Memorandum submitted by the World Business
Council for Sustainable Development (WBCSD)
1. WHAT CAN
THE PRIVATE
SECTOR DO
TO ALLEVIATE
POVERTY?
The concept of a desirable and tradable commodity,
be it a raw material or the provision of a service, is a concept
that is several thousand years old. The "market" then
was normally the bazaar or the village where individuals and/or
groups carried out the transaction. Today the world is a much
more complex place where large multi-national corporations buy
and sell goods and services in a global market place where the
transaction may never involve a face to face interaction. The
principle however has not changed, the innovative and entrepreneurial
spirit that drove individuals then to discover new products for
established markets, as well as search for new and ever more remote
markets to conduct the trade, is still key to economic growth
and wealth creation today. The methods however, then as now, were
not always seen as fair and responsiblebut globalisation
today does not have to be the new form of colonisation. Globalisation
can be all about making the World's markets inclusive and accessible
for all.
In today's world it is important to remember
that the private sector represents everyone from the street trader
in New Delhi to large multi-national corporations. The common
factor when it comes to poverty elimination is the nimbleness
and innovative approaches these different entities take to grow
and penetrate the markets in the developing world. For larger
entities this includes how they behave in localizing their supply
chains and service provision to maximize the benefit to the local
communities in which they operate. The bigger the entity, the
more potential benefit it can drive if the growth is done in a
responsible and sustainable way. This is not just about providing
direct employment, it also creates local purchasing power that
then drives the growth of other Small and Medium sized Enterprises
(SMEs). This benefits both the wage earners and their families
such that they can afford health care and education for their
children, thereby also benefiting future generations.
2. WHAT ARE
THE DIFFERENT
TYPES OF
PRO-POOR
GROWTH?
There are many types of pro-poor business models
and these are described in the attached "Business for Development"
publication. The key however is doing business with the poor in
ways that simultaneously benefit low-income communities and also
benefit the company engaged in the initiative. This creates a
virtuous circle and an enterprise that is sustainable for the
long term because it is not dependent on donations to keep it
alive. It also stimulates demand for the same product or service
and hence a market for other SMEs to take advantage of.
3. WHAT ARE
THE CONNECTIONS
BETWEEN GROWTH
AND PSD?
The two are joined at the hip, economic growth
cannot be maintained without a private sector driving and growing
the market place.
4. WHAT ARE
THE CONSTRAINTS
ON THE
PRIVATE SECTOR
IN DEVELOPING
COUNTRIES AND
HOW CAN
THEY BE
ADDRESSED?
This is covered extensively in the attached
"Business for Development" publication[167].
Basically the contribution of the private sector to development
can be accelerated BUT only if there is an enabling environment.
This is as true for SMEs as it is for large multi-national corporations.
The members of the WBCSD have three broad priorities:
Effective legal and regulatory frameworks;
A supportive environment for SMEs
including access to training and finance; and
Investments in core infrastruture
The members of the WBCSD urge policy makers
to do the following:
Leverage Overseas Development Assistance
to attract more Foreign Direct Investment to developing nations.
This investment in building supportive framework conditions will
pay dividends as it has a significant multiplier effect on economic
growth and local development.
Focus on incentive-driven aid. Aid
should be targeted at developing nation governments that are demonstrating
commitment to, and progress on, good governance. For countries
gripped by serious turmoil, aid should be directed at bottom-up
initiatives carried out in partnership with relief NGOs and/or
the private sector.
Involve the private sector in development
strategies. For instance, when governments identify development
priorities at the country level and formulate poverty reduction
strategies, the private sector should be systematically involved
early in the process.
Make energy provision a priority.
The adequate provision of energy in developing nations is crucial
to underpinning the achievement of all the Millennium Development
Goals.
Open up international markets to
goods from developing nations, enabling developing nations to
strengthen their international trade, stimulate growth and so
create wealth.
Individual host governments in developing
nations should work to improve the framework conditions within
their countries to provide a `safe space' that inspires confidence
to both local and overseas investors. This favors innovation,
entrepreneurship, investment and sustained economic growth. These
improvements will benefit foreign investors, local entrepreneurs
and most importantly, people at all levels of society, especially
the very poorest.
Key areas for collaborative action to improve
framework conditions:
Business can take a lead in improving framework
conditions through:
Transparency initiatives to strengthen
governance;
Active contribution to policy design.
Sound government leads by:
Upholding and promoting the rule
of law;
Protecting human rights and equality
before the law;
Protecting clear tradable property
rights;
Rooting out corruption at all levels;
Paying adequate salaries to public
servants.
Government, business and civil society can work
together to:
Root out corruption across the board;
Raise capabilities of public servants.
5. WHAT TYPE
OF DONOR
INTERVENTIONS HAVE
STRONG LEVERAGE
IN CHANGING
THE BUSINESS
CLIMATE (IN
PARTNER COUNTRIES)
TOWARDS PSD AND
PRO-POOR
GROWTH?
See answer to question 4 above and comments
to question 7 below
6. HOW IS
THE PRIVATE
SECTOR ENGAGING
IN DEVELOPMENT?
Several case studies presenting what WBCSD member
companies are actually doing toward achieving the Millennium Development
Goals are included in the Business for Development publication
that is attached. The WBCSD is also working actively with its
Network of Regional Partners in the Developing world to find ways
to accelerate this contribution and create a more enabling framework.
The private sector is recognised more and more
as a potential partner by National and International Government
organisations as well as development agencies. However there is
still not enough trust between parties. This can get in the way
of progressive dialogues leading to action.
7. WHAT AID
INSTRUMENTS CAN
BE USED
BY DONORS
TO ENCOURAGE
PSD? PRIVATE BENEFITS
VERSUS BENEFITS
TO SOCIETY
(PUBLIC GOODS)HOW
MUCH IS
THIS AN
ISSUE?
See answer to question 4 above but aid needs
to be focused and incentive driven.
Corporate Social responsibility and philanthropy
offer a source of funding but this will not have the same materiality
as a real business venture with the capacity to grow. Specific
actions to improve infrastructure and SME capacity building are
given overleaf.
Key areas for collaborative action in Infrastructure:
Business leads in infrastructure development
through:
Providing the capacity to operate
and maintain infrastructure in a cost-effective way.
Sound government leads by:
Setting and maintaining sound economic
policies;
Increased targeted investment;
Upholding the rule of law and protecting
property rights;
Seeing projects through to effective
completion;
Renewing and maintaining existing
infrastructure;
Ensuring new projects benefit all
people, including the very poorest.
Government, business and civil society can work
together to achieve:
Appropriate public-private partnerships,
electrification, safe drinking water and sanitation, telecommunications
and other basic infrastructure.
Key areas for collaborative action in SME capacity
building:
Business leads in local SME capacity building
through:
Direct investments in equipment and
technical assistance;
Workplace organization;
Management and employee training;
Training in financial management;
Enhanced access to information;
Compliance with technical requirements;
Identification of foreign partners;
Training in tender process participation;
Facilitating access to finance.
Sound government leads by:
Provision of primary and secondary
education;
Provision of vocational training;
Providing incentives for foreign
investors to work with local suppliers.
Government, business and civil society can work
together to:
Creating partnerships to promote
the training of skilled workers;
Facilitate access to finance.
February 2006
167 Not printed. See http://www.wbcsd.org/web/publications/biz4dev.pdf
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