PRESS CONFERENCE ON REPORT ‘UNLEASHING ENTREPRENEURSHIP: MAKING BUSINESS WORK FOR THE POOR’

PRESS CONFERENCE ON REPORT ‘UNLEASHING ENTREPRENEURSHIP:

MAKING BUSINESS WORK FOR THE POOR’

“We need to build a true development coalition in which all the actors play mutually supportive roles -- governments, public development agencies, the private sector, civil society organizations and labour unions”, Kofi Annan, United Nations Secretary-General, said this afternoon at the launching of the report of the Commission on the Private Sector and Development, entitled “Unleashing Entrepreneurship:  Making Business Work for the Poor”. 

The document was presented to the Secretary-General by the Commission’s co-Chairs, Prime Minister of Canada Paul Martin and Mexico’s former President Ernesto Zedillo.  Also participating in the presentation was the Administrator of the United Nations Development Programme (UNDP), Mark Malloch Brown.

Calling for targeted policy reforms and initiatives to promote local businesses that are critical to the eradication of poverty in the developing world, the report draws on the expertise of the Commission’s 15 members, who include internationally recognized leaders in business, development economics and government from both the industrialized and developing countries. 

Mr. Annan pointed out that in the work for development the United Nations had only sporadically tapped the power that could be drawn from engaging the private sector.  Convening the Commission nine months ago, he had challenged it to identify ways to engage the private sector in developing countries, with a view to unleashing the entrepreneurial and creative potential of their own people.  And he was “delighted that the Commission has risen to the task”.

As time was a critical factor in the battle against poverty and in the work to reach the Millennium Development Goals, the Secretary-General said he was heartened that the launch of the Commission’s recommendations would be followed by a plan of action and a set of initiatives, to be developed further as catalysts for action.

Those initiatives, to be announced in the coming months, would include projects driven by the United Nations, and others conceived and managed by the Organization’s development partners, members of the Commission, the private sector and international development institutions.  The report also in many ways complements the efforts of the Global Compact -- the United Nations’ corporate citizenship initiative, which brings together companies, non-governmental organizations and trade unions, with the common purpose of fostering action in support of universal values.

Presenting the report, Prime Minister Martin said that it was more than an analytical treatise or a collection of facts and statistics -- it was a “call to action”.  As spelled out in the document’s opening paragraph, the most pressing challenge of the twenty-first century was to end poverty; to realize, in human terms, the aspiration of the Millennium Development Goals.  The 1.2 billion people -– one fifth of the people on earth -– living on less than $1 a day was a staggering number.  “Imagine row upon row of people, of all ages, of all ethnic

makeup, representing the full breadth of humanity, living in abject poverty”, he said.  That was the moral impetus behind assisting the developing world.

For too long, he continued, development specialists had overlooked or downplayed the role of entrepreneurship in creating economic growth, providing employment and increasing productivity.  Local small businesses and the informal, village-based micro-enterprises were the key players in the development effort.  They were the local employers.  They were driven by the energy, innovation and dreams of a single person, a single family, or a small firm starting from scratch.  “All finding their niche, creating local employment; paying local wages, meeting local demand.  All with a potential to grow, to forge linkages with other businesses, small and large, and to drive the national economy forward as they expanded to new markets.”  Unleashing local private enterprise –- supported by strong, indigenous democratic institutions -- was a new pillar of development. 

He said that for small businesses to flourish and provide the jobs and income to build a more equitable and prosperous society, they needed cross-cutting partnerships on the domestic and international levels, which should involve micro-entrepreneurs, multilateral development institutions, civil society and large-scale private sector companies.  Here the international community could assist.  Through new ideas, best practices, innovative approaches –- many of which were outlined in the report -– it was possible to stimulate new thinking and new action among all those who had a role to play in development.

Local private businesses needed predictability, assurances of even-handedness and a level-playing field, he said.  They also needed the rule of law and a regulatory regime which aimed to facilitate, rather than stifle, entrepreneurial activity.  He also noted the need to support knowledge and skills acquisition in developing countries.  Multinational corporations with branches in developing countries could play an important role by mentoring, training and assisting local businesses through their knowledge and expertise.  It was possible to do more by facilitating linkages among multinational corporations and small- and medium-sized enterprises.

Also emphasizing the importance of the private sector’s contribution to sustained economic growth, Mr. Zedillo said that one could find small entrepreneurs working hard to provide for their families in “any shantytown or village in a developing country”.  As useful as that version of the private sector was in providing some employment and income to large masses of people, however, it was not enough to defeat their poverty. 

It was a strong proposition of the report that in many developing countries the private sector failed to rise to its potential because property rights weren’t truly protected and government regulation of businesses was excessive and of bad quality.  The obstacles included the lack of legal status and title to property, red tape, difficulties in obtaining credit or registering a business, cumbersome taxation rules and corruption.

