Dear Colleagues,
Over the years I have made many observations about sustainability in
development, and often my views have not been very well received.
In my view, not enough of the analysis of sustainability has been done
taking a comprehensive view of the development situation as a whole. The
official development assistance (ODA) community has done little to
measure performance in development at a level where decision making can
be improved. There is a lot of information that shows, in the aggregate,
that developing countries have deteriorated in the overall quality of
life over a period of many years while similar data show that rich
countries have become significantly richer over the past forty years.
In developing countries, there are lots of guns and greed, but rather
less of grace and good. Sad.
High performance development, from my perspective, is when achievement
is the maximum it can be given local resources, financial, human and
natural. If this is the principal measurement, then development in
places like resource rich Nigeria, for example, is a terrible failure
while resource poor Somaliland should be considered successful.
After forty plus years of development, the position has been reached
where many of the developing countries are not "sustainable" without
external support. In such places, it is not simply enough for a business
or project to be profitable in an accounting sense, but it must also
prove to be "valuable" from the community and indeed the national
perspective.
I want to keep this post short....but this is a big topic. I would
suggest that sustainable development needs, more than anything else, to
be creating value. Value creation needs to be funded. Success in
development cannot be funded at this point in history by internally
generated cash flows, so external funding is needed. But this funding
has got to be allocated to, and go to, value adding activities.
This is in contrast to the resource allocation that has dominated
development for most of the past 40 years and continues today. Too much
of the resource flows from the international community has been going to
value destruction, including foreign direct investment ("FDI"). FDI can
be very profitable, but it is frequently a value destroyer in the host
country and in the community where it is operating. Not always, but very
often. "Studies" carried out by international experts and funded by the
ODA community are often value destroyers. Too much of what is done in
the ODA world has value to the donor, but not much to the nominal
beneficiaries.
I am a proponent of the sort of analysis that shows what an activity
costs and what are the values derived, both in terms of local profit and
in terms of indirect socio-economic value to the local community and to
the national economy. An approach using value creation is better than
using just a profitability measure. In the corporate (business)
environment profitability is often a good measure of value creation, but
in many of the needed development interventions there is no simple way
to measure profit, but it needs to be very clear that the local society
does get value. Roads, communications, education and health are
difficult to measure using the business profit concept as the measure,
but can be measured by thinking through the "value" that is derived from
such initiatives.
The World Bank uses some of these concepts in its project appraisal
process but for some reason it has not delivered success in development.
In my first World Bank assignment in 1978 I learned in part why the
World Bank was getting it wrong. While its project analysis was quite
rigorous (MacNamara liked numbers) the position of the project in the
community context, the national context, and international context, was
being ignored. In a local sense the projects did not address local
priorities, and to some extent this was true at the national level, and
in the global context the projects were so huge as to disrupt markets
for decades! Not suprisingly it is in areas where the World Bank has not
been marginally involved that development has progressed, notably places
like Singapore, Mauritius and China, to name some.
Value creation is needed for sustainability, and profitability may be a
measure of value creation, but not necessarily.
Sustainability is also determined by "cash" and it is cash where
development has most failed. Good value adding projects get terminated
when the cash runs out and nobody wants to keep funding them. Many
countries with significant human and natural resources are stuck with no
cash, and no way to handle their cash crisis. The UN, World Bank, IMF,
capital markets and the corporate world have not yet created a financing
vehicle that works for developing countries, and in reality, are still
trending in the wrong direction.
This week the UN Year of Microfinance will be launched. This is good
news...but it is only a small piece in the development puzzle...and
without all the other pieces it will not be enough.
Certainly value adding is a requirement for sustainability and success
in development. But is anyone going to measure this and put it into the
public domain for analysis and review? Maybe it is time for this to be
done. Transparency, Accounting and Accountability and effective
Monitoring and Evaluation (TAAME) needs to be on the agenda and
implemented so that all can see success and failure.
The NGO community and many development experts seem scared of the idea
of profit. Creating value is a responsible approach to development.
Profits in a good business are a good thing. They help fund the next
generation of good business. Spending good money on bad development is
criminal. What resources are available should ALL be used on value
adding activities. ALL.
Sincerely,
Peter Burgess
____________
Peter Burgess
in New York
Tel: 212 772 6918
Email: [EMAIL PROTECTED]
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