Combination of effective state and private sector key, says EBRD President
A new partnership between the state and private sector will be crucial if countries are to achieve the recently approved Sustainable Development Goals, EBRD President Sir Suma Chakrabarti said this evening.
And an institution such as the EBRD, one with a public policy mandate but focussed on the private sector, is well placed to foster such a partnership in the countries where it invests, he said.
Sir Suma used a lecture at the London School of Economics to chart shifting attitudes to the relative importance of state and the private sector for development in the past – and to look ahead to the best model for their relationship in the future.
An effective state and an emphasis on the private sector were “the twin instruments for driving economic development”, he said in the lecture, organised by the LSE’s European Institute.
“States need a dynamic and productive private sector to generate jobs and growth,” he said. “The private sector needs an effective, enabling state.”
The EBRD’s track record over the almost quarter of a century since it was founded and its readiness to generate and adapt to new ideas in the field of development gave it a unique perspective on the challenges ahead, he argued.
“We are a powerful catalyst for foreign direct investment and the channelling of equity and private financial flows into emerging market countries,” he said.
“We are focussing on inclusion and bringing more women and other excluded groups into the workforce.
“That puts the sort of expertise we have gained over the years right at the heart of the new, expanded development goals for our planet.”
Key to the successful delivery of the Sustainable Development Goals, SDGs, adopted for the next 15 years by world leaders last month, will be a common purpose shared by the state and private sector, he said.
“In many countries there is no dialogue between the state and private sector,” he told the LSE audience. “At the extremes, we’ve seen cases where the state captures the private sector and cases where the private sector captures the state.”
“For markets to function well, crucial to the delivery of the SDGs, we believe there need to be clear rules of the game for how the state interacts with the private sector. There needs to be a level playing field.”
He highlighted the success of EBRD-sponsored Investment Councils in six countries so far in providing a way for policymakers and business executives to work together on dismantling obstacles to investment.
“Platforms are helpful, but they are not a cure-all,” Sir Suma said. “For them to work, and for real partnership to be formed, governments have to be ready to listen, to make good policy choices and to think long term.
“Private sector businesses have to be ready to think beyond their own narrow interests and be part of a discussion on how to foster competition.”
“The EBRD cannot force them to do that. But we can use our leverage as a major financial investor and our expertise in creating a sustainable framework for markets to nudge state and private sector clients towards reform and better governance.”