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Encouraging Development

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					Encouraging Development
By bringing together international institutions, local reformers and private partners, the
development sector in Egypt is set to finally see some results

By Andrew Bossone

February 2007 Business Today Egypt magazine

Most people know the Chinese proverb about the value of teaching a man to fish rather than giving
him one, but there is a similar proverb in Arabic that originates in Egypt: “The noblest charity is to
preclude a man from accepting charity, and the best alms are to show and enable a man to dispense
with alms.”

It appears these old proverbs are finally coming into fruition: In the past three decades, foreign
governments and aid agencies have poured money into development projects in Egypt — only to
complain that after the donor stops sending money, the project falls apart.

“The international experience shows that probably the greatest weakness of aid has been the fact
that when the program or the project has been concluded and the donor has withdrawn, everything
has collapsed,” says Georgios Tsitsopoulos, first counselor and head of operations at the Delegation
of the European Commission in Egypt.

Now the focus has switched from one-time donations in the form of money, buildings or equipment,
and is moving toward sustainable long-term projects and reforms with local and often private-sector
partners.

“That‟s the goal of every economic assistance program — to get the recipient countries or
organizations where they no longer need an economic assistance program.”
“That‟s the goal of every economic assistance program: To get the recipient countries or
organizations where they no longer need an economic assistance program,” says Ken Ellis, the
director of USAID in Egypt. “They can do it themselves. And their economy is strong because they
have a good democratic base, they have a good education system, they have a good health system
that takes care of the people who are then more productive. And when that happens you don‟t need
assistance from other people; you can do it by yourself.”

Both Ellis and Tsitsopoulos have worked in development here for the past three and a half years,
with their four-year contracts coincidentally expiring this June. They both have remarkably similar
things to say about what they‟ve seen and what will happen in the future. They believe aid should be
tied into reform; that financial sector reforms have been very strong, but social ones need to improve;
that the private-sector plays a key role in change; that the government and aid agencies have finally
gotten on the same reform agenda; and that 2006 was a watershed in development, but that it will
take some time before it trickles down to the population.

“I think aid should focus on reforms,” Tsitsopoulos says. “I think that we need to make this switch
from small projects without any sustainability, where there is limited ownership and when the donor
withdraws everything collapses, to something which the government comes up with itself in concrete
sector reforms and then the donors stepping in to support these reforms.”

“If we don‟t tie assistance to reform, then what I think we‟re doing is just perpetrating a bad system,”
Ellis says. “If we‟re just going to do good deeds, build somebody a house or build a school, there‟s
nothing wrong with that. But if you don‟t change, if you don‟t reform the underlying causes of lack of
housing, lack of good schools, lack of health care, then what have you done really? You have only
benefited a few people.”

Support for tying aid to reform is not unanimous, however. Some local critics say that it holds Egypt
to foreign standards, rather than putting the concept of development in an Egyptian context. It also
raises the chance that foreign governments can use this aid as political pressure or even as a threat
to withdraw funds. Another concern is that the reforms will produce a number of contracts that go to
foreign companies.

“All the improvements to education and other areas will not materialize into something tangible for the
population if more jobs aren‟t created.”
Some might have a problem with the idea that Egypt, a civilization that has been around for
thousands of years, falls behind in the United Nations Development Program (UNDP)‟s Human
Development Report. But it is hard to argue that making improvements in areas like health care and
education are bad. For now, in terms of governmental pressure, the aid is only tied into social reform,
not political reform. And considering Western nations have been donating to Egypt for years, there
seems to be little threat they will go anywhere.

In the case of foreign companies getting contracts, it should only be because they are the most
qualified or give the best offer. That does not necessarily mean they will always run the project: Intel
is running a digital village in Oseem that connects a government kiosk, schools and health centers
via wireless broadband internet (WiMax), but when the test period is over, Intel will pass everything to
the government, which will invite local companies to compete for the tender.

Public-Private

In an ideal world, reforms would not be needed at all, or at least if they were, then local companies
would do the work. But until that happens, a popular solution is to push for public-private partnerships
and initiatives. The government has the resources, the private sector the expertise, and both seek to
benefit from a better overall environment — economically and socially. For example, it was the
Egyptian Education Initiative that began in partnership with the World Economic Forum that pushed
Intel‟s WiMax project in Oseem.

