Commonwealth Business Council


Media Conference: Commonwealth Business Council
Media Centre Conference Room
Speakers: Lord Cairns, Dr Mohan Kaul
Sunday, 3 March 2002

LORD CAIRNS: Those of you who have shown any interest in the affairs of the CBC, thank you very much for coming along. We thought it was just worth taking a little bit of your time to talk a little bit about what the CBC has been trying to do. I suspect most of you know that CBC has been going since the CHOGM in Edinburgh some four and a half years ago when we were asked to provide the link between the business across the Commonwealth and Governments. We were asked to find ways of increasing trade and investment between Commonwealth countries and to create a dialogue between Governments and companies of all sizes and all shapes from across the Commonwealth to try and get both to work together, to try and make more happen.

We, two years ago, produced for the CHOGM in Durban a fairly detailed set of proposals that we hoped and the business throughout the Commonwealth hoped that Governments would adopt in the forthcoming WTO negotiations. Essentially, that was to say that the WTO was the way forward, that the numbers of the Commonwealth which make up about 42 out of the 130 odd WTO members, if they acted as a block, could take a fairly decisive role and within that, that we should try and separate out the issues of trade and the rules for trade from those which were more concerned with the environment and labour standards. Albeit both those latter two are important, they are different issues and to model them increased the likelihood of the creation of non-tariff barriers to replace tariff barriers. Incidentally, for the Australians here, our committee on that was led by Hugh Morgan of West Mining, WMC I think it's now called, who is a member of our council.

Slightly to the surprise of everyone concerned that was adopted in the Fancourt declaration and very fully reflects the views that we had put to them and we like to think that that's a cohesion between the Commonwealth block - it is quite important when after the aborted sessions in Seattle the meeting at Dohar took place. A number of members of the Commonwealth were leading from the third world membership. The South Africans, the Kenyans and others took quite an important part in following the line that we had been suggesting, albeit there is a bit an of environment that crept in in the final stages of those in negotiations which quite frankly we had preferred to see dealt with in other quarters.

Since Fancourt and Johannesberg and Durban we have been doing what we try to do, which is to arrange conferences and meetings on country specific investment programs, getting investors to come in to look at a country, get the Government and the local business with international investors to find ways in which we could improve investment and we can get people to understand the real issues. Both Government, to understand the issues that are worrying the international investors, and getting international investors to see what it's really like on the ground.

We have held a number of those conferences, most recently. Mohan Kaul, the Director-General and I were in Maputo last week. We had 350 people looking at what is one of the poorest countries of the world; some local business, some 100 or so people from outside Mozambique looking at what the opportunities were there. So we run those sort of things. We run specific sector and industry conferences, E-commerce, IT, telephony, all those sort of things on a multi-lateral basis.

We do quite a lot of work on trying to facilitate Government private sector dialogue on issues of corruption, on issues like trade facilitation - like how you get goods in and out of countries in reasonable time and without tremendous hold-ups at Customs which quite often happens.

On the issue of good governance, good corporate citizenship. What is expected of the business community in the increasing liberalised world? What is expected of them beyond making the largest number on the bottom line that they possibly can? I think there is a greater understanding of the part in civil society that the private sector is having to play.

Coming to this CHOGM, we felt that in addition to that we should juxtapose the proposals we made on trade on the last occasion with proposals to deal with investments. I think it's our view that quite often the Governments expect a great deal of companies which perhaps companies' business is not really able to play a major role in. Equally, corporations have very high expectations of the sort of conditions they are going to find in the country.

We put this into a format. We call it the 16-point program for investment, a Compact, which copies are available alongside of those proposals. The feeling is that we have six main headings under which business has every right to expect Government to do its thing and we have six points where Governments have every right to expect business to do the proper thing. Then we have four at the end of this which really are issues that neither can deal with without the other.

You were asking questions this morning about corruption. Corruption is a two-sided thing. There is the giver and the taker of corruption. What we are saying is that business and Governments have got to work it out together as to how they can reduce this, which is a tax on investment essentially. Neither one can do it without the other. There are three other points under these headings.

