Doing Business with the World - Mapeo de Promotores de RSE

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“True sustainability needs capitalto flow to areas of greatest need,and not necessarily where thereturn on investment is highestif a reasonable return can besustained over time.”John Rice, Vice-Chairman,General Electric CompanyFinancialflowsThe global viewFinancial capital is flowing increasinglyto developing countries, after a dip atthe end of the 1990s. In 2006, globalcapital flows, private and official,reached record heights at around 5%of global GDP. Private capital flows –private equity, foreign directinvestment (FDI) and credit extendedto developing countries by bankingand finance institutions – reached US$647 billion, a rise of 17% from 2005(see Figure 19). There has been a shiftfrom debt towards equity financing:equity flows made up US$ 419 billion,of which FDI accounted for US$ 325billion and portfolio equity US$ 94billion. 26 FDI to developing countriesrepresented approximately onequarterof worldwide FDI flows of US$1.2 trillion (see Figure 20). 27Private capital flows have been fuelled by companies in developing countriesseeking funding in global financial markets, thereby avoiding underdevelopedlocal capital markets, reducing the cost of their capital and taking advantage oflow global interest rates. In 2005, South-South investment flows representedmore than a third of all investment flows to the South. 28There are, however, large differences in access to global finance amongdeveloping countries, with most capital going to East Europe, Central and EastAsia and the Pacific regions. In 2006, the 51 poorest countries received onlyabout 8% of total capital flows; and sub-Saharan Africa received only 6% of theUS$ 4.9 trillion in total private capital that flowed to developing economiesbetween 1990 and 2006 (see Figure 21). 29Workers’ remittances have risen globally from US$ 102 billion in 1995 to anestimated US$ 232 billion in 2005 (see Figure 22). The share going to developingcountries increased from US$ 58 billion in 1995 to US$ 167 billion, or 72%, in2005. Unrecorded remittances transferred through informal channels arebelieved to account for at least 50% of recorded flows. 30 In 2004, workers’remittances made up one-quarter and more of the GDP of low-income countriessuch as Moldova, Lesotho and Haiti and more than 10% in countries likeHonduras, El Salvador, Lebanon and Jordan.Source: World Bank. Global Development Finance:The Globalization of Corporate Finance inDeveloping Countries. 2007.$ billions Percent700600500400300200100010019901991PrivateOfficial19921993199419951996199719981999Total flows/GDP(right scale)20002001Figure 19: Net capital flows to developingcountries, 1990-200620022003200420052006e765432101$ billions P ercent5004003002001000Net debt flowsEquity flows/GDP(right scale)Equity flows1990199119921993199 4199519961997199819992000200120022003200420052006eFigure 20: Net debt and equity flows, 1990-2006543210Source: Idem Figure 19.Latin America andCaribbean 14%Middle East andNorth Africa 4%South Asia 6%sub-SaharanAfrica 6%East Asia and Pacific 28%Figure 21: Total private capital flows todeveloping countries (2006)Europe andCentral Asia 42%Source: The World Bank. Global DevelopmentFinance. 2007.24
In comparison, official developmentassistance (ODA) from the 22members of the OECD DevelopmentAssistance Committee (DAC) reachedUS$ 103.9 billion in 2006 (0.30% ofcombined gross national income),amounting to 16% of private capitalflows. It is predicted to grow to US$130 billion by 2010. 31 In 2005, thelargest donors were the US, Japan, theUK, France and Germany.At the same time, the burden of debtowed by developing countries toofficial lenders including the IMF, theWorld Bank and government lendersremains high. A fair proportion ofcapital inflows are used to repayofficial lenders. According to TheEconomist, between 2003 and 2006,these net capital outflows amountedto US$ 185 billion. 32 And this despitethe fact that 30 countries arereceiving debt relief under the 1996Debt Relief Initiative for HeavilyIndebted Poor Countries (HIPC) andthe 2006 Multilateral Debt ReliefInitiative (MDRI), with a further 10countries eligible.Microfinance has grown in popularityover the last 30 years. It is estimatedthat in 2006 approximately 10,000microfinance institutions (MFI) servedmore than 150 million clients in 85countries. MFIs include communitycooperatives, government-funded notfor-profitorganizations, as well associal investors and commercial banks.The potential demand formicrofinance products is around 500million people, with many moremillions of people banking theirsavings with MFIs. Estimates of thepotential market for microfinanceestablish it at around US$ 300 billion.Microfinance is reaching microenterprisesof individual or groupentrepreneurs, many of them women.So far, only about 2-3% of MFIs areestimated to be self-sustaining withoutgovernment or aid funds, recoveringtheir cost through interest paymentsby their clients. 