We have witnessed, in the last fifteen years, a significant change in the needs and nature of development aid given to and needed by the developing world. Since the turn of the century we have witnessed the very fast pace at which some emerging economies have caught up to and surpassed many OECD economies, especially in terms of magnitude. This is not surprising, as in many cases these countries and regions boast vastly larger populations than their OECD counterparts, but this growth rate has created new needs for these rapidly developing countries that emphasized the gap between the “haves and the have-nots” in both regional and individual cases.
It is clear that the role of development aid has changed from a handout to an investment in many cases. It is no longer good enough to simply provide developing countries with development programs that fail to include the local population and also the private sector in both the developing world and the developed world. Development is just that, development, the evolution and progression of local regulators; institutions and the provision of a nurturing environment within which societies and their economies can grow.
As developing markets mature many of their successful entrepreneurs are in a position to turn their attention to philanthropy and development and thus we frequently hear from citizens of the developing world that it is up to the local citizens to pull their countries out of poverty and indeed a number of them have put up substantial amounts of money to build incubators, advance learning and provide succour for the local poor.
However in spite of all these efforts we still have an overwhelming number of people living below the breadline in numerous and diverse countries around the world. We have a massive number of unemployed youth, some with good educations, who cannot find jobs and it is this cadre of youth that provides the greatest threat of security around the world and we still have a vast number of women being held back by an institutionalized lack of education. These challenges surely point to a shortcoming in the efforts of the traditional development infrastructure.
The new paradigm must continue to include local and international interests and a combination of both public and private sectors working with philanthropic organizations. A typical project might for example involve a philanthropic enterprise that funds a better mousetrap to be used in the developing world. It will utilize the private sector to develop and distribute the item and the public sector will monitor its use to ensure that this better mousetrap is used as intended.
When one looks at the developing world from the top down there are many commonalities that one can find.
The challenges for the development community start with these eight commonalities indicating that there are some obvious areas that require massive levels of development before they will be overcome. These challenges must all be tackled simultaneously as we do not have time to sequence the projects.
Let us look at four industries whose development would do provide a platform on which developing countries can grow their economy and address these needs.
The first sector is Healthcare and Sanitation. This area starts with education, giving the population an understanding of the need for proper sanitary conditions. The availability of modern medications have largely kerbed the outbreaks of plague and other diseases that afflicted Europe in the middle ages but poor sanitation is none-the-less a major determinant of poor health in the developing world. This is a space for development and philanthropic agencies to partner with the local public sector in finding a solution. The provision of actual healthcare, as in the development of hospitals and clinics and their staffing is a space in which the private sector can play a major role. There are healthy profits to be made in healthcare and developing countries should create an enabling environment for a strong healthcare sector as those in the industry are innovative and will cut their cloth according to their clientele.
One is always concerned that medical treatment in exchange for cash will leave the very poor without any care whatsoever but if the vast majority of the population is cared for in the private sector it makes the task of looking after the needy far more manageable for the public sector and philanthropists. In addition the development of modern hospitals and medical facilities for the affluent will have a trickledown effect on the rest of the population as the employees of these organizations will inevitably pass on some of their knowledge to the general population.
The next sector is Agriculture. Food security is of the utmost concern to all countries and many developing countries spend vast amounts of scarce foreign reserves in purchasing food that they could grow domestically as many have allowed their agriculture industry to wither and die rather than develop an environment in which farmers can thrive and thus keep young men and women on the farm. It is very important that agriculture be brought out of its cottage industry and subsistence phase and scaled up to a profitable industry. The key to building any entity in the agricultural business is to ensure that the whole value chain of agriculture is in place. That is that there must be a processing plant within easy reach of the farm or plantation and that once the goods have been processed there is a suitable distribution infrastructure and network to get the finished goods to market. If any one of these three components fails all three will fail. However there is another key value chain that is required for an agricultural industry to be successful and that is a financing value chain. The most difficult funds to raise are inevitably the seed funding required to expand a small acreage into a sustainable agri-business, even if it is done by a co-operative. Established plantations are reasonably easy finance as are processing facilities on condition the public sector has ensured that sufficient infrastructure exists. The conundrum of financing mid-size farms is one that one would expect the philanthropic organizations or even to private sector to embrace as the results in terms of good and secure jobs and solid profits are very appealing. However this is not the case and many a potentially good agri-project flounders due to lack of finance. Banks are loathe to lend to the sector and many farmers do not have strong title to their land or sufficient equity to carry bank loans. Like Healthcare this is an industry that requires partnerships between public and private sectors and can use a good dose of philanthropy.
Housing is an industry that needs government to create an enabling environment for home ownership. There are numerous viable models to provide home ownership to the disadvantaged. The key ingredient to enabling new home buyers is to provide them with a mechanism for raising the down-payment and then a system that will provide mortgage finance at reasonable rates. Few developing markets have robust fixed income markets to create sufficient mortgage finance so this part of the equation needs to be facilitated through national home loan banks, often guaranteed by the government. For a mortgage market to thrive and be leveraged it is necessary for ownership to be easily and cheaply established and for courts to be able to foreclose on failed mortgages both quickly and fairly. In addition the government regulators must ensure that minimum building standards are adhered to.
We now turn to educating our burgeoning society and this is a major challenge as in many developing countries. Teachers themselves are poorly educated and thus cannot, with the best of intentions, educate the youth. This must be addressed through modern technology and communications and in many cases schools and universities in the developed world must be used to help produce materials and programs that can be used to “teach the teacher” simultaneously with teaching the child. In the case of young girls thought leaders and political policy are critical to changing societal attitudes. Once a society has overcome this obstacle, overall improvement in living conditions results as well as a vast increase its productivity by having qualified men and women perform technical jobs. While discussing education the role of “on-the-job technical training should be addressed as this is critical to establishing a successful workforce and allowing the economy to grow. It is necessary for all parties to work in concert with each other to create a well educated population that can advance society.
By fostering these four industries developing countries will go a long way towards creating a successful society that is ready to operate on the world stage and to expand into the myriad industries that are operative in today’s world. However in each of the above four industries it is imperative to involve the public sector to act as a facilitator and regulator, philanthropists and aid agencies to help to fund new enterprises and that the private sector be allowed to leverage the industry and make profits for then they will create a successful industry.