We didn't know when we got here whether - although we obviously had solicited in the interests or the opinions of all our members, we would have solicited the opinion of numbers in the CBC forum which was due to take place in Melbourne before CHOGM in October in which I think we were going to have about 1,000 people, but at the last moment that had to be pulled out which is a huge disappointment for us, but extremely uncomfortable for our pockets.

However, we have circulated all the members of the CBC with these proposals; had discussions in various countries. There is general agreement that these pretty well stand up. They are nothing frightfully new or frightfully special. They build on the UN global contact. They are consistent with but perhaps more explicit than the thinking which lies behind the early statements coming out of NEPAD and I have obviously discussed them with the people at NEPAD and they feel comfortable in those terms with it.

We presented these to the Heads of States in one of their Executive Sessions yesterday afternoon and there were a number, including Australia, of condemnations of that. Neither Mohan or I have been in the Executive Sessions today, but Tony Blair and many others came out of that session telling me that it had taken up quite a large part of this morning's session and there was, I think, if not unanimously, almost unanimously strong endorsement of the principles that we laid forth. That might come into the category of nice words said nicely and anybody can agree to them, can't they? The question much more is: Will anything happen as a result?

We, ourselves, suggested - and I have to leave that to Governments - that as the feeling has been developing in NEPAD itself, it's also come up quite a lot in the economic dialogues in New York, that really these things are only going to work if there is a degree of peer review. The pressures of peer review is very much part of the NEPAD thinking and it would be our view that these principles, as we have laid out, will only start to have any significant effect if Governments do agree, maybe now, maybe later, to some form of peer review so that they become increasingly fundamental principles of the way in which in economic terms the Commonwealth will act with each other.

We have said that the business council, probably along with the Commonwealth secretariat, ought to be able to facilitate that sort of peer review. I don't think we see ourselves there as the umpire, but we would be there ready to help in creating an acceptable bases from which peer review could take place.

I was very encouraged with the very warm endorsement, that everyone coming out of that session came up to us and expressed to us, and the exercise that I just suggested will now be as to whether it makes any difference or whether they were nice words and everyone has gone off to talk about Zimbabwe and will forget it thereafter.

So that was happening in terms of the time taken quite a significant part of the Executive Session; a little bit last night and also quite significantly this morning. If anyone would like to ask any questions about that, if Mohan would like to add anything else on it, we have got copies of the report which will be available at the end of the rows. Frankly, happy to talk about any aspects of that. The only comment I had was President Museveni said he wanted number 3 to be in number 1. "market economies with access, open to commercial trade", he said you should make that number 1 rather than number 3. They're not supposed to be in any particular priority or order.

DR KAUL: Number 3. President mus suggested that...

LORD CAIRNS: He said he wanted number 3 to be number 1, President Museveni of Uganda. He feels that each country will have their own priorities. They're not supposed to be ranked in priority terms. They are all, as far as I'm concerned, equally important.

QUESTION: What would be the relevance of this peer review? Who would decide what those elements are to be and, you know, clearly an organisation like the Commonwealth, some peers do a lot more reviewing than others. Who would do the review when, and under what conditions?

LORD CAIRNS: Well, it isn't an area in which I think the CBC should be prescriptive. I mean, if I go along and say to governance, "We are going to review you every year.", I don't expect to get much except for a sore arse. On the other hand, we have laid down the challenge to them to say, "How do they want to do it?" it's not for us to tell them. Clearly, if there is a regular review, once every year or so, we do do surveys of business opinion of governance. Not our opinion. Everybody who will answer a survey, we will feed that into a general pole of attitudes and we do let Governments know what the results of those surveys are.

To some extent, it's already there but at the moment in a fairly noted form. I think we are going to be working in parallel with NEPAD because Africa isn't any part of the Commonwealth, but if it's thinking through these issues for themselves, quite rightly, it needs to be led by - Africa needs to be led by Africans, not by being told everything from outside. Their sense is that those who form part of NEPAD will be determined by how they feel that their fellow Africans are doing against criteria which aren't a million miles from the ones we have laid down here. You had a question.

