Strengthening the Banks Anticorruption Efforts: Scaling Up to Tackle Corruption Risks

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Increasing Domestic Impact of Investments
Through Linkages

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Broadening Domestic Impact

• The impact on the domestic economy of large-scale
  investment varies significantly
• In part depends on the intrinsic
  capital-intensity of the sector
• Promoting linkages to domestic firms can enhance
  and broaden the impact of major investments

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Benefits of Linkages

• For Large Firms
• Reduced procurement, production, and distribution
  costs
• Improved integration in new overseas markets
• Enhanced reputation and local license to operate
• For Small-Medium Enterprises (SMEs)
• Access to new clients and markets
• Enhanced skills, standards, and capacity
• Acceleration of knowledge transfer and technology
  upgrading
• For Local Communities
• Stimulation of economic activity, increased
  employment opportunities, and local or regional
  competitiveness
• Added local purchasing power

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Approaches to Promoting Linkages

• Building SME Skills and Capacity
• Procurement Opportunities
• Access to Information
• Access to Finance
• Corporate Social Responsibility
• Leveraging Global Standards

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Building SME Skills and Capacity

• Facilitating training, mentoring, and consulting
  for SMEs over a period of time
• Mozlink, an IFC program in partnership with CPI.
• Program has had a significant impact on SMEs and
  the local economy
• Built the capacities of 45 local SMEs.
• Mozal spends 17 million with 250 Mozambican
  companies monthly.
• The success of MozLink encouraged four
  corporations in MozambiqueMozal, Sasol, CDM, and
  Coca-Colato partner with IFC to design a
  three-year SME development and linkages program,
  MozLink

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Building SME Skills and Capacity (cont.)

• Standardized training modules can be very
  cost-effective. IBM IFC have developed an
  online SME Toolkit containing self-guided
  modules.
• Martins Group in Brazil has provided online
  training to 11,000 people through its Martins
  Retail University.
• A number of companies have developed best
  practice guidelines specific to particular
  industries or business activities.
• Unilevers Sustainable Tea Initiative provides
  guidelines for tea farmers to produce crops with
  high yield and nutritional quality, and low
  environmental impact.

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Procurement Opportunities

• Firms can establish internal programs that aim to
  increase engagement with SME suppliers
• ExxonMobil in Chad is an example
• The National Content Strategy encourages
• Contracts to be broken up into manageable sizes
• Shorter payment cycles
• Longer-term contracts
• The Local Business Opportunity Program has helped
  develop local suppliers through
• Supplier assessment program, which found
  significant gaps in accounting, risk management,
  HR.
• In response, training initiated in IFC managed
  facility

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Access to Information

• It can be difficult and costly to identify the
  right SMEs, and especially costly for large
  numbers of small transactions
• One solution is dedicated staff or departments
• Anglo American has created Anglo Zimele to
  identify and perform due diligence on potential
  SME suppliers.
• In Chad, ExxonMobil has developed supplier
  databases for 60 potential suppliers, as well as
  1,000 additional SMEs surveyed by IFC/Chamber of
  Commerce.
• SBP shares supplier databases with large firms in
  South Africa, Tanzania, and Malawi.

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Access to Finance

• Financial services are critical to SMEs success
  in scaling up production and upgrading
  technology, but SMEs often regarded as high risk.
• Financing coupled with technical assistance for
  entrepreneurs can help promote access to finance.
  
• Mozambique Small and Medium Enterprise
  Initiative)
• Programs can also catalyze lending to SMEs
  through providing risk guarantees and training to
  financial institutions
• Madagascar Partial Risk Guarantee Program
• BP Supplier Finance Facility in Azerbaijan

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Corporate Social Responsibility

• Ensures management commitment to domestic
  linkages
• Local content targets become a part of Managers
  performance assessment
• Social Responsibility Agreements can help assure
  balanced expectations on all sides, and provide
  performance measures
• Newmont in the Ahafo mine in Ghana has involved
  traditional, local and regional officials in its
  Social Responsibility Agreement, which will
  underpin a broader community development plan
• Diavik Diamond Mines (Canada) socio-economic
  monitoring and participation agreement signed
  with authorities and indigenous groups outlining
  companys commitments to local SME development
  and linkages

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Leveraging Global Standards

• Increasingly global accreditation bodies are
  working with multi-nationals to ensure compliance
  with social and environmental standards

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International Standards

• ISO Standards on Environment
• Extractive Industry Transparency Initiative
• UN Compact

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Challenges and Lessons

• Securing internal commitment within large firms
• Plan early, plan for the long-term, consult
  widely, and be prepared to adjust
• Managing expectations and reducing dependence
• Strengthening public policy environment
• Customize to fit industry, investor, and local
  context
• OBRIGADO!