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Memorandum submitted by Professor Calestous Juma for the
United Kingdome Parliament (1993 Laureate)
Memorandum submitted by Professor Calestous
Juma
ABOUT CALESTOUS JUMA
My name is Calestous Juma. I am a Professor of the Practice of International
Development at Harvard University's Kennedy School of Government.
My work focuses on the role of technological innovation in development
with emphasis on Africa. I have recently reflected this thinking
in two reports I helped to produce. The first, Innovation: Applying
Knowledge in Development was prepared by the Task Force on Science,
Technology and Innovation of the
Millennium Project commissioned by the UN Secretary-General Kofi
Annan. I co-coordinated the task force. The second, Going for Growth:
Science, Technology and Innovation in Africa, was launched in London
in November 2005 and seeks to advance the implementation of sections
of Our Common Interest, the report of the Commission for Africa
chaired by Prime Minister Tony Blair. I hold the view that the private
sector represents the most efficient
way to transform scientific and technical knowledge into goods and
services.
1. INTRODUCTION
1.1 The private sector is being increasingly recognized
as a driving force in economic development in general, and welfare
improvement, in particular. However, much of the focus on development
cooperation still focuses on the role of the public sector as the
central organizing principle. This model relies on public agencies
and non-governmental organizations as providers of critical services
to local communities. An alternative approach is to shift the locus
of responsibility for improving human welfare to the entrepreneurial
capabilities of the people. The goal should be to enable individuals
to solve their own problems by transforming knowledge into goods
and services. This entrepreneurial function should help guide the
reinvention of UK development cooperation philosophy.
1.2 The emphasis on entrepreneurship will alter the role
of the state from being a provider of services to being an enabler
and promoter of business development. In other words, developing
countries should become "entrepreneurial states" whose
main function is to promote human welfare through emphasis on the
role of the private sector, especially small and medium-sized enterprises.
This is not to rule out the role of the public sector in development,
but to argue that the main function of an entrepreneurial state
is to create a viable environment and offer the support needed to
empower the people to meet their needs by finding creative solutions
to local problems.
2. THE PRIVATE SECTOR AND WELFARE IMPROVEMENT
2.1 Economic change is largely a process whereby knowledge
is transformed into goods and services. In this respect, creating
links between knowledge generation and business development is the
most important challenge facing developing countries, especially
Africa. For these countries to promote the development of local
technology, it needs to review the incentive structures already
in place. There is a range of structures suitable for creating and
sustaining enterprises, from taxation regimes and market-based instruments
to consumption policies and sources of change in the national system
of innovation.
2.2 Small and medium-sized enterprises (SMEs) should
play leading roles in the development of new opportunities and the
use of technology. Policy makers need to develop, apply and emphasise
the important role of engineering, technology and SME growth as
source of development. They need to support business and technology
incubators and production networks as well as sharpening the associated
skills through business education. A leading example of this approach
is the work of the Japanese International Cooperation Agency (JICA)
in helping to upgrade industrial clusters in Indonesia and other
Asian countries.
2.3 Banks and financial institutions also need to play
key roles in fostering technological innovation in developing countries.
But their record in this field has been poor in developing countries.
Reforming some banking and financial institutions would allow them
to help promote technological innovation. Specific credits and tax
breaks could be provided for businesses that seek to upgrade their
technologies. Institutions such as the African Development Bank
(ADB) could play a key role in expanding business opportunities
by lending to infrastructure investments that help to extend regional
markets.
2.4 Infrastructure projects could also serve as a foundation
for diffusing technical skills in society. New infrastructure projects
such as railways, roads, ports, telecommunications and waterways
should be directly linked to technical training and business incubation
institutes. Current discussions to extend and expand telecommunications
connectivity and rail networks in Africa provide a unique opportunity
to create allied technical training institutes as well as foster
the development of SMEs. Institutions such as the Royal Society
of London and the Royal Society of Engineering could play key roles
in helping to bring UK technical competence to the service of development.
2.5 Capital markets have played a critical role in creating
SMEs in developed countries. Venture capitalists and angel investors
do not just bring money to the table; they help groom SME start-ups
into international players. Bringing venture capital into developing
countries could create new businesses and improve their sustainability.
3. CRITICAL CONSTRAINTS ON THE PRIVATE SECTOR
3.1 The dominant approach to the role of the government
has been to focus on its size and its negative impacts. As a result,
most of the attention has gone to how to reduce the size of the
government rather than redefine its role. One of the most critical
constraints on the private sector is the low level of competence
and knowledge in government agencies and their donor partners on
how to improve the environment for the effective functioning of
government.
3.2 Despite extensive debate on corruption in Africa,
little attention has been provided to leadership training for public
servants and development practitioners on governance issues. There
are hardly any major governance schools in Africa and other developing
countries, and the few programmes that exist tend to training leaders
in administrative routines that often
stand in the way of creativity and entrepreneurship.
