What’s Different about Doing PSE in Fragile and Conflict-affected Situations? Four Key Considerations

Across engagement efforts in the field, we’ve seen firsthand how some private sector actors can mitigate drivers of instability and conflict by creating jobs, providing essential goods, increasing financial inclusion, developing infrastructure, advocating for peace and economic stability, and promoting other forms of inclusive economic development. As Ben Miller et al found, the private sector can be catalysts, key contributors, facilitators, and influencers in fragile and conflict affected situations. And yet we also know there are many instances in fragile and conflict affected situations (FCS) where this ideal can go terribly awry. Engaging the private sector in FCS is both inherently unique and challenging when compared to employing the same approaches in more typical development contexts.

To tackle this gap, we have collaborated with dozens of PSE and humanitarian practitioners; advisors from USAID’s Bureaus for Conflict Prevention and Stabilization (CPS), Humanitarian Assistance (BHA), Resilience and Food Security (RFS), and Democracy, Development and Innovation’s (DDI) PSE Hub; implementing partners; and firms of all shapes and sizes to pull together key considerations and insights for engaging the private sector to improve the conditions and opportunities within these environments.  

Doing private sector engagement (PSE) in FCS is surprisingly more common than not — a Brookings Institution analysis of 1,500 USAID private sector partnerships between 2001 and 2014 found that one-third of these partnerships were in countries facing fragile situations. Despite this institutional experience, USAID currently has no official guidance outlining the special considerations and adaptations needed to effectively engage the private sector in such contexts.

We are excited to launch this new USAID primer offering guidance and lots of real-world examples consultatively sourced from both the PSE and humanitarian communities, and grounded in systems thinking given the dynamic nature of FCS. It includes:

• Four critical considerations for tailoring PSE to an FCS context (we dive into these below, so keep reading!).
• Profiles on four types of typical private sector actors in FCS — social enterprises, local private sector, large footprint companies, and new investors — representing various incentives, risk appetites, and decision-making drivers.
• Tailored discussions on Where Can USAID Add Value? and What Are Anticipated Behavior Changes from Engagement?
• Practical insights from 13 brief vignettes across a spectrum of fragile contexts and private sector profiles, including: two winning firms from the Humanitarian Grand Challenge; Global Development Alliances (GDAs) facilitated by USAID/Colombia; integrated interventions in a multi-year market development program in the DRC; a Gap, Inc partnership in Myanmar; and investment facilitation in Mali and Haiti.

Here, we’ll spotlight the four key considerations we distilled that are guiding parameters:

1. Add a "third dimension' — conflict sensitivity — to shared value definitions.

PSE practitioners have long emphasized shared value as focusing on where development objectives intersect with core business interests. In FCS, a third dimension—conflict sensitivity—must intersect, ensuring engagement also aligns with principles such as Do No Harm to foster stability and resilience. One practical step for applying a conflict sensitivity approach includes mapping conflict dynamics and stakeholders. USAID’s Conflict Assessment Framework is another resource that can help practitioners assess the political, economic, social, and security factors at work within a specific context, with special attention paid to how key actors mobilize grievances and resiliencies to drive or mitigate conflict. This approach can help practitioners forecast how such dynamics might evolve in the future and anticipate potential triggers or turning points. For example, by being intentional about drawing in historically opposed groups through market facilitation activities in the coffee sector, the ÉLAN RDC Activity (spotlighted in a Primer vignette) was able to contribute towards conflict stabilization by rallying these market actors around a common economic goal.

2. Emphasize PSE best practice to do upfront opportunity scoping.

This is essential to understanding individual companies’ roles in the system and, by extension, who the most strategic and impactful set of partners might be to USAID. This mapping can help to reveal companies whose interests are aligned with stability versus those whose interests are aligned with chaos. For example, as explored more in a Primer vignette, USAID’s BHA incorporated aspects of this in a 2020 private sector landscape assessment in the Caribbean, which informed a more conflict-sensitive design of the Caribbean Corporate Investment for Resilience (CCIR) pilot. The pilot then explored areas of alignment between business interests and humanitarian goals and included an interactive systems map co-created with humanitarian and private sector actors, culminating in three focus areas for cross-sector collaboration: supply chains and logistics, communications and coordination, and business continuity. The co-creation process also revealed how each set of stakeholders contribute to and are affected by humanitarian issues.

