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2 The B2B Programme and its Context

2.1 Danish development priorities and support to Private Sector Development

The overall objective of Danish development cooperation is to fight poverty in the Danish priority cooperation countries through economic growth and social progress. Democracy and human rights are at the centre of Danish development strategies, and private sector initiatives have been placed within this context. In terms of Private Sector Development (PSD), Danida’s Action Programme for Business Growth and Development issued in 2006 is an essential background document for the B2B Programme. The Action Programme focused on Danish support for improvements of the business environment in Danida partner countries, but also re-emphasised the role of Danish enterprises in transfer of business experience, leadership competence and technology to local partners.

The Action Programme reiterated the long tradition in Danish development cooperation in involving the Danish business sector, going back to the establishment of Denmark’s Development Finance Institution (DFI), the Industrialisation Fund for Developing Countries (IFU) in 1967.

2.2 Key conclusions and recommendations from past evaluations and reviews

Over the years Danida has commissioned several evaluations and reviews of its business sector instruments, including country studies of the B2B Programme. These studies and evaluations have pointed to the relevance of the programmes, especially in relation to the access to technology and knowhow. The partnership programmes have been emphasised as playing an important complementary role to the sector programmes as they reach beneficiaries that are not directly targeted by the sector programmes. There are, however, also critical observations made by these evaluations. Examples of the latter relevant for the Evaluation are:[3]

Table 2: Key conclusions from past evaluations
Conclusion/observation Mentioned in:

The link between the business partnership programmes and poverty reduction is unclear (with the formulation of the B2B Programme, poverty reduction became an explicit objective of the programme in line with Danida’s overall policies) and Danida’s cross-cutting issues do not have a central role in the programmes (maybe except environment).

Mozambique country evaluation(2008).

Ghana country evaluation (2008).

Analysis of a future PS Programme(2006).

There is little synergy between Danida’s business partnership programmes and other sector programmes, even in countries that are implementing sector-wide business programme. This limits the possible long-term impact of the partnerships.

Mozambique country evaluation (2008).

Analysis of a future PS Programme (2006).

PSDP evaluation (2001).

The one-size-fits-all approach of the partnership programmes (non-country specific set of guidelines) makes the programme less relevant in the local context.

Mozambique country evaluation (2008).

PSDP evaluation (2001).

There is limited sharing of experiences between companies both in partner countries and in Denmark, which hampers internal learning.

Mozambique country evaluation (2008).

Ghana country evaluation (2008).

Analysis of a future PS Programme (2006).

PSDP evaluation (2001).

There is a narrow focus on individual business cases (matchmaking) and a lack of focus on the enabling environment in which the local businesses operate. This influences the prospects for sustainability of results and hence also broader impact of the programme.

Mozambique country evaluation (2008).

Ghana country evaluation (2008).

PSDP evaluation (2001).

Longer preparation period and more assistance in the first phase could yield better results.

Analysis of a future PS Programme (2006).

PSDP evaluation (2001).

Technology transfer has been well perceived, but the tying of the aid to Danish companies might not have been the most appropriate way to offer this type of support as there are often cheaper options regionally and in competitive situations.

Mozambique country evaluation (2008)

Additionality is very difficult to assess and measure. Analysis and documentation of additionality needs more attention.

Analysis of a future PS Programme (2006).

PSDP evaluation (2001).

Stronger result-orientation in the programmes and more relevant indicators in the monitoring system (follow up after the official partnership has ended). Results should be both quantifiable and qualitative (the latter has been addressed by organising reviews of the B2B Programme in individual countries across supported projects).

Analysis of a future PS Programme (2006).

Administration of the programmes should be simplified and less bureaucratic at the project level as well as the programme level.

Analysis of a future PS Programme (2006).

PSDP evaluation (2001).

The Evaluation has followed up on these points in order to identify whether the critical points are still valid. This is discussed in the final chapter of the report.

2.3 The B2B Programme objectives

The objective formulations for the B2B Programme as stated in the Company Guidelines from 2006 and 2010 are identical in substance, but with a slight difference in formulation. Box 1 below contains the formulation of the B2B Programme objective in its most recent version.

Box 1: B2B Programme Objective 2010

“Danida’s Business-to-Business (B2B) Programme is a part of Danish development cooperation. The overall objective of the B2B Programme is to contribute to poverty reduction by promoting economic growth and social development in developing countries. The immediate objective is to promote the establishment of long-term, sustainable and commercially viable partnerships between companies in Danida’s programme countries, including Egypt and South Africa, and Danish companies, with an aim of strengthening local business development. The focus of this support is to ensure a transfer of knowhow and technology from the Danish partner to the local partners thereby strengthening the competitiveness of the local partner and by that, their local and international market presence. In turn, by partnering with a local company, the Danish company may gain access to new markets, raw materials and reduced production costs.”

