Memorandum submitted by Syngenta AG
1. INTRODUCTION
1.1. Syngenta is delighted to have the opportunity
to submit evidence to the Committee on the subject of Private
Sector Development.
1.2. Syngenta took the initiative during
2005 of launching the Going for Growth project—a
collection of essays published by the Smith Institute, edited
by Professor Calestous Juma of Harvard University—and sponsored
by Syngenta.[64]
1.3. In publishing this collection of thought-provoking
essays from a number of senior figures central to the development
debate, Syngenta and Professor Juma aimed to take forward the
excellent work of the Commission for Africa by exploring the key
issues surrounding development and economic growth in Africa and
recommending actions for governments, financial institutions and
businesses alike.
1.4. Going for Growth places particular
weight on the role of science, technology and innovation in advancing
development in Africa. The role of the private sector is a central
tenet of Syngenta's CEO Michael Pragnell's own contribution to
the publication—which focuses on agriculture, business and
development. Improving the productivity and performance of the
agriculture and food sectors in Africa will be essential in any
strategy aimed at sustaining growth and the attainment of the
Millennium Development Goals.
1.5. This submission therefore draws on
the issues raised in Going for Growth and seeks to look
at steps the private sector can take to promote support for R&D
and economic growth by finding new and innovative ways of working
with governments and setting the highest standards in business,
management and training, working both with multinationals and
local businesses. We believe that there is a need for better partnerships
between the public and business sectors, particularly in agriculture.
2. BACKGROUND
INFORMATION
2.1. Syngenta is a world leading agribusiness
committed to sustainable agriculture through innovative research
and technology. The company is a leader in crop protection and
ranks third in the high-value commercial seeds market.
2.2. Syngenta's primary business areas are
Crop Protection and Seeds. Crop Protection involves the production
and sale of herbicides, fungicides and insecticides. Seeds comprise
high value seeds, field crop seeds, vegetables and flower seeds,
and these are developed for individual geographic regions to produce
higher yields and greater reliability. Crop Protection represents
approximately 85% of the company's sales and seeds constitute
roughly 15% of overall sales (GM seeds equate to 17% of total
Seeds sales—less than 3% of overall turnover).
2.3. In 2003-04, Syngenta's investment expenditure
on research and development totalled $727 million worldwide, including
$150 million in the UK, making it seventh in the top 10 foreign
companies investing in UK R&D (DTI 2004 ranking).
2.4. Syngenta's goal is to be the leading
provider of innovative solutions and brands to growers and to
the food and feed chain.
3. WHAT CAN
THE PRIVATE
SECTOR DO
TO ALLEVIATE
POVERTY?
3.1. Syngenta believes that the Commission
for Africa's report was right to focus strongly on the role of
business, trade and economic growth in its chapters on "Going
for Growth and Poverty Reduction" and "More Trade and
Fair Trade"; and that by highlighting the importance of business
as an engine of economic change, the report effectively challenged
governments, companies and organisations around the world to identify
real and achievable solutions and strategies.
3.2. The Committee will be well versed in
the broad arguments as to how a healthy business environment could
contribute to alleviating poverty in developing countries. Syngenta's
particular perspective on this issue focuses upon the role of
the private sector in aiding and encouraging the transfer of knowledge,
education and business skills from developed countries and companies.
This needs to be done in a manner which leads to greater knowledge,
investment and business development in Africa in order to achieve
the following benefits:
3.2.1. Developing local businesses in the
form of small and medium enterprises (SMEs);
3.2.2. The availability of quality, but affordable,
goods and services;
3.2.3. Employment and job creation—and
the promotion of broad-based economic and social development
as well as reinforced commitment to best practice in industrial
relations;
3.2.4. A knock-on impact on the provision
of social services as business works towards and encourages
improved housing, health facilities and public spending on those
who need it most;
3.2.5. The development of an entrepreneurial
spirit—as local employers develop their skills and
networks, they will develop their own companies and markets and
healthy competition will emerge;
3.2.6. The development and growth of indigenous
knowledge resources—providing future generations of
teachers and business leaders.
3.3. All of these issues are particularly
pertinent in the area of agriculture and food production/processing
because agriculture is a crucial stepping stone to prosperity
and sustainability. As successful examples in Kenya show, partnership
between agribusiness companies, local farmers and entrepreneurs
has built up a thriving horticultural industry, because even the
smallest of inputs to local farmers can move quickly up the value
chain into food production and marketing.
3.4. To take this forward more broadly a
framework is needed. In Going for Growth, Syngenta proposed an
"Enterprise for Africa" forum in which all stakeholders—companies,
governments, donors, NGOs—could be brought together to focus
on agriculture and food production as a means of development and
building businesses.
3.5. A similar template could be used in
other sectors, and we are delighted that as Syngenta was working
on Going for Growth, Business Action for Africa (BAA) was born
out of the Commission for Africa's report. Syngenta is now working
closely with BAA on the agricultural focus of their work and look
forward to updating the Committee on the progress we make.
4. WHAT ARE
THE CONSTRAINTS
ON THE
PRIVATE SECTOR
IN DEVELOPING
COUNTRIES AND
HOW CAN
THEY BE
ADDRESSED?
4.1. The biggest constraint on the private
sector in terms of taking forward business in developing countries
is very often concern about political and economic instability
and hence investment predictability, poor physical investment,
weak institutions and a lack of trust. Companies are simply not
able to take the substantial investment risks involved: SMEs find
it hard to get up and running—this issue needs to be addressed
by radical action from local governments, not only to alter negative
perceptions, but to make fundamental changes to the social, economic,
legal and regulatory structures of their countries as set out
below.
