Development Policy Committee’s discussion paper: Businesses need stronger incentives and fewer obstacles in development financing

This is highlighted in the discussion paper on incentives and stumbling blocks for development finance, commissioned by the Development Policy Committee (DPC).

The paper was prepared by Sari Laaksonen Consulting, and it presents concrete measures to increase the participation of Finnish businesses. The paper’s results are based on previous and yet to be finalised assessments, survey data and background interviews.

Businesses are not fully aware of types of support available

Since the mid‑2010s, Finnish development policy and the Team Finland model have increasingly emphasised broader business participation in activities funded through development finance. Businesses are supported in this by instruments financed from development cooperation appropriations and by blended finance models and public actors such as Finnfund, Finnvera, Business Finland and Finnpartnership.

According to the paper, various instruments have been developed to encourage private sector participation, and individual instruments largely serve their purpose and achieve significant results. However, despite improved cooperation between the instruments, gaps remain. Moreover, businesses are not always fully aware of the opportunities these instruments provide.

Businesses also struggle to understand the complex practices of multilateral financing in EU and international financial institutions’ projects, for example.

Business participation can be promoted

The surveys conducted by the Confederation of Finnish Industries and the Federation of Finnish Enterprises companies´ interest in new markets has increased. Their interest is focused on the rapidly emerging economies in Africa and on the southeast Asian countries. However, businesses find market entry difficult. Key impediments include business risks and a lack of information concerning possible partners and markets.

The DPC’s discussion paper proposes eight concrete recommendations and improvements that can be implemented within the current structures without a major administrative reform. The proposed improvements will help businesses to address their resource shortage, the lack of partners and to manage uncertainty. The recommendations can also improve price competitiveness, product suitability for the market and financing opportunities.

Enhanced cooperation would help to succeed in tender processes

The discussion paper proposes creating a permanent partnership and consortium mechanism for EU and international financial institutions’ procurements.

Lack of partners and resources are key obstacles to the participation of SMEs in particular. Project success often depends on forming consortia and rapid tender preparation, which sets a high threshold for individual businesses.

The partnership and consortium mechanism would bring together Finnish businesses and their local partners to provide comprehensive solutions. The aim is for businesses not to have to start from zero in each country and/or tender process. The partnership mechanism would help to to build the necessary cooperation structures, making success more likely.

The discussion paper on incentives and stumbling blocks for development finance is available on the DPC website (in Finnish). 

Inquiries:

• Marikki Karhu, Secretary General of the Development Policy Committee, tel. +358 50 525 8649, marikki.karhu@gov.fi