3. Pay extra attention to a firm’s position and incentives.

Most businesses typically thrive in more stable environments — characterized by transparency and accountability. However, some private sector actors perform better in chaos and are able to maintain a privileged position by participating in entrenched patterns of corruption, advancing their own special interests at the expense of the collective good. Others are simply managing the best they can within challenging conditions. It is important to be aware of the complex dynamics within these contexts and the various incentives that could motivate a diverse set of private sector actors. 

The primer explores this in depth through use of four types of private sector actors representing various incentives, risk appetites, and decision-making drivers: social enterprises, local private sector, large footprint companies, and new investors.

For example, as the vignette on Gap, Inc. describes, the firm explored the potential of getting a first-mover advantage and shaping the garment industry best practices by entering the Myanmar market soon after the lifting of U.S. sanctions, despite many obvious, complex, and evolving risks. In Haiti, where INVEST has closed $20 million in deals to date, they found that hiring and cultivating Haitian transaction advisors was critical to adeptly assessing risks from proposed deal pipelines (as well as strengthening long-term, in-country capacity). INVEST found it key to tranche categories of investors according to their return on investment (ROI) requirements and risk appetite profiles, and was successfully able to convince investors of how tremendously resilient, highly adaptive, and strategic businesses that have survived in fragile contexts like Haiti tend to be.

4. Go beyond financial support to embrace diverse engagement roles (e.g., as conveners and actively facilitating systems leadership).  

There is a clear need to shift away from contributing only or primarily financial support to also helping private sector partners navigate these environments to gain access to human capital, data, information, and infrastructure. USAID and implementers can add value by accompanying firm partners in problem solving to unlock constraints throughout partnership implementation and by leveraging their convening power when necessary and appropriate to draw other key actors — including peer firms, civil society, and public actors — into dialogue or action. An emphasis on ensuring USAID and IP staff are well trained and coached in co-creation and relationship management best practices can help the team navigate the complex challenges that face partnerships in FCS. By shifting into this active, facilitative, and accompaniment role, development practitioners can add value by acting as catalysts for positive change; as facilitators of constructive, peace promoting activities; as key contributors to an enabling environment that supports stability; and as influencers of stability.

For example, USAID developed PSE advisory groups in Colombia and Haiti to advise on the Missions’ approach to engaging the private sector in these complex environments, and carefully ensured these groups were representative of the local community. Likewise, the Response Innovation Lab highlights how creating a space or platform to bring together practitioners, local community members, and innovators can help to develop and deploy new context-appropriate approaches for humanitarian crises.

Another element of this facilitative approach is practicing systems leadership, or developing productive relationships between individual systems actors, which can lead to constructive institutional relationships over time. These leaders are critical to aligning incentives between diverse actors, fostering trusted relationships and shared learning, and identifying priority interventions and solutions.

In Closing

The suggestions in the new Primer on Private Sector Engagement for Fragile and Conflict-Affected Situations bring together guiding principles and the latest thinking across PSE, conflict, humanitarian, and resilience work. Check out the Primer — let us know what’s useful for your work or resonates with your experience. This Marketlinks Theme month has also highlighted several other great experiences and learning from folks across these communities, including Laura Meissner and Emmanuel Nouga-Ngog’s opening blog on this topic, and Holly Krueger’s two-part interview with Markets in Crisis Community of Practice facilitator Maha Hayek, as well as the BEAM Exchange’s policy briefs on MSD in FCS. More detailed guidance that explores institutional considerations would be particularly valuable, signaling essential points for USAID Mission engagement as well as where implementing partners are best positioned to contribute, so that development practitioners can habitually fulfill the role of active and equal partner to their company counterparts.

MSP is advancing learning and good practice in market systems development (MSD) and PSE within USAID, USAID partners and market actors. This primer is one in a series of forthcoming guides on PSE for special considerations that the Feed the Future Market Systems and Partnerships (MSP) Activity is developing—including PSE for Nutrition (a beta version developed; planning pilots in several countries in 2022); PSE for Climate Adaptation to Advance Resilience; and PSE for Large-Scale Food Fortification. To stay up to date with these and more resources on PSE and MSD, sign up for the newsletter.