“Civil society, everybody has to do their share,” says USAID‟s Ellis. “There has been an increase in
the social awareness of many firms in Egypt. We see not only local businesses but also international
firms now taking part in trying to do development.”

In the beginning of December, USAID connected with the Ministry of Irrigation and Water Resources
and the Coca-Cola Company in a “Global Development Alliance” to provide clean water and solid
and liquid waste treatment for communities in Upper Egypt and the Delta.

“It‟s a relatively modest number, but [about] 80,000 people will benefit from that,” says Ellis.

The population benefits from clean water and sanitary conditions, while Coca-Cola does well from the
deal because three ingredients are important to Coke: water, sugar and caffeine. It therefore gains
access to a population in a hot region that drinks, on average, about 12 glasses of sweet tea per day.
USAID, meanwhile, gets to dip its toes into an infrastructure project while it officially phases out its
direct funding for them.

It seems like a win-win situation.

“There‟s a corporate awareness that you have to be part of the solution in any of the countries that
you work in. And I think that‟s growing. I think that‟s a trend that‟s growing,” Ellis notes.

After the government announced a plan in January to fund LE 7 billion in sewage and fresh water
treatment projects in 2007, the Saudi Amiantit Group got an $11.36 million (LE 64.78 million) deal for
pipes to provide water access around the country, according to a company press release. A recent
press report says the government plans to fund some LE 20 billion for water and sanitation projects
in total.

It could be said, then, that public-private partnerships encourage more development for projects to
help the population. What‟s more, opening up the tender process will give the government more
options in terms of quality and price. And hopefully, as companies like Amiantit come into the
country, they will also engage in corporate social responsibility (CSR, see “You‟ve Been Rated, page
66).

“In a globalized economy we are all in the same boat,” says Tsitsopoulos. “We [all] have a very vital
interest for Egypt to develop and to reap the benefits of globalization of the international economy.”

In recent years, international attention to business activities considered unethical — including slave
labor and excessive pollution — have prompted boycotts by offended consumers. Although the public
pressure did not always materialize into changes in behavior, it made companies more image-
conscious, sometimes prompting CSR to allay criticism.

“I‟m a little bit afraid that because the PR element is so strong that it will turn into a fashion,” says
Mohammed El-Kalla, private sector specialist for UNDP in Egypt. “And you probably get a lot of
people doing it without studying the problem and doing proper CSR. You could be just doing
cosmetics.”

There is the risk that CSR is more about PR than honestly trying to make a positive impact. It also
runs the risk that companies will compete with each other about the size of donations, but at least in
theory they‟re competing for a good cause. Although many of the large foreign companies already
engage in CSR, it is still largely a new idea here.

“The multinationals already have [CSR] implemented in different parts of the world,” El-Kalla says,
“so in the beginning we started focusing on educating Egyptian companies and replicating
partnerships with multinationals that already had the knowledge and understanding of CSR.”

From mid-November to early December, the UNDP Sailing the Nile project took eight boats to eight
cities to promote the UNDP‟s eight Millennium Goals. The trip reached people often excluded from
participation and decision-making, including marginalized youth, refugees, women and the illiterate,
according to a volunteer website.

These partnerships are on the forefront of the agenda for agencies such as the UNDP. Two of the
major partners of the trip were Vodafone Egypt and Procter & Gamble, who in addition to contributing
$30,000 (LE 171,000) and $10,000 (LE 57,000), respectively, also helped design and implement the
project. Not coincidentally, the final two targets of the eighth goal are to cooperate with
pharmaceutical companies to provide access to affordable drugs and with technology companies to
help with communications and information.

“By getting involved with Sailing the Nile, the idea was to promote that type of partnership that
encompasses government, civil society and private sector together, and of course donor agencies,”
says Ramez Farag, a Procter & Gamble spokesman. “The project was a role model of that type of
partnership in Egypt — and a pioneering one at that.”

The key to these partnerships is getting the private sector companies engaged in activities outside
their regular business activities that positively affect the communities in which they work until CSR is
the standard practice. But it sounds like companies are getting the message from UNDP.

“The whole discussion now is that how much the private sector can be a citizen and no longer just an
entity that‟s making profit, which is looked at cynically by people, and can contribute to development,”
El-Kalla says. “They should have a longer vision in which private-sector investment in sustainable
development will mean better markets and products for them.”

