Two sides of the same coin
Ladies and gentlemen,
The base of the pyramid is at the top of my priority list. My results-based development policies target the poor and disenfranchised, especially in Africa. All policy efforts are fully geared towards achieving the – Millennium Development Goals by 2015. The role of the private sector is pivotal. After all, the road to development leads through the market place, not through some government office.
That is why I talk to and work with business leaders whenever I can. This morning has been a great opportunity to discuss a subject where profit and poverty reduction are two sides of the same coin: “Base of the Pyramid strategies”. For instance, these strategies could decrease the “poverty penalty”, the premium the poor pay on everything from rice to credit. They often pay five to 25 times what the rich pay for the same services, as C.K. Prahalad has so frequently pointed out. But “Base of the Pyramid” strategies will not automatically bear fruit. They will not automatically benefit the poorest of the poor. This requires – accountability, innovation and sustainability. I will return to these points later on.
Ladies and gentlemen,
As C.K. Prahalad and Stuart Hart wrote: “The challenge for managers is to visualize an active market when what exists is abject poverty. With all due respect to the importance of wetlands, it is like visualizing a theme park where you see only swamp.”
This is a challenge for managers in the business community and in development institutions and NGOs. For too long, development cooperation looked upon the poor as victims, not as people who can be part of the solution. For too long, we have created dependency rather than opportunity. But this has changed. From the – day I became minister, I have put society-centred development cooperation centre-stage, with a special focus on the private sector. This applies to development cooperation in general and my own activities in particular. For instance, last week, together with the Minister for Foreign Trade, I headed a trade mission to Egypt. During the mission, I signed an agreement with the Egyptian government on the reorganisation of a state-owned Egyptian rural bank. The Rabobank will assist the Principal Bank for Development and Agricultural Credit in becoming a full-blown commercial bank.
Ladies and gentlemen,
To be honest, I think that the business community has too long ignored the business opportunities at the base – of the pyramid: the world’s poorest four billion people. But things are changing here as well. In particular, when I look around this room, I feel a little like I’m preaching to the converted. Many of you are already exploring the opportunities: Unilever is selling shampoo in single sachets in India and iodised salt in Ghana; ABN/AMRO has entered the microfinance market in Brazil and India; DSM has a micro-nutrient intervention programme in place in South Africa, Ghana and Kenya; Philips Medical Systems is making health care more accessible in India; Heineken’s initiatives on HIV/AIDS and other communicable diseases are considered an international best practice. And these are just a few examples. As last week’s World Bank report, Global Development Finance 2005, emphasised, the developing world is where the action is: in 2004, “developing countries outgrew high-income countries, – and the gains were widespread Ã?? all developing regions grew faster in 2004 than their average over the last decade”. The economy of Sub-Saharan Africa expanded by 3.8 per cent last year, a growth rate we have not seen in the Netherlands for quite some time.
Ladies and gentlemen,
I will now address three issues that are central to the success of “Base of the Pyramid” strategies: accountability, innovation and sustainability.
First, accountability. “Base of the Pyramid” strategies will only contribute to achieving the Millennium Development Goals, if companies are truly engaged with society in developing countries. If they are accountable, close to the people. This means that your – offices there should be like houses of glass. Your activities and your contribution to society at large should be fully transparent. In my opinion, a perfect way to enhance this contribution is to partner with small and medium-sized enterprises in these countries, thereby further stimulating local entrepreneurship and employment.
Second, innovation. The information age is transforming society: we are moving from a firm-centric society to a consumer-centric society. Today, consumers are much more aware of what’s on the market. Their demands are changing. Also at the base of the pyramid. These new consumer demands lead to a call for innovation. Products must be redesigned to reflect the very different economics at the base of the pyramid: small unit packages, low margins per unit, high volumes. If – companies are able to adapt to these new demands, big profits await. Multinational companies have the capacity to respond better and more rapidly.
I have already mentioned Africa’s excellent growth rate. If you really want to target the base of the pyramid, this is where the real challenge lies: Africa is not densely populated and has a low level of economic integration. My policies are aimed at jump-starting integration. For instance by reducing regional trade barriers and improving the business climate. But innovation by the private sector is also a powerful tool to reach the base of the African pyramid. Innovation is a central issue for this government. Maybe we could look at putting “innovation to meet the needs of the people at the base of the pyramid” on the agenda of the Innovation Platform. I will discuss this with the prime minister.
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I now come to the third and last issue: sustainability. Normally, there are no second chances when it comes to the environment. But in the case of “Base of the Pyramid” strategies, there are. When providing services to the four billion people at the base of the pyramid, we have a chance to avoid the mistakes we made in the past; the mistakes we made when producing for the top of the pyramid. I meet a lot of business managers who are prepared to develop sustainable solutions. Create a sustainable future, make a difference. I read in ABN AMRO’s annual report, that it explicitly takes sustainable development into account in its finance decisions. Another positive example is the World Business Council for Sustainable Development, which brings together 175 international companies sharing a commitment to sustainable development. Sustainability – is more than “corporate social responsibility” or philanthropy: it’s part and parcel of your core business.
Ladies and gentlemen,
Let me conclude. With “Base of the Pyramid” strategies, profit and poverty reduction are two sides of the same coin. That makes us natural partners. To quote Humphrey Bogart: “This could be the beginning of a beautiful friendship”. I invite you to further develop that friendship in, say, six months time.To continue what I describe as the “Pyramid talks”. We have already had breakfast together: shall we make it dinner next time?
Thank you