swiss cooperation strategy for mongolia 2007-2012 - Deza - admin.ch

SWISS COOPERATION STRATEGY FOR MONGOLIA 2007-2012
Another factor has to be considered in private sector development programs: If sustainability is at stake,
programs should not be burdened with too many built-in barriers (like working in rural areas only, working
only with the poor etc).
Subsidization implicitly means that sustainability – if defined in the sense that services and benefits
continue in the long run – is not reached. If subsidies are not, eventually, incorporated into the product
price, it simply means that the program has failed.
It is often argued that the poor are not able to fully finance services and that from a development
perspective it is justified to subsidize. Evidence shows that there must be no trade-off between serving the
poor and reaching financial self-sufficiency at meso level. Especially in banking but also in occupational
skills training it has been demonstrated that the poor are willing and able to pay the full cost of service
provision if the service opens the door to a job and can thus be considered as an investment.
If subsidies are paid it is important to have an explicit strategy in the project document concerning
the type of subsidy (supply or demand sided)
the reference criteria on which it is based (cost factors, client segment, sales volume etc)
the duration
the exit scenario (time-bound/result-oriented? Alternatives to SDC funding?)
Beware of Labor Market Distortions
Intervention by donors in the private sector always carries the risk that existing (and perhaps fairly well
functioning) markets are distorted to the detriment of the weakest market players. Especially donor initiated
informal sector programs operating in a stagnant (rural) economy can lead to a ”zero sum game”: jobs/
incomes ”created” in one enterprise/geographic area are likely to be destroyed somewhere else (usually in
a place not covered by the program) and, ironically, hit the economically marginal people.
In order to minimize such perversions, SDC Mongolia carries out detailed market assessments before
intervening, such as:
sector analysis to identify dynamic (sub)sectors,
value chain analysis to determine potentials and bottlenecks,
rapid appraisals combined with concrete action to gain inside experience and to create a climate of
trust, etc.
Selective Integration of Transversal Aspects
Development programs – also those in the private sector – must take into account issues such as gender,
respect of minimum social standards and ecology.
Care shall, however, be taken not to overload programs in an already difficult surrounding with too
many transversal issues. They often remain nothing but paper declarations and, at best, create frustration
at the operational level.
It is, therefore, necessary to have a clear understanding of which transversal issues are to be dealt
with at what level (country program, sectoral program, individual project) and it should also be clear that
– in a market approach – these special requirement have their price tag in terms of program cost and/or
in terms of downgraded sustainability, outreach and impact. The rationale for this kind of ”additional
burdens” must therefore be made explicit in the program/project document. Donors must also accept to
provide additional funding and professional inputs for such types of intervention to the concerned local
implementing agency.
Macro Level Activities: Impact through Leverage
Operating in markets can be frustrating if the policy and regulatory framework puts barriers to growth
potentials. If donors and governments were able to agree on joint/ coordinated programs which render
a country more attractive for private investment, the mass of micro and meso level activities of donors
could easily be abandoned. This ”good governance” approach remains a vision. In the meantime, SDC
lays importance on actively supporting the improvement of the environment for private sector activities
through:
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