Private sector development

© GIZ/Dirk Ostermeier

Economic development in developing countries is driven by small, private-sector companies. Their role should therefore be strengthened.

The liberalisation of world trade has changed the framework conditions for economic development in developing and emerging countries. Production, trade and investment are increasingly being integrated into global value and supply chains.

Today, the traditional competitive advantages of developing countries (low wages and natural resources) are no longer enough when it comes to standing up to international competition. Developing and emerging countries need to build new strengths and gain a competitive edge through unique selling propositions in production and service.

Such offers can only be developed in a dynamic, effective and competitive private sector. In many developing and emerging countries, small and medium-sized enterprises account for over 90 per cent of all private businesses. They are the ones that generate employment and income and offer innovative products and services. Thus, small and medium-sized private companies pave the way for the sustainable development of national economies.

The higher the level of private-sector development in cooperation countries, the easier it is to achieve development goals, as the state can use tax revenues from entrepreneurial activity to finance, among other things, social spending.

In its partner countries, GIZ supports a dynamic private sector that creates opportunities for the poor and minimises adverse environmental impacts. It strengthens micro and small enterprises, promotes business relations – including those with medium-sized and large international companies – and assists firms in the developing countries in complying with social and environmental standards. Resource-friendly production is essential if companies are to meet environmental and climate-related targets and avoid having a negative impact on local people and production conditions.

When supporting small enterprises, German development cooperation works with large firms from its partner countries, Germany or other countries. The objective is to combine the drive for innovation of the private sector with the resources, knowledge and experience of international cooperation. This generates more jobs, local small enterprises benefit from technology transfer, new markets are created, and local value creation is increased.