Private Sector Development According to the DAC Committee of the OECD

6.2. private sector development according to the DAC Committee of the oecd
A word on the Organisation for Economic Co-operation and Development (OECD) and on the Development Assistance Committee (DAC)
The Organisation for Economic Co-operation and Development (OECD) gathers 30 member countries mainly from European Union and North America, but it has expanded to include Japan, Korea, Australia, New Zealand, Mexico and four former communist states in European Union (add state names). It provides a forum for reflection and discussion, based on policy research and analysis, which helps governments shape policies. 
The European Union has its representative in the OECD and is a member of the Development Assistance Committee (DAC) since 1961.
The Development Assistance Committee (DAC), which supports the Development Co-operation Directorate, is one of the key forums in which the major bilateral donors work together to increase the effectiveness of their common efforts to support sustainable development. It monitors aid budgets and concentrates on how international development co-operation contributes to the capacity of developing countries to participate in the global economy and to overcome poverty. The DAC produces regular statements on its examination of member countries’ aid records and it compiles all its findings in an Annual Report on issues, trends and statistics in assistance to developing countries. The DAC also works with the donors to generate guidelines for effective aid and for addressing new challenges.
In the guidelines “DAC Guidelines in Support of Private Sector Development” (offline PDF document in English, 31/12/1993), the Development Assistance Committee gives the following definitions:
Private sector definition
"Private sector" is conceived by the donor community as a basic organizing principle for economic activity where private ownership is an important factor, where markets and competition drive production and where private initiative and risk-taking set activities in motion. The private sector principle can be applied in all economic activities -- agriculture, industry and services (including the delivery of public services). Donor motivations for supporting private sector development are based on promoting economic efficiency and social welfare. Donors agree that fundamentally private sector development is about people: releasing and harnessing their productive potential and satisfying their human needs and desires; and creating pluralistic societies which provide both human freedom and human security”.
Country private sector development strategy
Private sector development (PSD) cuts across many sectors and involves a wide range of public policies and institutions. Achieving assistance goals is predicated on the careful elaboration of both country-specific and overall donor agency strategies in this area.
The elements of a country private sector development strategy pointed out by the Organisation for Economic Co-operation and Development (OECD) are:
• an on-going policy dialogue regarding measures and their phasing to liberalise and appropriately regulate the economy, downsize and upgrade the efficiency of the public sector and create a propitious enabling environment for private initiative and risk-taking;
• project interventions supporting enterprise development, privatisation, export promotion, financial sector reform and foreign direct investment;
• technical assistance for business and vocational training, specialised technical support and advisory services for governments vis-à-vis financial sector development and reform and privatisation, foreign direct investment promotional activities and the development of business-related professional services and standards; and
• institutional development to strengthen public sector capacities for policy formulation and implementation, to deepen indigenous business management skills, and to promote the organisational development of private sector intermediaries
Enabling environment
According to the Development Assistance Committee (DAC) of the OECD, the term "enabling environment" refers to the economic, physical, legal, regulatory and institutional framework within which business operates. It encompasses:
• Macroeconomic policies fostering growth and stability;
• Legislation and policy reform to facilitate the ability of local people to establish and protect property rights;
• The creation of efficient markets in a competitive setting;
• The provision of appropriate and efficient infrastructure;
• Rational legal and regulatory policies that balance legitimate controls and protection with concerns regarding efficiency, simplicity, impartiality, and legal redress;
• Appropriate fiscal policies and effective collection procedures;
• A policy and institutional setting that facilitates empowerment, private initiative and risk-taking;
• Institutions and distribution systems for disseminating information about markets, enterprises and government policies; and
• Support services for business.
 
An efficient and hospitable enabling environment is a prerequisite for business investment, transactions and management. It reduces incentives for enterprises to operate informally.
Links to relevant DAC Guidelines
DAC Guidelines on Strengthening Trade Capacity for Development (offline PDF document in English)
25/04/2001
The trade, aid and finance communities are developing more coherent strategies to help developing countries integrate with the global economy. These guidelines provide a common reference point for these efforts. They also show how donors can help developing countries build their capacity for trade. 
DAC Guidelines in Support of Private Sector Development (offline PDF document in English)
31/12/1993
These orientations suggest broad policy outlines and practical donor strategies for promoting the private sector in developing countries.
Links to relevant OECD Publications
Official Development Assistance and Private Finance
February 2002.
This publication highlights the main conclusions that emerged from the February 2002 Development Partnerships Forum focused on the theme of ODA (Official Development Assistance) and Private Finance: Attracting Finance and Investment in Developing countries. http://www1.oecd.org/publications/e-book/4302051E.PDF
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[1] COM(1998)667, page 4.
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