One of the most thought provoking comments from the attendees
at the recent Commonwealth Business Forum held in London
from the 23 to 25 of September was that laid out by Mr.
Nand Kishore Sing, Member of the Indian Government's Planning
Commission. Mr. Sing exposed two "important paradigms"
as he termed them, in the race towards a globalized economy
for the developing world. First of all, the model of globalisation
cannot be universally applied nor can it be applicable
and secondly the pace of globalisation should be country
driven and country specific, which comes to say that globalisation
for the developing world is not a unique "one world"
concept, as the developed world eagerly accepts.
Why this country specific approach instead of the more
global outlook as expounded by the more ardent supporters
of globalisation? Because one of the most visible realities
of globalisation is that it tends to miss out on the needs
and specificities of local economies and governments.
Rather, it pretends that the Western concept of economic
liberalism and trade patterns are easily and should be
easily adopted by every nation and that this liberalism
is the only way forward, which is not always the case.
It is true that international trade has done much to develop
certain economies and that through this trade they are
able to penetrate new markets providing for a source of
income and prosperity. But this trade is limited and has
some important side effects. Instead, the pattern that
international trade seems to be adopting nowadays is one
where the strong economies use their economic potential
to either export towards emerging economies, thus inundating
their markets, or use the cheap labour found in these
countries to produce at lower costs for re-exporting.
Is this the way forward for developing these economies?
Hardly not.
Developing countries, as the final communiqué of
the Commonwealth Business Forum clearly proposes, should
be able to pierce the developed world's markets in order
to export and trade in an efficient and unrestricted manner,
and not merely be a target of the latter. This means that
trade barriers and subsidies are to be lifted in order
to allow for the products of these countries to enter
foreign markets. This is specially so with agricultural
products from emerging economies finding their way into
highly subsidized markets such as European Union.
Oxfam, the UK based NGO, believes that one of the problems
of emerging economies is that multinationals do not integrate
sufficiently in their environment in order to allow for
greater interaction with the local economy. This is particularly
so with the extractive companies whose workforce usually
concentrates itself in and around compounds. Furthermore,
Barbara Stocking, Director of Oxfam UK, believes that
there is not sufficient transparency and information in
the public domain to show how these economies are profiting
or not from international investments.
At this stage one should ask, is globalisation the answer
to all the woes of emerging economies? In a certain way,
the globalisation of the economy has brought new technologies
and new products to many areas of the world. Be it through
the Internet, mobile communications or scientific research.
Sir Christopher Hogg, President and CEO of GlaxoSmithKline,
one of the world's largest pharmaceutical groups, explained
that a large part of the research and development carried
out by the company he presides is aimed at eradicating
many of the diseases that are hindering the growth of
developing regions, particularly Africa where HIV-Aids,
Malaria and Tuberculosis are hurting future generations
and depleting the continent's workforce. Companies such
as GlaxoSmithKline are working on new drugs to prevent
future illnesses or contain existing ones. But there is
an added problem that globalisation and its economic prowess
poses to the emerging economies. How do you finance all
of this? Do you allow these countries free and unlimited
access to medication? Who takes charge of the costs?
Companies in this globalized age work for a profit, no
matter what the product and no matter where the markets
may be and companies such as GlaxoSmithKline are definitely
no exception. Although large pharmaceutical groups are
developing new ways to make drugs financially more viable
to emerging economies, the costs for these communities
are still great and contribute an important financial
burden. These countries, although the focus of the big
multinationals' research and development, are also the
target for their products and constitute natural markets
for these. Preferential pricing, fomented by companies
such as GlaxoSmithKline, is a way to get cheaper medication
out to the developing nations.
The issue of intellectual property rights is hurting pharmaceutical
and other multinationals in developing countries due to
the widespread use of generics that are mere copies of
those drugs developed through research and development
by the large corporations. These contend that while they
spend billions in research, smaller companies are using
their patents to create generic medication that is sold
in local markets, financially hurting the former. Effective
international property protection is essential in the
words of Sir Christopher Hogg in order to maintain the
large groups' continued funding for research and development.