3.3 Knowledge of the role of business in improving human
welfare should become part of the criteria for presidential and
executive leadership in regions such as Africa. The business community
should ensure that this criterion is reflected in their contributions
to the formation of political party platforms in developing countries.
3.4 One way to improve the situation is to focus on "leadership
training" with the purpose of creating a new generation of
public servants whose main focus is to promote entrepreneurial activities.
This can either be done through schools of governance or schools
of business, management and entrepreneurship. Such schools will
be charged with the mandate of building competence based on experiences
from around the world. The Jamaican Ministry of Commerce, Science
and Technology has recognized the value of such a facility and is
in the process of creating an international institute that will
promote learning on the linkages between science, innovation and
business. Similar facilities need to be created in other regions
of the world, especially in Africa.
3.5 In addition, developing country presidents need to
create offices of science and innovation advice that can complement
their economic advisors. These offices can be supported by a network
of think tanks and academies of science, technology and engineering
which can help to provide advice on how to use existing and new
technologies to support business development. Malaysia, for example,
provides an example of how such advisory activities can work in
a cost-effective way. Such a network of think tanks could
provide insight and advice to governments on new and inspirational
approaches to linking science, business and human welfare. A pioneering
example is the Netherlands Development Research Council, a government-sponsored
think tank that focuses on how research for development funded by
the Dutch Government can be aligned with the needs of developing
countries.
3.6 Another neglected instrument for promoting the role
of the private sector in development is prizes. There is a general
assumption that the private sector is only concerned with making
profit. But enterprises that seek to complement this imperative
with other social needs are hardly recognized and heralded as role
models. Prizes such as the Right Livelihood Award need to be accompanied
by counterpart honours for those who lead the way in promoting business
development as an instrument for welfare improvement.
3.7 With such competence and support systems in place,
the new leaders will be in a position to generate ideas on how to
overcome the various constraints on the private sector at all levels.
In other words, the state will enter a period of transition from
being a mechanism for arresting growth to facilitating creativity,
problem-solving and genuine empowerment.
4. DONOR INTERVENTIONS
4.1 There are two approaches that donors can adopt to
improve the contributions of the private sector to human welfare.
The first is to work directly with governments and other actors
to promote the creation of space for the development of private
enterprises and their alignment with human welfare goals. This of
course presupposes considerable knowledge on these matters on the
part of the donor community. It is our view that a large part
of the donor community needs to upgrade its knowledge on the role
of business in development.
4.2 A complementary approach would involve mutual learning
about the role of business in human welfare improvement. One of
the ways to promote this is to support the reforms in higher education
and the creation of new institutions that train leaders in good
governance and entrepreneurship. Donors can facilitate this process
by supporting international collaboration between UK and developing
country universities on these issues.
4.3 An unfolding example that could serve as an inspirational
model is the Dubai School of Government. The school seeks to: (a)
provide leading executive education programs for regional decision
makers; (b) advance public management through comprehensive research
and analysis; (c) facilitate knowledge exchange on current public
policy issues through forums and conferences; (d) share expertise
of world leaders at policy forums; and (e) offer a masters program
in public administration and public policy. It is being developed
in cooperation with Harvard University's Kennedy School of Government.
Africa needs such schools but with a strong entrepreneurial orientation.
4.4 The current food crisis in Africa underscores the
importance of rethinking the role of universities as agents of community
development. This is particularly critical for Africa where universities
were created largely to produce functionaries for the civil service.
Not only do they need to create linkages with the private sector,
but they need to serve as incubators of enterprises. There are already
a number of inspiring examples. The University of Zambia, for example,
was the midwife of Zamnet, the country's largest Internet provider.
In fact, donor agencies played a critical role in the creation and
development of Zamnet.
4.5 Another inspiring model is the Genesis Institute
at the Pontifical Catholic University of Rio de Janeiro whose main
function is to upgrading local human welfare by transferring knowledge
from the university to the community and improving local socio-economic
conditions. The Genesis Institute incubates enterprises which "graduate"
from university and move into the world as corporate agents of change.
Its core values include the constant search for innovation and commitment
to community development.
4.6 Equally critical is the urgency to create mentoring
programmes that would enable developing country entrepreneurs to
learn from role models and benefit from practical advice. There
is no shortage of corporate leaders willing to share their experiences
directly or electronically with young entrepreneurs in developing
countries. The US, for example, has used the Digital Freedom Initiative
(DFI) to help mentor information and communication technology (ICT)
entrepreneurs and small businesses in Senegal, Peru, Indonesia and
Jordan.
4.7 Donor agencies themselves will need to provide internal
leadership on knowledge on business and human welfare improvement.
