries, the European Commission highlights the problems inherent in this task: limited confidence in weak economies, restricted markets and deficiencies in policies, institutions or public infrastructure. It also points out organisational weaknesses in the private sector, in financial and non-financial services aimed at businesses, and queries the administrative capacities of the businesses themselves.

In response to this rather gloomy diagnosis, the Commission advises devoting more resources to the private sector as part of an integrated approach to its cooperation with the ACP countries. The proposed strategy consists of encouraging dialogue between the private sector and governments, improving services - financial and otherwise, improving the flow of private investments, and promoting small businesses and development of trade between the EU and the ACPs. The document also defines the roles of the institutions and available instruments.

If the Commission is to coordinate strategy and back both reforms and the private-public dialogue, then it will need to share responsibility with the EIB and the CDI for supporting the development of small and medium-sized businesses. It also plans to instigate rapid access to aid for potential investors. An agency for guaranteeing investments is currently being considered.

The private sector has become an important link in the strategy of the new ACP-EU partnership, above

A wider role

In order to offer better technical assistance, to both European and ACP companies, the Centre for the Development of Industry/Enterprise should no longer restrict itself to industry but evolve to assume a wider role, supporting all types of business and becoming the body to which the Commission would always refer for advice in this domain.

In January 1999, a meeting was held in Las Palmas on Gran Canaria (Spain), bringing together representatives of the Association of National Chambers of Commerce, representatives of industry and of other ACP economic operators, in order to examine the role of the private sector in future ACP-EU relations. The Commission's recommendations were very well received. A closing resolution emphasised that “the remit of the CDI should be widened to enable it to deal with all aspects pertaining to the world of business.”

The CDI's role is to help businesses in EU/ACP countries plan and implement new partnership projects, and also to expand existing operations, while resolving technical problems such as the transfer of technology and know-how from North to South.

The future Centre will have a role to play, with the European Commission, in helping to mobilise the EU private sector

In future, the CDI should be in a position to extend its expertise beyond industry to cover related services, in view of their increasingly important role in modern economies and the gradual erosion of the traditional distinction between the manufacturing industries and the service sector. This new orientation will be reflected by a change of title after the new EU/ACP agreement is ratified, with the CDI becoming the CDE (Centre for the Development of Enterprise).

The Commission proposes that, in line with its existing country on country strategies, the Centre should increasingly become the Commission's advisor and active partner in the task of drawing up an inventory of all service providers in the ACP countries - technical, commercial, administrative - including the ones involved in the preparation of projects intended for the local private sector. CDE will continue to act as a supplier of information to European businesses regarding the concrete possibilities and practical conditions for developing business in ACP countries. The Centre's strength will derive from its knowledge of the private sector in the ACP and EU countries, the financial bodies which exist to support them, and the current deficiencies in services available to businesses.

Mechanisms to help implement the strategy

Other organisations and programmes, already in place or in the process of being developed, will work with the CDE to implement this strategy to develop the private sector. One such programme is EBAS (the EU-ACP Business Assistance Scheme), which partially subsidises enterprises needing access to advisory services in all areas relating to business competitiveness. Another is Diagnos, a project focusing particularly on research and improvement the business environment. A third is Proinvest, a programme currently under preparation, which aims to increase investment (domestic, cross-border and foreign) in the ACP regions by strengthening organisations such as the professional associations, the chambers of commerce and industry. All these programmes can make a significant and useful contribution to the development and support of the private sector in ACP countries.

The strength of the CDI comes from its knowledge of the ACP-EU private sectors