international policy centre for inclusive growth (ipc-ig) brasilia … · 2021. 2. 10. · case...

International Policy Centre for Inclusive Growth (IPC-IG)

Brasilia Alejandro E Rausch 3-5 December 2012

A new perspective on private sector contribution to development

Inclusive business models / inclusive

markets

Development benefits

Business benefits

Philanthropy

CSR / Social investment

Risk

Premise: Opportunities exist to build bridges between business and the poor

Inclusive business models create a win-win scenario between business and the poor

Benefits for business: generating profits, creating innovation, developing new markets,

strengthening supply chains

Benefits for the poor: meeting basic needs, increasing productivity and incomes,

empowering communities

Inclusive business models include the poor on the demand side as clients and customers, and on the supply side as employees, producers and business owners in the

value chain Sectors: energy, water & sanitation, agriculture,

health, financial services, ICT, handicraft, education, housing, tourism

Types of organizations: MNCs, large companies (public/private), MSMEs, cooperatives, NGOs, social business

The poor harbour a potential for consumption, production, innovation and entrepreneurial activity that is largely untapped

2.6 billion people live on less than US$ 2 per day; 1 billion lack access to clean water; 2.6 billion lack adequate sanitation; 1.6 billion lack access to electricity; 5.4 billion have no access to internet

GIM Principles | Products | Objectives

Principles

• Core business emphasis

• Developing world focus

• Human development framework, guided by the MDGs

• Global thinking and Local agenda

• Partnership and multistakeholder approach

Products

• Reports (global, regional and national)

• Case studies (120 published + 1,000 examples)

• Knowledge network: 45 Southern academic institutions, Centers of Excellence, KM platform

• Tools: Strategy Matrix, Heat Maps, Actor Framework, Training for companies and intermediaries

Objectives

• Deepen the understanding of how inclusive business models can contribute to sustainable human development

• Enable the creation of more inclusive business models by informing individual, collective and policy action

- Conceived in 2006 as platform for collaboration focused on research & advocacy - Advisory Board gathering over 25 key stakeholders including business associations,

academic institutions and development agencies

Market information

Regulatory environment

Physical infrastructure

Knowledge & skills

Access to financial products and services

Adapt products and processes

Invest in removing constraints

Leverage the strengths of the poor

Combine resources and capabilities with others

Engage in policy dialogue with government

Strategies C

on

stra

ints

Strategy Matrix – A Tool to Understand Constraints and Possible Strategies

MNCs

Large domestic companies

SMEs

Policymaking institutions

Research and advocacy

institutions

Finance institutions

Institutions with complementary

capabilities*

Provide the

incentives and

infrastruc-ture

that enable

business to act

Provide the

know-how and awarene

ss for business

to act

Provide the

funds for innovative projects

that often

require time and resources

Provide specific know-how,

expertise,

resources and

networks

* These may include NGOs, development organizations, etc.

Actor Framework – Who Supports Inclusive Business Models and How?

Inclusion, Competitiveness and Institutionalisation of

Supplier Development Programmes

Structure of the Presentation:

SDP and Inclusive Business and Growth

SDP y Global Value Chains and Innovation Systems

SDP and their institutionalisation

Supplier Development Programmes Where, When and Why?

Why? Enhances competitiveness and incomes for both suppliers and anchor

firms Creates sustainable employment Where? Low Income Countries Middle Income Countries Developed Countries When? Crisis-Post-Crisis Environments Inclusive Growth and Businesses SDP (supplier and distributor) for domestic markets Direct Foreign Investments (DFI) Export / trade Value Chains

Supplier Development Programmes Focus

Are:

Demand-driven

Promote:

Collaboration

Associativity

Improves quality and competitiveness

What is a Supplier Development Programme?

Entrepreneurial system comprised by:

A firm called anchor or client (EC) that purchases from its suppliers (EP) (or sells to its distributors).

Group of suppliers that provide goods and services to the anchor firm ( or group of firms that distribute).

Objetive:

Improve the competitiveness and levels of income of Micro SMES through Value Chain (VC) Mechanisms.

EP

EP

EP EC

EC EP

EP

EP

The intervention is done within a productive Value Chain: A client or anchor firm and a maximum of 10 suppliers which may represent cooperatives and / or associations, are supported by one or two consultants during 10-12 months.

The Supplier Development Methodology is Established.

Subsequently, the client or anchor firm continues replicating the methodology to the rest of its supply chain.

