1Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Djordjija PetkoskiHead of Business, Competitiveness
and Development TeamWorld Bank Institute
World Bank Institute
1st MercosulForum on
Sustainability
2Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Population and Poverty in LAC• Total population: 551.4 million, of which:
– Nearly one quarter lives on less than $2 dollars per day (115 million people).
– 9.5% lives on less than $1 dollar per day (42 million people).
• LAC is the richest developing region, with average per-capita income at $3,700.
• It also has the higher standards of inequality among its population. In the year 2000:– 23% of the population had access to 61% of GDP – 77% had only access to 39% of total GDP.
3Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Late 1990s: Starting in 1999, growth slowed down due to external shocks –commodity prices fell, financial flows plunged, OECD growth slowed down and OECD demand for exports decreased
Average GDP per capita Growth Rates
Source: World Development Indicators, 2004
2.9
-0.4
2.0
-0.6
2.6
1.31.0
1.2
3.6
5.6
6.7
5.3
3.5
2.3
1.6 1.6
-2
-1
0
1
2
3
4
5
6
7
8
1961-80 1981-1990 1991-1998 1999-2002
Latin America & CaribbeanWorldEast Asia & PacificHigh income: OECD
Latin America - Economic Growth
4Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Manufactured exports have increased but there is still heavy dependency on agricultural and commodity products....
Latin America - Export Composition 1962-2001
Source: World Development Indicators, 2004.
La tin Am e rica a nd the Ca ribbe a n: m e rcha ndise e x port s a s % of GDP
0
2
4
6
8
10
12
14
16
18
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
A gric ulture and Food Produc ts Manuf ac tures Metals & Ores Fuel
5Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
.....especially when compared to East Asia
Latin America - Export Composition 1987-2001
Source: World Development Indicators, 2004.
Ea st Asia a nd P a cific: m e rch a nd ise e x po rts a s % o f G DP
0
5
1 0
1 5
2 0
2 5
3 0
3 5
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
A gr ic u lture and Food Produc ts Manuf ac tures Metals & Ores Fuel
6Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
ON THE OTHER HAND …
7Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
6,880Volkswagen Brazil5012,628PEMEX Gas y Petroquimica25
7,111Volkswagen Mexico4914,522CVRD Brazil24
7,154Telemar, Brazil4815,263Petrobras Distribuidora23
7,162Tele Norte Leste, Brazil4715,300CEMEX Mexico22
7,343Grupo Carso Mexico4615,322Telmex Mexico21
7,352Copec Chile4515,517Wal-Mart de Mexico20
7,508Repsol YPF Argentina4416,791Uruguay19
7,590Bunge Brasil4316,974El Salvador18
7,975Honduras4217,128America Movil Mexico17
8,151Paraguay4117,237CFE Mexico16
8,113Grupo Votorantim Brazil4019,431Costa Rica15
8,268Odebrecht, Brazil3928,302Republica Dominicana14
8,320Ipiranga Petroquímica3831,315PEMEX Refinacion Mex13
8,424Telcel Mexico3731,683Guatemala12
8,876Electrobras, Brazil3636,244Ecuador11
9,076Gerdau, Brazil3558,360Petrobras Brazil10
9,334Bolivia3478,430Peru9
9,696Jamaica3384,152Petroleos de Venezuela8
9,722Ipiranga Distribuidora3287,324Petroleos Mexicanos7
9,928FEMSA Mex31115,250Chile6
10,219Daimler Chrysler Mex30122,309Colombia5
10,490Codelco Chile29138,856Venezuela4
11,096Petróleo Ipiranga Br28183,309Argentina3
11,282General Motors Mexico27768,437Mexico2
11,325Org. Techint Argentina26794,097Brazil1
GDP/ Sales 2005 (data in millions)
Country / Company GDP/ Sales 2005 (data in millions)
Country / Company
Source: WBI utilizing data from World Development Indicators 2006 and Latin Trade the 500 Companies, Dec 31, 2005.
8Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
FDI vs OFA in Developing Countries in America
0
100
200
300
400
500
600
700
1990 2000 2002
Foreign Direct Investment(FDI)
Official Financial Aid(ODA+OOF)
51113Official Financial Aid(ODA+OOF)
366609126Foreign DirectInvestment (FDI)
200220001990
Foreign Direct Investment VS Official Financial Aid
9Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Emerging Changes: Rising Risk
McKinsey Quarterly (Jan. ‘06)Identifies
10 Trends to watch in 2006
1. Centers of economic activity will shift: The march of Asia.2. The demographic deficit: Productivity gains for the public sector will be essential. 3. Consumer preferences will change: New consumers in emerging markets.4. The technological revolution will continue: A new way of interactivity.5. The global labor market will open up new talent s ources: Migration of jobs.6. Business will come under sharp scrutiny: Stakeholder pressure.7. Demand for natural resources will grow: Resources are restrained.8. New industry structures will emerge: Non traditional business models.9. Management will go from art to science: New management approaches.10. New models of knowledge are emerging: Leveraging information.
10Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
The role of Business in Development : Corporate
Social Responsibility
11Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
To think and act comprehensively and systematically about:
• The role of business in development
• The manner in which the business is conducted
• Corporate governance• Poverty alleviation• Corporate contribution to peace
and war against terror• Business, government and civil
society partnership- common ground and collective action
CSR: A New Paradigm
12Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
A New Mind Set: Beyond “CSER Pays”- Adding Value
From: Separation and Competition
To: Enlargement and Overlapping
Corporate Responsibility
is the commitment of business to managing and improving the economic, environmental and social implications of its activities at the firm, local, regional and global levels.
13Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Corporate Social & Environmental Responsibility
14Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Why is CSR Important?
• Long-term viability & sustainable/positive returns on investment.
• Reduced operational risk.• Reduced long-term costs of
production.• Improved operating
environment.• Improved investment
environment.• Increased partnerships.
15Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Less influential1%
Equal influence9%
Much more influential42%
More influential46%
Don't know1%
Much less influential1%
Source: Race to the Top: Attracting and Enabling Global Sustainable Business, Business Survey Report, World Bank, IFC, October 2003
Compared to 5 Years Ago
Growing importance of CSR factors
16Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
0 10 20 30 40 50 60
Withdraw from a country
Choose one host countryover another
Withdraw from a partner
Choose one partner overanother
Percentage of respondents
Source: Race to the Top: Attracting and Enabling Global Sustainable Business, Business Survey Report, World Bank, IFC, October 2003
Actions taken by companies due to CSR Concerns
17Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
A New Mindset / Framework• Looking at longer term profit-by improving longer
term economic prospects• Bigger picture—importance of local conditions for
company’s ability to compete• Understanding the benefits of influencing the quality
of business environment• Focus on the alignment of economic, social and
environmental goals• Importance of specialized knowledge• Importance of partnership
– Common language– Common ground– Negotiation skills—co-opetition
18Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
New Framework - CSRSustainability actions
(Strategy, plans & programs, structure & systems)
Corporate & business unit
Strategy
Sustainability Performance
•Work force diversity•Environmental impacts•Bribery/ corruption•Community involvement•Ethical sourcing•Human rights•Product safety•Product usefulness
Long termcorporatefinancial
performance
Stakeholders reactions
•Employees•Community•Customer•Government•Investors•Financial analysis
feedback
Corporate cost = Benefit of actions
19Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Competitiveness
• The Fundamental Challenge for Business is to Remain Profitable and Competitive.
• Operate under increasingly complex, competitive and economically and socially uncertain conditions.
• Publicly listed companies: huge pressure to deliver robust and growing quarterly earnings.
• Pressure to establish cooperation with nontraditional partners and competitors, as well as focus on unfamiliar issues.
20Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Why Competitiveness Framework?
• Corporations– Better relate CSR to their competitive strategy
and competitive context– Better communicate and collaborate with
government and civil society
• Government– Better understand corporate intent and the
drivers behind corporate success– Improved business environment
21Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Why Competitiveness Framework?
• Civil Society– Better understand corporate intent and the drivers
behind corporate success– Strengthen their relevance and credibility through
• Improved governance structure • Relevant knowledge
• Youth – Sustainability and long term impact– Today’s decisions and tomorrow’s consequences– Relevant education and knowledge– Governance structure for relevance and credibility
22Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Potential of the Corporate Sector
• Unleashing the potential of the corporate sector and entrepreneurship is critical to achieve poverty alleviation at scale and in a sustainable manner
• Traditional expectations from corporate sector development– Private sector creates jobs
and income for individuals– Creates tax revenues for
governments
23Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
“Corporate Social Responsibility is a topic of vital importance to the World Bank in our efforts to fight poverty. It is a mission we must undertake responsibly, ensuring that we respect culture, protect the environment, and strengthen communities in the course of our work.”
Paul Wolfowitz, President of the World Bank, 2005
24Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Business, Competitiveness
and Development program
25Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Global Program – Reaching more than 30,000 participants per year– Working in more than 90 countries per year
Objectives• Address the need for a better understanding of the
role business can play in development.• Address the need for broader acceptance of multi-
sectoral partnerships, corporate governance, transparency and social responsibility as vital components of corporate strategy.
• Highlight the importance of these issues in relation to poverty reduction, good governance, anti-corruption and country competitiveness.
Business, Competitiveness and Development
26Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Business, Competitiveness and Development
Main themes for capacity building:
– Business and Multi-sectoral Partnerships
– Corporate Social Responsibility
– Business Ethics and Anti-corruption
– Competitiveness and Development
– Sustainable SMEs
– Corporate Governance
27Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute
Djordjija [email protected], Competitiveness
and Development TeamWorld Bank Institute
Thank you !!!