Needless to say, effectively addressing those issues was not all that a country must do to overcome underdevelopment, he continued.  Other key elements, such as good governance, macroeconomic discipline, open markets and sufficient investment in physical and social infrastructure, must be put into play.  In the case of poorer countries, generous international assistance was certainly needed.  However, if entrepreneurship was not allowed to flourish, progress was almost impossible, even if the other ingredients were in place.

The message was precise and should be compelling:  poverty would remain intractable in countries lacking a vigorous domestic private sector.  Therefore, the impediments to its development must be removed.  To that end, the report outlined a series of policy recommendations for the governments of the developing countries themselves -– where the primary responsibility indeed lay  –- as well as actions to be taken by the multilateral institutions, civil society organizations and the private sector itself.

Of course, he added, the document in no way intended to provide a blueprint for private sector development in every developing country.  The members of the Commission had just tried to describe the general sense of direction that the reform process must follow in the pursuit of a domestic private sector that truly served to expand opportunities for the poor.

Mark Malloch Brown, Administrator of the UNDP, added that the Commission’s report was part of the continued “intellectual revolution” at the United Nations.  It was a reflection of the Organization’s picking up important issues, which were critical to the achievement of the Millennium Development Goals.  Unless there was a vigorous private sector in poor countries, those goals would not be met.  For the UNDP, the report added “another leg to the table” of its total vision of the development strategy, and the Programme was proud to have been able to support it.  It showed how to build businesses “from the bottom up” in poor countries, creating jobs and services for the poor in the process. 

Responding to a question regarding the responsibilities of the multinational private sector, Mr. Martin said that while the focus of the report was on the development of an indigenous domestic private sector, entities of the multinational private sector could provide mentoring and training, for example.  Also, large multinational corporations in their home countries benefited from local business sources.  When operating in developing countries, they should also seek to source from local enterprise and facilitate its access to large financial and consumer markets. 

Mr. Zedillo added that there was no conflict between domestic and multinational private sectors.  There were enormous synergies, which, unfortunately, were sometimes not taken advantage of.  It was necessary to create a proper environment for the local businesses to prosper.  Domestic reforms were needed, and it was necessary to establish proper rules and institutions in that respect.

Asked which of the two countries –- Canada or Mexico -- could be cited as an example for developing countries to emulate, Mr. Zedillo replied that the report had not set an objective of making comparisons and measuring indicators of the business environment in every single country.  At the country level, it was important to see what kind of local adaptations could be implemented in order to emulate the best practices.

Mr. Martin said that within Canada he could cite several examples where the provinces with a long history of local entrepreneurship became much wealthier than others.

A correspondent asked what corporations intended to respond to the report’s recommendations with particular initiatives.  Mr. Malloch Brown replied that Hewlett-Packard Company already had a major programme on the “bottom-of-the-pyramid” business development and services provision.  In follow-up to the work of the Commission, the UNDP would be looking at ways to work with individual companies.  It also had partnership relations with Microsoft and many others.

The idea was to use the report as the basis for future action, he said.  Both within the Commission membership itself and through today’s launch appealing to a wider number of businesses, including members of the Secretary-General’s Global Compact, he hoped to see “plenty of pick-up of the recommendations of this report”.  It was important to create a virtuous circle where multinational corporations would act not as destroyers of local business, but as partners and generators of local business development.

Asked about the negative effects of globalization, Mr. Martin said that there was no doubt that the gap between the rich and the poor had actually increased.  In today’s world, the old answers did not apply anymore.  It was for that reason that the Commission’s report had sought to find new approaches to the problem of globalization.  Growth had to come from local vision, and the response of the great corporations in the developed economies should be positive in that respect.  It was also necessary to look at the reasons why the developed economies had done so well.

Looking at the situation from the point of view of a developing country, Mr. Zedillo added that, in the developing world, some countries had been very successful in achieving rapid growth and overcoming poverty over the past 20 years.  Indeed, there were some factors under the control of the developed countries and multinational corporations that influenced the development of poor countries.  But, it was important to remember that primary responsibility for development lay with the developing countries themselves.  Rich countries should do their part, but, more frequently than not, policy failures could be found in the developing countries themselves.

Responding to a question about Canada’s plans for the implementation of the Commission’s recommendations, Mr. Martin said that they would become an important part of the country’s foreign aid thrust.  In fact, later in the day, Canada was going to announce two initiatives that flowed directly from the report.  Canada had agreed to work with the United Nations in putting together “a sort of brokerage arrangement” to promote development of the private sector in developing countries.  The country also intended to fund a local enterprise centre in Bangladesh, which would provide “one-stop shopping” for indigenous small businesses there.

The report emphasized the importance of the rule of law, a correspondent remarked.  Given the history of abuse in Mexico and the prosecution of the brother of his predecessor, would Mr. Zedillo support applying the rule of law to former presidents?  Mr. Zedillo replied that nobody should be above the law.  That was the rule during his presidency, and it was always the case in Mexico.

* *** *