House of Commons - International Development

Select Committee on International Development Written Evidence

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 responsible—but 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.