Australia’s Foreign Aid Program Underpinned by the Private Sector?

What role does the private sector have in achieving the development outcomes of Australia’s foreign aid policy, asks Mark Ingram, CEO of Australian NGO Business for Millennium Development.

Foreign Minister Julie Bishop has launched Australia’s new foreign aid policy. Central to the her address at the National Press Club was her opening statement that our foreign aid program will have two main goals: human development and private sector development.

Human centred development makes sense.

We all understand the imperative to meet basic human needs in the poorest places on earth, especially in our region. No family should go without food, be without education or lack access to the provision of health services to treat basic illnesses and safeguard against preventable disease. But what about the private sector, what role can it play in achieving these development outcomes? And as many in the aid sector are asking, what exactly does this mean?

The answer quite simply lies in the reality of job and income creation as sustainable pathways out of poverty. Over 90 percent of jobs in developing countries are in the private sector. And according to a recent World Bank survey of 60,000 people living in poverty, poor people themselves recognise the importance of jobs as they see employment as their best prospect for escaping poverty. Millennium Development Goal 1 which tracks the halving of extreme poverty as measured by level of income, was achieved 5 years ahead of schedule largely due to the role of the private sector, and especially of course the opening up of the Chinese market to global trade. In order to eliminate extreme poverty by 2030, it will be critical to fully harness the power of the private sector.

But it’s not just about jobs, it’s about recognising where the greatest opportunities exists to work with the private sector to lift communities out of poverty through commerce. So how can the private sector work with the poor?

Let's take agriculture as a case in point: According to the International Fund for Agricultural Development, there are 500 million smallholder farmers in the world. Smallholder farmers provide up to 80 percent of the food supply in Asia and sub-Saharan Africa.  And about two-thirds of the 1.2 billion people now surviving on US$1.25 a day or less live in rural areas that are largely dependent on small-scale agriculture.

As world leaders wrestle with the question ‘how will we feed 9 billion people on earth in the year 2050, many of the world’s leading food and agribusiness companies are becoming increasingly aware that these smallholder farmers are the future to meet growing demand.

In many cases, these farmers can double their productivity and output together with their income, through access to tools and technology available today within the private sector. More importantly, by improving smallholder farmer productivity and their access to markets by working with the private sector, incomes will be generated and will go a long way to solving poverty.

So how do we ensure that mutual benefits are generated for poor communities and companies alike? The key as to whether we succeed in eliminating poverty in partnership with the private sector over the next 15 years is how Governments, NGOs and business work together to navigate these complexities, which today is largely unknown territory to most companies. What is needed is the co-development of mutually beneficial business models that create wealth for the poor and generate profit for companies.

The United Nations Development Programme calls this Inclusive Business. To achieve these ends, there needs to be trusted intermediaries between the poor and markets, and there needs to be large scale impact. Governments and NGOs play a vital role in creating an environment conducive to inclusive business, in empowering the poor to be "market ready".

Nevertheless, it remains critical to support humanitarian relief. Millions around the world remain in dire situations precluded from participation in markets. Governments and civil society must hold the line in maintaining commitment to aid and charity and ensuring that the basic needs of those living in extreme poverty are met.

Mark Ingram is the Chief Executive Officer of Business for Millennium Development (B4MD), an Australian NGO that connects poor communities to global markets in order to deliver sustainable and measurable improvements in incomes and livelihoods through private sector partnerships. B4MD works with many of the world’s leading companies across South East Asia, the Pacific and in Kenya encouraging and facilitating these inclusive business opportunities. Follow B4MD on Twitter to stay up to date with their work @b4MD