Win +

Win

Kind of Intervention

Adapting SDP to Groups at the Base of the Pyramid

1.Enterprise Diagnóstic for

each productive group

2.Formulation of the intervention

plan

3. Associative Process

4.Structuring and

consolidation of Enterprises

5. Relation

with anchor

firm

6.Supplier Development Programme

Month 1 and 2 Situation

Diagnostic

Month 3 to 6

Phase 1, 2

Month 7 to 8

Phase 3 and 4

Month 9 to 18

Phase SDP

Productive Situational

Diagnosis of the area

ETERPRISES´ FORMALISING PROCESS

Financing Supplier Development Programmes

Start Up: Donor Funding (multilateral, bilateral, INGO, LNGO) Government Funding Operation: Contribution anchor firm up to 30% Contribution supplier / distributor not more 15/20% Rest is generally subsidy unless developed market sectors Financial Tools for Working Capital and Investment Microcredit and Self-Finance-Groups Guarantee Funds and Reciprocal Guarantee Fund / Company Supplier / Distributor and Capital Goods Provider Credit Commercial Bank credit

Case Study 1 WFP-PURCHASE-FOR-PROGRESS (P4P)

Suppliers: 10 basic grain producer associations

Located: Ahuachapán (5); Santa Ana (1); San Vicente (1); Usulután (1); Morazán (1) and La Unión (1) in El Salvador

Started: November 2009

Ended: November 2010

Initial Situation:

Association of producers of basic grains that weren´t legally registered, that sold their production to intermediaries at low prices that barely covered their costs.

AGRISAL, was formed by the 10 now formalized basic grain producer associations that formed the SDP where the WFP became the anchor firm.


Outcomes:

Quality improvement in processing conditions due to Investment by WFP through improvement plan in grain storage centres

Enterprise management: organization, link to market, formalizing business, legal and task issues.

Financial aspects: Working capital

Production Aspects

The Association / AGRISAL participates in State bidding processes for corn, maize and beans .

45% increase in price with respect to informal market

The intermediaries have been eliminated

Workers have been registered in the Salvadorean Social Security Institute (ISSS)

100% Increase in sales and higher benefits.

Case Study 2 Food and Nutrition Security for El Salvador MDG-F Joint Programme: UNDP-WFP-UNICEF-WHO Objectives: Food security; production diversification and increase income

of women HH heads Diagnosis of areas / regions Goals: 1) 150 families have diversified their agriculture and livestock

production to increase their production and consumption of food with emphasis in nutrition and income. 2) 35 families increase their incomes and local employment through creation of sustainable micro enterprises with women, youth and indigenous population linked to financing, markets, government and aid agencies. 3) 1,000 families improved food and nutrition security.

Beneficiary selection: 1. family should have children of less than 5 years;2. does not have to be assisted by other projects; has to have disposable agriculture land or have economic experience in other activities; accept commitments of programme and participate in activities; and belong to a Community Based Organisation (CBO) or Local Based Organisation (LBO).

Case Study 2 Food and Nutrition Security for El Salvador

Services to Families


-Development of management and

business skills

-Specialized TA

-Microenterprises: Casas Malla and

small non agriculture businesses

Links through the SDP (future links)

Market goal / anchor firm



Sustainability of Actions Link with Govt.

Programmes (Family Agriculture Plan -

PAF- and SMES Centre – DCMYPE-)

Strengthen technical,

entrepreneurial, associative and

value chain capacities

Support with agricultural and non agricultural inputs

Investment in infrastructure and

creation of Revolving Funds

Absortion of methodologies and technical team by

CENTA/PAF

Legalislation for associative groups

Case Study 3 INDUPALMA Business-Led Peace Building

A Comprehensive Model that Generates Wealth

Founded in the 1950s, Indupalma, illustrate a twist of Colombian business reactions when faced with conflict in a unsafe (FARC/ guerilla) zone.

• Cooperative Companies of Associated Work (Associated Entrepreneurial Units-AEU-) were created with some of Indupalma’s staff workers, assuring them that with their work’s contribution they build capital. 1,700 AEUs created to date owned by individuals 6 has and families 10 has.

• Peasant’s entrepreneurial activity started in December 1.995 offering their agricultural services to Indupalma. Cooperatives received to handle agricultural activities that were not the core of Indupalma’s business.

• In it’s second phase (1997), Indupalma helped Cooperatives acquire productive assets (dumper trucks, tools, cranes, tractors, scythes, computers).


• During the third phase (2000), peasants became landowners. A Model of Economic and Social Development was designed that involved and motivated peasants and investors to start their own business in their land, thus becoming collective owners and entrepreneurs.

