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CSR Europe – GAIN Working Lunch on Base of the PyramidBruxelles, le 8 mai 2008

Ladies and Gentlemen,

It is a pleasure for me to be with you today for an exchange on such an exciting subject matter as the Base of the Pyramid.
This is so for two reasons:
First because it is extremely important that business, not the least, have started to opt for new ways of looking at doing business with and in developing countries and in dealing with poverty situations.
Second, because this happens in a context where donors and developing countries have realized that public intervention can only be a part of the solutions for the multiple problems with which developing countries and their populations have to cope.
Indeed, several decades of development aid did not bring the results we hoped. Donors, including the Commission, concluded that we could not go on in the way we did. Therefore we took a number of important decisions over the past years, both at the international and the EU level. Let me briefly go through them :
First of all, in 2000, donors defined specific goals in order to increase the focusing of their aid and to make its objectives more concrete: they adopted the Millennium Development Goals, to be reached in 2015.
Today we know that certain developing countries may reach most or several of these goals, but several countries will not. Many African countries are in this last category.
Second, in 2003, donors committed themselves in Monterrey to increase substantially the levels of financing of aid. At the EU level, Member states committed themselves to increase development aid to 0.7% of their Gross national Income in 2015, with an intermediate objective of 0,51% in 2010. The 2010 objective corresponds to some additional 30 billion euros per year, 90% of which is to come from their national budgets.
Thirdly, the donors adopted in 2005 the so-called Paris declaration in order to make aid more effective :
- better donor coordination
- harmonization of procedures
- alignment on the priorities, institutions and systems of the recipient countries, and to ensure leadership of the recipient country.
Part of the Paris declaration is about increasing sector-wide programmes and increasing budget support.
In order to cope with that on the EU side, the Commission has convinced the Member states in 2005 to agree on development policy and priorities, the so called European consensus; and in 2007 to agree on more and better division of labour at the recipient country level.
All these changes cannot take away the fact that effective results in development will require much more than only public development aid :
What is also needed is a strong role of the private sector as being the most essential engine of economic growth.
This recognition has been at the basis of the global Aid for trade strategy agreed some years ago alongside the ongoing international trade negotiations at the WTO. It was recognized that developing countries needed to overcome many barriers to make their private sectors compete and to attract investments.
Aid for trade is there to tackle the numerous supply side constraints:
infrastructure, transport, energy, water and telecommunications.
The European Commission has been a major donor for infrastructures. It will continue to be so, through the bilateral programmes financed at the country levels and through horizontal initiatives, in particular the EU Africa Infrastructure Trust fund. This Trust Fund was set up with the European Investment Bank. It should help us to leverage even more aid for the building of infrastructures.
Other barriers relate to the business regulatory environment. Many regulations and procedures need to be changed, modernised and simplified, including for customs and other trade facilitation measures.
An important problem is furthermore that the markets in many developing countries are simply too small to make investments attractive. Therefore the creation of larger, regional markets is a must and has been one of the Commission's priorities since quite some time already.
As I have made clear at other occasions, I believe that the Economic Partnership Agreements can play an important role in getting there, in Africa in particular.
Another very important constraint for developing countries, is the lack of skills, at all levels. You also suffer from this constraint to develop your activities. Donors, like the European Commission, can assist in building capacities, but the private sector's assistance is equally indispensable as many of the skills are needed there and need to be adapted to what is required for the private sector's development.
All these constraints are also the background for what you have called the Laboratories on Sustainable Business at the "Base of the Pyramid", also called "BOP" which brings us together today.
These "BOP initiatives" are interesting because: they are looking for opportunities to set up business in a sustainable way, at scales and with approaches adapted to local circumstances. They aim at working with local businesses and partners, also NGOs, in a way to allow them to expand and to structure themselves. These can add much needed value through local production and transformation processes, thus generating jobs and revenues.
What is particular for BOP initiatives, compared to corporate social responsibility initiatives in general, is that they are about business, profitable business. The initiatives are not limited to the food sector and include the development and use of promising microfinance and other financial schemes and institutions.
What is needed to develop these initiatives? It may be that shareholders need additional encouragement to support such initiatives of their companies. And to accept that it requires a more long term approach than they may have been used to adopt, in terms of the time period allowed for profit generation by new business activities.
But, the advantage I see, is: where these initiatives are undertaken, it is to be in the market place for a long time and as solidly as possible; using company and brand names to establish reputations.
Possible role of the European Commission and other donors:
CSR Europe has started discussions with my services on possible synergies and ways to collaborate. Further meetings are planned for June and September. Of course, I welcome and encourage these discussions. The process up to now has been focusing above all on mutual understanding of what each is doing. This takes time because our respective organisations work according to a very different logic. In the Commission, many have been inspired by almost anti-business philosophies. We also have complex procedures...
The meetings of June and September will still be needed to improve on that as well.
But what has already become clear is that many of the constraints which prevent BOP initiatives to be undertaken or to be successful are also the constraints on which the Commission and other donors are working through the programmes they finance :
Be it through private sector development programmes or trade related assistance in order to help facilitating trade and business creation and development,
be it through infrastructure programmes, vocational training programmes or other types of programmes;
be it on governance and public financial management aiming to improve the environment in which people and companies can develop and scale up their capacities and possibilities.
The interventions financed by the European Investment Bank with "donor money" from the European Development Fund, have similar aims where it intervenes to improve access to finance to SME's as well as to participate in the financing of important infrastructures.
The coming meetings at work level must also help us to clarify how public donors and private sector could closer work together.
As I understand it, it goes beyond the simple co-financing of initiatives of the type the Commission already does since a number of years in the field of NGO managed fair trade projects for example.
I see this lunch discussion as an opportunity to explore further the potential for synergies. In this connection, we are of course aware of similar projects financed by USAID for example, which also has financed some BOP initiatives involving US companies.
We will need to clarify a number of issues, including the question whether the Commission is better placed than the EU Member states to engage directly, financially in projects involving specific companies, not the smallest ones moreover.
In that respect, it will also be useful to see what types of initiatives could be proposed by private sector, involving groups of companies for example. And coherence which may be needed between our approach to BOP initiatives and that to other private sector initiatives aiming at sustainable ways of production.
Aspects which are also to be taken into account are the Commission's strive to intervene through larger, sector wide programmes, its wish to play the card of division of labour, not only as between donors but also in the full respect of the comparative advantages of each of the actors, including private sector.
I would like to conclude my intervention by thanking you Mr Davignon and Mr Nadoo for having invited me, and for having provided me with the opportunity to discuss with you on the essential role to play by the private sector in generating growth in developing countries, both through BOP but also initiatives.
I trust that our exchanges and the coming meetings with my services will be fruitful. They should lead to better mutual understanding of our respective roles, and more importantly to achieve a realistic identification of potential synergies.
I am sure that the first draft of the working paper you transmitted to us yesterday will be a useful further contribution to the process you initiated with us.