Financial initiatives
4.2. Effective and transparent financial
support is essential to encourage not only international investment,
but also to foster national investment and the growth of new businesses
locally. Essential indirect financial support needs to be provided
by governments working through the following initiatives:
4.3. Improved investment laws which enable
both a dynamic micro-finance sector and the provision of venture
capital support for new start-ups;
4.4. Tax incentives for public/private partnerships,
research institutions, private enterprises and business incubators;
4.5. Reform of land tenure laws in order
to allow land to be used as collateral for credit;
4.6. Support for entrepreneurial projects
formed around the research outputs of public institutions.
Legislative and regulatory environments
4.7. In addition to the financial resources
set out above a sound and consistent legal and regulatory environment
is also essential to reduce bureaucratic processes, support markets
and maintain a stable infrastructure. By creating fair, transparent
and predictable systems and the institutions to manage them, local
businesses will have more opportunities to thrive and international
companies will have more incentive to invest. Factors to be considered
include:
4.7.1. Globally aligned legal standards,
4.7.2. Intellectual property rights,
4.7.3. Anti-corruption laws,
4.7.4. Incentives for international firms,
4.7.5. All of the above need to be strictly
supported and upheld.
4.8. Working within such a framework will
enable businesses and legal systems to develop a sense of mutual
respect, but it is also essential that the public sector is simultaneously
strengthened in order to ward against the persistent problems
of corruption.
4.9. In Going for Growth, Syngenta
cited an example of its work in Burkina Faso in this context and
it demonstrates aptly how private companies can work with governments
to strengthen their regulatory structure. Syngenta assisted the
Burkina Faso authorities with drawing up and putting in place
regulation for field trials of new seeds and provided support
and training for the regulatory team who were able to maintain
the legislative framework and monitoring the trials.
Encouraging SME growth
4.10. Up to 90% of businesses worldwide
are SMEs, which are responsible for creating the great majority
of new jobs. Therefore it is essential that the development of
this sector—as well as investment by multinationals—is
encouraged, especially in the spheres of science and technology
and the delivery of benefits to farmers and consumers. This is
because small technology start-ups in developing countries offer
a huge opportunity for entrepreneurship and employment and have
knock-on effects as drivers of structural change and economic
growth.
4.11. To encourage such entrepreneurship,
budding businessmen need incentives and support. Current challenges
include limited local demand, financial problems such as lack
of credit, a lack of business/management support (as well as a
lack of a skilled workforce), and problems accessing information
such as market intelligence and intellectual property rights.
Then of course there are also regulatory and market barriers and
inconsistent government policies, together with corruption issues,
as set out above.
4.12. In order to address these issues,
Governments, donors and companies need to consider remedies for
the market failures that affected previous attempts at entrepreneurship
and institute measures that promote the use of intellectual capital,
for example:
4.12.1. Promoting business and technology
incubators and business parks;
4.12.2. Creating production networks and
providing access to skills, educated labour and business services
and fair markets;
4.12.3. Develop special economic zones in
which firms can import goods duty free if they are also obliged
to export.
4.12.4. Improve physical and institutional
infrastructure.
Encouraging science, technology and innovation
4.13. Availability of funding for science
and technology is an increasingly global concern. The dramatic
reduction in public sector funding for R&D means that the
role of the private sector is more important than ever. By way
of example, as the largest global investor in agricultural research,
Syngenta invests around £450 million in R&D each year.
Inevitably though, much of this must be targeted at the major
existing markets where it will be possible to recoup the investment
and R&D costs.
4.14. Therefore it is essential that development
strategies factor in policy measures to promote and endorse R&D
innovation. Key issues that need to be considered include:
4.14.1. Better co-ordination between education
systems and institutions;
4.14.2. The role of existing R&D institutions
and options to establish new ones—and of course their funding;
4.14.3. Effective public-private co-operation
on research programmes;
4.14.4. Technology diffusion programmes and
mechanisms;
4.14.5. Encouragement of private investment.
5. HOW IS
THE PRIVATE
SECTOR ENGAGING
IN DEVELOPMENT?
5.1. Joint ventures are one of the key ways
in which Syngenta has worked in developing countries. A good example
is a joint seeds venture in southern Africa where Syngenta brought
the technology and offered its partner, a Zimbabwean seed company,
the scope to widen the market for its products. This was a synergistic
collaboration where the partner company benefited from the support
and guidance provided; Syngenta also gained through access to
a new market and seed varieties it had previously lacked.
5.2. Such partnerships are, however, limited
and often fail because a lack of capacity stops local businesses
becoming valid partners for large companies, while funding or
lending agencies who might support them are constrained by a lack
of suitable financial partners domestically.
5.3. Syngenta has therefore tried a number
of its own partnerships, experimenting with the partnership arrangements
used in other countries, by, for example, bringing together Syngenta's
distributors with the traders and financiers of the products produced.
By integrating the production chain in this way farmers are able
to receive pre-payment for their goods and thereby pay for the
inputs to achieve increased productivity.
6. CONCLUSION
6.1. In conclusion, Syngenta believes that
agriculture in African countries is under-performing. It could
and must play a greater role in growth, in the reduction of poverty
and the eradication of hunger. This will mean reducing constraints
and increasing incentives and opportunities for enterprise. It
will need new and purposeful partnerships between the public sector,
business and civil society. It will also require building trust
and leadership.
6.2. We believe an initiative along the
lines of an "Enterprise for Africa Forum" could help
by identifying opportunities, building partnerships and trust,
promoting good practice and by providing a new focus for solving
these key problems. This would lead to real progress for all the
major stakeholders involved.
March 2006
64 See http://www.smith_institute.org.uk/pdfs/Going_for_Growth.pdf Back
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