QUESTION: I'm just wondering on the issue of Zimbabwe, is it affecting the way business peer reviews Africans? Also, running on from that is there a feeling of association of nations in terms of not being able to deal with issues involved?

LORD CAIRNS: I don't know that I can speak for all of business any more than probably you can. I think there is a concern about Africa at the moment and probably more concern than maybe there ought to be. When we were in South Africa during last week, reading my papers from London and talking to people in London, the gloominess about Africa, even South Africa, didn't seem to me to be reflected in what I was seeing and hearing and talking to people in South Africa. South Africa just had an extremely good budget and a very promising set of circumstances. Now, the tourist business, you couldn't get a hotel room in Cape Town. If you listened to London you would assume that there wasn't a single person visiting the place. Absolutely packed. That doesn't mean anything, but if you like it's one straw in the web. So I think to the extent that everyone is focussing on the issues around Zimbabwe, they are getting in the way of reality as well as, I suppose, potentially being a real issue.

QUESTION: In practical terms, what would you say over the past four years are your success stories?

LORD CAIRNS: We are not terribly good at shouting about ourselves. I mean, I think that to have got in Durban probably the most progressive statement on an approach to the WTO. I know of nowhere where developed and developing nations together have stood behind one statement which makes total sense to me in terms of what is best for countries rich and poor. I think it was an achievement to which we were only part - the Commonwealth, itself was very much a part - because the Commonwealth is very good at developed and developing nations talking to each other as equals and having the trust in each other which, when you get into the bigger forum, tends to become rich versus poor, ACD versus the 77, or whatever.

Now, on a smaller scale, I think we have helped to create investment in a number of countries. We certainly have sewn the seeds for it. I think we have helped a number of companies in a wide range of countries to think through some of the issues about their role in civil society. I hope if this actually starts to get some teeth, either now or in a year or two, that may also be a contribution.

Whether we have actually contributed anything, frankly it's for other people to tell us. We do get told by Government and by a number of people who work with us that we - but really we are the last people that should be shouting about it.

QUESTION: Earlier today we heard about a new Commonwealth private equity fund and you, yourself, said you were recently in Mozambique. I'm just wondering whether you would like to share with us any thoughts you might have in general terms about what is restricting investment in the developing countries in Africa?

LORD CAIRNS: Wearing another hat, I am the Chairman of the Commonwealth Development Corporation, which is probably the largest equity investor in Africa and, indeed, we manage the Commonwealth in one front, which I think at the end of the day proves itself that to have done reasonably well. We perhaps have made the risk adjusted returns that the developing world might have expected. But I think there is every chance that we will produce in dollars a double digit return. What are the problems of investing in Africa? They are right across the field. Frankly, these principles address a large number of them. The enforcement of contract would be one that I would put very high on the list. That comes in this document. And finding really good entrepreneurs and people understanding the whole business of corporate governance. Many people who have been successful are running very much family businesses, where have the business of the family and the business of the company tend to get a bit mixed up. There's nothing wrong with that, except that it's very difficult to invest along side.

Frankly, I think we in CBC struggle to make as many investments as we would like in Africa. We are constrained by the relatively small size of quite a lot of the economies and we have spread a lot of time encouraging trade areas in order to increase the market size, so that the economy scale can be obtained. So there are a wide range of issues and a wide range of problems.

On the other hand, I would have to say that in broad terms we have seen the asset values in the developing world gain substantially higher against growth rates of 1 to 3 per cent, if they are lucky, and occasionally 4. We have seen the asset values in countries, which are quite often shown in growth rates, are far higher than that, going down for the last ten years. Some day my guess is that will change the other way and we will see some really good markets in margin markets which we haven't seen really since the early 90s.

QUESTION: Could I also question point 14, where you propose that jointly business and Governments will tighten corruption...joint national public/private actions. Could you give some examples of successful actions that have already taken place and also what the CBC would be looking for, what you would like to see in this area in the next few years.

