The ‘Kadey’ syndrome

(by Milinda Moragoda)

The North-South dialogue between developed and developing countries generates the greater part of the activities of the international organizations. But the results of these efforts have been limited to many expensive reports that end up gathering dust on the shelves of academics and policy-makers.

The time has come to seek a more pragmatic approach to this subject by involving the private sector.

Reports of misery and hunger in the developing world no longer have an impact on people in the West. Sometimes they are even negated by such revelations as the Multi-billion dollar deals made by the leader of the Philippines for his personal gain.

This has led cynics to say that development aid is purely the transfer of resources from poor people in the rich countries to rich people in the poor countries.

Both North and South have become disillusioned with the international organizations; the New International Economic Order (NIEO), introduced by the Group of 77 in 1974, has met non-cooperation and stalling from the North.

Neither have attempts to develop South-South cooperation been very successful.

A solution to the problem is not foreseeable as long as political leaders look only at short-term policies which are rewarded at the hustings. This short-sighted attitude has manifested itself in the North by a new wave of protectionism aimed especially at the newly industrialized countries (NICs), a group of fast-developing, export-driven Third World countries that have shown unprecedented growth rates over recent years.

At the same time, the attitude of the Third World countries towards the multinational corporations has remained hostile. The South views the multinational as a modern version of the East India companies of the past.

Nevertheless, many Third World countries encourage foreign investment and give incentives to their own private sectors to expand. Companies in the southern private sector are now among International Fortune’s 500.

However, the basic mentality of the private sector in both the North and South remains at a primeval stage. In Sri Lanka, there is the familiar local store or “kadey”. This is a stall shop often run by a proprietor who employs a few underpaid ten-to-twelve-year-olds illegally. His scales are rigged and his goal is daily profit maximization.

In the modern multi-billion dollar corporations of the North and the South, the systems may be more complex and the terminology more sophisticated, but the ultimate modus operandi remains the same. I call this phenomenon the “kadey syndrome”. It is time that this small-minded point of view be replaced by a larger vision.

To really maximize profits, today’s large corporations should look for long-term benefits. If one-third of the world’s population living in the North represents the major market for most of the North’s private sector, how much would it be worth to the northern private sector to triple its potential market by bringing in the other two-thirds as well?

For the South, which concentrates its activities on exports to northern markets, the development of the southern markets would be worth a great deal.

The creation of markets in the South should be done through a systematic and coordinated investment strategy in the third World. The private sectors of North and South joined together could provide a much more stable environment for investment for both parties.

A completely new forum should be set up independent of existing private sector umbrella groups. It could be called the United Private Sector Forum (UPSF). It should be set up at a seminar hosted by a renowned and prestigious academic institution, or a well-known periodical or newspaper. The participants in this seminar should be a representative group of influential businessmen from all over the world.

The theme of the seminar could be “Prospects for a Concerted Global Private Sector Strategy to Enhance International Development” and its agenda should include:

• A concerted long-term North-South private sector strategy to promote development.

• The overall guidelines for such a strategy and the vehicles for its realization. Among the areas to be considered should be the transfer of technology, access to capital, management skills and fostering entrepreneurship.

• The nature of the forum and the commitments needed from the private sector.

Each national Chamber of Commerce would devise a strategy for the private sector in the development of that country. Then the leading companies in the different sectors would be nominated to send representatives to the UPSF.

(Originally published in World Link Magazine, of the World Economic Forum, May 1988)