Indupalma set goals for the Project’s Expansion with third parties for the development of 10.000 hectares over a 10-year period. This goal has been achieved; from IBIO, the firm manages 21.854 hectares of which 11.577 are owned by third parties. 21.854 hectares are suitable to start designing and establishing an oleo-chemical cluster in the middle Magdalena region.

Indupalma’s managed projects are constantly increasing: 70.000 hectares by 2020, it is necessary to set up an extracting facility for every 10.000 hectares (7 facilities). A policy to incorporate in at least 20% of the property, projects from small peasants, thus making them entrepreneurs has been established.

Case Study 3 INDUPALMA Business-Led Peace Building Model characteristics Project is the union of various landowners that are economically active producers. Proprietors of a Project are landowners (peasants, investors). Individuality of ownership of the land and sow are maintained (direct relation to

the owner). Project loans involve land and owners, expressed as partnerships or cooperatives

(legal entity). Responsibility is collective; each owner is held responsible for other owners’ non-

fulfillment within the Project. Each owner, who generally contributes with their land’s mortgage and/or carry out

the Agricultural Guarantees Fund, offers guarantees for loans. The loan has a joint guarantee. Guarantees are protected of responsibility because operations are performed by an

expert (Indupalma) and resources are managed by a trust entity. Owners, operators, trust companies and Banks meet monthly, to evaluate results

and make economic, technical and operational decisions.


Coverage of the Model The project’s operator is an expert (Indupalma) who guarantees that all

aspects as stated within the operation’s contract are fulfilled. The trust company operates as a cash flow unit, through an autonomous

equity that handles all project’s income from loans and sales of production. The trust company orders payments through the business operator and

verifies that these are in accordance to contracts. Results Peasants are owners of productive assets and cultivated lands. 1,700 AEUs Projects that are part of the model are covered within technical, financial

and commercial aspects. Trust has been built in order to Access financial systems. Technical and logistics operations are guaranteed by a company with vast

experience like is Indupalma. Product commercialization is guaranteed. Projects are managed with an autonomous equity, which guarantees

transparency in the use of all resources.


• Employment, property and constant income have been guaranteed for its associates. 6 has for individuals and 10 has for families. Income at least 3 MW.

• A new entrepreneurial force has been developed with the objective to achieve their Independence.

• Contracting schemes changed from workers to entrepreneurial owners.

• A community with an entrepreneurial spirit and safety conditions.

• Decrease in illiteracy rates.

• Outsourcing, through the creation and contracting of Cooperative Companies of Associated Work. (Capital building through manual labor).

• People from the region became involved in contracting and buying processes.

Contracting out to the workers allowed the company to concentrate on its core business –exporting palm oil – while shedding its labour burden, solving problems with the union, generating local good will, and enhancing its production environment.

Supplier Development Programmes El Salvador

El Salvador (started 2009) 15 anchor firms 139 Supplier firms Sectors: Agroindustry, shoes, natural health, medicines, food and

beverages, bakeries, dairies, public transportation, tourist transport Sustainable employment: 3,503 Average employee per firm: 32 Percentage of VC that have increased employment 50% Percentage of increase in employment of enterprise who have

achieved an increase of 19.5% New employments created: 500 Enterprises that have made new investments: 80% Amount of Investment: US$ 1,000,000 Enterprises that have increased their sales: 32% Incremental sales: US$ 8 million Percentage of formalized firms: 15% worked with 150 firms

Supplier Development Programmes

Bangladesh: Swisscontact /Katalyst; US$ 50 M multi donor project; sectors: fish maize, vegetables, potatoes, prawns, furniture, tourism, jute;

Business Case: By providing embedded services to farmers (e.g. seeds / fertilisers plus free advice), retailers could win and retain customers at no extra cost.

Phase I 2002-07 was for focus/experiment & Phase II 2008-13 was to scale up

Thus, 17 Input companies plus 4,000 retailers reached 1 million farmers

Chile: CORFO; SDP for Grape: optimising use of water and labour and Livestock: introducing traceability and improved sanitary conditions.

Paraguay: Frutika: citrus, maracuyá; Trociuk: citrus, bovine livestock; Shirosawa: 45,000 producers of sesame; Manufacturas Pilar: organic cotton; Hierba Par: Medicinal Herbs, biofuels; Singer: stevia / natural sugar ; Azucarera Paraguaya: organic sugar; MEDA: dairy products; CECONPAN: Housing value chain

Dominican Republic: Banana Value Chain: 1,300 smallholders, 15,000 direct employees, 45,000 indirect employees, US$ 250 million exports

Mexico: Industry auto parts, agroindustry, dairy, metal mechanics

Relevance of Global Value Chains What are the GVCs?