LORD CAIRNS: Not because it's an issue of corruption and I want to back it, but I am beginning to get the feeling that I have talked too much and I haven't let the man who does the real work, Mohan call, have a word. Mohan, have a go at that one?

DR KAUL: What we did, following the Durban summit, where we had apart from the trade agenda, which we focused on, we also introduced the idea of corruption. Following that, the president of Botswana volunteered, himself, to say that if we could work in Botswana with his team. The Botswana comes very low in the corruption and comes very high in the kind of - corruption is not a problem for investment in Botswana. So what we are doing at the country level is to create a public/private group. It's a business and a Government and it represents civil society - a joint group working under the president's office. There are copies of some of these - this was the forum report that never took place. This was the business forum in Melbourne. There is an action program at the end which we have also given to the heads there because it is part of our report. The action program talks about the business agenda for change to corruption.

Basically, we are looking at sources of corruption where business and Government can identify those and what actions could be taken at the local level. So it's locally driven, but business and Government together. So we work in Botswana, Ghana and Tanzania and we hope this business agenda for action will be taken to other countries as a Commonwealth action plan.

While business and Ghana will try to identify sources, try to act similar to the CBC guidelines, but it's an action at the local level driven by local people. Since people are saying it takes two people for corruption, so here we are getting business and Governments working together.

We also found out that the sources of corruption, say in Botswana, are very different than in Ghana or in Tanzania. While the corruption may be there, there are different forms of corruption taking place. So it's very country specific. Now, they are the kind of things we are working on. This project is being funded both by Government as well as business private sector members.

I also wanted to mention one more thing, what our achievements were, apart from what Lord Cairns said. I think one of the things we focused on was the business agenda for Commonwealth; that Commonwealth has a business value. As you might have seen somewhere, what we say is "Commonwealth factor". We have found that if we invested - business invests from one Commonwealth country to the other, it's 15 to 20 per cent cheaper. So what we focus on was the attention of business. There's something like a Commonwealth factor. Now, in the past business wasn't that much thinking in the Commonwealth in the context of investment, but has since now tried to focus on that.

As you would have seen in the last few years, there is no intercommerce investments. Many of you may not know. A few years ago in South Africa, after the new Government took over, Malisha (?) was the second largest investor in South Africa. It's not now, but at that time. There are a number of privatisations that took place in Nigeria. South African companies and other companies have started taking part in those privatisation company. So there's a lot of investment coming from one Commonwealth country to the other and it is a lot to do with the Commonwealth factor, saying that people know each other better. This was very evident when we organised investment conference in Nigeria soon after president object San Joe's Government was installed and we attracted at that time about 150 Ministers into that country along with the local businesses. It was a very successful conference. I think over a billion dollar business was discussed at that meeting.

Same thing happened at Mozambique. You said about Zimbabwe. Zimbabwe question will not go away and I think business has now sort of come to terms with those kind of issues that will take place. But we were surprised. We were expecting about 150 to 200 delegates in Mozambique. We had 350 there. Half of them were from abroad. I mean, we had people from UK, South Africa, Canada, Belgium, US, and they were all investors talking about CBC projects in Mozambique. One of the big things in Mozambique or Tanzania which we did three months ago, was that there are signs of widespread private sector emerging. As the countries develop the market economy framework in Tanzania or in Mozambique there is signs of small businesses coming up.

Now, in Africa big projects take time to grow because they are all infrastructure projects. Companies are worried about the political risk or other risks that they are taking. But small investments are taking place. We were surprised in Tanzania, three months ago in September, when we did a conference, there were in the room about 200 small businesses from Tanzania and about 150 from outside and all major banks had offices out there. So slowly the investment climate in some of these countries are changing. But it will take a long time. I think the road map is there. I think it's slow but I think it is definitely going to be very forward in terms of business investments.

LORD CAIRNS: In case of doubt, neither the United States nor Belgium has yet joined the Commonwealth. Thank you very much for coming.

ENDS