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Business impact on reform of private economic governance

Research report

Written by Stephen Gelb, Nathaniel Mason

Research report

This report presents a study of the possible impacts of business firms on private economic governance (that is, regulation) within a sector, and its reform in developing countries. There are a range of ways donors can support private economic governance (PEG) reform. What is needed in a specific context will depend on detailed analysis of the existing rent structure and political economy of the sector.

Possible donor actions include:

  • Support for foreign firms’ collective action. Collective action by foreign firms is crucial for PEG reform, but wherever possible should aim for enforceable commitments of foreign firms to economic, social or environmental improvements in their value chains.

  • Support for domestic associations in the sector. PEG reform requires foreign firms (as a group) to build coalitions with domestic organisations, in particular business associations of domestic firms and representative bodies of ‘the poor’ (workers and small farmers).

  • Support for knowledge development and dissemination. PEG reform often requires the introduction of standards systems including compliance assessment mechanisms.

  • Financial support. Donors can use their own financial resources directly and indirectly – by leveraging private investment finance – to promote PEG reform in a sector by providing learning (or monitoring rents) to firms.

  • Support for new global approaches. Finally, donors can help to initiate a global debate about small consumption taxes levied globally (or regionally) on mass-market goods to fund welfare improvements for workers and small farmers in developing producer countries.

Stephen Gelb, Bijon Islam, Nathaniel Mason, Julius Gatune and Josephat Kweka