Impact Assessment

Evaluation of European Community Support to Private Sector Development in Third Countries, 2005

    This report presents the results of the evaluation of the European Community's support to private sector development (PSD) in third countries over the period 1994-2003. It aims to contribute to improving the coherence of the Commission's sectoral approach and also at enhancing coherence between PSD support objectives and the Commission's other policy objectives.

    Methods for info gathering
    The evaluation was carried out in two separate phases. First, the Desk Phase involved an analysis of documents collected in Brussels, interviews with Commission officials and a questionnaire sent to a sample of 25 Delegations. Second, the Field and Synthesis Phase of the evaluation entailed testing the hypotheses proposed during the Desk Phase though five country studies. In addition, during that phase a survey was carried out to explore the views and understanding of Delegations on the PSD Thematic Network as well as to assess their needs in terms of support from HQ. The team integrated these new findings with those from the Desk Phase and analysed this information base to arrive at an overall assessment of EC support for private sector development in third countries.

    Summary of results
    The evaluation covered all aspects of PSD; in BDS, it concluded: By focusing on direct delivery of BDS, not all programmes aimed at reinforcing local BDS markets and, as a result, these programmes did not succeed in meeting the criteria of outreach and sustainability. The misalignment of the objectives of EC programmes with those proposed by the Blue Book results partly from the fact that the EC strategy is not totally aligned with the Blue Book BDS paradigm.

    Despite the positive evolution towards a greater focus on reinforcing local BDS markets, EC programmes do not adequately address the failures of such markets and in consequence have been unsuccessful in reinforcing local BDS markets. Two factors help explain the inadequacy of EC solutions to existing market failures: first, the EC neither assesses market failures sufficiently nor devises adequate supply-side solutions. Some BDS programmes have successfully achieved their specific objectives, conditioned however on the problem of outreach.

    It recommended that BDS programmes should aim at reinforcing local BDS markets and not at the direct delivery of services. Moreover, those programmes should address prevailing BDS market failures rather than advocate demand-led subsidies by default. The latter requires an assessment of the local BDS market and of the exact reasons for market failures; use of supply-side measures whenever necessary; flexible programme design; an adequate balance between international and local consultants; and an avoidance of programmes with only limited potential impact on the economy.