“We are starting to understand it‟s not only about doing philanthropy,” Farag says. “It‟s not only about
contributing some money or effort. It‟s really about building things with people. And it‟s about doing
sustainable projects that last for a long time. And helps people build themselves so that they can
better face what happens in the future.”
The Reform Agenda

Projects like Sailing the Nile are good for promoting UNDP goals and solidifying its partnerships with
private companies, but they do little to actually advance the larger Millennium Goals. That‟s not to
say the goals aren‟t moving forward. The most recent Human Development Report has the country
improving in several key indicators such as literacy, life expectancy and per capita income. This
allowed us to jump eight spots on the list from 119 out of 177 to 111. The report highlighted the
unfortunate fact that we need to have better access to clean water and sanitation, particularly rural
residents, of which only 4% tap into the national sewage grid. The projects with Coca-Cola and
Amiantit, however, are proof that solving this is becoming important, which could lead to a higher
ranking next year.

But still, while infrastructure and related projects are needed, without associated reforms, they risk
having little impact. UNDP and other aid agencies will put their attention toward social goals and
hopefully education will improve. At the same time, however, more schools do not necessarily mean
better schools.

“Any governorate in Egypt can build a hundred schools, which is nice, that‟s good,” Ellis says. “A
hundred schools may reach a thousand or two thousand children out of a total school population of
several million. But if you can deal with the policies or you can deal with the issues that are keeping
the government and the governorates and the people from building their own schools, then you can
benefit all of the children of Egypt. So you have to deal with the policy. If you‟re not dealing with the
policy issues you‟re really doing charity rather than development assistance.”

In December, the European Commission signed a deal to provide LE 660 million to improve national
health care through reforms. The European Union (EU) has supported Egyptian efforts to reform the
health system since 1998 with LE 825 million for constructing 100 rural clinics, the provision of
equipment and medical training of the staff. USAID, the African Development Bank and the World
Bank also supported the first stage, according to press releases.

Millions of euros have poured in from the EU for education and health care, but it has also directed
significant funds towards financial reforms. In addition to 66 million for trade facilitation, 47 million for
customs reforms and 20 million in technical assistance, it also helped establish the Industrial
Modernization Center at the Ministry of Trade and Industry.

“We are very happy that Egyptian authorities have taken over the project now, and that‟s a good
example of sustainability because we have withdrawn but we have left behind us an institution, which
is the Industrial Modernization Center, which is completely an Egyptian institution pursuing the same
objectives which we launched through our program,” Tsitsopoulos says.

Still, this is more about upgrading a sector than making reforms to it. The International Finance
Corporation (IFC), the private sector arm of the World Bank, has been lobbying and working to
change the way businesses operate here. While social reforms are moving into the spotlight it could
be easy to forget about the economic reforms taking place. To be effective, the two must go hand-in-
hand. All the improvements to education and other areas will not materialize into something tangible
for the population if more jobs aren‟t created.

“There are some countries in this region that are very different,” says Lars Thunell, executive vice
president of the IFC, who reports directly to the president of the World Bank. “But I think one theme
you can see across is the demographic profile: In many of the countries you get more than 50
percent of the population younger than 20 years, or something like that, so job creation has to be
extremely important in all these countries.”

Thunell, like others, believes the private sector is the engine for growth and job creation. “The
government can‟t afford to do it themselves,” he says. “They have to bring in the private sector. That
doesn‟t mean they should give up control, for example of the schools, they can still have control over
the schools and the content and the pricing of things, but just bring in new capital.”
“If we do nothing [young people] are the real losers. I think it‟s our duty to help them. They want to
work,” said Thunell, in an exclusive interview with Business Today Egypt.

Business Start-Up 101

In December, IFC held the Business Start-Up Simplification Conference in Alexandria to highlight its
work on “one-stop shops” and explain how they will help new businesses open. The target of the
shops is to streamline business-licensing procedures, decrease the number of days to complete the
process, to operate an environment conducive to assisting prospective entrepreneurs and to create
momentum for reform.

The IFC uses a number of measurements to determine the success of the program: time, cost,
investor satisfaction and job creation. IFC has a baseline for all these, namely what the conditions
were before the one-stop shops.

“It would not just be an improvement for businesses going through a certain regulatory process,” says
Thomas Moullier, project manager. “It would send a tremendous message. And the reform
momentum now is already sending a tremendous message to the international community and to
international investors.”

