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Parliamentary Brief‘Sometimes individual public-policy engagement by entrepreneurs andcompanies can have far-reaching implications, changing market structuresand in some cases opening entirely new markets’They can gather and provide market informationthrough household surveys or settingresearch priorities.It is therefore in the interest of privateenterprises to share priorities and informationwith the government of their owncountry as well as that of the country inwhich they want to operate, if they are amultinational. They can inform the government’sresearch priorities by highlighting newmarket opportunities; they can also lobby forimprovements in education and other basicservices, for legal empowerment of the poor,and for safeguarding human rights and environmentalquality.Policy makers, on the other hand, dependon accurate and up-to-date informationto inform their decisions. But they are notalways aware of the market dynamics andconstraints to doing business with the poor,especially when new market actors or newproducts are introduced.Private enterprises can provide this informationto governments transparently andwith accountability. They can calculate andshare the positive effects of infrastructuralor legislative changes on their customers,employees, suppliers and business partners.Once a dialogue is open and active, thepublic and private sectors can go on to createcollaborations and facilitate cross-sectoralpartnerships. As Harvard economist DaniRodrik wrote in his working paper, IndustrialPolicy for the Twenty-First Century, thiscommunication is ‘an interactive process ofstrategic co-operation between the private andpublic sectors which, on the one hand, servesto elicit information on business opportunitiesand constraints and, on the other hand,generates policy initiatives in response.’There are many different ways businessesand government can begin this ‘interactiveprocess of strategic co-operation’. Thesediscussions can happen unilaterally or collectivelyas part of a business association,policy initiative or stakeholder dialogue. Atthe same time some companies have affectedpolicy simply by being innovative and successful— the demonstration effect.For the individual company, engaginggovernment alone can be the best availableoption to address a limited and specificconcern such as encouraging the provisionof public goods or services that are needed tooperate in a particular locale.Sometimes individual public policyengagement by entrepreneurs and companiescan have far-reaching implications, changing10market structures and in some cases openingentirely new markets.For other firms, collaboration is the preferredand often most successful option. Thesecompanies work in co-operation with companiesthat do similar business or with otherstakeholder groups to pool their resources,skills and knowledge on specific and systemicconstraints that affect the success of inclusivebusiness models.‘Policy change is most likely to occurwhen there is a critical mass of institutionsand interests with the same concerns that arewilling to act together,’ wrote UN Departmentof Economic and Social Affairs and theUN Capital Development Fund in BuildingInclusive Financial Sectors for Development.An example of a successful collaborativedialogue is the World Business Council forSustainable Development and SNV NetherlandsDevelopment Alliance (WBCSD-SNVAlliance), which advocated Ecuador’s newgovernment of Rafael Correa to put economicinclusion on the social development agenda.Correa took office in January 2007, and theAlliance soon assembled a powerful advocacynetwork of government agencies, businesses,NGOs and development agencies.By August 2007, the president announcedthat in an effort to overcome Ecuador’s highlevel of poverty he would make economicinclusion a part of his social developmentagenda. Overall the government set asidecredit lines totalling $87m for the next fouryears, with the aim to create some 250,000direct and indirect jobs.As the Alliance states on their website, ‘Inorder to achieve long-lasting result, the buyinof the public and private sector, as well ascivil society, is indispensable.’Individual or collaborative engagement iseffective, but demonstration effects can alsoinfluence policy, particularly when regulatoryframeworks or public goods and servicesare absent or inadequate.Irrespective of whether obstacles havetaken the form of inadequate infrastructure,missing knowledge and skills, or restrictedaccess to financial products and services,thriving enterprises that have used creativityand innovation to overcome them haveproved the benefits of removing such constraints.Granted, the government must firsthear about a business’s experience in order tolearn from it. Either direct or mediated bya third party such as a development agency,communication about a winning inclusiveenterprise is vital.In the Philippines, Smart Communications,whose network covers over 99 per centof the population, offers low-cost, prepaidmobile phone airtime cards and eases financialtransactions through the option to sendremittances using short messaging service(SMS) technology. Smart was an innovator,and the success of such products as Padala,the world’s first international cash remittanceservice linked to mobile phones, gave thecompany a foundation upon which to pursuemore innovations and open discussions withthe Filipino government.Now Smart, other mobile phone operatorsand banks are in a policy dialogue withthe Filipino government to address inadequatelegislation on mobile banking, as wellas many of the more delicate issues, such aspayment systems, customer due diligence,consumer protection, deposit taking, electroniccommerce, anti–money launderingand combating the financing of terrorism.So far, local policy makers have expandedregulation and enforcement to combatmoney laundering and the financing of terrorism,enabled customer due diligence to beconducted by retail agents and allowed banksto regard prepaid card accounts as accountspayable and not deposits.In turn, these measures have created amore effective, lower-cost regulatory regime,increasing the ability of operators such asSmart to expand access to the poor.But businesses and governments cannotcreate more inclusive markets and combatpoverty alone — civil society, donors andnon-government organisations should play arole to ensure that these dialogues are beneficialto all.More than 50 countries were poorerin 2000 than they were in 1990. A privatesector actively engaged with governments increating new opportunities for the poor isnecessary if we hope to reverse that trend andmeet the MDGs by 2015.David Wheeler is Dean of the Faculty of Management at Dalhousie University and theco-chair of the Case Studies Working Group for Creating Value for All: Strategies for DoingBusiness with the Poor. Sahba Sobhani is the lead author of Creating Value for All and theProgramme Manager at UNDP’s Growing Inclusive Markets initiative.OCTOBER 2008