33IndiaChinaMexicoFrancePhilippinesSpainBelgiumGermanyUnited KingdomMoroccoSerbiaPakistanBrazilBangladeshEgypt Arab Rep.PortugalVietnamColombiaUnited StatesNigeria33.43.33.23.23.22.84.24.13.93.56.96.86.56.411.612.718.121.721.30 5 10 15 20 25US$ billionsFigure 22: Top 20 remittance-recipient countriesby value, 2004Sources: IMF. BoP Yearbook. 2004. And WorldBank. Global Economic Prospects. 2006.Societal needsPeople need funds to purchase food andbasic services. Individual entrepreneursand local companies need financing topurchase equipment, secure insurancecoverage for themselves and theirequipment, or to cover against shockssuch as failed harvests. Yet withindeveloping countries, access to financialand banking services remains low. Only1 billion people are believed to havebank accounts; an estimated 80% ofpeople in least developed countries areunbanked. 34 Despite the growingimportance of microfinance, anestimated 3 billion people of workingage are excluded from securingfinancing and credit because of highlevels of perceived risk, prohibitiveinterest rates, high transaction costs orbecause they lack collateral. 35 Theseproblems are compounded by illiteracyand a lack of proximity to financialinstitutions. Recent studies showed that20 to 50% of the population isfinancially excluded or informally servedin emerging economies (see Figure 23).Small and medium enterprises indeveloping countries require access tofinancing to be able to grow and scaleup their operations. While largecorporations can secure funding withrelative ease and individualentrepreneurs are gaining increasingaccess to sources of microfinance,SMEs often experience considerabledifficulties in securing financing.For many developing countries officialdevelopment aid continues to be alifeline and accounts for a significantportion of GDP. For example, in 2002,aid accounted for 75.2% of the GDP ofSao Tomé and Principe and 37.3% ofthe GDP of Guinea-Bissau. 36 Aid allowsthem to provide their populations withbasic goods and services. Similarly,humanitarian aid and disaster relief tocountries with already severelystretched economic resources andbeset by crises contribute towardssupporting the very survival ofvulnerable populations.100%90%80%70%60%50%40%30%20%10%0%16,24,5Financially excluded % Informally served (%)Formal other (%), includes MFIs* Banked (%)36,343,049,42,58,939,221,426,629,023,037,08,08,047,0Brazil Colombia Mexico SouthAfrica*MFI: Microfinance Finance InstitutionFigure 23: Access to finance44,21,92,851,146,05,05,843,2Namibia BotswanaSource: Chidzero, Anne-Marie (FinMark Trust), Karen Ellis (UK Department for InternationalDevelopment), and Anjali Kumar (World Bank). Indicators of Access to Finance throughHousehold Level Surveys: Comparisons of Data from Six Countries. August 2007. Data sources:FinScope and World Bank.25
Page 1 and 2: Doing Businesswith the WorldThe new
Page 3 and 4: Table of contentsStatement of inten
Page 5 and 6: To align our core business strategi
Page 7 and 8: Population shiftsAnother concept th
Page 9 and 10: Doing business with the worldMultin
Page 11 and 12: Societal needsThe 2005 Millennium E
Page 13 and 14: How businesscan contributeDifferent
Page 15 and 16: Societal needsEducation is a key fa
Page 17 and 18: How businesscan contributeThe onus
Page 19 and 20: India has an even more severeproble
Page 21 and 22: How businesscan contributeThe key t
Page 23 and 24: Societal needsSMEs in developing co
Page 25: How businesscan contributeLarge cor
Page 29 and 30: How businesscan contributeLarge cor
Page 31 and 32: Societal needsThere is growing cons
Page 35 and 36: death are diarrhea, malaria,pneumon
Page 37 and 38: How businesscan contributeWhile hea
Page 39 and 40: Average annual growth rate:2000-205
Page 41 and 42: How businesscan contributeBusiness
Page 43 and 44: Societal needsDespite robust econom
Page 47 and 48: Societal needsThe world faces a glo
Page 51 and 52: In particular, large corporations c
Page 53 and 54: Press Release. “Aid for tradecapa
Page 55 and 56: About theWBCSDWBCSDThe World Busine

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