From Billions to Trillions

Business is hard everywhere. Wise business leaders will diversify the regulatory burden and comparatively high costs of operating in advanced markets where the competitive landscape is crowded, for the first mover advantage of pioneering markets.
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At the conclusion of the second World Bank Group Development Finance Forum, which brought together a select group of development experts, private sector players and thought leaders for working sessions in Dublin, it is clear the global development space is entering a period of profound change. Creating a pathway to prosperity and self-reliance for billions of people living in so-called 'fragile states' and developing countries requires a move from billions in development finance to trillions in combined capital stemming from all available sources. No sector has the balance sheet and long range survival instincts to do this like the private sector, which in many cases has remained -- to its own peril -- on the sidelines of potentially rewarding market opportunities at the base of the pyramid. Nothing instills hope and lifts more people out of poverty and into the middle class than private enterprise governed by market forces. Mobilizing stakeholders from across sectors requires pulling purse strings as forcefully as development professionals pull heart strings. To do so more effectively requires changing the narrative. Unleashing the needed wave of investments has some free points of leverage that global development institutions, like the World Bank Group and UN are uniquely poised to leverage, yet are underutilizing.

Fragility or Opportunity?

The first point of leverage relates to framing and establishing context. For far too long, the context of the aid and development world has been shaped by an often hypocritical tension between profit and purpose. This has driven a dangerous wedge between private sector participants and development professionals that still lingers, even at enlightened fora like the event in Dublin. Addressing this source of tension requires not only new lenses through which to view the intersection of where development objectives and the profit motive meet, it now requires a new cohort of people to peer through those lenses. When global institutions meet to coordinate their response to a crisis or a development challenge, which often deliberately or inadvertently creates winners and losers in the private sector, it is called consensus building. When the private sector does the same thing or is invited into the room it is often conflated with collusion. The world needs to move beyond this firewall and embrace authentic cross-sector collaboration because there is far too much at stake.

There is no longer a case for isolation and indifference to the development progress of countries all over the world. Global threats, pandemics and social upheaval recognize no borders and as the Ebola crisis taught us in West Africa, when all lines of defense fail the costliest of interventions is needed, which is a military one. Companies of all sizes, even if they are not directly invested in emerging markets are increasingly falling prey to the long arm of supply chain risk, customer perceptions, cyber threats and shareholder activism. Recent examples of this vicarious risk include the backlash against the global garment industry following the collapse of the Rana Plaza factory in Bangladesh. Although many of the major clothing brands were not directly implicated, the culpability of sub-suppliers in their value chains was sufficient to trigger a call to action for reform and improved employment conditions. Similarly the frequency of supply chain disruptions triggering negative national, company, consumer and human consequences continues unchecked.

Allowing conditions to fester half a world away, like the slow and uncoordinated response to the Zika virus, has global ramifications to business, public health and global security. In the era of climate change, the Aedes Aegypti mosquito - host of vector-borne diseases like Dengue and Zika - does not respect borders and is on an inexorable march north due to unprecedented warming patterns and global travel connections. To quantify the potential impacts, Brazil, the southern epicenter of Zika is also host to the summer Olympic Games, which draws in billions in investment and expected returns. Brazil can ill afford the perfect storm of political upheaval, public health threats and the "Olympic curse" all at once, just as the rest of the world cannot afford to remain idle to their neighbor's problems.

Investing in Fragility

More than 90% of startups fail in advanced economies. Yet, small to medium sized enterprises (SMEs) typically account for roughly 90% of all employment in these countries where entrepreneurs are fueled by a command of failure and professionals are fueled by career mobility. Inversely, the scale of economic importance and demand has tilted eastward and south. For many years, the pioneers in the development profession have understood how the center of economic gravity would shift, as pioneering companies have understood the risk-reward trade off of being a first mover in complex markets. As the proverb goes, the pioneers get the arrows, the settlers get the land. It is now time to settle and begin developing a new yardstick for what successful profit-driven ventures look like at the world's frontiers. In keeping with this first mover theme, one must remember that the pathway to western prosperity was paved through commercial enterprises like the British East India Company and Portugal's Casa da India, which were early prototypes of the modern multinational. These organizations, like their modern counterparts, like CFAO Group in France or DKSH in Switzerland, have been successfully operating - in most cases uninsured - for hundreds of years in the world's most complicated markets. Whatever their motives, their development impact on the regions they operate in is undeniable.

To coax cautious investors off the sidelines and south of the Mediterranean, a new investment yardstick is needed, as is an entirely new lexicon of business with purpose - one that moves beyond the trite corporate social responsibility (CSR) sloganeering many companies promote. This yardstick must commence by defining a longer investment horizon for opportunities in pioneering markets like Sierra Leone, Liberia or Myanmar. After all, without risk there is no reward. As the Robber Barons before them who made massive fortunes by developing the U.S. through the risk-prone Westward Expansion prompting the Industrial Age, perhaps a new generation of Climate or Poverty Barons will accompany the Tech Titans and development institutions in auguring a time of shared prosperity. Development institutions like the World Bank Group play a vital role in this process, yet the narrative must move from 'fragile states' to lands of opportunity. Without being naive about the risks and human misery faced in many of the world's poorest countries, a ranking of profitable sectors would be more helpful in spurring investments in developing nations than a forced ranking of 'winners and losers' based on the ease of doing business.

Business is hard everywhere. Wise business leaders will diversify the regulatory burden and comparatively high costs of operating in advanced markets where the competitive landscape is crowded, for the first mover advantage of pioneering markets. While the traditional narrative holds that these pioneers must sell their souls by bribing corrupt officials, or they are themselves corrupt, urbanization, the cellphone and the Arab Spring are doing more to address kleptocracy than transparency rankings. People everywhere are united by the desire for advancement and self-reliance. For development institutions to keep pace with the times, they will need to fill the void of capital and competence in the "missing middle," as much as business and political leaders will need to tell a new narrative of hope.

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