Critical ex-post study of Danida’s Private Sector Programme in India

DIIS has published a study entitled 'Lopsided Business Partnerships: An Ex-post Study of Danida's Private Sector Development Programme in India'. The study has been carried out by senior researcher Steen Folke (who has recently retired from DIIS).

The study examines the implementation and outcome of the second phase of the Private Sector programme in India 1996-2003. The programme funded partnerships between Danish and Indian firms with a total grant of 74 million DKK (in phase II). The study investigates the results of PS support to 23 partnerships between Danish and Indian firms, constituting 65 pct. of all supported partnerships.

Nine of the Danish firms were small or medium-sized, while 14 were large, often among the largest firms in their sector in Denmark (Danisco, Danfoss, Novo Nordisk, Mærsk Data, Rambøll, Kampsax/COWI, Egmont, LMGlasfiber, Pedershaab etc.).

The PS programme granted up to 3 million DKK to each partnership for training, technical assistance and equipment. Half of the partnerships also received investment capital from the Industrialisation Fund for Developing Countries (IFU).
The study is based on in-depth interviews with managers of Indian partner firms and joint ventures as well as Danida’s administrators and other key informants.

The main objective of the PS programme in India was to “provide technology transfer and relevant training to Indian companies as part of a long-term collaboration, which is sustainable on a commercial basis after the PS programme support is withdrawn”.

Findings
The programme only accomplished its main objective to a limited extent. In most cases technology was transferred and relevant training provided, but only ten of the 23 partnerships examined became commercially viable (43 pct.). Only one of the ten involved a small or medium-sized Danish partner firm. The remainder were all large companies, most of them among the largest in their sectors in Denmark.

In five cases the partnerships were soon turned into subsidiaries of these Danish companies, thus negating the objective of 'long-term collaboration' with an Indian partner firm. Thus, gauged by the programme's own objectives, there were five successful cases, understood as commercially viable long-term partnerships, out of 23, a rather disappointing success rate (22 pct.). In addition one case can be viewed as some sort of success in that an Indian firm was enabled to take over a Danish subsidiary after the mother company decided to exit from all its business in Asia. The involvement of Indian partners in the successful partnerships was limited to a small number, three in joint ventures and three in other forms of partnerships.

There is no doubt that the PS programme in India has contributed to economic and social development, both by supporting the business partnerships that became commercially viable and through its effect in term of employment. It is another question whether this was done in an effective and efficient way. The extensive use of Danish personnel for both training and technical assistance was necessary to some extent, but the fact that 90 pct. of the costs were covered by Danida tempted the Danish firms to maximize the use of their own (expensive) staff. More widespread use of Indian personnel would have been appropriate and would have reduced the costs considerably

Conclusion
The results of the PS programme in India have clearly not measured up to the expectations or the programme's own objectives. There are many reasons for this: related to the partnerships, the technology, the markets etc. But the PS programme itself, the way it was conceived and administered, has had a bearing on the somewhat meagre results. In particular the programme, with its bias in favour of the Danish partners, and especially of large Danish companies, has contributed to what can only be described as lopsided business partnerships.

Relevance
There are currently PS programmes in almost all of Danida's programme countries. The India programme now belongs to the past. But in spite of contextual differences between countries and the introduction of some changes in the programme, in particular in 2006 when the programme had a major overhaul and was recast as the Business2Business (B2B) Programme, there are still lessons to be learnt.

Moreover, the experiences from this programme are relevant in the context of the Africa Commission, which in its final report in May 2009 is likely to recommend more emphasis on private sector development in Danish development cooperation.

Contact
The author Steen Folke can be contacted by phone +45 3323 0080 or e-mail to steenf2@gmail.com