(B2B Guidelines 2010)

It should be noted that the overall objective and the immediate objective are not fully coherent. Thus, “promoting long-term, sustainable and commercially viable partnerships between companies in developing countries and Danish companies” does not necessarily contribute to poverty reduction. This might be the case with many programmes but the management and implementation of the programmes should ensure that the causal link between immediate and overall objective is ensured and specifically clarified, e.g. during the appraisal. Grants provided under B2B might even have negative impact in the sense of creating market distortions by favouring one enterprise over others, thus leading to economic inefficiency at the market place. Equally, B2B projects resulting in failed collaborations might nevertheless have had positive impact in terms of poverty reduction as a result of knowhow transfers. Due to this, the Evaluation is separating these two objectives in the further analysis.

2.4 Programme design

Danida’s B2B Programme comprised three phases of support as mentioned in Section 1.1.

In the Contact phase, both a Danish company and a company from one of the eligible countries could apply for support to investigate possibilities for collaboration. B2B could provide a grant of maximum DKK 100,000 to cover up to 90% of the costs for travel and related matchmaking costs. The Contact phase grants were open to individual companies both in Denmark and the B2B countries as long as they fulfilled the minimum criteria for support.

In the Pilot phase a partnership had to be formed between a Danish company and a local company in one of the targeted countries. The B2B Programme covered up to DKK 1 million for 75-90% of the initial costs of such collaborations. This might have entailed a feasibility study, training activities, study visits, pilot production, and so on.

The Project phase was a deepening of the partnership under which the B2B Programme providing up to DKK 5 million (including previous support) to cover up to 90% for relevant costs such as training and technical assistance, equipment, setting up or improving production facilities, further studies and so on. The programme paid particular attention to improvement of the external and working environment and to strengthen the Cor porate Social Responsibility (CSR) in the local companies.

The intention with the B2B Programme was that companies would join the programme in the Contact phase to identify a suitable partner; these partners would then proceed to the Pilot phase to assess the feasibility of the partnership and their joint initial business idea; and, if proven feasible, the partners would deepen their collaboration in the Project phase, for example by setting up of a joint venture (JV). Overall, the programme has followed the model, even if there are partnerships established without a Contact or a Pilot phase. This is further elaborated below.

2.5 Eligible countries

The B2B Programme was open to 19 of Danida’s partner countries listed in the table below.

Table 3: Countries eligible for B2B collaborations
Africa Asia Latin America
Benin
Burkina Faso
Egypt
Ghana
Kenya
Mali
Mozambique
South Africa
Tanzania
Uganda
Zambia
Bangladesh
Bhutan
Nepal
Vietnam
China
Indonesia
Bolivia
Nicaragua

For China and Indonesia only environmental technology projects were accepted in the B2B Programme. These countries had their own guidelines.

2.6 Programme management

The Business and Contracts Department (in 2011 renamed the Department for Green Growth) in Danida was responsible for policy, coordination and guidelines for B2B, whereas the implementation and administration of the various partnerships were delegated to the Danish embassies with assigned B2B coordinators in the focus countries. While B2B was a centralised programme with a design laid out in the programme guidelines, the embassies had flexibility in terms of management, for example in relation to sector focus of the programme and marketing of the programme in dialogue with Copenhagen. B2B has had an intensive management input. All together some 18 persons (full-time equivalent) were engaged in the programme.[4]

The Confederation of Danish Industry with its 10,000 member companies, and the Danish Federation of Small and Medium-Sized Enterprises with its 20,000 members have both played essential roles in the B2B especially in the promotion of the programme to their members in Denmark, arrangement of study tours and similar events and by providing assistance to their members in preparing applications to the programme. Other organisations and consultants have likewise played an important role in promoting the programme to Danish companies. The programme allowed applying companies to be reimbursed for consultancy costs associated with the preparation of applications, a service many companies utilised, especially those with limited international/project experience.[5] HVR was contracted as a consultant to Danida in 2006 and 2007 for marketing activities.

