Private Sector Development

2007-10-13T16:51:00.000-07:00

Creating Markets, Transforming Lives

Abstract

The main goal of Private Sector Development (PSD) initiatives is to eradicate poverty. This is the view held by the international community that committed themselves to the fulfillment of the year 2000, Millennium ‘Development’ Goals (MDG). Within a time frame of 15 years the world is expected to:

1. eradicate extreme poverty & hunger

2. achieve universal primary education
3. promote gender equality and empower women
4. reduce child mortality
5. improve maternal health
6. combat HIV/AIDS, malaria & other diseases
7. ensure environmental sustainability
8. develop global partnership for development

According to the SIDA report[1] ‘the attainment of the goal of halving income poverty by 2015 requires robust economic growth’ and a substantial amount of change in economic patterns distinct to ‘Sub-Saharan Africa and Latin America’. Since this report was published the crisis in Darfur has made headlines, along with Zimbabwe’s 1400% inflation rate. Since the year 2000, MDG’s initiatives, there has been Tsunamis, earthquakes, hurricanes, famines, civil wars and the implementation of the war on terror in various places across the globe. These external factors have had a negative effect on the world economy, reflective in a weakening US dollar that is now 1 to 1 with its Canadian counterpart. For the developing nations, a weaker dollar means greater affordability of US exports, but without the assistance of the donor community to subsidize Private Sector Development in the Third World, these countries will really only gain a larger trade deficit. Closing the deficit, one country at a time, will require a new world view and a better management of time.

Introduction

Globalization has affected the way societies and nations around the world do business. Consider this; vast spatial distances between countries are no longer a limitation for the innovative since the advent of the internet. With little to nothing in this still evolving electronic environment, billionaires can be made over night. This may be due to the fact that online businesses are able to market products to target consumer groups, not only in their area but anywhere on the globe. Over the years the private sector has made evident its great potential to (1) reduce unemployment and (2) give an up and coming generation a reason to further their education, as degrees seemingly are proportional to salaries. Very aware of this potential, governments have entrusted, utilities that once were state managed into the care of private companies. This seems to be the logical route for nations to take, focusing on governance and leaving business to the economic experts, believing that the competitive nature of the private sector should be reason enough for high standards to permeate throughout all their services. The private sector seems to be the single most important catalyst for social stability in any given country whether developed or developing. Nevertheless, I believe that the continued investment of government in private sector development and the private sector’s investment in its community are necessary for a country to build and maintain a viable and vibrant economy. The purpose of this paper is to provide practical ideas to those with the power to define change and the vision to point nations in the direction they ought to take for the overall betterment of the world.

Donor Impact on PSD

According to the World Bank[2], ‘…states typically experience a dramatic increase in aid immediately after crises, followed by an equally dramatic drop in assistance a few years on’. Commitments made by the donor community must be consistently met, whether rain or shine; the percentage of funds received by a government, above the average expected quota should be invested wisely, as a sign of good governance. Areas of such a country that support Private Sector Development and would benefit greatly from the billion or so extra dollars would be education, health care and community programs that encourage entrepreneurship as oppose to dumping it into the budget deficit. Change must be visible, not only statistically measurable, as an incentive for further greater donor investments.

It has been said that the private sector is the engine of economic growth, a vital factor in the Poverty Reduction Strategies (PRS) being pressed by the international community in the Paris Declaration but if this is the case than the donor is the driver, with the vision to see a brighter future. To continue the analogy, the government would be that proverbial straight road leading to a glorious destination. Only selfishness can seize the engine, blind the driver or bend the road.

PSD initiatives answer to poverty

Many developing countries are rich in raw minerals, have a predisposition for tourism and are filled with ingenious citizens that have learned to live comfortably within depressed economies. Despite this fact, a buffeted people will eventually crumble, if they are their own support, no matter how ingenious they may be.

The fundamentals of any economy start from the ground up, with the small business owner and the conscientious-consumer. Both, must budget against taxes, meager incomes. When a country relies heavily on the imported goods and suffers from long-term trade deficits and inflating budget deficits, the middle class also suffers as they spend what they do not have, taking out a mortgage to fulfill a dream, taking out a loan to educate themselves along with their children and crediting to make up the difference. The macroeconomic world of the country will be affected as demand dampens as goods are priced beyond what salaries can compensate. In the street, the working person says the cost of living is too high, the money doesn’t stretch like it use to. When a people begin to place survival over comfort, when opportunities to obtain even leased land become scarce, the government representative of those people should step in. The government can intervene in several ways, and usually does so by tax reduction, subsidies, tariffs on imports, raising minimum wage, price ceilings, etc.

However, these measures of alleviating the economic crunch felt by consumers worldwide rarely trickle down, to the ground level from high and private world of the private sector. Therefore we find that communities in developing countries become slums while industry prospers, PRS are not readily appreciated by the heart of the economy, the people. As a people standing for a people, government needs a new interactive and personal approach for different long-term results. Utilizing the human resource in the institutions already established such a schools, government offices, corporate buildings, community centers and churches, donors can strategize with governments to help meet the cry of these people. The people of a nation can clearly voice their nation’s priorities if someone was listening. According to the World Bank[3], ‘In the Paris Declaration, the international community reaffirmed the centrality of a country-based development model as the cornerstone for accelerating development results’ but how could such a model work efficiently without the input of the Educator, the CEO and the Pastor.

The basic infrastructure for change is in place, what’s missing is the integrity to manage along with the dedication to give with purpose. Instead of throwing funds to the wind, follow it and watch it impact one person at a time. A hopeless nation will not dream, will not invest in land, will not build a home, further an education, or start a business. Injecting hope at the ground level, with continued support from above, in terms of interest and tax reduction will have an economic balancing effect. It is in the interest of policy makers to focus on the individual citizens, as a percentage of the revenues and GDP depends on the decisions that individuals make, no matter how infinitesimal that contribution may be annually. The goals of a people oriented government will be to:

• establish trade schools
• reintegrate the homeless into society
• promote IT certification
• enforce immigration laws
• fairly Distribute land

Similarly the goals of a consumer oriented private sector will be to:

• foster Community Awareness
• initiate Internship
• lecture in public and private schools
• establish after school ‘business oriented’ programs
• further job development through online courses

In order to allow developing countries to develop, established countries ought to:

1. cancel debts instead of buy them
2. give grants to foundations and institutions that influence the young
3. promote open communication
4. import goods and support product development
5. mediate between countries at war
6. assist in sanitation improvement initiatives
7. introduce technology to refine natural resources for commercial purposes
8. facilitate foreign exchange student program

Conclusion

The main players in the economic game are the governments, the private sector and the donors. However the most integral factor in the whole scheme of Poverty Reduction are the people that ought to benefit the most from every board meeting and declaration drafted. See faces, not just numbers. The goals of the international community are more than a wonderful dream, they are the hope of my generation, what children pray for before they fall asleep at night, on cold and wet mud floors.

[1] Making Markets Work for the Poor, October 2003

[2] The Country-Based Development Model and Scaling Up, Number 2 - April 2007

[3] The Country-Based Development Model and Scaling Up, Number 1 - January 2007

Walking in Freedom

Private Sector Development