Synthesis documents

Review of DFID Activities in the Enabling Environment, Dec, 2004

    The Investment, Competition and Enabling Environment (ICEE) Team of the Department for International Development (DFID) has undertaken a review of the contribution DFID makes to improving the enabling environment for private sector development and pro-poor growth in developing countries. This is a summary overview of the main report, outlining the broad findings of the review.

    The objectives of the review were to compile an inventory of DFID activities in the enabling environment; examine DFID experience in supporting reforms of the enabling environment; identify models of enabling environment support that work; and make suggestions on what DFID should do in this area in the future. The review focused on DFID activities which address the extent to which government policies, laws and regulations effectively set the rules of the game for business and positively influence the performance of markets, the incentives to invest, and the cost of business operations.

    Methods for info gathering
    The review consisted of a desk study drawing upon existing materials and supplemented by meetings between the consultants and selected informants, including telephone and email contact with DFID country offices engaged in enabling environment work and discussions with a number of DFID's bilateral and multilateral development partners. The review drew upon existing DFID documents, including evaluation reports and project memoranda relating to activities in the enabling environment, both in London and at country level; case study material prepared by the ICEE Team for the World Development Report 2005 on the investment climate; recent studies from the SME Donors Committee; and recent work conducted internally summarising DFID projects in private sector development and estimates and analysis conducted for the 2004 Treasury Spending Review.

    Summary of results
    DFID's involvement in the enabling environment has grown in recent years to an estimated spend of £435 million since 1996. Some £175 million of work is currently planned. The review has found that enabling environment reform is highly complex and multidimensional and that DFID's support in this area takes many forms, in terms of scale of project, area of focus, and type of activity. The report identifies sixteen broad areas of focus in DFID's enabling environment work: support for privatisation and parastatal reform; investment and competition; general enabling environment and pro-poor growth promotion (including making markets work); and regulation-related projects, have been found to be the most common areas of focus. There are at least nine broad sets of activities that DFID commonly undertakes to promote reform in its areas of focus. These include capacity building, technical assistance, policy research, and, increasingly, the promotion of policy reform dialogue between the public and private sectors.

    The report examines the capacity of the Department to undertake enabling environment work and the challenges such work brings. The review concludes with several recommendations for staff in central and country offices. In line with the key messages from WDR 2005, the report calls for the strengthening of policy support to DFID country offices in the implementation of reform of the business-enabling environment across key sectors, including enterprise, agriculture, infrastructure and finance. Recommendations are also made for further research on enabling environment issues, the improvement of knowledge management systems, and the development of a monitoring and evaluation framework that can be used for projects in the enabling environment.