3 questions to
Etienne Viard was appointed Chief Executive Officer of PROPARCO by the Board of Directors on 1st December 2010. He took over from Luc Rigouzzo who was appointed Director of Cabinet of the Minister for Cooperation.
You already know PROPARCO. You left it in 2008 to head AFD's Mediterranean Department. Why have you come back?
Well, firstly because I was asked to, and when I look at my career, my attachment to AFD's private sector investment arm, and the increasingly important role it plays in the implementation of France's public policy for development financing, I see it as a great honor and accepted with pleasure. Luc Rigouzzo, my predecessor, was appointed Director of Cabinet of the Minister of Cooperation, Mr. de Raincourt. Mr. Zerah, Chief Executive Officer of AFD, subsequently put forward my nomination to PROPARCO's Board of Directors, which approved it on 1 December 2010.
And also because PROPARCO has been very important in my career. I started out in African State-owned and private companies right after I graduated from the HEC Paris international business school. These initial experiences made me want to work for development and, without realizing it at the time, I fully shared the intuition that led to the creation of PROPARCO: financing sustainable development is not just about budget transfers from State to State. Building a formal private sector is one of the main keys to economic and social development wherever we are in the world. I joined Caisse Française de Développement in 1988 with this conviction, then I joined PROPARCO for the first time in 1999. I was Investment Director, then went on to become Deputy CEO. I worked for three CEOs: Gilles Peltier, Claude Périou and Luc Rigouzzo.
Finally, because PROPARCO has been experiencing extremely strong growth in its business in recent years, the tools I helped to set up prior to my departure have been enhanced and developed, and PROPARCO's teams are today recognized for their commitment and professional expertise.
You've experienced the recent changes to PROPARCO, how would you describe it today?
PROPARCO is a development finance institution (DFI) set up by AFD in 1977 on the conviction that the private sector should be one of the main players in the development of South economies, particularly because:
- it is the first factor for growth and job creation and generates fiscal contributions that allow States to play their role as investors in the general interest and redistributors of wealth;
- it is in the front line in terms of environmental and social concerns and governance;
- and it can become an intermediary for public policy by directly providing certain basic services, particularly in the social sectors.
Thirty years on, with its developmental impacts and results constantly improving, PROPARCO is living proof that it is possible to finance operations that are economically viable, socially equitable, environmentally sustainable and financially profitable. This success shows just how right that initial conviction was. It is especially interesting because PROPARCO's model for economic development and strategy is unique and ambitious. It is based on:
- a governance structure that sets it apart from its European partners. Its capital and Board of Directors are indeed open to public and private partners from both North and South countries;
- an approach to time and risk that leads it to focus exclusively on long-term financing in geographical areas or for private players that are considered as being too risky by commercial banks;
- finally, a portfolio of projects selected for their social, environmental and economic impacts.
PROPARCO's strategy is today based on three cornerstones:
- to promote economic growth and job creation in the poorest countries;
- to provide basic services for populations via the private sector (electricity, water, housing, infrastructure, microfinance, health, education...);
- to disseminate high environmental and social standards, particularly in terms of energy efficiency in emerging countries.
PROPARCO offers private entrepreneurs in South countries three main types of financial tool: loans, direct and indirect equity investments, and investment tools in local currencies.
PROPARCO focuses almost 60% of its investments in Africa, but today also operates in all countries on the OECD's Development Assistance Committee list.
What challenges will PROPARCO be facing over the next two years?
PROPARCO will be continuing to develop its activity in line with the efforts that have been made over the past five years. This is the first challenge facing all PROPARCO's teams.
PROPARCO will, moreover, once again see growth in 2010, and in 2011.
Sub-Saharan Africa will remain its top priority in all its business sectors. The extremely ambitious target of €500m of investments in Africa – higher than the commitment made by the French President in Cape Town in 2008 – will be achieved in 2010. This target will be maintained in 2011, with a focus on French-speaking Africa.
PROPARCO is the European bilateral DFI with the highest level of commitments in the Mediterranean and will continue to be so. PROPARCO’s strategy is to be a key player within a network of Mediterranean financial institutions, with the aim of scaling up regional integration and exchanges with Africa.
It will continue to extend its activities to other geographical areas. For example, with the opening of an office in Mexico. We will be focusing on our high level of expertise in the sectors of climate change, water and sanitation, agro-industries, health, education and tourism.
