Reference Guide on Governance and Private Sector Engagement

The policy defines PSE as a strategic approach through which USAID consults, strategizes, aligns, collaborates, and implements with the private sector for greater scale, sustainability, and effectiveness of development or humanitarian outcomes. The Middle East Bureau's PSE Plan, issued in December 2019, aims to position Bureau staff to work with the private sector to solve mutual development challenges in the Middle East and North Africa (MENA) region. As part of the ongoing roll-out of the Middle East Bureau's PSE Plan, the Reference Guide on Governance and PSE provides practical guidance on how to integrate PSE in democracy, human rights, and governance (DRG) programming to improve service delivery, with a focus on the solid waste management, water, and energy sectors. The Reference Guide captures approaches, models, best practices, and lessons learned on PSE from across USAID's sectors that can be adapted for DRG purposes in the MENA context. The Guide can be used as an additional resource during the USAID Program Cycle to assist in the design of DRG programs that integrate PSE approaches. There are three main approaches used for service delivery improvement in solid waste management, water, and energy: procurement, private sector partnerships (comprised of public-private partnerships and global development alliances), and privatization. These approaches fall on a spectrum based on the country's maturity in relation to cross-cutting enablers, including the legal and regulatory framework, business enabling environment, autonomy of the private sector, political will and buy-in, and capacity of government to structure, manage, and monitor contractual relationships with the private sector. DRG programming can play a critical role in supporting MENA countries to improve the cross-cutting enablers for PSE, particularly the business enabling environment (BEE), through DRG approaches to policy reform, participatory dialogue and decision-making, and transparency and accountability of institutions. A strong BEE empowers citizens to open a business and employ workers, secure a location and utilities for the business, access finance while protecting investors, carry out daily operations, and enter into and enforce contracts. When determining the PSE approach, guiding questions can be used to gather information to assess a country's BEE during project and/or activity design. The guiding questions help determine whether the private sector can help achieve the intended project goal(s) and, if so, the most relevant PSE approach. The private sector has a complex role in society and with government, and its sophistication varies across sectors and industries. Common constraints to PSE in the MENA region include a lack of an independent and/or robust private sector, legal and regulatory constraints or inconsistencies, lack of trust between government and private sector, lack of access to finance for private sector firms, and lack of capacity and know-how within government and local private sector to structure, manage, and monitor partnerships and/or contracts. When designing a project that integrates any of the PSE approaches, it is essential to "get right" the private sector's incentives for collaborating in such a project. Understanding and addressing the private sector concerns and incentives in the project design phases will define the shared incentives between the government and private sector, encourage the private sector's participation, and increase the likelihood of a successful partnership. Common private sector incentives include generating profits and growing their business, attracting investment to help drive growth, sharing risk through the use of memoranda of understanding (MOUs), and political capital. USAID must define and clearly articulate its value proposition to the private sector to demonstrate that the relationship is mutually beneficial for all parties involved and to help compel the private sector to engage in and buy into a proposed project.