Pascale Bonzom, UNDP, BRC

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Fostering Responsible Business in Eastern Europe
and the CIS
Pascale Bonzom, UNDP, BRC Athens, September 12
2008
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Forum Objectives

• To provide an opportunity to Greek businesses and
  UNDP Brokers to explore responsible business
  opportunities and investments in Eastern Europe
  and the CIS.
• To identify a few concrete opportunities for
  follow-up with UNDP Brokers.

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Responsible Business Opportunities A Definition

• Business opportunities that include the poor and
  vulnerable as consumers
• Delivery of needed and affordable goods and
  services
• Packaged goods, financial services,
  telecommunications and IT, energy, waste
  management, etc.
• Business opportunities that include the poor and
  vulnerable as employees and entrepreneurs
• Product and service sourcing
• Agriculture, forestry, packaged goods, IT
  services, etc.
• Responsible investments in product manufacturing
  or employment intensive service delivery
  including Public Private Partnerships (PPPs)
• Agro-processing, wood work, construction
  materials, roads and building construction
  through PPPs and tourism.
• 4 characteristics
• Profitability, Participation of the poor,
  Sustainability, and Human development impact

Many examples show that providing basic goods and
services as well as income opportuni-ties to the
poor can be a sustainable and profitable
busi-ness strategy and contribute to human
development.
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Why engage in responsible business opportunities?

• To access new opportunities/markets
• To develop/test new business models/innovate
• To enjoy the first movers advantage
• To create value chain efficiencies (e.g. sourcing
  from small holders)
• To secure the license to operate from local
  communities
• To implement a CSR vision/strategy/commitment
• To leverage voluntary labels such as Fairtrade
• To do good business
• while doing good at the same time

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But barriers to Private Sector Development remain
significant in most transition economies

• The foundations for private sector activity are
  not in place
• Unfavorable business environment including weak
  policies (e.g. competition policies) and legal
  and regulatory institutions,
• Limited private sector participation in policy
  dialogue,
• Lack of access to finance
• Lack of skills and knowledge to respond to market
  opportunities
• Business value chains and market linkages too
  weak and unbalanced
• Lack of adherence to principles for responsible
  investment and business
• Leading to.
• High degree of companies operate in the informal
  sector
• The majority of enterprises are subsistence
  micro-enterprises, most of which are concentrated
  in low value added sectors
• Lack of competition - large incumbent enterprises
  frequently stifle entrepreneurial energy
• Local demand and ability to pay is weak

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How can UNDP help Business engage?

• Local knowledge (markets, constraints, service
  providers, etc)
• Convening power (local business partners,
  governments, civil society and donors)
• Regional network (of partners and expertise)
• Project alliance facilitation
• Feasibility studies/Market research co-funding
• Technical assistance for strengthening local
  value chain partners
• Continuous problem solving and facilitation
• Monitoring and evaluation of development impacts

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Business Brokers our main delivery mechanism

• Dedicated and pro-active
• Public and private sector background
• On the ground, with local knowledge and contacts
• Support of the UN access to government, donors,
  civil society and regional players
• Facilitate business linkages
• Provide country and sectoral information
• Identify investment opportunities in priority
  sectors
• Assistance with addressing knowledge and skill
  gaps among local partners

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• Local Manufacturing in Bosnia
• A responsible business case study

Lead company My Cycle (Slovenian
Company) Innovation Brokering partnerships for
new employment opportunities in
Bosnia Investment US 6.2 million (EUR 4 mm)
over 2 years
Challenge
Solution
Business result

• Broker introduces My Cycle to potential sites and
  facilitated contacts with local authorities
• My Cycle purchases non producing factory in
  Srebrenica for EUR1 mm (US 1.5mm) and renovates
  it according to their needs
• The company will initially employ 60 people from
  the Srebrenica area, and later an additional 120
  employees will be added to the workforce

• My Cycle from Slovenia is seeking new location
  for its factory
• The companys core business is manufacturing of
  wheel chairs, and over 90 of the products will
  be sold via export
• Srebrenica, known for the 1995 genocide during
  Bosnian war, is an economically depressed region

• The project demonstrates the relevance of the GSB
  service offer and the advantages of the on the
  ground presence
• Factory operations to begin in 2009

Development result

• An opportunity for women to participate in
  direct formal employment in the factory
• Reduced unemployment in the region

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• Wine sourcing from Moldova
• A responsible business case study

Lead company Svorov, Pucari (Moldovan SME) and
Domain Menada (Polish SME) Innovation Brokering
new relationships to diversify wine export
sales Investment Modification of manufacturing
practices for EU standards (TBD)
Challenge
Solution
Business result

• Wine accounts for 1/3 of Moldovan GDP and is a
  major export product for Moldova
• Russia was a key importer, but in 2006 a ban was
  enacted on Moldovan wine
• The industry and the livelihoods of hundreds of
  small farmers are now at risk

• Broker facilitated market linkages between
  Moldovan wine producers (Suvorov Vin and Purcari)
  with Domain Menada, a Polish importer and wine
  distributor
• The Moldovan exporters have also changed
  manufacturing practices - such as bottle size -
  in order to comply with EU standards, therefore
  opening up further future opportunities as a
  result of this project

• As of 2007, 1.4 million bottles exported to
  Poland
• Suvorov Vin has contracts with 15 large firms
  (approximately 1,500 farmers)

Development result

• New markets for smallholder farmers creating
  greater income security and growth potential for
  the future

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• Local Wool Sourcing in Moldova
• A responsible business case study

Company Dari Prirodi and Toplu Yapa wool
collectors Filatura
Ungheni yarn and carpet producer Innovation
Development of a pro-poor supply chain
Solution
Challenge
Development result

• Broker approached Filatura, wool collectors as
  well as USAID (already working with Filatura) and
  brokered the idea of developing a local supply
  chain
• UNDP facilitated and co-funded 2 feasibility
  studies one on wool sector in Moldova overall
  and the other on improving the quality of local
  wool
• UNDP facilitated access to working capital loan
  for wool collectors
• UNDP and Filatura initiated quality improvement
  of the wool produced by local farmers

• Number of farmers involved in supply chain
  doubled
• Quality of wool led to a price increase from 10
  Lei to 14 Lei/kg

• In 2006 Filatura Ungheni purchased 97 of its
  wool from abroad and only 3 from local sources
• Out of 10,000 sheep farmers in under-developed
  rural areas, around 2,000 in the supply chain
• Local wool did not meet quality criteria by
  Filatura Ungheni

Business result

• Filatura Ungheni purchases up to 20 of its wool
  from local sources, cost savings app. 1 mil USD
• Wool collectors gained access to working capital
  loan

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Conclusion

• Business is good for development and development
  is good for business
• Good luck in identifying responsible business
  opportunities

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Contact information pascale.bonzom_at_undp.org UNDP
Bratislava Regional Center for Europe and the CIS
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• EFCHARISTO POLY!
• ANY QUESTIONS?