PROPARCO will be increasing its amount of direct financing, particularly equity investments. It will be scaling up its activity in the infrastructure sector and consolidating its activity to support banks and microfinance institutions.
Finally, PROPARCO will give priority to financing businesses that are working to develop the agricultural sector and agro-industries, particularly in Africa.
All these efforts, initiated by my predecessors and implemented by talented teams, will be made while ensuring that there are closer ties and a closer operational synergy between PROPARCO and its parent company, Agence Française de Développement.
Autumn 2010 marks the 10th anniversary of AFD operations in the Palestinian Territories. AFD is helping to build a viable Palestinian State by financing projects in the sectors of water and sanitation, support for municipal and local development and the private sector, energy, health and education. Hervé Conan, Director of the Jerusalem agency, tells us more.
- AFD has been operating in the Palestinian Territories for some ten years now. Can you remind us what the specific objectives are for these operations, which lie between urgency and development?
Well, the Palestinian Territories are obviously a specific case for our operations. My predecessors had to build projects during the second Intifada and come up with solutions to allow activities to continue when Hamas was at the helm of the Palestinian Authority. Yes, we have put together projects that aim to provide the population with direct income (job creation) via high labor intensive infrastructure projects or infrastructure projects for communities hard hit by the conflict (located in Area C* or near the wall), or a project to address the psychological problems that stem from the conflict. Yet our target clearly focuses on developing the Palestinian Territories and we have a remit to build the capacities of the partners we work with in order to help them build the future Palestinian State and improve living conditions for populations. The projects that we implement support sectoral policies and innovative financing mechanisms which, for example, prefigure the financing methods that a Government will use for its municipalities and civil society.
* The West Bank is divided into 3 areas: Area A, which makes up 18% of the total surface area and whose administrative management and security come under Palestinian responsibility, Area B (22% of the territory), where only the administrative management is under Palestinian responsibility, and Area C, which is completely under Israeli responsibility and covers 60% of the territory.
- Water is a factor of political and economic conflict between Israelis and Palestinians. What are the challenges and difficulties relating to water? What is AFD’s role in this crucial challenge?
Water is a core issue in the negotiations between Palestinians and Israelis. Projects for new boreholes or wastewater treatment plants must be approved by the Joint Water Committee (JWC) that was set up under the Oslo Accords. This means in fact that they must be approved by the Israeli Government. If the project is in Area C, it must also be approved by all the ministries concerned by the planned construction. This turns out to be a real “obstacle course”.
AFD is heavily involved in the water sector. It is our biggest sector for operations with almost 50% of our commitments:
- We are involved in water production with the creation of new boreholes and equipment for existing boreholes. We are also supporting the future bulk water company that will supply the different municipal or inter-municipal utilities;
- We are involved in water supply with the creation of water supply and distribution networks: we have two major projects currently ongoing in the Northern West Bank, which will provide a home water service to over 35,000 people and improve the service for 30,000 other people. We have just finished preparing a €10m project to improve the water service in the City of Bethlehem;
- We are involved in wastewater treatment (AFD is the biggest funder of the wastewater treatment plant in Northern Gaza / 35,000m3 / day). This is a new sector for the Palestinian Territories: there is currently (November 2010) only one wastewater treatment plant in operation in Ramallah. The difficulty of these projects lies in the fact that there is no reference – and therefore no local expertise – and in the technical level imposed by JWC in terms of the quality of discharged water and the obligation to reuse 100% of wastewater. In this respect, AFD assists the Palestinian Water Authority (PWA) by supporting pilot processes and providing input for the debate on these issues;
- And finally, we are involved in supporting the sector reform by actively participating in the ongoing debate and supporting the technical team in charge of assisting the reform of PWA.
- What are the other priority sectors for operations? What impacts have the main projects had over the past 10 years?
In addition to the water and sanitation sector, the two other focus sectors for our activity are municipal and local development and support for the private sector. We also operate in the health sector.
Our operations to support municipal and local development focus on activities that have a direct impact on the local target populations: to improve basic infrastructure in target neighborhoods in the City of Gaza, electrification of villages located in Area C in the Northern West Bank; community projects in villages affected by the separation wall, high labor intensive projects led by local NGOs that aim to provide the beneficiary communities with community facilities, particularly for young people (daycare centers, socio-educational centers, play areas, Gaza zoo, etc.), but also in terms of education (schools) and primary health care.