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Other exponents of globalisation
One of the questions that arises is how to allow for those
countries to develop by trading their own products or
finding their own markets. If one of the aims is to bring
the private sector, Governments and financial donor institutions
together, then this should be done in a way as to develop
the private sector in these countries. One step forward
is through the development of SMES and sizeable companies
that can create an industrial and trading base. As Dr.
Khumalo, Chairman of South Africa's Transnet exposed,
the idea is not so much as to give handouts of money but
to foment private enterprise. In this regard Transnet,
one of the leading South African companies, is taking
an important step. According to Dr. Khumalo, Transnet
is involved in a myriad of private sector infrastructure
projects all across Africa that aim not only to develop
much needed infrastructure but equally to provide for
jobs and foster employment among Africa's youth. The aim
is to allow, in Dr. Khumalo's word, for people to have
a role in the economy. But this investment cannot be accomplished
without a critical support through private equity participation.
In this regard, strategic private partners are essential
in order to ensure the necessary financial backing for
any business enterprise. This is an aspect in which Africa
is needing the most development or support: in order to
provide private equity, investors must feel that their
investments will be secure, something which is not often
the case in the continent.
But how do you secure private equity? A clear consensus
to come out of the CBF was that Government must aid in
securing this private equity. How? Guaranteeing a tranche
of any investment is a first step. For example providing
financial backing for currency devaluation liabilities
which, as a participant at the Forum noted, is one of
the main concerns of investors when approaching investment
opportunities or projects in his country. A feasible alternative
would be the creation of a common fund supported by international
donor organisations or regional blocks. This common fund
could be used in the eventuality of currency exchange
related losses.
Abolishing the technological gap
If emerging economies need to develop markets and export
potential, they also need to breach the technological
gap that separates them from Northern economies. One of
the biggest challenges for the global market place will
be to mobilize sufficient investments in infrastructure,
and technological innovation. But the basis for this is
through education because all technologically advanced
societies have strong research and development structures
that enable their universities and research centers to
innovate new products. Companies such as SUN (which incidentally
stands for Stanford University Network) allocates 7% of
its current revenue towards research and development.
But how do you carry technology to developing economies?
One way could be through allowing the open source codes
so that developers in emerging economies can have access
to software that will allow them to design and use applications
that are normally commercialized in technologically advanced
societies. Another way is to find sufficient government
funded hardware and software for schools and other institutions
that are currently lacking IT products. But all of this
is difficult to realize unless there is an overall effort
from governments and private institutions alike that will
carry out these programs. Thus, another of the paradigms
of globalization is that while it has allowed for greater
access to new technologies, it is also creating a wider
abyss between those that have technologically advanced
societies and those that are staying behind. As new products
develop constantly, the gap increases and countries in
Africa for example find themselves further behind in this
tech race.
Concluding thoughts
Corporate social responsibility and good governance are
principles strived for in the corporate world of developed
economies. At least in principle. In reality, we have
seen that this is far from true. When companies in the
United States such as Enron, Tyco or Worldcom use dubious
accounting and tax principles for their own benefit, then
one has to ask what moral capacity does the main promoters
of globalisation, i.e. companies in the developed world,
have in order to demand for corporate social responsibility
in emerging economies. The industrialized world has hardly
given an example of integrity to emerging economies. But
it is equally encouraging that these companies have been
an exceptional few and that their rogue CEOs and Chairmen
have been put before justice. So, what next for the corporate
world and its export of corporate responsibility and good
governance? The era of the big corporate tycoons and the
global player has been hit by these scandals but it is
also currently plagued by the worldwide recession affecting
most economies. While markets remain depressed, the talk
will be more of getting them back in shape rather than
giving an example of corporate righteousness.
Managing globalisation, as some pretend, is not an easy
task. Are business and sustainable development compatible?
As we have seen by some examples exposed here, it seems
to be. But as liberalization goes global and takes its
consequences along with it, the gap between North and
South seems to widen. Why is this? Perhaps the answer
is at the speed in which the industrial nations are undertaking
breathtaking changes in technology, productive capacity
and transportation, linking themselves ever faster while
the developing world tries to catch up. A mixture of business
and good government are definitely the right choice but
to achieve this a creative effort must be undertaken by
all. Not just a few.
Alexander Dunn |
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