The market of course. Consumers in their choice to buy a product or not, investors in their choice to put their money in one company or another, and competitors who push the bar on performance for greater market share and profitability. Metrics of market share, profitability, and stock market index are straightforward in signaling who is successful and who is not.
How do these metrics fare when seen in the light of people who – not as consumers but concerned stakeholders – take to the streets dismayed with rising inequality or environmental degradation, when companies become “too big to fail” and therefore are not subject to the typical market forces anymore, or when the tragic events in Tunis – a response to market forces not working equally for the poor – escalate instability in an entire region.
Moreover, the private sector is now seen as a key partner in development. Expectations are such that the private sector will contribute to broader economic development and be recognized for that. The old divide of development being the business of the aid community was disbanded in Busan in 2011.
The World Bank Group, in its 2013 strategy, counts on the private sector as a key partner to leverage funding to meet needs for infrastructure investments (sums that are estimated in the trillions), provide better services in a cost-effective manner through public-private partnerships, and being an engine of growth through job creation. The strategy commits that clients will receive the combined benefits of an integrated package of services that brings together the public and private sector arms of the Bank Group.
IEG has many years of experience in evaluating private sector operations – the most among the multilateral development banks. And, for the last couple of years we have done so in conjunction with public sector investments, as our sector evaluations cover work by all the institutions of the World Bank Group. In spite of these advantages, we will not rest, and we challenge ourselves to develop our methods further:
- Leveraging brings different parties together for the same investment. How will we assess who leveraged whom, who led the initiative, and who made it happen? And does that matter, or shall we focus on each party’s contribution and how effectively it played its role?
- The Bank Group has invested in infrastructure through public and private channels for years. Can one learn from the other, for instance what does the profitability of privately owned/operated infrastructure tell us about operations and maintenance costs of publicly owned investments? Or can metrics be shared to ensure similar yardsticks and foster learning from one to another?
- Job creation – direct or indirect – is difficult to measure and not guaranteed. Investments in upgrading technology might result in a loss of jobs or a shift from blue- to white-collar jobs. Commonly held views that the small and medium enterprise sector will provide for the much needed jobs to meet the needs of millions of new job entrants is under scrutiny in one of our evaluations.
- Improving the provision and cost-effectiveness of services through public-private partnerships is the subject of another evaluation where we draw on years of experience of the World Bank Group to generate lessons to inform the implementation of the new Bank Group strategy.
Just like all other partners in the development business, the private sector will have to rethink the metrics by which it judges success and failure. We at IEG will contribute to this dialogue through our work.