In 10 years, AFD has financed over 500 micro-projects, provided electricity to 60,000 people, built over 50 km of roads in urban areas, created over a million man-days of work, improved schooling conditions for over 6,000 pupils, etc.
For the past 3 years, AFD has been supporting processes to build structural foundations by (i) cofinancing the Municipal Development Fund, which has an implementation mechanism that fosters good practices in terms of management, transparency and involving actors from civil society, (ii) by supporting the creation of a Palestinian financing mechanism for Palestinian NGOs that provide services in areas where the Palestinian Authority has little or no coverage (Area C, Gaza, East Jerusalem).
- Can you describe a typical work day?
The specificity of AFD’s work relates to the fact that our office is in East Jerusalem and that the vast majority of our partners do not have the authorization to go there. It is consequently AFD’s operational team that has to go to Ramallah where the ministries and municipalities in which we operate are located. We feel a bit like a mobile office. It takes between 20 minutes and 1 hour to get from Jerusalem to Ramallah, depending on the day, traffic flows and waiting times at the checkpoint. Our partners work non-stop from 9 am to 2-3pm. We spend most of our mornings and early afternoons in Ramallah then we go back to Jerusalem in the afternoon for team meetings or meetings with partner donors that are based in Jerusalem like us. We very seldom have a lunch break and when we do it is often used for informal work meetings. The specific geopolitical context of the Palestinian Territories gives rise to a number of missions by governments and actors working for decentralized cooperation. We generally receive them at the end of the day, if possible with our colleagues from the Service for Cooperation and Cultural Action (SCAC).
Coordinating the trips made by the five members of our team is a very important point in our organization, bearing in mind that we have one driver and three vehicles, including one armored vehicle, and that for Gaza it is necessary to obtain the prior approval of the Israeli security services one week before: this means we need to carefully plan our missions in order to take into account the different priorities and commitments we have in Ramallah and Jerusalem…
- Is there an anecdote or story that comes to your mind?
I think the thing that strikes us most in our daily work with our partners from the Palestinian Authority is their ability to remain resilient and their energy, despite an unending peace process, and the way they are always positive about project implementation.
When we attend a work meeting in Gaza with our partners, we can very quickly forget that we are in Gaza, on a part of Earth living in a very particular context, cut off from the rest of the world, which our partners can very rarely leave. Our partners orient us toward discussions based on objectives for development and not urgency. It is consequently important for us not to forget why we are there, not to get involved in the political issues of the conflict and to make every effort to do our job as development officers, i.e. to implement concrete projects in the field in response to the Palestinian Authority’s policies and priorities…
Chief Executive Officer of AFD
What is your viewpoint on AFD?
Over the past ten years our Institution – which will be celebrating its 70th anniversary next year – has experienced a profound revolution and I do not hesitate to use this word. AFD has seen a considerable geographical expansion and a wide diversification in its areas of activity. After these ten years of major changes, I see my role as being carved out within a period of consolidation. All these benefits must now be shored up and we need to avoid any over-diversification.
What is your vision for Africa?
How do you see AFD’s activity in the French Overseas Communities?
Head of AFD’s Environment and Equipment Division
The topic of International Biodiversity Day on 22 May 2010 was “Biodiversity and Development”. To what extent can biodiversity projects contribute to social and economic development in developing countries?
Since 2000, AFD has pledged over 500 million euros for “biodiversity” projects. This figure is rising sharply and we are going to continue in this direction. There are two reasons for this.
The first is because this is what our partners themselves expect from us, as they increasingly face the real and bitter experience of the social and economic cost that comes with the deterioration of their “natural capital”, the uncontrolled exploitation of their water resources, agricultural soils, wood, fish, etc. The link between biodiversity and development – mainly understood in the sense of goods and services rendered to human societies by natural environments – is consequently becoming increasingly clear. Many research studies – for example the Millennium Ecosystem Assessment or The Economics of Ecosystems and Biodiversity – prove that we are all dependent on our environment, but that the poorer we are, the more biodiversity represents a daily resource and life insurance, so its erosion makes us even more vulnerable.
