FCDO Private Sector Development Technical Competency 1: Reading List

–Trial version for discussion —

Competency PSD1: Economic development, inclusive growth and poverty reduction

The UK FCDO’s Technical Competency Framework on Private Sector Development specifies key competencies to guide PSD advisors’ recruitment and professional development. This page signposts and describes recommended reading on competencies related to ‘Economic development, inclusive growth and poverty reduction’. In addition, this page serves as a practical reference to support FCDO PSD advisors in their work; it has no official status and is offered as one possible resource for the PSD community.

Click on the following links for resources on other competencies in the framework: PSD2  PSD3  PSD4  PSD5 PSD6 (to be added to the extent possible within the thematic scope of the DCED’s work)

1.1 Analyse theory and evidence on the relationship between investment, economic growth and poverty reduction in developing countries. Provide advice (including commission research) on opportunities for, and constraints to, generating inclusive growth.

For policy guidance specifically for donors, read Promoting pro-poor growth (OECD, 2007). For a more recent take on inequality, read Poverty and Shared Prosperity (World Bank, 2016). For current evidence on the links between PSD and poverty reduction, visit the DCED Evidence Framework.

1.2 Explain the roles of public and private entities in economic development, investment and inclusive growth (including with reference to the international architecture). Advise which of these entities and actors are the best placed to lead different initiatives.

Outline and recommended reading

To be added

1.3 Analyse the context and factors which have an impact on economic development, economic participation and exclusion (especially women), and inclusive growth and poverty reduction – specifically including: political and security factors; economic factors (including fiscal and monetary policy); social and cultural factors; environmental and climate change factors.

The most important factors driving economic development and poverty reduction are widely debated (e.g. Handbook of Economic Growth Vol.1 and Vol.2, by P. Aghion). DFID (2008) summarises eight essential conditions for  economic growth and highlights lessons from donor experience, including the need to prioritise binding constraints based on country-specific diagnostic research. Examples of factors to consider by PSD programmes include:

1. Macro-economic factors: Macro-economic stability is generally seen as a pre-condition for inclusive growth. Fiscal policy can have a direct impact on the poor through the government’s overall fiscal stance and the distributional effects of tax policy and public spending. Monetary and exchange rate policies can further affect the incomes of the poor, either directly (e.g. due to inflation) or through the country’s overall competitiveness and growth. Macro-economic policies however need to be complemented by other supporting policies and a conducive legal and regulatory business environment in order provide the foundations for inclusive growth (see relevant reading under competency PSD4-add link).

2. Political factors: Policies and technical solutions to development often fail in practice because of institutional and governance issues – the formal and informal rules and power structures through which state and non-state actors interact. Key implications include (a) basing policy reform processes on a sound understanding of the local political economy and b) integrating economic development strategies with efforts to promote more inclusive and effective governance structures (although evidence on effective practice is still limited).

3. Security and conflict: Some economists argue that security is a pre-condition for growth, while others focus on the linkages between low levels of economic development, inequality and conflict. Practical experiences highlight the role of the private sector in providing an important route out of poverty even during conflict, and its potential to contribute to economic development and stability.

4. Social factors, including gender norms: Social factors, including gender norms have an important impact on the formal and informal rules that govern private enterprise and affect prospects for inclusive economic growth. A broad body of research confirms that women’s economic empowerment (WEE) is a critical enabler of business growth and inclusive economic development.

5. Environmental factors:

The natural environment is central to economic activity and growth, including by providing the resources needed to produce goods and services. As such, in order to be sustainable, economic development depends on due consideration for the environment, including the causes and consequences of climate change. ‘Green Growth’ strategies seek to address this, although their impact on poverty reduction and inclusion remains debated.

1.4 Advise on the design, management and M&E of economic development programmes and policies that promote inclusive and low carbon growth (and including identifying and mitigating safeguarding risks, particularly the risk of sexual exploitation, abuse and sexual harassment).

For detailed lessons and guidelines on how to design and implement different types of economic development programmes, please refer to the DCED Knowledge Portal on PSD. Specific technical enquiries can also be directed to the DCED Secretariat at admin@enterprise-development.org.

For an overview of lessons and recommendations for effective private sector development initiatives, read Towards private sector led growth: lessons of experience (AfDB & Norad, 2016). For a review of DFID’s experience with economic development and learning, read DFID’s approach to supporting inclusive growth in Africa (ICAI, 2017).

For donor experience with PSD programming, including for specific themes such as business environment reform and market systems development, visit the DCED website on evaluations of agencies’ PSD work.

For a review of member experiences with promoting green growth, read Green growth and PSD: Stocktaking of DCED experiences (DCED, 2014).

Regardless of the specific economic development approach, adaptive management of programmes is often considered as a key success factor. Key resources include: Key principles of adaptive management (ILO, 2016); advice on how to procure adaptive programmes (BEAM Exchange, 2020); a detailed guide on implementing adaptive management (PACT, 2020); and case studies on using results for adaptive management (DCED website).

For a practical monitoring framework  applied by many market systems programmes in particular, review the documentation around the DCED Standard for Results Measurement – including an introductory video (see below). Note that the term ‘M&E’ may not be helpful, as it conflates two functions: monitoring (performed as a core management function) and evaluation (which is necessarily external).

Specific insights into how to incorporate gender-related risks into design and monitoring, refer to the DCED paper on Integrating gender and WEE into PSD programming (DCED 2017).