Integrating into GVCs

Capturing Value within GVCs

Discussion of international policy regarding GVCs (trade and investment policies, international standards, exchange rates, etc.)

Innovation Systems and GVCs

GVCs and IS: an endogenous relationship

The approach towards VC have evolved with time and are increasingly complex

Integrating into GVCs Attraction

Free international flows of goods, services, capital, knowledge, people, and policies related to them (business environment, framework)

Protectionism may hurt exports that in turn need crucial imports)

Investment barriers and FDI attraction (investment, trade, competition, tax, human resources, infrastructures, corporate and public governance)

Integrating into GVCs Ease GVC Functioning

Reduction in trade barriers (NTB, standards, processing zones).

Logistics and infrastructures (transport, ICT,…), but also soft infrastructures (facilitating policies and procedures)

Supply Local Capabilities to Interact with GVCs

Supply capacity of domestic firms (business linkages, skills development)

Capturing Value within GVCs Rents are generated and not equally distributed along the

VC. For emerging countries challenge is to capture more value and economic benefits from their activities within GVCs

The value captured by home countries reflects their capacity to attract innovation and development of intangible assets.

Policies to attract (Multinational Corporations)MNCs

Policies to help firms grow to more important positions within GVCs via innovation and internationalization policies

Capturing Value within GVCs “Moving up (and moving down) the value chain” to higher

value activities.

Risk of lock up in low value manufacturing activities (as GVC integration may occur without developing capabilities in design and logistics).

“Modularity trap”: despite labor productivity increases, firms operate in low value niches and activities with little chance of upgrading.

Upgrading requires better access to international markets and also better technological capabilities and intangible assets.

Typology of Objectives for Value Chain

Interventions (Humphrey, Navas-Aleman, 2010)

Typology of Objectives for Value Chain Interventions (Humphrey, Navas-Aleman, 2010)

Working with lead firms often regarded as most

promising way for firms´ upgrading in developing countries

Access to strategic knowledge (technology and markets)

Horizontal linkages

Alternative links to reduce dependency and raise

bargaining power

Systemic Approaches to Value Chain Development

(Hartwich and Kormawa, UNIDO 2009)

Innovation Systems and GVCs Global Value Chain framework:

• Focus on the role of leading firms and inter-firm networks in firms upgrading; • Limitation: little attention to the understanding of the upgrading itself. How is knowledge accessed? How do firms in GVC learn and innovate?

Innovation Systems framework: • Focus on how interactions among enterprises, institutions, research bodies and policy making agencies contribute to learning and innovation within firms; • Limitation: little attention to external linkages in the generation and diffusion of knowledge and innovation;

It is necessary to establish a link between GVC, VC and IS. Es necesario establecer un nexo entre las CVG y CV y los SI

Forms of GVC Governance

Institutionalisation of MSMES

MSMES are subject to public policy for reduction of poverty, inequality and sustainable employment and SDP and GVC are appropriate tools to achieve those goals.

Therefore…

It´s necessary to have institutions and public policy in accordance with the challenge faced by countries, regions and localities.


However…

The set of policies to support MSMES have considerable limitations

Firstly, the scarce coordination between different programs and instruments

Secondly, in the case of those programmes and tools that are efficient and new, there are problems to scale up and reach a larger quantity of beneficiaries

Finally, there is lasting lack of systematic and permanent mechanisms of evaluation of programmes and policies that may allow feedback, modify and improved the tools used and strategies adopted


Creation of a new institutional system that will allow a qualitative change in policies to promote MSMES and SDP

It is necessary to build institutional and learning capacities through a process that goes beyond short-term

It is necessary to design a long-term project that guarantees continuity of management and technical personnel and starts institutional learning processes, closely linked with systematic evaluations of the interventions carried on

The institutional strengthening has to be followed by a progressive increase in funding, given the limited resources usually allocated to promotion policies for MSMES. In this regard, not only do the financial resources have to be considered, but also the human resources and capacities needed to implement these promotion policies.

Institutionalisation SDP

The institutionalisation of the SDP should involve:

Policies

Financing

Operations

Institutional development

SDP should be leveraged to consider Inclusive Businesses (IB) and Markets together with Global Value Chains (GVC) and their relation with Innovation Systems (IS)

Supplier Development Programmes Inclusion- Competitiveness-Institutionalisation

Thank You!

Alejandro E Rausch

[email protected]

[email protected]

Skype alejandrorausch

international policy centre for inclusive growth (ipc-ig) brasilia … · 2021. 2. 10. · case...

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