UNLEASHING ENTREPRENEURSHIP Making Business Work For The Poor

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UNLEASHING ENTREPRENEURSHIPMaking Business Work
For The Poor

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WHO COMMISSION CO-CHAIRS, plus
CO-CHAIRS The Right Honourable Paul Martin Prime
Minister, Canada Ernesto Zedillo Director, Yale
University Center on Globalization Former
President, Mexico EXOFFICIO MEMBERS Mark
Malloch Brown (United Kingdom) Administrator,
United Nations Development Programme Maurice
Strong (Canada) Special Adviser to the
Commission
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7 PUBLIC LEADERS THINKERS, and
Eduardo Aninat (Chile) Former Deputy Managing
Director, International Monetary Fund Jorge
Castañeda (Mexico) Former Minister of Foreign
Affairs, Mexico Distinguished Professor of
Politics Latin American Studies, New York
University Luisa Diogo (Mozambique) Prime
Minister, Mozambique Former Minister of Planning
and Finance, Mozambique Peter McPherson (United
States) President, Michigan State
University C.K. Prahalad (United States) Harvey
C. Fruehauf Professor of Business Administration,
University of Michigan Business School Juan
Somavia (Chile) Director-General, International
Labour Organization Hernando de Soto
(Peru) President, Institute for Liberty and
Democracy, Peru
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8 CHIEF EXECUTIVES
Carleton Fiorina (United States) President and
CEO, Hewlett - Packard Company Rajat Gupta
(India) Senior Partner Worldwide, McKinsey
Company Anne Lauvergeon (France) Chairman of
the Executive Board, Areva Group, President and
CEO, Cogema Jannik Lindbaek (Norway) Chairman,
Statoil ASA Alan Patricof (United
States) Vice-Chairman and Founder, Apax
Partners Kwame Pianim (Ghana) CEO, New World
Investments Robert Rubin (United
States) Director and Chairman, Executive
Committee, Citigroup Former Secretary of the
Treasury, United States Miko Rwayitare (South
Africa) President and Executive Chairman, Telecel
International
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OVERVIEW

• The Commission and its Objectives
• The Commissions Report
• Key Messages
• Recommendations

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FIVE KEY MESSAGES

• 1. Why the private sector is so important in
  alleviating poverty
• Strong expansion in sustainable private sector
  investment is the main driver of accelerated
  economic growth, essential for reducing poverty
  and making rapid progress towards the Millennium
  Development Goals.
• 2. Constraints on the private sector in
  developing countries
• Domestic private initiative and entrepreneurship,
  particularly within the small and informal
  sectors, have enormous potentialbut they are
  trapped in disabling business environments.
• 3. Unleashing the potential of the private sector
• Governments need to create an enabling
  environment for a competitive private sector to
  develop. For domestic and foreign players to
  thrive requires a strong rule of law and a level
  playing field.
• 4. Engaging the private sector in development
• Private initiative driven by market-based
  incentives has the demonstrated capacity to
  contribute to important development goals. The
  private sector, properly enabled, can do
  substantially more by developing and replicating
  successful models.
• 5. Recommended actions
• To ensure progress towards the MDGs, all
  stakeholdersgovernments, development
  institutions, the private sector and civil
  societyneed to collaborate more effectively and
  expand the use of private sector capabilities in
  meeting development objectives.

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1. WHY THE PRIVATE SECTOR IS SO IMPORTANT IN
ALLEVIATING POVERTY
Strong expansion in sustainable private sector
investment is the main driver of accelerated
economic growth, essential for reducing poverty
and making rapid progress towards the Millennium
Development Goals.
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MORE PRIVATE INVESTMENT MORE GROWTH
Source Lawrence Bouton and Mariusz Sumilinski,
2000. "Trends in Private Investment in Developing
Countries Statistics for 1970-1998,", IFC
Discussion Paper No. 41 (Washington, D.C.
International Finance Corporation).
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FOUR BILLION PEOPLE AT THE BOTTOM OF THE PYRAMID
Purchasing power parity in dollars
Population in millions
gt20,000
75-100
Tier 1
1,500-20,000
1,500-1,750
Tiers 2-3
lt1,500
4,000
Tier 4
Source Prahalad, C.K., and Allen Hammond.2002.
Serving the Worlds Poor, Profitably. Harvard
Business Review July-August.
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2. CONSTRAINTS ON THE PRIVATE SECTOR IN
DEVELOPING COUNTRIES
Domestic private initiative and entrepreneurship,
particularly within the small and informal
sectors, has enormous potentialbut it is trapped
in a disabling business environment.
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DETERMINANTS OF THE ENABLING ENVIRONMENT
Private Sector Growth

Pillars of entrepreneurship too often missing
Level playing field
Access to financing
Access to skills know-ledge
Rule of Law
Foundations of the private sector not yet in
place
Physical and social Infrastructure
Domestic macro environment
Global macro environment
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THE BURDENS FACING ENTREPRENEURS IN LOWER INCOME
COUNTRIES
Low and lower middle

• Enterprises in low and lower middle income
  countries face the longest duration and the
  highest cost (as a percent of GNI per capita).

Upper middle
High
Note Low and lower middle-income countries had
GDP per capita (purchasing power parity) of less
than 2,976 in 2001, upper middle-income
countries were between 2,976 and 9,205, and
high income countries were above
9,205. Source World Bank. 2003. Doing Business
in 2004 Understanding Regulation. New York
Oxford University Press.
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3. UNLEASHING THE POTENTIAL OF THE PRIVATE SECTOR
Governments need to create an enabling
environment for a competitive private sector to
develop. For domestic and foreign players to
thrive requires a strong rule of law and a level
playing field.
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4. ENGAGING THE PRIVATE SECTOR IN DEVELOPMENT
Private initiative driven by market-based
incentives has the demonstrated capacity to
contribute to important development goals. The
private sector, properly enabled, can do
substantially more by developing and replicating
successful models.
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ENGAGING THE PRIVATE SECTOR

• Serving markets at the bottom of the pyramid
• Forming ecosystems and building networks
• Fostering public-private partnerships for
  sustainable development
• Improving corporate governance
• Advancing responsible business practices and
  corporate social responsibility standards

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POSSIBILITIES AT THE BOTTOM OF THE PYRAMID

• Financial Sector ICICI Bank, India
• Retail Sector Casas Bahia, Brazil
• Cement Sector CEMEX, Mexico
• Cellular Phone Sector Grameen, Bangladesh
• Vodacom, South Africa

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INITIATIVES
Illustrative list of initiatives under
consideration
Publicsector-driven

• Informality and Regulatory Reforms
• Business School Network
• Technology for Microfinance
• Business Linkages
• Bottom of the Pyramid Business Development
• Annual Private Sector Report
• SME Brokerage
• Microfinance

Private sector-driven
UNDP-driven