The Swedish Agency for Public Management

Collaboration between aid and industry. An analysis of role distribution between Sida and Swedfund (2016:7)

On commission by the government, Statskontoret (the Swedish Agency for Public Management) has carried out an evaluation of roles and division­ of labour­ between Sida and Swedfund regarding instruments­ for collaboration with industry and innovative ­forms­ of financing. The commission also included an examination of the added value of a possible bilateral loan instrument and the most appropriate responsible body for such an instrument.

Sida and Swedfund have different roles

Sida is Sweden's main aid agency. Its operations­ consist mainly of donor-based initiatives, but collaboration with trade and industry make up a small part of them. For Sida, collaboration with industry is one of several working­ methods­ to achieve the objectives of its aid policy and fulfil its commission as an aid agency. Sida works with industry in its general role of constructing functioning social institutions­ and­ ­regulatory frameworks in developing countries, but also by supplementing­ and facilitating processes for other financial resources which contribute to eradicating ­poverty­ in line with Sida's remit.

Swedfund is a state venture capital company whose commission is to help reduce poverty through sustainable enterprise. The company is Sweden's development finance institution for investments in poor countries and functions­ as a directly investing, active owner of individual companies.

Sida's operations as a whole are much larger than those of Swedfund. Regarding­ collaboration with industry, though, the two actors are more equal in size. This is true in terms of financial scale as well as the number of personnel working in these areas in each organisation.

Few problems with role distribution between Sida and Swedfund

Statskontoret judges that there are no great problems with role distribution between Sida and Swedfund. The two actors have fundamentally different areas of responsibility. Their initiatives are sometimes carried out in different phases of development and sometimes in the same phase, but nevertheless, their work has a substantially different focus and character. Nor are there many overlaps between Sida's and Swedfund's instruments. Their fundamental­ roles require different skills and working methods, and their commissions are carried out in rather different cultures and are well suited to their agency versus company forms.

Coordination and collaboration should be improved

Coordination and collaboration between Sida and Swedfund should be improved. This requires no organisational changes, but could take place within the present division into a government agency and a state-owned company.

According to Statskontoret, the striving for improved collaboration should emerge from Sida and Swedfund themselves through a joint discussion of which areas the development of cooperation should take place in. The areas of cooperation that are selected should be those in which both parties feel that there are benefits.

Statskontoret can see many opportunities for improved cooperation. For instance, the parties should be able to exchange information more regularly and arrange more cooperation when new instruments and working methods are developed. In particular, Swedfund could be more involved in the work of drafting results strategies for aid, wherever relevant. Sida's and Swedfund's ­­collaboration with strategic partners should also be better coordinated. There may also be reason to try to harmonise the definitions of essential concepts and have similar indicators to measure and follow up the impact of operations. Other options include facilitating­ exchanges of officials between the two actors, making greater use­ of their consolidated skills in certain sectors, and arranging more joint delegation trips.

Statskontoret would also like to stress the importance of clear managing and controlling signals from the government­. It is essential that the Ministry for Foreign Affairs takes an active, controlling role in continued development so that improved cooperation can be achieved between Sida and Swedfund.

Certain questions on loan instruments should be clarified

Sida has stated that there is a gap in the current system for financing aid initiatives, resulting in certain initiatives that have the potential to generate return flows not being funded, or at least not in an optimal manner. For this reason, Sida has proposed that a bilateral loan­ instrument­ should be set up with the agency.

Statskontoret considers that Sida could probably manage to fill this gap with its current instruments, i.e. guarantees and grants or other actions, better than it does at the moment. But that is hardly enough to completely cover the needs that Sida has pointed out. We are not able to assess the precise size of these needs, however. Sida has also pointed out situations where donations or guarantees would not work as a viable alternative to a loan instrument.

Multilateral development banks have both the resources and skills to cover the funding needs that Sida refers to, if they are able and willing to handle this type of loan. On the other hand, they can hardly­ be expected to fully consider what Sweden may wish to pursue. They are probably more risk averse than Sida, too.

Swedfund's current loan instrument could possibly be expanded to include some of the needs that Sida cites. This would work if it was a case of capital contribution for an individual business project of a similar nature as those that Swedfund currently works with. Such a solution should probably be based on some form of cooperation between Swedfund and Sida. It also requires that Swedfund's owners give the company a commission of this kind.

In summary, Statskontoret considers that a bilateral loan instrument could be a valuable addition to Sida's tool box. A task­ of this kind does not appear to deviate from what the government indicates in Sida's brief. Sida's long experience of ­collaboration with industry and work with similar instruments also indicates that this is the case.

Before the government can decide whether a bilateral loan instrument should be introduced, however, it needs to take a position on certain issues that are ultimately related to aid policy principles. This applies partly with respect to the large risk whether it is at all appropriate to conduct loan activities of the kind described by Sida in an agency form, and partly whether Swedfund should be given tasks in this context. The government should be able to make such considerations straight away. The government should subsequently collect further information for decisions that may be needed to clear up certain remaining uncertainties about the scope,­ costs and skills issues with respect to operations. In order to do that, the Ministry­ for Foreign­ Affairs should discuss the issue with Sida. Possibly, Swedfund should also be involved.