Memorandum submitted by Mung'omba
Associates
My name is Wila Mungomba, a businessman
in Zambia. I am a past President of the African Development Bank
and Executive Director of the International Monetary Fund. I currently
sit on a number of boards including the Emerging Africa Infrastructure
Fund, a DFID initiative.
I hereby submit written evidence on
some aspects of the Inquiry.
1. What type of donor interventions
have strong leverage in changing the business climate (in partner
countries) toward PSD and pro-poor growth?
The creation of an enabling environment
for private sector development is key.
- Regulatory environment
Although most developing countries have established
regulatory authorities for various sectors, such as Power, Water,
Banking, Telecommunications etc. there appears to be difficulty
in these regulators operating independently especially where there
are still State owned enterprises competing with privately owned
business. More Donor intervention is needed for improvement to
the entire regulatory landscape.
- Investment promotion
To date most investment promotion has
been focused on the macro-level issues. It is important for Donors
to assist through technical assistance for the developing countries
to do some basic studies on target sectors such Agriculture, Tourism,
Mining etc to enable the investment promotion to have meaning
to potential investors. Additionally a more professional investment
promotion program could help attract more FDI into the developing
countries.
- Competition Policy
One of the big issues in the developing
world is the lack of well articulated Competition Policy particularly
with regard to state owned companies that compete with the private
sector. The existence of such companies makes the private sector
nervous as policy is normally skewed against them. Technical assistance
is key to ensure that not only is there clear policy but the role
of State owned enterprises in a competitive landscape is clearly
defined.
- Regional Integration
There has been very little donor focus
on Regional Integration. Most of these countries Infrastructure,
Trade and Investment if property integrated can unleash significant
growth opportunities. Southern Africa for example could easily
become an integrated economy over the next two decades. Donors
need to direct Aid/Technical Assistance to SADC, COMESA, ECOWAS
in order to build regional institutions capable of accelerating
development.
- Risk Finance
As a result of poor macro-economic management
in the past, there is a shortage of long term finance and short
term finance is generally expensive. It is key that local savings
through Pension Fund and Insurance reform are harnessed and that
donors provide long term resources for intermediation through
established Commercial
Banks and also via the establishment
of new entities such as Private Equity and Agricultural Funds
followed by a recapitalisation of the local development banks.
- Property Rights
In order to develop a middle class,
the laws relating to land tenure, Deed Registry and security perfection
and realisation need to be clear. In addition, property rights
will unleash the necessary credit and promote investment. Again
Technical Assistance would be needed in this regard.
2. What aid instruments can be
used to encourage PSD? Private benefits versus benefits to society
(public goods) - how much is this an issue?
The NGO's have moved this debate
a more than should be the case. Continued non sustainable aid
will not help the developing world. Any packages of incentives
that is targeted at the private sector will always have entrepreneurs
benefiting. This, so long it is not excessive nor abused, is key
to encouraging the private sector to take the necessary risks
for development. The key is significant development that creates
jobs and opportunities. To do this the Donors must focus on:-
- Encouraging the establishment
of Public Private Partnerships (PPPs) in Infrastructure. Most
developing countries do not yet have the legal framework to make
PPPs viable. It is important therefore that Technical Assistance
is targeted at this key area. The shortage of infrastructure puts
developing countries at a significant disadvantage when they compete
for FDI. Donors should expand significantly initiatives such as
Emerging Africa Infrastructure Fund, INFRACO and TAF if we are
to see significant improvements in infrastructure.
- Localised Technical Assistance
funds to help private sector companies formalise more quickly
as well as to enable them prepare project plans, marketing for
exports and training of local personnel.
- Corporate Social Responsibility
(CSR) - The standards of Corporate Governance in the developing
world need to be improved if we are to get CSR working at levels
we have seen in the developed world. Targeted Technical Assistance
would be very useful in this regard.
For Corporate Social Responsibility
to work properly there must be proper political governance hence
initiatives like the Investment Climate Facility which aims to
improve political governance as well should be encouraged.
3. How is the private sector
engaging in development?
- Dialogue between the public and
private sectors is key but this should extend to the Donor Community
as well. Such a tripartite dialogue is more likely to assist in
the effective delivery of donor help. In addition, the Donor Community
will get confident in sometimes using the private sector to deliver
some of their aid programmes.
- Dialogue between the government
and members of the International private sector that are not yet
investors in the developing countries will more clearly define
what the developing countries have to do to attract investment.
- In areas such as small holder
agriculture linked to large marketing organisations, central storage
and irrigation facilities, warehouse receipts and input supplies,
it is essential for the donors, governments and investors in the
agricultural sector to be in constant dialogue so that they can
come up with a set of policies, the overarching regulation, technical
assistance and donor financing to effect genuine pro-poor growth
that is anchored on common infrastructure.
The response is only to part of the
Inquiry that I felt able to respond to.
3 February 2006
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