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Statement of Sir John R. Kaputin, Secretary-General at the Global Conference on Social Responsibility Vilamoura , Portugal , 16 February 2007 Honourable Chairman, President of World Council of Corporate Governance, Director General of World Council of Corporate Governance, Representative of the Portuguese Government, Distinguished Delegates, Excellencies, Ladies and gentlemen, INTRODUCTION I am greatly honoured by the invitation to participate in the second Global Conference on Social Responsibility and to address this plenary on the “Global Challenge of Poverty and Attrition of Natural Environment”. Permit me to express my utmost gratitude and congratulations to the Leaders of the World Council for Corporate Governance for their stewardship in fostering structured dialogue on corporate social responsibility. The focus of this year’s dialogue – “Corporate Social Responsibility Plus – Strategies that Enrich the Poor and Build Corporate Brands” – is of great interest and importance to the African, Caribbean and Pacific Group of States. Let me, in this regard, join those who spoke before me in reiterating that this conference provides us with the best opportunity to foster the dialogue for mainstreaming stakeholder issues in the corporate boardrooms and making markets work for the poor. In contribution to this structured dialogue I propose to focus my intervention on “ Opportunity and Participation for Corporate Social Responsibility”. Please be informed that the details of my intervention are contained in a brief paper prepared for this Conference. I would like to highlight the key points of my contribution and in particular the case for community-based capital mobilization. OPPORTUNITY AND PARTICIPATION Honourable Chairman, You may be all aware that continuous creation and exploitation of opportunity and widening of participation have emerged as major phenomena for sustainable development. This is broadly considered highly effective, especially in efforts targeted at poverty alleviation, in view of the inherent multiplier effects and cost-effectiveness. Opportunity refers to the scope for expanding or diversifying existing economic activities or creating new ones, as well as for enjoying the material, social and other benefits arising therefrom. Stakeholder involvement throughout the development cycle, beginning with the initial planning stage, is critical to ensure that strategies and measures aimed at exploitation of economic opportunity are suited to and meet the needs of these stakeholders. One of the most practical expression of opportunity and participation in the corporate community has been the expanded operations of micro- and small and medium enterprises that have emerged as important sources of employment and avenues for generating new wealth. Small business undertakings, embracing micro- and small and medium enterprises, operate in a wide range of economic activities in virtually all countries. Because of their economies of scale advantages, these enterprises are of particular importance to ACP and other developing countries. Through employment creation these enterprises have powerful multiplier effects. By providing income and increasing production, these enterprises can induce further demand for goods and services, which, in turn, creates more opportunities and employment. They also bring about indirect effects, such as broadening the national tax base and increasing tax revenues, which can be redistributed through appropriate policies to further expand opportunities and widen participation. Therefore, the expansion of micro- and small and medium enterprises, and policies for their promotion, are an important vehicle for expanding opportunity and widening participation, especially in ACP and other developing countries. MOBILIZING FINANCIAL CAPITAL Honourable Chairman, One of the major constraints on sustaining opportunity and participation of the poor and other disadvantaged groups, as well as small enterprises is the lack of access to finance. We are very much aware that macroeconomic and financial sector reforms have not succeeded in filling this financing gap for the bottom 50 to 70 per cent of the economically active population. We are also aware that non-traditional specialized financial intermediaries, including poverty oriented banks and non-governmental organizations, for their part, reach no more than perhaps 2 per cent of the more than 500 million people who run micro- and small enterprises throughout the world. Two of the best-known examples in this category are the Grameen Bank of Bangladesh and the Self-Employed Women’s Association (SEWA) Bank of India. These innovative financial institutions have over-time successfully expanded their operations from highly subsidized into non-subsidized financing products. Since these cases are to-date a common reference point for meaningful expression of opportunity and participation I will not dwell much on them. COMMUNITY-BASED CAPITAL MOBILIZATION Honourable Chairman, Let me at this juncture bring to your attention a very successful case of community-based capital mobilization that has, apparently, yet to find its way into the mainstream reference. This case is important to the theme of the Conference mainly due to the fact that, like the Grameen and SEWA banks, its community-based character can create enormous opportunities for economic participation in the ACP and other developing countries where poverty challenges are greatest. The case in point is that of mobilization of capital among the Tolai people of the Gazelle Peninsula of Papua New Guinea’s East New Britain Province. For those who may not know the coordinates of Papua New Guinea, it is the largest State among the Pacific Islands situated just north of Australia. As early as the 1970s the Tolai people took a decision to transform their economic environment through a critical path that embraced a mix of community values, local resources and participation of stakeholders. Their decision entailed mobilizing local capital – mainly coconuts and shell-money – to create new employment and income earning opportunities for the respective communities. The initial capital mobilization effort by these communities also entailed creating the New Guinea Development Corporation. Contrary to the requirements of the then introduced legislation the New Guinea Development Corporation did not begin with a board of directors but with a stewardship composed of a group of village leaders. Corporate concepts were strategically explained to the community in familiar, cultural terms, with "corporation", for instance, being equated with the traditional Tolai landowning group (or clan), the "wunatarai". Consistent with the commitment of the founders of the New Guinea Development Corporation to self-reliance, customary practices and translating corporate norms into familiar terms, capital contributions were initially not sought in cash but in the form of coconuts - three per adult and one per child - and traditional Tolai shell-money, "tabu". The coconuts were subsequently sold for cash and the proceeds formed the capital base for the New Guinea Development Corporation. The Corporation became the only modern institution in Papua New Guinea to conduct its business in two currencies - the Kina (the national currency) and tabu. The initial capital raised through communal effort and selling of the “coconut” and “tabu” denominated shares eventually involved some 10,000 people. In line with the Tolai custom, the initial capital raised through these communal efforts was put on reserve until further rounds of coconut contributions and sales were made. Furthermore, as per the Tolai custom, the initial capital was not used for paying wages and salaries. This was delayed until the initial investments in new opportunities were made. The Corporation’s early investments included opportunities such a storage facility, a cocoa fermentary, a copra drier, and plantations. It also became the first Corporation in the country to obtain a commercial credit from a foreign bank. Over the years the New Guinea Development Corporation, still retaining its initial and unique corporate brand of community ownership and participation, expanded its investments in opportunities available in other parts of the country. Thereby widening both the employment and the income base not only of the founding communities but also of the subsequent members and communities that participated as employees in many of its new opportunities. Today, the corporate brand that characterised the formation of the New Guinea Development Corporation has been replicated through the creation of other similar institutions elsewhere and therefore contributing to the expansion of employment opportunities throughout the country. Honourable Chairman, Distinguished delegates, Allow me to conclude with a proposition that opportunities and participation can constitute an important component of the sought PLUS for the corporate social responsibility. However, this would require concerted leadership by the international community and the corporate society in bringing this noble goal into fruition. The dialogue at this conference should provide the impetus for the World Council for Corporate Governance to play its appropriate role in providing its part of the requisite leadership. I thank you for your kind attention.
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