The EU’s support to private sector development (PSD) in third countries increasingly gained importance over the last decade. The Commission issued a specific PSD policy in 2003, followed by PSD guidelines for its staff in 2003, 2005, 2008 and 2010. It provided PSD support in all third countries through a wide variety of financing instruments and mechanisms. This support totaled €2.4 billion of direct aid over the period 2004-2010 (excl. general budget support).

ADE conducted an overall thematic evaluation of this EU cooperation in the field of PSD, on behalf of EuropeAid’s Evaluation Unit. The evaluation produced a detailed inventory and typology of this support. Its assessmet is based on a set of evaluation tools including missions to nine countries (Algeria, Jordan, Morocco, Zambia, South Africa, Jamaica, Nicaragua, Ukraine, and Vietnam). Findings relate to both strategy-level issues and the main thematic areas of PSD: improving the business environment, increasing access to finance, enhancing enterprise competitiveness, promoting investment, and generating employment.

The conclusions of the evaluation relate mainly to the overall strategy-level, as usual for such a wide thematic evaluation. They highlight that the EU’s efforts led to a number of successes, for instance in terms of contributions to countries’ institutional and regulatory reforms with a view to facilitating the creation and growth of enterprises. The EU’s support for PSD was furthermore considered especially relevant and successful in a number of middle-income countries. It also possessed specific types of potential value-added. This relates for instance to providing PSD support in the context of EU trade negotiations. Or to its ability to offer significant grant resources for blending mechanisms, for providing for instance an improved range of financial services to enterprises, such as risk capital to SMEs or longer term loans. The EU proved to be a large donor when it comes to PSD, allowing it to offer a critical mass of funding and to address a wide range of needs. It adopted a “generalist” approach, funding a nearly all-encompassing range of activites. This enabled it to be responsive to country needs and to align with national strategies. In this context, EU support was – quite rightfully – more geared by considerations related to the building of partnerships with beneficiary countries than by PSD-related technical matters.

Results remained uneven, however, for a number of reasons. For instance, there was often a lack of a strategic approach, based on a strong initial needs diagnoses and aiming at maximising the EU’s impact. The EU overall delivery model of supporting the private sector through the public sector was also not conducive to optimal delivery of its aid. A number of opportunities were furthermore missed, notably in terms of ensuring that the PSD expertise existing in different EU internal market DGs was made available for PSD support in third countries, or in terms of capitalising on the knowledge acquired by EU Delegations in this field. The EU did also rarely link its support for PSD to objectives in terms of employment, nor did it use this support to promote crosscutting issues or the Decent Work Agenda. Finally, despite the financial weight and the breadth of its support, the EU was not recognised as a major contributor to PSD.

The evaluation provides a set of recommandations to the EU on this basis.

This overall thematic evaluation actually leveraged many other specific studies conducted by ADE in the field of PSD. These include for instance:

• the Evaluation of the EU-ACP Centre for the Development of Enterprise (CDE), 2011;
• the Final Evaluation of the EU/ACP Microfinance Programme (2005-2010), 2012;
• the Mid-Term Review of the PSD Programme BizClim2, 2012;
• the Mid-term Evaluation of the Investment Facility and EIB Own Resources Operations in ACP Countries and the Overseas Countries and Territories, 2010;
• the former Evaluation of EC Support to PSD in Third Countries (1994-2003), 2005. 

The report of the present Evaluation of the EU’s Support to Private Sector Development in Third Countries (2004-2010) was published on the European Commission’s website, including executive summaries in English, French and Spanish. To download the final report and related documents, click here.