The only answer for the Third World, in my view, is for it to become more productive — and the way to achieve that is by encouraging both local and international investment, especially in rural development. State-owned enterprises can seldom be a total substitute for private sector initiative in building the infrastructure of a nation’s economy. A developing country cannot afford the burden of loss-making enterprises….

I am not convinced that Third World planners and developers have an in-depth understanding of rural priorities and perceptions. People in rural areas have an inherited understanding of the issues that affect them most. They are often free from many of the ideological concepts that may affect urban populations…

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Interviewer: Pranay Gupte in Aiglemont

The Ismaili sect, with its social and theologically liberal outlook, is probably the most progressive in the Islamic world. Spread over four continents its adherents are guided by their high profile Imam, Prince Karim Aga Khan. Pranay Gupte profiles the life and philosophy of the unlikely patriarch. And his image of a new world order based on free enterprise….

The Aga Khan and the various Imamat institutions under his control contribute more than $100 million annually to Third World development activities through investments, charities, and grants. He directs more than 60 companies, who employ more than 10,000 people in countries ranging from Bangladesh to Zaire. He is now participating in a new $50 million growth fund that will invest in emerging securities markets in developing countries (the fund’s initial capitalisation includes subscriptions from institutional investors in the United States). He is accelerating his entrepreneurial commitments in the Third World because he believes that, at long last, more and more governments are recognising the value and necessity of pushing the private sector in order to improve the living conditions of their people.

The only answer for the Third World, in my view, is for it to become more productive — and the way to achieve that is by encouraging both local and international investment, especially in rural development. State-owned enterprises can seldom be a total substitute for private sector initiative in building the infrastructure of a nation’s economy. A developing country cannot afford the burden of loss-making enterprises.

The Aga Khan believes quite devoutly that risk capital is a better agent for development in the Third World than loan capital. “When risk capital is involved, investor commitment is higher, as is the likelihood of technology transfer,” he said….

The nerve centres of the Aga Khan’s operations are located in Geneva and in Gouvieux. His secretariat in Gouvieux, housed in an elegant chateau that is surrounded by thick woods and grassy knolls, contains some 100 staff members, many of them non-Ismailis. The Aga Khan is often asked why, when the majority of Ismailis live in the Third World, his own headquarters are in the West. His response:

The reason is simple. My grandfather believed that the Third World, and more particularly the Islamic world, would make far more rapid progress if they were able to learn the lessons of the industrialised nations. Hence many of the development strategies such as cooperative banking and housing which he introduced to the Ismaili community were based on Western models.

There is also the fact that Switzerland and France offer more stable political and economic environments.

The Aga Khan feels that increasingly developing countries are transforming their attitudes concerning the private sector’s participation in economic development in the Third World.

There is a new sense of pragmatism in the developing world. This pragmatism recognises that dogmatic approaches to political philosophy and economic development haven’t worked. I am particularly pleased that long held suspicions about the private sector are melting away.

But for private enterprise to flourish, Third World states must create what the Aga Khan calls an “Enabling environment” to replace the “disabling environment” currently prevalent in many developing countries.

By a disabling environment I mean a political and social situation in which legal restrictions or prejudice shackle enterprise, in which land or buildings are summarily expropriated, expatriate work permits denied, or the remittance of expatriate salaries refused, trade preferences rescinded…

The “Enabling Environment”, on the other hand, is one where the rights of entrepreneurs are guaranteed and protected by law, and where a system of incentives is securely in place so that managers, teachers, physicians and nurses don’t abandon their native countries for more lucrative places in the West.

Nevertheless, the Aga Khan feels, no development policy in the Third World can genuinely succeed unless increased attention is paid to the rural sector. Noting that 80 per cent of the world’s population lives in non-urban areas, he said:

I am not convinced that Third World planners and developers have an in-depth understanding of rural priorities and perceptions. People in rural areas have an inherited understanding of the issues that affect them most. They are often free from many of the ideological concepts that may affect urban populations…

The Aga Khan cites some of his rural-support projects, such as ones in the northern areas of Pakistan and in India’s Gujarat state, where grassroots organisations have been established to identify local health, education and employment needs. As a result, subsequent investment in relevant development schemes has tended to be efficient, profit-making for the local units, and ultimately self-sustaining.

Any development agency, whether private or national or international, has to make sure that the work it instigates is a permanent contributor to the improvement of the quality of life in a region.

He feels that perhaps the greatest obstacle to rapid development in the Third World continues to be political dogmatism.

All in all, I feel that this is a moment of opportunity for fresh thinking about development and about the need for an enhanced private sector role in the Third World. I see it in historical terms. It is a moment of opportunity created by a number of forces — some successes in the Third World where private enterprise has flowered, some failures, plus a very radical change in the world economy. We must get a grip on the forces of change.

SOURCES

  • The Illustrated Weekly of India
  • Text (secondary source): ismaili.net

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