Examination of Witnesses (Questions 277
- 279)
TUESDAY 9 MAY 2006
MR BOB
FITCH AND
MS ANN
GRANT
Q277 Chairman: Good morning to you
both and thank you very much for coming in to give us evidence.
As you will know, the Committee is really interested in how we
can grow the private sector in poor countries as a means of improving
economic support for the government and, obviously, economic conditions
for people. I think what we are really interested in is what works.
I have to say, with the brief, it has got lots of indications
of great initiatives that people are working on and attracting
funds to, but we are rather short on examples of what really is
working and in particular of the interaction between the private
sector and the development agencies, the extent to which they
can work together or the extent to which they have discrete responsibilities,
so if you can bear that in mind that would be helpful. Also, by
way of introduction we would really value your views on what you
think our own Department for International Development can do
in encouraging private sector development; whether you think they
are good at it and what their strengths and weaknesses are, and,
to the extent they have strengths, and we know as a department
they have but in this context, what you think they could most
reasonably focus on in ways that would be positively helpful for
enabling the private sector to do the business and encourage growth,
jobs, and improvement in poor countries. Ladies first?
Ms Grant: Thank you very much,
and thank you for the opportunity to give evidence today. I assume
I am here on the basis not only of my actually rather new job
with Standard Chartered but also because I have been involved
on the interface between business and development most recently—and
inspiringly from my personal point of view—in South Africa
where the relationship between business, government and the civil
society is very special for historical reasons. But also where
I think all three groupings see themselves as playing a part in
the national project, in nation building, and have communication
systems and mechanisms coming from the history which do mean they
talk about economic development and national development all the
time, though it is obviously a very tense relationship, as in
many countries, some of the time. Before that, I was the Africa
Director in the Foreign Office in London when DFID and the Foreign
Office separated, and that was also very interesting and important
experience for me, and then before that I was in New York in our
delegation to the UN, where I was also on the board of UNDP and
UNICEF, so I had some experience of the multilateral organisations.
I also worked briefly for Oxfam in the '80s and '90s. As you say,
a lot of people have given a lot of evidence. I was here for the
DFID evidence session, and I think that the DFID memorandum[1]
set out very fairly the key areas to work on, which themselves
have been set out by the World Bank's report, I think, on "Doing
Business in 2005"[2].
I think the fact that growth and jobs are key to development and
that the private sector is key to both is now accepted wisdom,
but the actual mechanisms and ways of working and, indeed, training
and background of people involved in development is still quite
new. I think one of the reasons you have not got the examples
of what works and the track record, if you like, on the private
sector working well and smoothly with development organisations
across the board is because that is still new for both cultures.
There is a cultural problem of how you see the world, which I
think is now pretty much sorted, but for people who were brought
up, as I was, on the sort of Nyerere school of development studies,
where you were talking about basically socialist models of redistribution
in Africa, especially, although those models have not worked and
have not been found to be productive, there are an awful lot of
people for whom that is the basic training which it is difficult
to accommodate to the new models of the private sector being a
force for good and part of the solution for poor people rather
than an exploitative and negative force, especially again in Africa.
I think the intellectual work has now been done and we are a long
way down that road but you are talking about people in long-term
business, whether it is NGOs, governments, multilaterals, for
whom working naturally and easily with the private sector is still
quite new.
Q278 Chairman: Even allowing for
the fact that the majority of people in poor countries are in
the private sector, they are at a very low level and it is the
only form of economy, so although they know it is the private
sector it is not active enough and does not deliver enough for
them.
Ms Grant: Exactly, and again a
lot of the problems are of terminology. When a lot of people in
development, academics and others, thought of the private sector
in the past they meant basically multinationals working on a global
scale, and that has been the private sector going into Africa.
