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11 Conclusions and Recommendations

11.1 Overall conclusions

The B2B Programme facilitated transfer of knowledge and technology to the local companies through well-functioning partnerships, resulting in improved performance as regards company management, productivity, turnover, environmental management, and working environment. Generation of employment in the local companies – as well as upstream and downstream employment – was less than anticipated. The diffusion of technology and management practices to other local companies in the sector or in general happened only to a limited extent. While the majority of B2B supported local companies achieved satisfactory results, the spill over effects to their surrounding local communities did not materialise to any significant extent – except in a very few cases – in consequence of less employment generated and limited diffusion of technology and knowhow. The anticipated socio-economic benefits to the local communities were thus less than anticipated and correspondingly the contribution to poverty reduction was less than warranted. The B2B projects performed equally well in constrained as in conducive business environments. This points to the potential for effective development impact of a programme such B2B if it strongly promoted towards countries where the collaborations make a difference, rather than towards countries where the market forces anyway create substantial FDI flows.

The Evaluation recommends:

  1. The strategic framework for the business partnerships should be broadened to: maximise employment generation and diffusion of technology and knowhow in order to enhance the dissemination of development effects; and incorporate potential positive and negative systemic impacts in the project design.

There may be a limit to the extent to which an individual business partnership can address potential systemic impacts, but nonetheless an analysis of potential systemic impacts might significantly enhance the sustainability of the project by taking measures that maximise potential positive impacts and minimise negative ones. Many of the new Danida country programmes, introduced in 2013, will have a ‘thematic area’ that concerns private sector and business development, which may deal with national level regulatory issues and business environment challenges. Considerations on and experiences from such thematic areas may provide important information on the country’s business environment and guidance when elaborating the country’s ‘business opportunity profile’ and designing partnership projects – and thus create some element of synergy between the Danish business interventions.

11.2 Conclusions and recommendations for the immediate term

The recommendations for the immediate term could in principle be implemented right away, but the timing could be adjusted to coincide with other amendments of DBP guidelines.

Programme criteria requirements

Small companies – less than the DBP requirement of five employees – have the potential to contribute to significant development effects. They are also more vulnerable than large companies and may thus require a more tight screening process. The multiple partner approach, as introduced for DBP and being applied, could be a means of establishing more robust partnerships and may at the same time increase the diversity of the project design. The reduction of the grant level to 50% for the DBP project implementation phase will imply a higher degree of financial commitment compared to the 90% for B2B projects and also reduce the risk of not well-founded partnerships being approved. This is likely to reduce the risk of failure considerably, although it may also imply that the portfolio size shrinks – at least in the short to medium term. Mutual trust between the Danish and local partners appears to be a fundamental factor for well functioning partnerships. The timeframe provided for the DBP identification and preparation phases appears to be too short to allow that mutual trust can evolve substantially.

The Evaluation recommends:

  1. Future business alliances should not exclude companies due to size. Small companies with less than five employees could be engaged through the DBP multiple partner arrangement;
     
  2. The grant level for the implementation phase should remain at 50%, but could be modified at a later stage to provide incentives for specific countries and sectors;
     
  3. The duration of identification and preparatory phases should be about one year each to enable adequate time for mutual trust to evolve.

Project design requirements

The scope of the conceptualisation and design of projects have substantial bearing on the partnerships’ wider outcomes and impacts. Positive systemic impacts could be attained by addressing problems related to value chains, logistic systems, technology deficiencies, etc. The focus of most previous B2B projects has been on the local company in a narrow sense – rightly so – but a wider apprehension of the external context could potentially stimulate positive impacts for the local company as well as for the local community through a wider dissemination of development effects. Market distortions have a risk of creating substantial negative development effects and should accordingly be avoided. Appropriately integrated external CSR interventions in the business case have the potential to contribute to the wider development effects in the local community and should accordingly be encouraged.

The Evaluation recommends:

  1. Measures to enhance positive systemic impacts should be considered in connection with the conceptualisation of the business case and design of the project;
     
  2. Specific attention should be paid to how technological advancements could be diffused to the business community in a way that doesn’t erode the companies’ competitive gains, for example through sharing of information in business associations, universities and NGOs;
     
  3. The risk of market distortion should be made explicit in applications and measures taken to minimise resulting negative effects;
     
  4. Increased attention should be given to how external CSR could benefit the business case and contribute to local level development effects.

Promotion and marketing of the DBP

The consequence of reducing the support to 50% for DBP Project phase has in the short term implied that the number of applications has dropped significantly. There would thus be a need to promote and market the DBP programme in order to ensure the warranted level of outcomes and utilise the funding set aside for the DBP programme. Marketing plays a strong role of engaging Danish companies, and as projects perform equally well in constrained and conducive environments, the marketing should emphasise where DBP makes a difference, i.e. where there is limited FDI.

The Evaluation recommends:

  1. DGG should launch a promotion campaign for engaging Danish companies in the DBP Programme, with a particular emphasis on countries with low overall inflow of FDI, which will increase the programme’s additionality and effectiveness.

Matchmaking and application

The embassies have been quite resourceful in facilitating the matchmaking and setting-up of the partnerships, but have had lesser resources to assist with the conceptualisation and application processes. Only a few of the Danish companies had the capacity to apply for the partnership support without any advisory assistance and others were heavily dependent on such assistance throughout the whole process. DI and HVR have provided such assistance to member and non-member companies and have accumulated substantial knowledge on business partnerships in developing countries. Danish and local consulting firms have also specialised in providing this kind of assistance. Especially small companies with limited or no international experience are in need of such assistance.