The one-stop shops tremendously improved the amount of time it took to register a company. That,
however, was just one of six steps for many businesses: registration, tax card, industrial project
approval, building permit, industrial registration and operating license. In the beginning, the IFC says
the whole process took 277 days; now it‟s 135 days and four steps. Soon it will be 45 days and three
steps: pre-approval and land assignment, final approval and building permits, and finally industrial
registration and operation licensing.

The building permit process, which was a hot issue at the IFC conference, had 17 procedures by
itself. Then there were instances of applicants speeding up the process by what one investor called
“taking privileges.”

“We have a lot of problems, and as local investors, we have to overcome them,” says Mohamed
Ragab, chairman of the Alexandria Business Association and education philanthropist. “But a foreign
investor, he is not obliged to do that. He has many countries where they have no problems.”

“One way of dealing with corruption is to reduce the number of encounters investors have with civil
decision-making points,” says Sherif Hamdy, the project manager for the one-stop shop in
Alexandria. “And that is applied in the registration part by assigning a civil servant to work on behalf
of the investor in obtaining and completing the needed documentation and approval from other
authorities.”

This is probably the most refreshing part of the one-stop shop: investors have one point of contact.
So they don‟t visit the shop and talk to an employee unfamiliar with their case. It is a complete shift of
mentality on the part of the government, which now sends the message that they are providing a
service to potential investors rather than granting the privilege to operate in the country.

In all fairness, improving the business environment in Alexandria is not perfectly indicative of cities
across the country. It has a developed economy, business sector and infrastructure. But the IFC says
it works in places where it can have a high impact and growth potential. So while it is a bit ahead of
other locations, Alexandria is a good example of putting a one-stop shop in a decentralized location,
namely, anywhere but Cairo. That‟s why there‟s an expectation that the government will replicate it in
other locations like Ismailia, Sohag and Port Said.

“My impression is that the government sees a lot of things they want to do — and you have to have
respect them for that — but for them it‟s an issue of how do you prioritize the work, how do you do
this step-by-step?” Thunell says.
Some people say the first step to solving a problem is admitting that you have one. If that‟s the case,
then the government went farther by setting up a path to reform. But the IFC hasn‟t always been a
favorite of the government. Its annual „Doing Business‟ report ranked Egypt in the last 10 out of 175
countries in 2006. This upset a few people of course.

“Nobody likes to see themselves at the bottom of any list,” Ellis says.

“If you can reduce the amount of time it takes to create a business or open a business in Egypt, more
Egyptians may want to start a business,” he added. “Which means more jobs for unemployed
Egyptians are created. They‟re not isolated events; they‟re all linked together. So when the
government addresses the problems, they‟ll not just rise in the standings of the „Doing Business‟
report, it actually does mean something.”

The ranking must have ruffled the wrong feathers, particularly putting us at the bottom of the entire
Middle East and North Africa. On the other hand, 2006 was not the first year of economic reforms,
but it was a significant year in terms of seeing the reforms produce results — and other reforms.

“This is a measurement of what is actually happening, what is actually done,” Thunell says. “It‟s not
the intention of the government, it‟s not saying anything about that.”

“I think it‟s important that this is an illustration that this is an opportunity for whether Egypt is 165, 145
or 90, let‟s not argue about that, let‟s argue how we can move forward.”

“I have seen a lot of economic progress in the last years with a government that has a clear-cut
economic reform program,” says Tsitsopoulos. And due to this clear-cut [agenda] that has not only
been announced but also largely implemented, the country is right now firmly on an economic growth
path.”

No Rambam, thank you ma’am

The aid agencies, foreign and local governments and private companies are all taking part in the
country‟s future, but the local population needs to play an important role for change too.

The man from Egypt, whose proverb was quoted at the beginning of this article about enabling a man
to help others, can be a source of inspiration. As a youth in the twelfth century, the Rabbi Moses ben
Maimun, also known as Abu Amran Musa or Rambam, fled religious persecution with his family
throughout Southern Spain and North Africa, eventually settling in Fustat, the first Islamic capital of
Egypt. He grew up to become an important religious thinker, creating a summary of the entire body of
Jewish religious law and developing arguments still studied today. He acquired many of his ideas
from Arab thinkers and wrote his most famous work, The Guide to the Perplexed, in Arabic.