As you say, the fact that 90% of people in Africa are in the private
sector and not in public sector employment is again something
I think you need to keep repeating because it helps to break down
all the stereotypical ways of looking at the relationship between
business and the state and poor people, so I think it is a new
area. We very much welcome, certainly in Standard Chartered Bank
where we work in difficult and emerging markets, Asia, Africa
and the Middle East, the new emphasis by the Secretary of State
in his speech on the private sector, which mentioned the private
sector very much in the terms you have just done, Mr Chairman,
and where it is obviously high on the agenda of DFID to develop
new alliances, new ways of working, and a much more intensive
dialogue with the private sector. We certainly as a bank have
got that dialogue. We have been meeting various officials, especially
the Financial Inclusion Team, over a period of months; we have
got some meetings coming up now, very much focusing on the White
Paper agenda on this agenda. We contributed to Business Action
for Africa, and I very much commend them, and we sign up to everything
that the Business Action for Africa submission to this Committee
said[3];
which are the key areas to work on, where we are at the moment
and how far we need to go. Certainly for us in Standard Chartered,
and in my personal role as an adviser in that bank, we are very
open to new ways of working, to new ideas, to new risk sharing
whether it is funding, looking together at things like credit
rating for countries, where we have expertise and experience which
perhaps NGOs and government officials have not, and where we would
like to rely on our skills and experience for the agenda which
is being developed. We would like to have, and I think we do have,
the opportunity to contribute as DFID decides what it can best
do in individual countries, especially Africa, but more broadly
we want to be part of that, and we think we have the dialogue
with William Kingsmill and others that we need in order to make
that input. Finally, on the ways of working, I did not realise
until I joined the bank that there is actually a global shortage
of financial professionals; there are not enough people in the
banking sector to go around. They are constantly being poached
from one bank to another, there are huge new demands because of
growth from China and India for that kind of international expertise,
and it is very difficult, even for a bank like mine that is very
keen to participate in all this, and we do not have people to
spare to come to two-day meetings or to develop policy documents.
We need to get sharper and smarter and briefer. For example, I
am going to suggest to DFID, if we are going to look at new Africa
Challenge Enterprise Fund, that we have somebody to come to the
bank to do half an hour's quick presentation where I might possibly
get some of my senior colleagues, especially if it is before work
really gets going in the morning, rather than the opportunity
to submit papers and to come in. I think that is a Civil Service
way of working that does not match up very easily to the way the
private sector works and I think we have not got that much tolerance
for another lot of summits, another lot of discussions—discussions
on policy in particular. We would like a quick run-through of
what is possible, and then a follow-up with the business as to
who is going to take it forward and a small team to actually work
on it, so that we learn by doing rather than by talking about
it, and we are very up for that. For looking at pilot schemes
and at different ways of sharing risks on new kinds of funding
we are already involved in a lot of Business Action for Africa's
discussions and we have a very strong government relations team
doing that. When it comes to doing business and promoting business,
our focus is on small and medium businesses in Africa and elsewhere
in the developing world and that is where we would like to look
at working together with DFID. As we found in the UK, there is
a limit to how much government servants can get involved and promote
and develop business on the ground themselves. The important things
are the ones we know about—the investment climate, the regulatory
frameworks, the enabling environment.
Q279 Chairman: We have other questions
on that but, Mr Fitch, it is the interaction between the private
sector and DFID that is of interest to us and you have the experience
of the Challenge Fund, but briefly, what do you think DFID's expertise
in this area is and how do you think you can best interact to
stimulate the private sector? I take Ann Grant's point entirely
that private sector is private sector and governments facilitate
or get in the way but cannot actually do it.
Mr Fitch: Yes. I think DFID's
strength over the last seven or eight years in this area has been
its innovativeness and willingness to challenge perceived wisdom,
and part of that has been very much looking at this private sector
engagement issue. I think they have had one or two fundamental
realisations along the way that has helped that. One of the things
they have realised is that the private sector needs to get on
with doing business which is making a profit. Whereas profit-making
was perceived to be perhaps non-desirable in the development world
eight or 10 years ago, DFID has led a process of embracing that
where it is seen to be ethical and coincidental with its own ambition,
which is to help reduce poverty, and I think one of the more enlightened
parts of our approach recently has been to engage on a business-to-business
type of agenda rather than looking at more of a kind of corporate
social responsibility type agenda. The corporate social responsibility
may be part of the motivation of the private sector for getting
involved, but I think what DFID has realised is that that type
of involvement is not likely to be sustainable. The most sustainable
private sector participation is where it is driven by profit,
so what DFID has very much gone about is looking for that coincidence
of developmental and commercial interest, and that has been extremely
important. Along the way the other realisation they have had—and
I say this at the risk of you saying: "Well, you are a private
consultant; you are bound to say that"—is that they
realise to do this business, DFID themselves are not the best
body to do the business type of interaction. The private sector
has some difficulty in having constructive conversation with civil
servants, however good and enlightened they are, and I think their
willingness to look at ways of outsourcing that type of intermediary
role has been very important as well in pushing this agenda forwards.
1 Ev 127 Back
2
World Bank/ International Finance Corporation/Oxford University,
Doing Business in 2005: Removing Obstacles to Growth, http://www.doingbusiness.org/Documents/DB-2005-Overview.pdf Back
3
Ev 161 Back
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