Private sector public goods

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This year's Program of Seminars at the IMF/WB Annual Meetings are built around the theme of "Asia in the World, the World in Asia" and many of the sessions have looked at the consequence of Asia being home to the most populous nations, a large majority of whose people still live in rural settings. This was certainly picked up as the focus of the session “Business Reaching the Poor”. C. K. Prahalad, building on his comments earlier in the day, noted that in Asia, the poor are not a distinct business proposition to be treated warily. Rather, serving them as core consumers and linking them as producers into the supply chain is simply conducting business for the majority.

One cannot ignore the fast market growth – 5.5 million new cell phone users a month in India. Rupert Keeley, from Visa International, noted sustained triple figure growth in China for its financial services from low-cost payments. Keeley also described the rapid uptake of debit and prepaid cards in Asia, which now form over two-thirds of their business. Further (and familiar) positive examples followed, such as that of Amul dairy linking small dairy farmers to a sophisticated dairy distribution and marketing system, or the e-choupal system outlined by ITC Ltd. Chairman Yogesh Deveshwar, linking rural producers to urban markets and fully integrated into ITC’s business model.

However, Shanta Devarajan, the World Bank's chief economist for South Asia, noted that many of these examples reflect market failures that the private sector is addressing on its own initiative.

Business is providing collective action goods in the absence of government action. He cited the example of the health sector - where 80% of Indian health spending is in the private sector. This provoked debate on the extent to which the private sector can overcome the lack of public goods.

David Housego outlined the successful case of Shades of India, which sells textiles produced by women entrepreneurs in Indian villages to the global luxury market. (Housego, formerly a correspondent for the Financial Times and The Economist, is now President of Shades of India.) Scaling up this success is constrained by restrictive labor regulations and infrastructure limitations – notably unreliable electricity and water supply and poor roads. Governments need to help create the enabling environment to allow business innovation to flourish - as a facilitator, not just a provider. The big question: how to find the right balance of public sector support? Too much government involvement might risk undermining business efficiencies and profit motivations.


Michael Jarvis

Executive Director, Transparency and Accountability Initiative

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