Transcript No Slide Title
Fostering Inclusive Markets in South Eastern Europe and the Western CIS
Pascale Bonzom, UNDP, BRC Thessaloniki, September 12 2008
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2.6 billion excluded – not only a “Development Challenge” but a long-term Business Opportunity
Population earning less than US$2 a day per region (World Bank) 2
A vibrant Private Sector is a key component in meeting development goals…..
Economic Growth is a pre-requisite for human development A vibrant Private Sector drives economic growth and empowers the most vulnerable people through:
- Provision of quality products and services - Jobs - Entrepreneurship - Tax revenues and redistribution options
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Development benefits Additional ways in which business and development intersect CSR / Social investment Philanthropy
• Contribution of financial or in-kind resources to development projects • Social investment that is strategic to the core business and that contributes to reduce exclusion
Business benefits
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… evidence is emerging that core business assets need to be deployed in order to achieve core business objectives while including the poor Development benefits Policy dialogue / advocacy Philanthropy
• Contribution of financial or in-kind resources to development projects
CSR / Social investment
• Social investment that is strategic to the core business and that contributes to achievement of the MDGs • Dialogue which contributes to more effective governance institutions, rules, policies and processes
Pro-poor business models / inclusive markets
• Enterprise solutions that accelerate and sustain access by the poor to needed goods and services and to livelihoods opportunities
Business benefits
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Why engage in pro-poor business models and inclusive markets?
To access to new opportunities/markets To develop/test new business models/innovate To take enjoy the first mover’s advantage To create value chain efficiencies (e.g. sourcing from small holders) To secure the license to operate from local communities To implement a CSR vision/strategy/commitment To leverage voluntary labels such as Fairtrade
To do good business while doing good at the same time
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Core Business & Development: A Mutual Value
Many examples show that providing basic goods and services as well as income opportuni ties to the poor can be a sustainable and profitable busi ness strategy and contribute to human development.
Businesses benefit from including the poor in a number of ways that increases their revenues, profits and long-term value generation:
on the supply side
: finding new customers, creating long-term customer loyalty, developing transferable innovations
on the demand side
: improving production capacity, getting access to high-quality inputs, expanding customer reach The poor benefit from participation in markets in a number of ways that increase their opportunities: getting access to goods and services getting access to income opportunities as suppliers, employees, distributors and entrepreneurs increased choice and power Inclusive business has 4 characteristics: profitability, participation of the poor, sustainability, and human development impact 7
But barriers to Private Sector Development remain significant in most transition economies… The foundations for private sector activity are not in place:
- Unfavorable business environment including w eak policies (e.g. competition policies) and legal and regulatory institutions, - Limited private sector participation in policy dialogue, - Lack of access to finance - Lack of skills and knowledge to respond to market opportunities - Business value chains and market linkages too weak and unbalanced - Lack of adherence to principles for responsible investment and business
Leading to….
- High degree of companies operate in the informal sector - The majority of enterprises are subsistence micro-enterprises, most of which are concentrated in low value added sectors - Lack of competition - large incumbent enterprises frequently stifle entrepreneurial energy - Local demand and ability to pay is weak 8
How can UNDP help Business engage?
Local knowledge (markets, constraints, service providers, etc) Convening power (local business partners, governments, civil society and donors) Regional network (of partners and expertise) Project alliance facilitation Feasibility studies/Market research co-funding Technical assistance for strengthening local value chain partners Continuous problem solving and facilitation Monitoring and evaluation of development impacts 9
Business Brokers: our main delivery mechanism
Dedicated and pro-active Public and private sector background On the ground, with local knowledge and contacts Support of the UN: access to government, donors, civil society and regional players Facilitate business linkages Provide country and sectoral information Identify investment opportunities in priority sectors Assistance with addressing knowledge and skill gaps among local partners 10
Local Manufacturing in Bosnia
An inclusive market case study Lead company:
My Cycle (Slovenian Company)
Innovation
: Brokering partnerships for new employment opportunities in Bosnia
Investment
: US$ 6.2 million (EUR 4 mm) over 2 years
Challenge
• “My Cycle” from Slovenia is seeking new location for its factory •The company’s core business is manufacturing of wheel chairs, and over 90% of the products will be sold via export •Srebrenica, known for the 1995 genocide during Bosnian war, is an economically depressed region
Solution
•Broker introduces My Cycle to potential sites and facilitated contacts with local authorities •My Cycle purchases non producing factory in Srebrenica for EUR1 mm (US$ 1.5mm) and renovates it according to their needs •The company will initially employ 60 people from the Srebrenica area, and later an additional 120 employees will be added to the workforce
Business result
•The project demonstrates the relevance of the GSB service offer and the advantages of the “on the ground” presence •Factory operations to begin in 2009
Development result
•An opportunity for women to participate in direct formal employment in the factory •Reduced unemployment in the region 11
Wine sourcing from Moldova
An inclusive market case study Lead company:
Svorov, Pucari (Moldovan SME) and Domain Menada (Polish SME)
Innovation
: Brokering new relationships to diversify wine export sales
Investment
: Modification of manufacturing practices for EU standards ($TBD)
Challenge
• Wine accounts for 1/3 of Moldovan GDP and is a major export product for Moldova • Russia was a key importer, but in 2006 a ban was enacted on Moldovan wine • The industry and the livelihoods of hundreds of small farmers are now at risk
Solution
• Broker facilitated market linkages between Moldovan wine producers (Suvorov Vin and Purcari) with Domain Menada, a Polish importer and wine distributor • The Moldovan exporters have also changed manufacturing practices - such as bottle size in order to comply with EU standards, therefore opening up further future opportunities as a result of this project
Business result
• As of 2007, 1.4 million bottles exported to Poland • Suvorov Vin has contracts with 15 large firms (approximately 1,500 farmers)
Development result
• New markets for smallholder farmers creating greater income security and growth potential for the future 12 12
Local Wool Sourcing in Moldova
An inclusive market case study Company:
Dari Prirodi and Toplu Yapa – wool collectors Filatura Ungheni – yarn and carpet producer
Innovation
: Development of a pro-poor supply chain
Challenge
• In 2006 Filatura Ungheni purchased 97% of its wool from abroad and only 3% from local sources • Out of 10,000 sheep farmers in under developed rural areas, around 2,000 in the supply chain • Local wool did not meet quality criteria by Filatura Ungheni
Solution
• Broker approached Filatura, wool collectors as well as USAID (already working with Filatura) and brokered the idea of developing a local supply chain • UNDP facilitated and co funded 2 feasibility studies – one on wool sector in Moldova overall and the other on improving the quality of local wool • UNDP facilitated access to working capital loan for wool collectors • UNDP and Filatura initiated quality improvement of the wool produced by local farmers
Development result
• Number of farmers involved in supply chain doubled • Quality of wool led to a price increase from 10 Lei to 14 Lei/kg
Business result
• Filatura Ungheni purchases up to 20% of its wool from local sources, cost savings app. 1 mil USD • Wool collectors gained access to working capital loan 13
Where do we work?
Currently have brokers in the following countries:
South East Europe
Albania
Western CIS
Belarus Bosnia I Herzegovina Turkey Moldova Russia Ukraine Armenia Georgia In the process of securing funds for expanding to the following countries: Kosovo, Kazakhstan and Uzbekistan.
Possibility to expand into new countries should there be converging private sector and country demand. 14
CONCLUSION: A new model of inclusiveness with a double bottom-line
Innovation Execution Resources
Business The Poor / UNDP
Neutrality & convening power On-the-ground experience Local expertise
Sustainable business
Profits Growth
Sustainable development
MDGs Local enterprise development 15