Commission on the Private Sec t o r Dev&el o p m e n t R E P O R T TO THE SECRETA RY - G E N E R AL OF THE UNITED NA T I O N S UNLEASHING EN T R E P R E N E U R S H I P MAKING BUSINESS WORK FOR THE POOR Commission on the Private Sector Development& REPORT TO THE SECRETARY-GENERAL OF THE UNITED NATIONS UNLEASHING ENTREPRENEURSHIP MAKING BUSINESS WORK FOR THE POOR 1 March 2004 The analysis and policy recommendations of this Report do not necessarily reflect the views of the United Nations Development Programme, its Executive Board or the United Nations Member States. The Report is an independent publication by UNDP and reflects the views of the members of the Commission on the Private Sector and Development. Copyright © 2004 United Nations Development Programme One United Nations Plaza, New York, NY 10017, USA All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form by any means, electronic, mechanical, photocopying or otherwise, without prior permission of UNDP. COMMISSION MEMBERS CO-CHAIRS The Right Honourable Paul Martin Prime Minister, Canada Ernesto Zedillo Director,Yale University Center for the Study of Globalization Former President, Mexico MEMBERS Eduardo Aninat (Chile) Alan Patricof (United States) Former Deputy Managing Director, Vice-Chairman and Founder, Apax Partners International Monetary Fund Kwame Pianim (Ghana) Jorge Castañeda (Mexico) CEO, New World Investments Former Minister of Foreign Affairs, Mexico C.K. Prahalad (United States) Distinguished Professor of Politics & Harvey C. Fruehauf Professor of Business Latin American Studies, New York University Administration, University of Michigan Luisa Diogo (Mozambique) Business School Minister of Planning and Finance, Mozambique Robert Rubin (United States) Carleton Fiorina (United States) Director and Chairman, President and CEO, Hewlett-Packard Company Executive Committee, Citigroup Former Secretary of the Treasury, United States Rajat Gupta (India) Senior Partner Worldwide, Miko Rwayitare (South Africa) McKinsey & Company President and Executive Chairman, Telecel International Anne Lauvergeon (France) Owner Mont Rochelle Winery Chairman of the Executive Board, Areva Group President and CEO, Cogema Juan Somavia (Chile) Director-General, Jannik Lindbaek (Norway) International Labour Organization Chairman, Statoil ASA Hernando de Soto (Peru) Peter McPherson (United States) President, Institute for Liberty President, Michigan State University and Democracy, Peru EX-OFFICIO MEMBERS Maurice Strong (Canada) Special Adviser to the Commission Mark Malloch Brown (United Kingdom) Administrator, United Nations Development Programme ALTERNATES Debra Dunn for Carleton Fiorina (United States) Senior Vice President of Corporate Affairs, Hewlett-Packard Company Michael Froman for Robert Rubin (United States) President and CEO, CitiInsurance COMMISSION SECRETARIAT Executive Director: Nissim Ezekiel Core Team: Jan Krutzinna, Naheed Nenshi,Yann Risz and Sahba Sobhani UNLEASHING ENTREPRENEURSHIP: MAKING BUSINESS WORK FOR THE POOR i Photo: Somalia Green/UNDP Laurence Sonya FOREWORD nding poverty, the aspiration of the Millennium Development Goals, is the overriding developmental objective of the 21st century. Despite great progress E in the past 50 years, 1.2 billion people—one-fifth of the people on Earth—live on less than US $1 a day, without access to many of the social services basic to a decent human life. Their plight requires a global response making full use of all the financial, intellectual and organizational resources that we can muster. It is against this urgent background that Secretary-General Kofi Annan asked us to convene the Commission on the Private Sector and Development to answer two questions. How can the potential of the private sector and entrepreneurship be unleashed in developing countries? And how can the existing private sector be engaged in meeting that challenge? This report is our responses to these questions. The report offers recommendations on how the major actors—governments, public development institutions, the private sector and civil society organizations— can modify their actions and approaches to significantly enhance the ability of the private sector to advance the development process. The objective of ii UNLEASHING ENTREPRENEURSHIP: MAKING BUSINESS WORK FOR THE POOR poverty alleviation leads us to focus based individuals as much as it does believe that it is critical to develop on developing businesses that create that of the managers and innovators a set of pilot actions and initiatives domestic employment and wealth— in multinational corporations and that would test the main observations by unleashing the capacity of large local companies. It is their voices and conclusions of our work— local