World poverty cannot be reduced without the help of business [Archives:2005/879/Opinion]

September 22 2005

Heads of state and government from around the globe will today assemble at the 2005 World Summit of the United Nations to judge the progress made during the last five years toward the goals of human betterment set by the international community at the 2000 UN Millennium Assembly ? the Millennium Development Goals. They will also seek to agree upon the steps that still need to be taken if these goals are to be fully achieved. Particular attention will be given to the all-important goal of reducing the level of poverty by 50 percent by 2015.

What has all this to do with business?

The essential role of the private sector in this effort has been widely recognized. As UN Secretary-General Kofi Annan emphasized, “It is the absence of broad-based business activity, not its presence, which condemns much of humanity to suffering. Indeed, what is utopian is the notion that poverty can be overcome without the active engagement of business.”

Without the economic growth and job creation that result from a vibrant private sector, there can be no sustainable poverty eradication, now the overriding development priority of the world community.

However, the contribution of the business community to the “millennium development process” is heavily dependent on the attitude and actions of government toward it. It can make its full potential contribution only if it can operate in an appropriate public policy framework ? in an open market economy and regulatory system that encourages trade, investment and enterprise, respects human dignity and individual freedom, protects property rights and does not tolerate corruption.

The Monterrey Consensus achieved at the United Nations International Conference on Financing for Development in 2002 placed the mobilization of domestic resources in the forefront of its “agreed actions for development”. And properly so, with private domestic capital formation being the largest source of new investment in developing countries.

Three key areas of the domestic legal and regulatory framework have a strong impact on the business environment and warrant particular attention:

– Opening and closing a business. Bureaucratic requirements to start up a business are excessive and time-consuming in many countries and laws and regulations often restrict the ability of enterprises to restructure or shut down.

– Property rights. In many developing countries a large part of land property is not formally registered, limiting accessibility to credit and improved land values, especially for small enterprises and the informal sector.

– Effective enforcement of contracts and protection of creditor rights, supported by a well-functioning, independent court system.

Providing a conducive environment at both the macro and micro levels for domestic private sector growth will also have the important by-product of helping to attract foreign direct investment (FDI) and other productive international private capital flows. An enabling domestic environment is essential for both.

Even in these circumstances, for a variety of reasons, private domestic capital formation in the least developed countries (LDCs) and private capital inflows will fall substantially short of the levels required to meet minimum Millennium Development Goals, certainly those of poverty reduction. These countries will continue to need special attention and assistance.

One contribution by the global business community represented by the International Chamber of Commerce (ICC) is through the Investment Advisory Council (IAC), an international forum established under the joint aegis of the UN Conference on Trade and Development (UNCTAD) and ICC. IAC brings together senior government officials from LDCs and senior businessmen from around the world to examine innovative ideas and projects aimed at encouraging and facilitating foreign investment in them.

Another activity that reflects business' commitment to development is ICC's work with UNCTAD to produce investment guides for LDCs. The aim is to make selected LDCs better known and more attractive to foreign investors by bringing together two parties with complementary interests: companies that seek new locations and countries that seek new investors. Investment guides have already been published for Uganda, Bangladesh, Ethiopia, Mozambique, Mali, Mauritania, Nepal and Cambodia; guides for Tanzania, Kenya and East Africa are being released this month. Benin, Eritrea, Guinea-Bissau, and Madagascar have also requested guides.

Business has a large self-interest in helping achieve the Millennium Development Goals. Business thrives where society thrives. Prosperous companies can contribute effectively to the improvement of social conditions by creating jobs and economic growth, and benefit from higher living standards in the societies where they operate.

From a purely business perspective, societies cannot be mired in poverty if new business opportunities and new markets are to be created. For efficient operation, companies need a healthy and educated workforce. For profitable operation, companies need prosperous consumers.

For all these reasons, business represented by the International Chamber of Commerce has been deeply and constructively engaged in the many UN and other meetings and conferences that have established a global partnership for development and identified its interlinked priorities.

On the occasion of the UN summit, ICC reaffirms the support for the overriding goal of poverty reduction that prevails in the global business community which it represents. It will continue to engage with governments, communities and other stakeholders in pursuit of the UN's development objectives. Its constituents look forward to bringing their vast real world experience to this effort.

Guy Sebban is Secretary General of the International Chamber of Commerce