The Millennium Development Goals (MDGs) established a successful framework for the world to address fundamental social issues such as poverty, health, hunger and education. As discussions commence on the shape and scope of the global development agenda that will succeed the MDGs, which expire in 2015, it would be helpful to consider the role of the private sector and rethink the international community’s overall approach to development.
Economic development is the best way — indeed, the only way — to achieve sustainable poverty reduction. It creates a virtuous circle. Growth creates jobs, and jobs reduce poverty.
The private sector has a key role to play.
Private-sector capital flows now dwarf traditional public-sector aid flows. For example, of the US$200 billion in total US resources dedicated to development in 2010, 87 percent came from private flows. By contrast, in the 1960s, official overseas development assistance accounted for 70 percent of capital flows into developing countries.
A similar picture prevails globally. Domestic resource mobilization, remittances from expatriate workers, private debt and equity flows, and philanthropic contributions exceed official international aid by a wide margin. Private flows are no longer the tail, but the dog that wags the development agenda.
NEW LEADERSHIP
Nonetheless, much of the development-policy community remains stuck in the distant past. For example, policymakers insist on the importance of “public-private partnerships” and argue that the private sector needs “to learn to work with the public sector.”
However, today’s reality would be better described as “private-philanthropic-public partnerships” (expressed in that order to reflect each component’s relative importance), or “P-4.”
We need to persuade public institutions to focus on how to work better with their private counterparts, not vice versa, because the public and private sectors have a shared interest in accelerating economic development and ensuring that everyone benefits from globalization.
This is not meant to diminish the important role played by the public sector, which alone can create the conditions — the rule of law, sound macroeconomic policies and good regulatory regimes — needed for the private sector to flourish.
For example, they catalyze the development of supportive property and customs regimes, including the establishment of credit bureaus and laws to protect creditors’ rights — all necessary prerequisites to channel financing flows.
Possibly the biggest prize in aligning private and public-sector development efforts lies in the relatively unexplored area of blended finance. We have barely scratched the surface in integrating the efforts of development finance institutions (DFIs) with private and philanthropic initiatives, which could make the whole greater than the sum of its parts.
A World Economic Forum study estimates that, when aligned, an annual increase of only US$36 billion in public-sector investment in climate change could be leveraged to 16 times that amount by mobilizing US$570 billion of private capital. In fact, to improve alignment and reflect the new P-4 order, government agencies and DFIs should be encouraged to establish explicit targets for leveraging private capital. Particularly in an age of lean governments and public austerity, success in meeting such targets should become a key performance indicator.
What should the private sector do better? While there are many examples of responsible companies that want to “do well by doing good,” sustainability and development goals are not always integrated into businesses’ core agenda. Total shareholder return (TSR) and corporate social responsibility (CSR) often seem completely divorced from each other.
The thinking, mostly implicit, is that maximizing TSR by polluting the environment is acceptable as long as some compensating contributions are made to CSR initiatives — the corporate equivalent of bathing in the Ganges to wash away one’s sins. We need a new standard that requires companies to report not just their financial metrics, but also their performance on social, developmental and environmental issues. For maximum impact, and in order to restore public trust in corporations, the standards must be global, clear and consistent.
EMERGING MARKETS
The other reality of the post-MDG world is the multi-directionality of development flows. Traditionally, development flows were unidirectional, going from the wealthy North to the impoverished South. However, the world order has changed. Emerging markets and developing countries now account for 50 percent of global GDP and 75 percent of global growth, and demographics will further accentuate the shift in the center of economic gravity.
“Southern” countries such as Brazil, China and India, to name only a few, are enhancing their contributions to overseas development. Domestic resources and diaspora remittances are increasingly funding development. As countries become less reliant on traditional sources of financing, they are less likely to follow foreign dictates blindly.
Indeed, people in developing countries are increasingly demanding a stronger voice in determining what is good for them. The North’s old “we know what is good for you” approach, however well-informed or well-intentioned, will no longer work. A more inclusive approach that reflects local conditions and preferences is essential.
The P-4 approach reflects the new global realities and seeks to leverage the best qualities of the private, philanthropic and public sectors.
Viswanathan Shankar is group executive director and chief executive officer for Europe, the Middle East, Africa and the Americas at Standard Chartered Bank.
Copyright: Project Syndicate
Because much of what former US president Donald Trump says is unhinged and histrionic, it is tempting to dismiss all of it as bunk. Yet the potential future president has a populist knack for sounding alarums that resonate with the zeitgeist — for example, with growing anxiety about World War III and nuclear Armageddon. “We’re a failing nation,” Trump ranted during his US presidential debate against US Vice President Kamala Harris in one particularly meandering answer (the one that also recycled urban myths about immigrants eating cats). “And what, what’s going on here, you’re going to end up in World War
Earlier this month in Newsweek, President William Lai (賴清德) challenged the People’s Republic of China (PRC) to retake the territories lost to Russia in the 19th century rather than invade Taiwan. He stated: “If it is for the sake of territorial integrity, why doesn’t [the PRC] take back the lands occupied by Russia that were signed over in the treaty of Aigun?” This was a brilliant political move to finally state openly what many Chinese in both China and Taiwan have long been thinking about the lost territories in the Russian far east: The Russian far east should be “theirs.” Granted, Lai issued
On Tuesday, President William Lai (賴清德) met with a delegation from the Hoover Institution, a think tank based at Stanford University in California, to discuss strengthening US-Taiwan relations and enhancing peace and stability in the region. The delegation was led by James Ellis Jr, co-chair of the institution’s Taiwan in the Indo-Pacific Region project and former commander of the US Strategic Command. It also included former Australian minister for foreign affairs Marise Payne, influential US academics and other former policymakers. Think tank diplomacy is an important component of Taiwan’s efforts to maintain high-level dialogue with other nations with which it does
On Sept. 2, Elbridge Colby, former deputy assistant secretary of defense for strategy and force development, wrote an article for the Wall Street Journal called “The US and Taiwan Must Change Course” that defends his position that the US and Taiwan are not doing enough to deter the People’s Republic of China (PRC) from taking Taiwan. Colby is correct, of course: the US and Taiwan need to do a lot more or the PRC will invade Taiwan like Russia did against Ukraine. The US and Taiwan have failed to prepare properly to deter war. The blame must fall on politicians and policymakers