2.7 The information management system

The B2B Programme had an elaborate reporting process for the purpose of appraising proposals for partnerships and monitor performance of the supported projects whether Pilot or Project grants. The Application documents for the Pilot and Project phases were essential in the sense of providing the basis for Danida’s decision to award grants and also as baseline to monitor progress. The documents, often of considerable length, provided comprehensive information of the partner companies, their financial position and the idea behind the partnerships. They furthermore provided detailed budgets for the collaboration, the justification from a development perspective, and milestones of expected performance, and for the Project phase grants, five-year targets for six pre-defined Programme Indicators. (These indicators were turnover, investments, male and female employment, investments in environmental activities and number of personnel, which would be exposed to CSR activities). Signed by the partners and the embassy, they formed the partnership agreement for the support.

The embassies undertook Appraisals of both Pilot and Project applications against a number of criteria. A template existed for the embassies’ due diligence of the proposed partnerships. Pilot and Project partners were expected to submit Quarterly Progress Reports until the B2B support ended. The last report of the year should provide information on the achievements against the milestones established and against the targets of the six Programme Indicators. Furthermore, after the B2B support had been disbursed, the partners should continue to report on the indicators for an additional three years. This, however, seems rarely to have happened and was not followed up by the embassies.

The progress reports for Project phase support submitted by the partners were used as a basis for the embassies to establish Annual Indicator Reports on the six Programme Indicators. Such reports were issued annually for all Project phase partnerships in a country and also aggregated for the whole programme. These annual reports were in theory B2B’s basic monitoring system of performance and outcome. As discussed below, they never functioned this way.

Once a Pilot or Project phase grant had been disbursed, the embassy should issue a Project Completion Report (PCR) concerning the outcome according to a pre-designed template. The template also included the embassy’s rating of the outcome of the collaboration.

Another element of the results based management system was Annual Country Reports prepared by the embassies for B2B Programme countries. These reports should include status of the country context and key developments; and the status of the partnerships and a qualitative assessment of their performance. In connection with the introduction of the B2B Programme in 2006, it was decided that periodic country specific reviews of the business partnership programmes should be conducted. Country Reviews were conducted by Danida’s Technical Advisory Services.

As evident from the above, the B2B Programme had an ambitious set-up for results-based management. The documentation has been an essential information source for the Evaluation, especially in establishing baselines for the collaborations. In general, the system has strong and ambitious ex ante features (for the purpose of applying and approving of projects), but is overall weak in monitoring and the assessment of outcome and impact, further discussed in Chapter 5.

2.8 International trends: Private sector and development

The idea that the private sector can contribute to development outcomes has become conventional wisdom. To reduce poverty, economic growth is necessary, with a transition towards higher productivity activities and employment creation, which can be achieved through expanding the private sector.

The Busan document on Aid Effectiveness[6] and the G20 Statement from 2011 all highlight the need for more private sector participation. There are different aspects of PSD though, and for donors it is useful to distinguish between “private sector development” and engaging the “private sector for development”.[7] While the first is mostly concerned about developing a country’s domestic economy and getting the business and investment framework right, the second relates to donors direct engagement with international businesses to achieve development objectives. The B2B clearly belongs in the second category, where a donor tries to encourage more development impact by supporting a non-developing country company. Common for most of these programmes is that they are based on a partnership model. Firstly there is a partnership between enterprises, and secondly between the public and the private with regard to the sharing of costs and risks. The basic justification for subsidising the partnerships tends to be based on theories for market imperfections, like asymmetric information, knowledge and perceptions of risk. Support is targeted at reducing the risk level of a business, as this is assumed to constitute a barrier to entry for foreign enterprises. Thus, donors try to encourage investments that would not otherwise have been carried out because of the high product/market/country risks.

Most bilateral donor agencies have one or several mechanisms that provide such “matching grants” to companies’ risky, but presumably developmentally beneficial, investments in developing countries. The Donor Committee for Enterprise Development (DCED) has identified at least 15 such partnership mechanisms.[8]

However, while these programmes have existed for a number of years – gaining increased popularity in the donor community– relatively little is known about the results. Indeed, the DCED says that “Despite the high expectations on development outcomes usually associated with such approaches, the evidence on their effectiveness remains elusive, and little has been documented on lessons learnt from experience so far.” According to DCED, there is relatively little knowledge about the results achieved, and in particular the development impacts of the supported partnerships. “Most of the available information on project-level results is on anticipated impacts, or anecdotes of mainly qualitative results, without clarity on how these are measured or how they can be attributed to donor support.”(p.2). There are virtually no widely available, credibly reported results of donor partnerships with businesses. The DCED sums the reporting status as follows: “Doing partnerships’ and ‘honest inquiry’ often appear as opposing cultures; donors rely on businesses’ self-reported data, or even create adverse incentives by publicising the launch of partnerships. In addition, the justification of partnerships as “light touch” generally means that little funding is made available for results measurement” (page 2).