Most donor agencies are led by people with extensive background
on relief and humanitarian activities. The time has come to increase
the level of knowledge and experience on business activities at
the highest levels in donor agencies. In fact, countries such as
Canada have taken this step by bringing corporate executives into
the leadership of development cooperation agencies as illustrated
by the appointment of Mr. Robert Greenhill, former President and
Chief Operating Officer of Bombardier International to head the
Canadian International Development Agency (CIDA). This is not to
argue for the superiority of one model over the other; it is to
provide additional
expertise that will make donor agencies more adaptive to the tasks
at hand and therefore more effective in their missions.
5. PRIVATE SECTOR ENGAGEMENT
5.1 The private sector can play an important role in
promoting human welfare through a diversity of social enterprise
programmes, the most critical of which is skill development. One
approach is for private companies, individually or collectively,
to commit to creating skill
development programmes in the communities where they operate. Such
programmes can range from short-term training courses on a variety
of issues to fully-fledged institutions such as colleges, universities
and other institutes of higher learning and skill development.
5.2 For example, mining firms could create mining or
earth sciences colleges that could help to promote technical business
schools. Ideas such as the proposal by the South African mining
industry for a mining school should be supported and implemented
without delay. Similar institutions could be created by other enterprises
operating in fields such as
agriculture, tourism, manufacturing and construction. Philanthropic
arms of existing enterprises could also be converted into educational
institutions to achieve similar goals. Such institutions would not
only benefit from company resources, but they would bring relevance
into curricula development as well as pedagogy.
5.3 Institutions created by the private sector would
bring practical learning through the involvement of technical staff
in teaching. Such schools would also serve as inspiration models
that restore confidence in the relevance of higher education in
development. The Pohang Science and Technology University created
in South Korea by Pohang and Steel and Iron Company represents an
example of how business and government can work together to improve
technical competence for development.
5.4 But the effective functioning of such institutions
would require forward-looking government policies and management
practices. For example, governments would need to leverage the private
sector by providing incentives such as tax rebates as well as critical
infrastructure support for the effective functioning of the institutions.
One approach would be to invite bids from governments that can offer
the best possible incentives and infrastructure support for the
effective functioning of such an institution. This process would
also help improve incentive systems for social enterprises in general.
5.5 In addition to the incentives, private sector engagement
will need to be promoted through forums that promote continuous
engagement between government, industry and academia. High level
executive leadership and trust are needed to make this happen. In
addition, such forums must be conducted in the most ethical way.
Such forums would also help private enterprises to build the trust
as well as contribute to the identification of mutually-beneficial
incentives and activities.
6. AID INSTRUMENTS
6.1 Most of the rules, procedures and routines used by
most donor agencies were designed to reflect the public sector model.
They are therefore ill-equipped to deal with the dynamic, uncertain,
risky and experimental world of business evolution. The world needs
a new generation of development cooperation instruments that reward
creativity rather than bureaucratic routine; encourage risk-taking
rather than glorify complacency; manage uncertainty instead of making
false appeals to predictability; appreciate the value of learning
through trial-and-error instead of looking for mythical blueprints.
Finally, development is a long-term process and therefore new aid
instruments will need to accommodate time as a critical element.
6.2 These criteria would lead to a new generation of
aid instruments such as endowments and trust funds as well as innovations
in the way businesses function. Some of the most innovative educational
institutions in Latin America were established as endowments with
donor support. EARTH University in Costa Rica, for example, is funded
through an endowment with initial funding from the US Agency for
International Development (USAID) and Kellogg
Foundation. But such funds will not only need local matching assets,
but they will also require incentives and laws that promote the
emergence of new social enterprises.
6.3 Finally, the question of scale is often taken for
granted. It is common practice for donors and their partners to
argue for "starting small" and then scaling up. This commonly
held view ignores the fact that often the act of scaling up is in
a new beginning and lessons at one scale may not be transferable
to other levels. It is therefore critical to identify donor investments
at the right scale. For example, infrastructure projects might yield
maximum impact at regional rather than national levels. Donor agencies
could focus on such projects rather than small-scale activities
which can be undertaken easily by local actors.
7. CONCLUSION
7.1 The central role of the entrepreneurial state in
a developing country is to unlock the potential to turn science,
technology, and innovation into business opportunities. Such a state
would need to undertake a number of core activities. These include
providing broader incentive structures to all entrepreneurship,
rewards innovation, fosters start-ups, and sustains existing firms
with injections of capital. Creating links between knowledge
generation and enterprise development is one of the most important
challenges developing countries face.
7.2 A range of structures can be used to create and sustain
enterprises, from taxation regimes and market-based instruments
to consumption policies and sources of change within the innovation
system. International cooperation aimed at leveraging these activities
is a critical element in the success of such efforts. In other words,
leaders in development cooperation agencies will need to be equally
entrepreneurial and seek to use their resources and influence to
promote rather than suppress local initiatives. The real challenge
for the UK is therefore undertaking fundamental reform in international
cooperation by defining entrepreneurship as driving force in development.
3 February 2006
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