FINANCING FOR DEVELOPMENT
Governments must develop administrative infrastructure
> BY DEVIKA SAHDEV
Copyright © 2002 by The Earth Times. All rights reserved

"If I had anything to request on behalf of the private sector for ODA," said Maria Livanos Cattaui, Secretary General of the ICC "they [donors and governments] would pay a lot of attention to helping to build the abilities and skills of administration. The people that we laugh at, bureaucrats, well they're very important in customs control, in taxation bureaus, in legal implementation. These are enormously important functions of a government and they need a lot of money to help to prepare them."

There has been a strong business presence, led by the ICC, at the International Conference on Financing for Development in Monterrey. The International Business Forum in Monterrey held a series of sessions on topics ranging from corporate restructuring to the need for good governance to encourage foreign direct investment (FDI). The private sector was involved in the preparatory process for this conference, forming a major part of the UN's multistakeholder approach to formulating the final outcome document, now the Monterrey Consensus. "We prepared important comments specifically on different parts of the draft," said Cattaui. "A lot of the comments we put in were taken very seriously in the final wording. Indeed we were quite honored and pleased to be a part of this process in a very integrated substantive way."

One of the major concerns of the business community-one that Cattaui said was taken seriously by governments and the UN-was the importance of concentrating on local entrepreneurship. "The input we put in and I think was underlined most, was of building on the strengths of local markets, on growing capital in countries so that it stays in countries," she said. "The biggest problem in many of the LDCs, and even in some of the middle-income countries, is that the policies are such that the local money flees the country and this is absolutely devastating. We're hoping that with local governments we can find ways to improve conditions so local money stays, so local entrepreneurs can build."

Local business is essential to domestic development because it helps generate wealth, keep that wealth within the country and also pave the way to attract international investors, said Cattaui. If basic policies and regulations are not in place in a country, it is hard to convince business to invest.

"Business cannot pretend to be government," said Cattaui. "It cannot provide basic service in the public good like primary education, real administrative training. In the countries where these services are totally lacking, where there is little regard for standards of any kind-labor standards, environmental standards, standards of behavior. And this is where you do not get investment; you do not get healthy competition of parties to prevent any kind of monopolistic tendencies or any other discouragement to a strong functioning market."

While business can and will come into a country under the right circumstances, it is imperative that governments, along with other intergovernmental organizations (IGO) and international institutions, ensure that the right policies and regulatory processes are developed to encourage their investment. But the private sector cannot wait for conditions to be perfect before they invest, said Cattaui. "The mandate that we have for the business community is that as you build up a business community you build up the economic strength and wellbeing of people that allow them to demand these services of the government." "Governments have to realize the role that they have to play," added Cattaui. "It is our full belief that governments count enormously, more than ever. They have all power to become good governors and there are many international institutions ready to assist and help them on that path-not dictate to them, because it's got to be governance coming from within. As they start on this path they're accompanied by local investment and international FDI."

Cattaui stressed that while the private sector will play its role in generating wealth and facilitating development, it cannot be seen as a philanthropic institution. Business must generate profits. "There is a place for business philanthropy," she said. "All the big foundations-Ford Foundation, Rockefeller Foundation-they were built first on the money made by business. There is a place for them. But the most efficient and long-term work is not philanthropy. For me the best thing that business can do is what it does best-build wealth, provide jobs, pay taxes so there is money in the public till to build value, to provide the training, skills and management expertise so that local partners build around an international investor."

These international investors are not always the expected McDonalds, Microsofts and Intels of the world. Many of the international investors in developing countries are actually small to medium-sized companies, often from emerging markets themselves said Cattaui.

"Take South Korean or Indian companies," she said. "They're all over South East Asia. They're willing to take the risk, they know the conditions, they can handle the business expertise, and they know how difficult it is. I think we're overlooking this. You'll be surprised how many companies I find from emerging markets that have moved upstream."

The business forum, which is running side events through the conference, has given the private sector an opportunity to voice concerns and give input to the high level delegates in Monterrey. "I think there is much more going on that we haven't uncovered and much more that we can use practically," said Cattaui. "I'm not starry eyed; I'm very hard-nosed on this one. We need to build the wellbeing of people and we cannot do that with words, we've got to do that country by country, sector by sector, company by company, effort by effort, case by case."