UNLEASHING ENTREPRENEURSHIPMaking Business Work For The Poor

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WHO – COMMISSION CO-CHAIRS, plus…

CO-CHAIRS

The Right Honourable Paul MartinPrime Minister, Canada

Ernesto ZedilloDirector, Yale University Center on GlobalizationFormer President, Mexico

EX–OFFICIO 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, andEduardo Aninat (Chile)Former Deputy Managing Director, International Monetary Fund

Jorge Castañeda (Mexico)Former Minister of Foreign Affairs, MexicoDistinguished Professor of Politics & Latin American Studies, New York University

Luisa Diogo (Mozambique)Prime Minister, MozambiqueFormer 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 EXECUTIVESCarleton 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, CitigroupFormer 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 Commission’s Report

– Key Messages

– Recommendations

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FIVE KEY MESSAGES1. 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 potential—but 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 stakeholders—governments, development

institutions, the private sector and civil society—need 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).

0

2

4

6

8

10

12

14

16

< 3% 3-5% > 5Growth rates, 1970-98

Inv

es

tme

nt

as

pe

rce

nt

of

GD

P,

19

70

-98 Private Public

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FOUR BILLION PEOPLE AT THE BOTTOM OF THE PYRAMID

Source: Prahalad, C.K., and Allen Hammond.2002. “Serving the World’s Poor, Profitably.” Harvard Business Review July-August.

>$20,000

$1,500-20,000

<$1,500

75-100

1,500-1,750

4,000

Purchasing power parity in dollars

Population in millions

Tier 1

Tiers 2-3

Tier 4

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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 potential—but it is trapped in a disabling business environment.

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DETERMINANTS OF THE ENABLING ENVIRONMENT

Private Sector Growth

Domestic macro environment

Level playing field

Access to financing

Access to skills & know-ledge

Physical and social Infrastructure

Global macro environment

Pillars of entrepreneurship – too often missing

Foundations of the private sector – not yet in place

Rule of Law

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THE BURDENS FACING ENTREPRENEURS IN LOWER INCOME COUNTRIES

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.

Number ofprocedures

8

11

11

Duration (days)

42

58

70

Cost (% of GNI/capita)

17

29

115Enterprises in low and lower middle income countries face the longest duration and the highest cost (as a percent of GNI per capita).

Low and lower middle

Upper middle

High

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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

Publicsector-driven

UNDP-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

Illustrative list of initiatives under consideration