Generally, the lack of good result data from partnership programmes should raise concerns as active promotion of international investment can raise conflicts of interest between development and commercial interests. Profit driven incentives may not converge with development objectives, for instance where low-income households are excluded due to their relatively lower buying power.[9] In most cases, it is a question of balancing interests between the private and the public sector, accepting that not everybody’s objectives can be met at all times. However, to do that, decision makers need to have good information about consequences and potential results of the different trade-offs. After having consulted a large body of current literature about business partnership programmes, it seems that most donors, including Danida, would benefit from improving result measurements and the reliability of development impact data.

2.9 Similar Nordic partnership programmes to B2B

Other Nordic countries are implementing programmes of the same nature as Danida’s B2B. The Evaluation has used these as references and especially as benchmarks for the assessment of B2B’s efficiency and effectiveness. The programmes are described in brief below.

Norway. Norad operates two programmes, which jointly have strong similarities to B2B. One is the Matchmaking Programme (MMP) which is or has been open to selected countries (Sri Lanka, Bangladesh, Vietnam, South Africa and India), and is providing grants for companies in Norway and in targeted countries to initiate partnerships by arranged visits. The MMP funds travels and contacts up to NOK 60,000 per company.[10]

Norad also has a grant programme, the Application-based Support (ABS) for funding of feasibility studies, training and environmental investments by Norwegian Small and Medium-Sized Enterprises (SMEs) in Norway’s partner countries, which the Norwegian companies enrolled in the MMP can utilise. The Norwegian companies have to fund at least 50% of the cost themselves, and most grants are in the range of NOK 0.3-0.5 million under ABS. MMP is outsourced to Innovation Norway, a semi-public institution, while ABS is administered by Norad in Oslo.

Sweden. Sida has operated two business alliance programmes since the 1970s, initially called Start East and Start South to promote business alliances between Swedish SMEs and partners in East and developing countries in Africa, Asia and Latin America. In 2009, these programmes were shifted by the Government to Swedfund, Sweden’s DFI, and the new programme was named Swedpartnership. Swedish SMEs can apply for loans of up to SEK 1.7 million (DKK 1.4 million) for competence transfers and equipment in business alliance in the DAC list of ODA recipients.[11] If the companies undertake the projects applied for, the loans are written off. The loan is for maximum 40% of the project cost.

Finland. The Finnpartnership programme provides grants to Finnish companies to explore partnerships in DAC list of ODA recipients for the purpose of achieving development effects. The programme covers 30-70% of costs for feasibility studies, training and establishment of joint ventures and other business alliances, and also for establishing subsidiaries. The grant ratio of the cost depends on the type of country (higher ratio for Least Development Countries (LDCs) and the size of the applying Finnish company (lower grant ratio for large companies). The maximum grant provided is EUR 200,000 (DKK 1.5 million). There is a matchmaking facility in the programme, which is a virtual meeting place, but consultants might also provide assistance companies to find partners. Finnpartnership is outsourced to Finland’s DFI Finnfund.


[3] Based on the ToR of the Evaluation and the relevance of specific issues, the Evaluation has particularly looked at the PSDP Evaluation from 2001, the analysis of a future PS Programme from 2006 and the country level evaluations of Ghana and Mozambique both from 2008.

[4] Data provided by Danida.

[5] Reimbursement was only accepted if the application was approved.

[6] 4th High Level Forum on Aid Effectiveness, “Busan Partnership for Effective Development Co-operation”, Busan, Republic of Korea, 29 Nov-1 Dec 2011.

[7]Discussion Paper 131: Common or Conflicting Interests? Reflections on the Private Sector (for) Development Agenda”, Bruce Byiers and Anna Rosengren, European Centre for Development Policy Management, 2012.

[8] “Donor Partnerships with Business for Private Sector Development: What can we Learn from Experience?”; M. Heinrich, DCED, March 2013.

[9] “The Role of the Private Sector in the Context of Aid Effectiveness. Consultative Findings Document”, P. Davies, DAC, Feb 2011.

[10] In this report, NOK and DKK are treated as equivalent.

[11] Before 2011, the upper limit was SEK 750,000.

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This page forms part of the publication "Evaluation of Danida Business-to-Business Programme 2006-2011 – Evaluation 2014.05" as chapter 2 of 11.
Version no. 1.0, 2014-11-14
Publication may be found at the address http://www.netpublikationer.dk/um/14_danida_btb_programme_2006_2011/index.html