In addition to serving as the personal physician to the sultan, he was also an indefatigable doctor for
the masses. According to a letter he wrote to a friend, he worked for the sultan all day long and
returned to find his house filled with people in need of healthcare. He worked through the night, rarely
taking breaks to eat. After his death, people around the world mourned him.

This man was influential in Egypt, about 850 years ago, by using his position to help other people.
According to one definition, albeit a simple one, Rambam was a social entrepreneur because he
dedicated the resources he had from working for the sultan to administering care to regular people.

There is little scholarship on the nascent field of social entrepreneurship, let alone a concrete
definition. There is also little press coverage of it since CSR gets much of the attention, excluding
Nobel Peace Prize winner Muhammad Yunus. Business Today Egypt, however, has covered it
extensively, in addition to sponsoring the Schwab Foundation‟s Egyptian Social Entrepreneur of the
Year award at the World Economic Forum last summer.

What is considered the most advanced definition of social entrepreneurship comes from Ashoka, an
organization that gives grants to people engaging with ideas to practice social entrepreneurship. It
takes the idea of teaching a man to fish one step farther: a social entrepreneur will revolutionize the
fishing industry.

“First of all they need to have a new idea that has not been done before in the particular country,”
says Iman Bibars, Ashoka‟s regional director for the Arab world. “They have to be creative in the way
they are solving the problem. And it has to be solving the problem in a structural way, in a systemic
way. So it‟s not like they find street children and you just want to create a place where they can go
and then teaching them. It‟s changing the attitudes or the policies towards street children.”

Ashoka fellows go through a rigorous selection process. They cannot apply; they have to be
nominated. Then they have to fulfill five criteria: innovation, creativity, entrepreneurship, social impact
and ethical fiber. After several references are checked, if they are chosen, they receive a stipend for
work, a sabbatical to focus on the idea, a network of other social entrepreneurs, visibility in the media
and a lot of training.

“We have three objectives in the Arab world,” Bibars says. “The first is to look for social
entrepreneurs and create a profession of social entrepreneurship. So now we even have [business]
cards for them. The second one is to bridge the gap between the business sector and the social
sector. And trying to make philanthropy treated a little bit towards development and not charity in the
Arab world. The third one is to improve and upgrade the social sector. So we started our
development with those who do this with other NGOs, which is training them on business plans, on
sustainability, on financial projection.”

Ashoka has brought in private-sector partners Citibank, Barclays Bank and the Egyptian Junior
Business Association to volunteer with NGOs to develop a self-sustainable project. The companies
examine the NGO‟s business practices like the financial management, the administration
management, how they produce a product or service and analyze different laws. This year Ashoka
will also run a business plan competition for NGOs to reinforce the social entrepreneurship practice
of applying business principles to social initiatives. It helps if the social entrepreneur already has
some business know-how.

“You see, usually local ideas are good, but most of the time they are not speaking the language of
the donors, they don‟t speak English,” Bibars says. “For [Ashoka] it‟s no big deal. But I‟m telling you,
the guy who is used to speaking to the donors creates less problems than then guy who is not. But I
still invest in both.”

Social entrepreneurs work in about every area of social reform, from the physician that increases
breast cancer awareness to the jojoba farmer that lobbies oil companies. What they‟re doing is
combining the best aspects of the public, private and NGO worlds and putting them into practice to
make a measurable and positive impact.

Social entrepreneurship may seem a bit advanced, considering many local companies are only
beginning to do CSR, but individuals here are already making a difference. Ashoka‟s regional office
has 26 social entrepreneurs and in 2006, for the first time, Ashoka elected ones from outside Egypt,
including Palestine and Lebanon. This year Ashoka will move into Morocco as well.

“The idea is having the potential of spreading and scaling up,” Bibars says. “And they have to have
an idea of how they are going to scale up. Not necessarily themselves, but at least by changing a
policy, a law, by collaborating, by mobilizing other groups.”

Through all the different development endeavors such as CSR, reforms, public-private partnerships,
sustainable development and social entrepreneurship, last year showed the enormous potential for
change that should continue in 2007.

“Maybe not today, maybe not tomorrow, but as we go through time to the future the changes that are
being made are going to make a major, major difference in people‟s lives,” Ellis says. bt
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