Private sector engagement (PSE) in South-South Cooperation (SSC): review on recent development

Abstraksi

This article reviews the latest development in policy discussion regarding private sector engagement (PSE) in South-South Cooperation (SSC). Focusing on the analyses of South-South think tanks and institutions such as United Nations Office for South-South Cooperation (UNOSSC), The South Centre, Network of Southern Think Tanks (NeST), and the South-South Global Thinkers, this article examines existing strategies to engage private sector actors with SSC and contextualises these approaches to Indonesia’s situation. As Indonesia gradually grows as an important player in global aid landscape, studying these strategies would enable decision-makers not only to ensure that Indonesia’s SSC approach is competitive, but also to accomplish their mission to use SSC as a tool to access non-traditional market, foster export, and facilitate the expansion of Indonesia’s entreprises. This article suggests that three approaches are salient. It is of note, however, that the boundary between these strategies are not clear. They differ more in emphasis and in the degree of comprehensiveness rather than in essence. First, the state is expected to ‘spearhead’ the expansion of domestic enterprises. In this approach, the function of the state is to ensure that politico-diplomatic environment in recipient countries is supportive of the operation of domestic companies. This is accomplished, for example, by conducting negotiation with the government of recipient countries or by granting contracts to domestic enterprises to implement SSC programs. Second, the state indirectly supports domestic enterprises, empowering them to the point that they are capable of expanding their business ‘naturally’, for example by bidding for procurement projects in recipient countries. While it is disputable, some analyses argue that this form of engagement falls within the domain of SSC. This article argues that the third approach is the most comprehensive and innovative. Although the idea for this approach can already be found in the works of some SSC scholars - especially Chatuverdi - this analysis is most clearly articulated during BAPA+40. In this conference, the importance of PSE in addressing structural problems - the divide between ‘capitalist’ and ‘subsistence’ economies - via SSC is increasingly acknowledged by international community. In BAPA+40, UNOSSC and NeST argue for a ‘development compact’ approach. From the perspective of recipient countries, investment and trade - alongside with capacity-building, skills transfer, concessional finance, and technical cooperation - are equally crucial for stimulating development. While tools such as capacity-building or skills transfer are expected to increase the number of skilled workers in those countries, investment and trade are important to generate new economic activities which would support the newly-trained workers. Although such an approach is arguably simplistic, it reveals how global SSC community expects PSE to work: it should be closely integrated with Southern donors’ capacity-building and technical cooperation initiatives. In this regard, what matter the most is not the amount of cash transferred to recipient countries. It is the precision of the project - whether it targets the correct problems “at the right time and in the right doses” or not - that is crucial. From the perspective of donor countries, this implies that detailed strategic planning and intensive communication with recipients are essential. Despite the controversy, it is precisely because of these abilities that China’s and India’s SSC are widely accepted and praised by South countries: China is capable of identifying and assisting South countries in sectors that are in need of development. For Indonesia, this insight means that the government has to work not only to engage private sector actors in SSC, but also to more closely integrate efforts to access non-traditional market with broader technical assistance programs.