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Results and Impact Blog

Connecting Expertise and Experience

How do we know where and how DFIs support job creation?
A growing share of global production takes place in the form of integrated value chains. This does not only concern global multinationals. For developing countries it is also a key development strategy to involve their companies in efficient global supply chains in order to stay competitive and to secure and create jobs. Today, global supply chains require an increasing set of international standards that companies need to comply with. In those cases, “good jobs” are created or rather secured. And good jobs lead to poverty reduction.

DEG (Deutsche Investitions- und Entwicklungsgesellschaft), a German DFI, has supported partner companies for 50 years in emerging and developing countries along the value chain to comply with high social and environmental standards. DEG understands the private sector as the backbone of sustainable development, a job creator and thus as an improver of living conditions of the local population in its partner countries.
DEG has measured its development effects and in this context also its employment effects systematically since 2002 when DEG established the so called Corporate-Policy Project Rating (GPR), which is nowadays used by 16 further finance institutions. Hereby, DEG tracks mainly three types of employment figures: existing direct and indirect jobs as well as newly created jobs.

In 2010, DEG’s investment clients provided around 2.26 million direct jobs (DEG 2011) and DEG expects that further 18,000 new jobs will be created by its new commitments in the year 2011, only. It is obvious that direct jobs are easier to record than the creation and securement of indirect jobs. External evaluations verify the direct employment figures as recorded. But DEG underestimates its indirectly employment effects substantially. One reason for this is that DEG just has a look in the supplier side measuring indirect effect. Hence, questions to be asked are: How can we measure indirect job effects on a national level properly?, What is the right method for it?, How do projects in different sectors contribute to indirect effects?, Are there any differences between sectors?

How does improved infrastructure contribute to indirect job creation? It is obvious that a power plant, e.g., creates not only direct jobs. Due to the provision of electricity hundreds of jobs can be created. But the question is, how many indirect jobs are really being created? DEG is working on several approaches to find an adequate methodology and hopes to have some more results on this at the end of the year. If you have any idea/experiences on this, we would be more than happy to share our previous research results with you.