The key challenges for the partners are to build a business case that is feasible and design the project by taking the contextual factors into account, and to decide on the most appropriate form of engagement. It is important to have a binding formal agreement prior to major investments, be it a joint venture or any other kind of arrangement that suits the nature of the partnership. The important aspect is that the partners have access to proper and reliable advice, especially the less experience partners. Networks for information and knowledge sharing between new and experienced partners – that help overcome unexpected problems – have been established with the assistance of the embassies in some countries.

The Evaluation recommends:

  1. Danida (DGG and the embassies) should continue to encourage new partners to seek advice for preparation of applications and facilitate access to consultancy service providers (e.g. business associations or consultants with demonstrated experience) in order to enhance the realism of the business case and the quality of the project design;
     
  2. Danida (DGG and the embassies) should consolidate/formalise knowledge sharing networks and introduce a ‘mentor’ arrangement in which one experienced company could guide new partnerships.

Appraisal and approval

Currently, the embassies have the appraisal and approval responsibility – most often it is the same programme officer conducting both functions. With hindsight, a number of the B2B partnerships should preferably not have been approved. The tightened screening process, as introduced in connection with the DBP, would in all probability have identified some of the poor-performing companies from a formal point of view. However, a more in-depth appraisal would have singled out those business cases and projects of inadequate quality, which would either need more preparation, or which simply could not fly. The embassies have not and are not likely to get adequate resources for comprehensive appraisals of the partnerships. An independent appraisal function would both augment the embassies’ resources and at the same time provide a critical analysis of the business case and the project design, i.e. the commercial and market aspects.

The Evaluation recommends:

  1. An independent appraisal function for partnership applications should be established and operated by a professional and commercial oriented organisation – ideally with presence in the country.

Implementation

Most B2B partnerships that reached the project stage were implemented with limited oversight from the embassies. The majority of projects were implemented without major problems, whereas some encountered serious problems. The anticipation was that once established the partners could manage on their own. Some of the partnerships had engaged advisers/consultants to assist with the implementation – the quality of which varied from good to less good. The embassies’ resource allocation for monitoring project implementation was limited both in terms of time, mobility and technical insight to the multitude of business sectors – and were thus not in a position to capture and deal with the problems that occurred either unexpectedly or which could have been foreseen. As stated above, the embassies are not likely to have additional human resources allocated for managing of business partnerships. A support function that could assist the embassies in reviewing complicated cases on request could thus be a solution.

The B2B quarterly progress reports served as an important means for monitoring of progress with the final progress report serving as the partners’ completion report. The B2B project progress was measured against six performance indicators. Regrettably, the management information system did not function well, as some information was incorrectly recorded and other information was hard to get by. The DBP operates with two key performance indicators: 1) new and maintained jobs for the local and Danish partners; and 2) CSR promotion in the local partner company. These two DBP indicators were also B2B indicator, but whereas the B2B CSR indicator focused on the number of people targeted by the activities, the DBP focuses on actual results. As development effects are centred on employment and CSR, these two performance indicators will remain essential. Especially employment and the wider effects of employment generation are essential to monitor – particularly so seen in relation to the relative poor performance of B2B in this aspect.

The financial management of the B2B Programme appeared to be satisfactory from the partners’ viewpoint, although some complaints were heard. However, compared to the B2B financial management, the very rigorous DBP accounting and auditing requirements are subject to serious complaints from partners, as these are seen as unnecessary burdensome. DGG states that the outsourcing of financial audits to one audit firm has resulted in lower costs and more efficient auditing.

The Evaluation recommends:

  1. The embassies resources are complemented on an ad-hoc basis for review of critical business cases by a professional and commercially oriented organisation – ideally with presence in the country.
     
  2. A review of employment data in completed and ongoing DBP projects to assess the quality of data recording and the magnitude of employment generated – and change of procedures if need be.
     
  3. Review of the accounting and audit procedures with a view to simplifying these.

11.3 Conclusions and recommendations for the medium term

The introduction of the 50% grant level and the rigorous screening process combined, have in all probability enhanced the quality and robustness of the partnerships. However, these measures have also implied that the number of partnerships has been significantly reduced – and consequently also the scale of the development effects in the DBP partner countries. This gives rise to considerations on the future strategic framework for Danida’s support to strategic business alliances and how best to promote private sector and business development. The new Danida country programmes open a window of opportunity, which could be explored further in relation to DBP and other Danish business instruments. Anticipating that the DBP will last at least for five years until 2016 – and possibly longer as the Growth and Employment Strategy may be extended beyond 2015[66] – it would be pertinent to consider how the DBP could be replaced. In Section 10.4, some other options were presented: a) creation of a middle facility that could bridge the gap between Danida’s business alliance programme and commercial funding; b) introduction of new forms of engagement, which among others could include support to fully owned subsidiaries of Danish companies; and c) as earlier mentioned a stratified grant level dependent on country and priority sectors.

The Evaluation recommends:

  1. A mid-term review of the overall performance of the DBP facility including the country reviews that have been conducted since 2011;
     
  2. Elaboration of the strategic framework for the next generation facility for Danish strategic business alliances – including considerations on harmonisation of the partnership facility with those of other EU member states.

[66] The Government’s budget framework for the development cooperation from 2015 to 2018 indicates that the annual allocation to DBP will on average be DKK 240 million.

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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 11 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