Business Call to Action Public Eye Q&A Series: Dutch Ministry of Foreign Affairs

Interview with Hans Docter, Director Sustainable Economic Development, Dutch Ministry of Foreign Affairs

There is consensus on the important role that private sector can and should play in development. What are the priorities for the Dutch Ministry of Foreign Affairs (Dutch MoFA) in 2019 and beyond in terms of engaging the private sector in its development initiatives?

In the Netherlands we believe cooperation between the public and private sectors is vital. The Netherlands’ age-old battle with the sea required governments and businesses to work together to protect us from the floodwaters. What’s more, it has taught us that cooperation leads to better results. The private sector is therefore a major driver of change, and we see it as a partner in achieving the SDGs.

Economic development is at the heart of efforts to abolish poverty and create jobs worldwide, especially when it includes creating opportunities for the most vulnerable people in society, such as women and the young. Through innovative entrepreneurship companies can create decent jobs and expand local markets. Moreover, private capital is needed to raise enough funds for international development.

Working with the private sector demands a holistic approach. Therefore we have three priorities when working with the business community. First, we support the creation of a favourable business climate with clear rules and regulations and transparent revenue collection. In Ghana, for example, we are helping to make the tax administration efficient. Second, we stimulate entrepreneurship. In many countries it is not always easy to market a product. The Netherlands supports entrepreneurs with technical assistance or financing. Finally, we work with Dutch companies to make production and trade sustainable. We urge businesses to take responsibility for their supply chains, and support them in doing due diligence in order to fight child labour and pay living wages.

I realise that the expectations for companies’ contributions to the SDGs are high. I also realise that this process demands patience and perseverance — and there are undeniably costs in the short term. Yet I believe that, in close collaboration with governments, NGOs, universities and other organisations, business for development works.

Corporate social responsibility is the norm, both in the Netherlands and in international business. Inclusive business plays a dual role of promoting inclusive growth while reducing poverty and inequality. How important is it to support the growth of inclusive business, particularly in fragile contexts? And what should this support look like?

I believe a greater focus on sustainable investment, trade and entrepreneurship is helping many African countries build stronger, more stable economies that can provide opportunities for all. However, fragile countries still suffer from ongoing violence – or the legacy of past violence. They face serious economic challenges, including damaged infrastructure, small private sectors and weak regulatory environments and institutions.

Entrepreneurs often struggle to access capital and training, while governments in these countries operate with a limited tax base. This is why we support IFC’s Conflict Affected States in Africa (CASA) initiative. CASA is designed to kick-start investments in 13 fragile African states by supporting SMEs, providing loans and helping to improve the business climate. This initiative shows how private sector development can be promoted in a conflict sensitive way, preventing unintended effects on conflict and instability.

It is also important to stimulate economic empowerment, especially for women, young people and the ‘base of the pyramid’, as this lays a foundation for a sustainable future. Inclusive economic growth is vital in fragile and conflict-affected situations. In countries like Somalia, Nigeria and Mali, 75% of young people between 15 and 24 work in the informal sector, often earning between $1 and $2 a day. The lack of sufficient decent work for this fast-growing young segment of the labour force offers them little or no economic prospects.

That’s why the Netherlands supports projects like the Next Economy through our Local Employment for Development in Africa (LEAD) fund. Vulnerable young people often lack financial resources, needed employment and entrepreneurial skills, role models and networks. But they don’t lack talent. The Next Economy aspires to break this cycle of poverty by empowering young people to use their talent and encouraging them to create their own future jobs. They are offered support in finding a job with a living wage and social security, offering them prospects for the future.

Given Dutch MoFA’s priority of promoting sustainable and inclusive growth, why is it important to support a platform like Business Call to Action?

First and foremost, BCtA is a partner of the Dutch government in promoting sustainable and inclusive economic growth worldwide. We value the practical work that BCtA does with individual companies. BCtA delivers training, provides needed tools and guidance, and builds networks for inclusive businesses. In Colombia, BCtA has worked closely with the Dutch embassy to create such a network. It also helps businesses define and measure their impact on various development goals. Over the years we have realised that this is an important first step towards fostering understanding of how a business can contribute to development goals. Often just a slight change in business plans, with a focus on inclusivity, can have a tremendous impact on the SDGs. The results BCtA achieves with this approach are impressive.

It is crucial to make more companies aware of the opportunities and responsibility that come with doing business, including the effects of inclusive business. As a part of UNDP and a multidonor platform, BCtA is in a unique position to raise international awareness for inclusive business. We wholeheartedly support the work BCtA does with UNDP, HLPF, the G20 and the B20. International collaboration on inclusive business is a necessity to make value chains fair and inclusive worldwide.

Globally, where do you see the greatest potential for inclusive business to have a significant and lasting impact in terms of improving lives and pulling people out of poverty?

I believe the greatest potential for inclusive business to lift people out of poverty lies in supporting a living wage for all. A living wage is defined as a wage high enough to afford a decent standard of living for a worker and their family. First and foremost, a living wage is a human right. It also reduces child labour and contributes to several SDGs: SDG1 (no poverty), SDG5 (gender equality), SDG8 (decent work) and SDG12 (sustainable production and consumption).

Globalisation has lifted many people in developing countries out of poverty. At the same time, however, new forms of exploitation have emerged. Since the collapse of Rana Plaza – a textile factory in Bangladesh – in 2013, steps have been taken towards safer production processes. Yet wages in international value chains are still structurally too low. This is a complex problem; countries that are dependent on export industries are afraid that raising wages might cost them their competitive advantage.

Living wages are at the heart of Dutch development policy. But in order to work together towards living wages, we need to understand how to calculate a living wage. The Netherlands is therefore working with the ILO to develop living wage benchmarks. We believe that calculating and publishing benchmarks can be a catalyst for further action on wages that will enable workers to escape poverty.

How can inclusive business help tackle some of the greatest issues of our time, such as food security Can you tell us more about Dutch MoFA’s initiatives around these priorities?

The Netherlands aims to improve the food security situation by strengthening the private sector. There is a growing number of companies and entrepreneurs aspiring to make a difference in Africa either by sourcing locally, or by offering affordable quality products to low-income communities. By combining expertise, a partnership between government, companies, NGOs and knowledge institutions can be of huge value in identifying innovative solutions, efficient and sustainable business models, and the inclusive participation of producers, entrepreneurs and consumers.

Therefore, the Netherlands supports 2Scale: an incubator program that manages a portfolio of public-private partnerships (PPPs) for inclusive business in agri-food sectors and industries. An example of this programme can be found in Benin. In the south of Benin, many smallholder farmers grow soybean as a substitute for cotton on impoverished soils. This legume is mainly sold to processing companies. However, business relationships between these companies and smallholder producers of soybean deteriorated because the crop was purchased at very low prices. Considering the potential of soybean products, soybean producer and processor organizations sought support from 2SCALE for market development of soybean products, with the aim of developing their soybean production and processing activities and hence improve incomes from these activities. The partnership further expanded to support women who, had started experimenting with processing soybean for products destined for the local market. Gradually soybean-based products have been integrated into the eating habits of local people. Soybean ‘cheese’ (tofu) in particular is replacing meat and fish in everyday dishes in many households.

We tend to believe that big projects make big impact. However, we should realize that small and innovative interventions can kick-start a transformation. Partnerships are capable of aligning interests and bridging differences so that major steps can be taken towards attaining the SDGs.

This Q&A series, Public Eye, is designed to put a spotlight on BCtA partner priorities around issues at the heart of inclusive business, such as the SDGs, inclusive economies, climate change, women’s empowerment, fragile contexts, refugees and more.