entrepreneurs. that we have heard the loudest. so that their relevance to the real world of development could be We set an ambitious time limit for The Commission has also demonstrated on the ground. That our work, which has been completed attempted to highlight a broad is why the report ends with an in a little more than half a year since range of good practices that show illustrative portfolio of actions that our first meeting in June 2003. Our how the capabilities of the private will be developed in greater detail intention was not to carry out basic sector can best be harnessed for the over the next few months—actions research. Much work on the subject cause of development and poverty that could be implemented on a is already under way, and major alleviation. The cases include pilot basis shortly thereafter. Some development agencies, private successful approaches that originate of them could be driven by the UN foundations and academic institutions with the traditional development system, and some by other partners are already focusing their energies players, such as the multilateral and stakeholders. on the private sector’s contributions development institutions and to development. Instead, our approach bilateral aid agencies. But more These initiatives are far from has been to understand and assimilate often they include lesser known but enough. We put them out to all of the work already carried out by all innovative approaches implemented you as indicative of the types of parts of the development coalition, by the private sector—both by actions that we believe can and including business, civil society and companies and civil society should be replicated for the widest labour organizations, and to integrate organizations. Those approaches possible impact. Nor do we believe that thinking in the framework rely on market mechanisms and that each of them is a perfect model. presented here. private sector incentives and thus Country differences require modifying lend themselves much more to the the initiatives—as well as some of The Commission’s work has been replicability and scalability that our overall recommendations—to heavily influenced by the voices of we believe needed. One of our key fit particular circumstances. Our entrepreneurs, expressed through observations is the lack of knowledge ideas and conclusions are presented their actions and through their about best practices and the great as directional, to elicit reaction and responses to wide-ranging surveys need for more sustained research constructive dialogue. The intent is launched to understand what most and analysis of what works and to catalyze a renewed coalition of affects their ability to be productive the major stakeholders—focused what doesn’t. and to grow. It is the capacity, drive more clearly on the challenges and innovation of entrepreneurs We concluded at the outset that outlined here. Such a coalition is that increase the impact of a it would not be enough for this essential to unleashing the capacity broadly constituted private sector. Commission to produce a traditional of the private sector, to achieving Entrepreneurship encompasses the report voicing opinions and urging the Millennium Development actions of small, informal, village- others to take action. Instead, we Goals and to alleviating poverty. Paul Martin Ernesto Zedillo Co-Chair Co-Chair UNLEASHING ENTREPRENEURSHIP: MAKING BUSINESS WORK FOR THE POOR iii Photo: Anh/UNDP Luc ACKNOWLEDGEMENTS he Commission’s work would not have been possible without the input and assistance of many individuals and organizations.We are deeply I grateful to all those listed here. A SPECIAL THANKS… To McKinsey & Company, who provided input and counsel to the Commission and its Secretariat throughout the project. The team of Maria Blair, Michael Monson and Mark Templeton was led by Tilman Ehrbeck, Diana Farrell, Jeremy Oppenheim and Les Silverman. To Jennifer Barsky, Prabal Chakrabarti and Irene Philippi who also provided vital inputs to the work of the Secretariat. READERS AND EXPERTS Our work has been informed by many who have gone before, and a number of them generously gave of their time and expertise to help shape our thinking. These include: Adrian Hodges, International Business Leaders Forum; iv UNLEASHING ENTREPRENEURSHIP: MAKING BUSINESS WORK FOR THE POOR Lalita Gupte, Mahdav Kalyan Bill Kramer, Water Research Institute; Arvind Gupta, Jemal-ud-din and K. V. Kamath, ICICI Bank; Hugh Locke, Locke Associates; Kassum, Michael Klein, Khalid Nandan Nilekani and Sanjay Purohit, Bill Draper, DraperRichards; Mirza, Francois Nankobogo, Neil Infosys Ltd.; Percy S. Mistry, Joaquim Boborquez; Maria Cattaui Roger, Marilou Uy and Dileep Oxford International Group;