Giving Thoughts

SDGs Call for Better Alignment of Public and Private Social Development Programs

By Sonia Balcazar, Consulting Associate, Synergos Consulting Services

On September 25, 150 presidents and the Pope unveiled the Sustainable Development Goals (SDGs) at the United Nations. The development community agrees that meeting these new commitments will require a “global change of mindsets, approaches and accountabilities,” as the World Bank states in From Billions to Trillions: MDB Contributions to Financing for Development. There simply are not enough international development funds, and multilateral development banks (MDBs) have called for an increase in public domestic revenues and private investment to help meet the SDGs. The extractive industry is one sector that is already making strides in this area, and governments need to capitalize on these efforts, but building effective public-private partnerships is no easy task.

For governments of natural resource-rich countries, the sustainable development agenda presents a challenge, because low commodity prices have resulted in stagnating public revenue. This could nonetheless be an opportunity for governments to harness private social investment by the extractive industry, which already has in place vast numbers of local community programs. The much-called-for development of public-private partnerships should focus on integrating the extractive industry’s local community programs into an overarching public development policy.

For two decades, the oil, gas and mining industries have been implementing local community programs to increase the opportunity for locals to become entrepreneurs—first suppliers to the industry and then to other sectors—and improve local people’s employability. Including locals in industry operations makes business sense and boosts the surrounding communities’ economy through the multiplier effect of improved purchasing power, growth and eventually human development.

An extractive industry partnership around companies’ community investment has great potential because these companies typically spend more on local employment training, procurement and infrastructure than on payments to governments through licenses and taxes. Also, payments to government are more volatile than operating spending, as margins vary with international prices (taxes depend on a company’s revenue, while operating expenses tend to remain the same). Finally, local community programs target extremely poor people in areas with very few other economic alternatives and scarce government presence.

Potential for collaboration

I believe the conditions are already in place for host governments to capitalize on local community programs run by extractive companies. Governments in many resource-rich countries have been introducing policies to facilitate this process. These policies include fostering competitive markets, and reducing red tape for business creation, economic diversification, micro-credit, and innovation and technology programs. In addition, the extractive industry already has robust multi-stakeholder platforms in place that have emerged from the need to navigate numerous conflicts. As a result, leaders committed to cross-sectoral dialogue have emerged.

Building effective public-private partnerships is difficult, and the process can seem overwhelming, but starting them is half the battle—something John Heller pointed out in Ten Lessons on Multi-Stakeholder Partnerships. I suggest companies start by recognizing the great potential that lies in linking local community programs to governments’ development agendas. From my time in the extractive industry, I know that finding small, but concrete shared objectives on low-cost, low-risk issues is crucial. For natural resources-rich countries, coming together around concrete action can help to overcome the corrosive effect of a lack of trust among government, the private sector, and communities, and can therefore keep the focus on the improvement of human development.

About the author:

Sonia Balcazar is a Consulting Associate at Synergos Consulting Services. She was the Regional Development Planning Manager for Rio Tinto at the La Granja project in Peru between 2007 and 2013.