The second reason is that “biodiversity” projects have proven their worth in the field by building synergies between preservation and development, whereas we used to think that it was necessary to choose between protection and exploitation. Our projects for protected areas are an example of this. They are engines of local development because they create economic opportunities for local populations. They are also vehicles for developing and opening up areas, thanks to the infrastructure they create. Finally, they help build social ties by bringing everyone together to work for a common local project and can sometimes stabilize conflict areas. The aim is consequently not only to preserve emblematic species, it is especially to create development opportunities that would not exist without biodiversity.
All these reasons justify a huge investment on the part of AFD to reduce the vulnerability of the poorest and create opportunities for all by sustainably developing the environment.
You are currently steering the definition of a biodiversity strategy at AFD. Can you give us a sneak preview of the main issues?
This link between development and biodiversity – whether it be in Africa, emerging countries or the French Overseas Communities – first requires us to consider the impact that all AFD’s activities have on biodiversity and, second, what contribution an institution such as AFD can make, both in the field and in debates, in order to ensure that biodiversity is better integrated.
We still need to finalize our strategy, but our initial discussions in-house and with our partners are steering us towards three priorities. The first will be to pursue our efforts to support local populations in the field in order to help them “save” their ecosystems and resources and thus preserve their natural capital. The second will be to better integrate biodiversity into all AFD activities, from infrastructure to agriculture, including urban development, in order to limit the impacts our projects have on biodiversity and seize the opportunities it offers us to enhance the sustainability of our projects (for example their resilience to climate change). Finally, our last priority will be to contribute to building new development paths based on the controlled withdrawal of biological resources. We will do this by continuing and extending our research on environmental economics, sustainable financing tools for biodiversity or scientific knowledge on biodiversity.
There is a busy diplomatic agenda in 2010, international year of biodiversity, with, in particular, the 10th Conference of the Parties to the Rio Convention on Biological Diversity in Nagoya in October. How will AFD be taking part in this agenda?
2010 is indeed a decisive year in terms of raising the awareness of citizens and policymakers to the idea that biodiversity constitutes both vital infrastructure that must be protected and an economic and social opportunity. The commitments made in Nagoya should give an international sign of this growing awareness and recognition for the many initiatives that are already underway at the local level in developed and developing countries. AFD will be attending the Nagoya conference alongside our French partners, the NGOs we work with on a daily basis, and our local partners.
We were just speaking about the importance of knowledge in order to inform policymakers in this uncertain world caught up in complex parameters, such as climate and biodiversity. France supports the idea of a scientific and political Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES). It would be like the IPCC for the climate and would build international scientific expertise in the field of biodiversity that would be unique, credible, recognized, multi-disciplinary and independent. The IPBES would allow developing and emerging countries to exploit and strengthen their own scientific expertise. This is the type of tool that AFD is pinning its hopes on in 2010. Indeed, it has seen from its experience of projects in the field and its dialogue with its partners in developing countries how important it is to have reliable and tangible knowledge in order to ensure that biodiversity is increasingly taken into account.
As a development institution, AFD consequently aims to be fully active in international debates in 2010 and, subsequently, help turn biodiversity into an asset for development.
Head of AFD’s Economic and Social Research Unit
How is AFD’s research activity promoted?
AFD’s research activity is still quite recent: the Research Department was only set up in 2002, yet AFD will soon be celebrating 70 years of activities in the field! I think this highlights the fact that the utility of research has not always been understood. Yet beyond knowledge production and capitalization, there is a real need to disseminate the outcomes of our research to any potential users of these results.
In fact, research is promoted right from the moment when the studies are launched, because we involve potential beneficiaries as much as possible in identifying the issues that will be investigated or in the choice of case studies. In addition, we organize feedback seminars – some of which the public can attend – in the countries where the studies are conducted, in Paris, or with our partner research institutes. More recently, we began contributing to training programs (at CEFEB, AFD’s training center, at ILO and in South Africa).
But above all, all our research studies are destined to be published: this very rapidly led the Research Department to launch specific collections and set up an in-house editorial team to conduct the essential tasks of proofreading the manuscripts, layout and printing.
You are launching new collections: what made you review your editorial policy?
Our editorial production has been prolific since the Research Department (RCH) was set up: 52 Notes and Documents, 92 Working Papers, 48 Ex Post (our evaluation and capitalization documents), without mentioning some external co-publications. Our series finally began to lack clarity as a result of this profusion of publications. We consequently reviewed our editorial policy in the autumn of 2009 and have launched five new collections. Each of them has a more clearly defined objective in terms of the research to promote and the target audience.
