The Growing Role of the Private Sector in Development: Part 1
In November 2012, the Standing Committee on Foreign Affairs and International Development published a report titled "Driving Inclusive Growth: The Role of the Private Sector in International Development." The report argues that private sector actors should be seen as development actors because they drive economic growth through investment, innovation and knowledge transfer, and employment and business creation. In order to enhance development, the report calls for the creation of public-private partnerships, which will harness the private sector's expertise and potential to spur growth.
The report includes two case studies of sectors in which it is argued that Canada has expertise and strength that should be used to the advantage of development: financial services and natural resources. The testimony regarding the role of mining companies was "polarized."
Ross Gallinger of PDAC pointed to Ghana, Chile, and Botswana as examples of countries where mining brought positive results, citing taxes and royalties paid, employment, and multiplier effects.
Catherine Coumans of MiningWatch Canada brought attention to research demonstrating that large-scale mining creates serious and long-lasting deficits, citing cases in which lack of regulation has led to environmental destruction, social conflicts, and revenue deficits as a result of corruption.
Pierre Gratton of the Mining Association of Canada poses the key question: "Through the International Council on Mining and Metals, we have been looking closely at this issue, the so-called “resource curse.” We have tried to identify ways in which we can ensure that this does not happen. It's by no means certain that the resource curse is going to happen. It's not certain that investing in Africa in a mining project is going to make the country worse off. It can make it better off... The question then becomes: how do you do development right? How do you do it in a way that ensures the likelihood of lasting economic benefits?
Professor Anthony Bebbington drew attention to address institutional capacity issues early on: "if the extractive economy grows very quickly without significant progress in building institutions to regulate that economy and use resources transparently in ways that foster stronger relationships between governments and citizens, then it's very difficult to catch up after the fact. Once the incentives have been distorted, once politics functions on the basis of access to rents, it becomes very difficult to turn that around after the fact."
The challenge then, is how to effectively build local and national institutions and governance capacity in the natural resource sector while resource extraction is taking place, because extraction cannot be postponed indefinitely until institutions are deemed strong.
