Memorandum submitted by Mung'omba Associates
My name is Wila Mung'omba, 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 package 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.
Wila Mumgomba
February 2006
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