We now have “academic” series – devoted to more in-depth research – and our Working Papers. Macroeconomic and country risk research has until now been destined for AFD’s internal use, but is to have a dedicated collection: Macrodev. Our thematic or sectoral research is widely based on case studies, the Focales series will be dedicated to these monographs that are at the intersection between a topic and a country. The Conferences and Seminars series has also been launched. The aim is to make the proceedings of our conferences more widely available and give them more clarity. The Ex Post series is more recent and is clearly understood as being dedicated to evaluation and impact assessment. It will be continued in the same manner as the Working Papers.
There is also the A Savoir series. What is it about and what are your aims for it?
This series is highly innovative. It first and foremost targets an operational public. The aim is to review existing knowledge of a specific issue: for example, the first volume addresses local fiscal methods, the second looks at public expenditure management in DCs, there is another on the practice of payment for environmental services. These publications analyze definitions, review and summarize available literature, examine practical cases of how things are actually applied and explore the limits and constraints in the field in terms of the instrument that is being analyzed. Our hope is that A Savoir will become a reference series for development professionals.
Former AFD Executive Director for Operations, former World Bank Director, author of the book published by Fayard Notre maison brûle au Sud, alongside Alexis Bonnel
What, in your view, are the new challenges for the South?
Our planet suffers from massive environmental stress. This primarily stems from the result of a phenomenal growth in the population which has risen by some 4 billion inhabitants since 1950. It is forecast that by 2050 the world will have 2.5 billion additional inhabitants. 95% of this growth will take place in South countries.
We will, at the same time, be witnessing a formidable expansion of the economies of emerging countries such as China, India, Brazil, Mexico or Indonesia. Yet without the right regulation, the taxation of the natural resources of our planet – which we thought were inexhaustible – will become dramatic. Moreover, we shall undoubtedly be seeing some extremely poor and often badly managed countries fall by the wayside. Their States are already seriously weakened and are often incapable of exerting their regalian power. If these States do not manage to consolidate themselves, to find the path of economic growth, to ensure both security and a minimum level of social services for their populations, they are highly likely to implode. This is what we are witnessing today in Somalia and Afghanistan.
In such a context, I think that the period where North countries were losing interest in the South is coming to an end, because both the success of emerging countries and the disasters looming for countries heading for implosion will have a direct impact on our lives and those of our children.
Serious doubts have been expressed over the effectiveness of Official Development Assistance, haven’t they?
Official Development Assistance (ODA) has always been criticized and its effectiveness constantly challenged. But we must be mindful of the historical perspective of its objectives that have changed over time with this concern for effectiveness. ODA was established after the Second World War, first in order to participate in the policy to “contain” communism, then to facilitate the decolonization process. It was quite effective in these two areas. It subsequently became bogged down in the management of structural adjustment programs where its action ended up being effective, but at an exorbitant cost; finally, it sought to help poor countries economically catch up with rich countries and to reduce poverty. Studies show that its effectiveness mainly depended on the quality of management in the countries concerned.
In short, it has been extremely effective in well-managed countries and widely ineffective in the others. In the end, we observe that it is the countries that need it the least that make the best use of aid. These principles today widely define the allocation policies for multilateral aid resources that are first given to the best managed countries. But this way of going about things neglects the fact that it is precisely the most badly managed countries – which are plagued by the most important difficulties – that need the most attention because the disasters that occur there are already turning them into regional or even global public evils.
What can Official Development Assistance achieve in such a global context?
The challenge is precisely to improve aid effectiveness in these countries, even those heading for implosion. All in all, apart from ODA, there is little rich countries can do in the face of the two major challenges that the South now poses: on the one hand, the foreseeable explosion of global environmental disorders that will gather pace with the economic and demographic growth of emerging countries and, on the other hand, the social, political and security disorders that are highly likely to occur as a result of the implosion of failed countries. ODA is one of the only available instruments to facilitate dialogue with emerging countries on environmental policies. This is what AFD is doing today and it is remarkably well positioned in this area.
In order to get countries that fall by the wayside back on track, one of the only things diplomats can resort to is conferences and military interventions get bogged down in asymmetrical conflicts. Here again, ODA is one of the only available instruments. The disaster in Afghanistan, which I analyze in detail in this book, shows us that it has its work cut out in order to change its approaches, its intervention methods and even the concepts that underlie its action.