WORKSHOP V
"Economic Development and the Role of Private-Sector Corporations"

Final Report

INTRODUCTION

There is no doubt that the private sector has brought about prosperity in development of not only Europe but Asia as well. Private-sector corporations are the driving force of economic development today, all around the world. Corporations have a major impact that transcends economics and extends to the broad scope of society.

The private sector's involvement in economic development can take many forms, from major multinational corporations to small and medium enterprises, and range across a wide diversity of sectors, including manufacturing, agriculture, and the industrial sector.

The Asian and European private sectors attach great importance to the creation of a conducive investment environment. While they must compete with each other for markets, they must also cooperate with one another. To do this, they must establish mutual processes which will build cooperative prosperity, especially as their competition mounts and the enormous interdependence of the two regions rises.

ISSUES OF CONCERN

1. Both European and Asian investment decisions are determined by return on investment. This is a fundamental principle which provides a common basis for doing business.
2. The government can play an important role in facilitating an environment that is conducive to investment. This role is a crucial link between the development goals of government and business.
3. Managers or Executives of regional offices require greater support and understanding from their respective head offices. Both Asian and European companies therefore gain from greater understanding and communication between the two regions.
4. European and Asian executives appearently lack knowledge in the areas of political structure, business management practice and culture in their respective regions and agree that increased efforts are required.

In addition to increased crosscultural communication the following issues need to be addressed:

1. Protection of intellectual property rights.
2. Human resource development
3. Legal environment
4. Sustained profitability
5. Sufficient infrastructure
6. A stable business environment
7. Free flow of information
8. Private enterprises should behave as responsible corporate citizens.
9. Balanced and fair competition between governments trying to attract investments.

RECOMMENDATIONS

1. The role of the government

1. Governments should foster the transparency and availability of information.
   The process for Foreign Direct Investment and Government Procurement Practices should be made more transparent.
2. Governments should provide stability (economic, political and social).
3. Governments should regulate and deregulate in order to establish open markets.
4. Governments should balance the interests of foreign and domestic investors.
5. Governments must establish better educational infrastructure in order to produce a skilled labor force and foster cross-cultural understanding.

2. Financing

Uniform agreement existed on the importance of financing for investment decision-making, especially the financing of infrastructure.

• Domestic capital markets, like stock exchanges and bond markets, should be developed.
• Bilateral and multilateral development funds should be set up for private sector participation in public investments.
• Governments should provide support arrangements, like guarantees and equities, to promote joint public sector - private sector activities, as needed.
• Greater creativity in financing should offer alternatives to traditional financial instruments.
• European Investment Bank, Asian Development Bank (ADB) and World Bank financing can be an alternative to traditional financing.

3. Human Resource Development

There was broad agreement on the need for human resource development as an essential part of the process of development in which the private sector can play a crucial role.

• Training centers should be established in cooperative ventures between the private sector and governments.
• The private sector should be encouraged to open itself up to students, in order to cultivate work experience through exchanges between Asia and Europe. The cross-cultural exchange of young professionals can also be established.
• The establishment of intra-company cooperation and other structures for cooperation like joint efforts between the private sector and the government or universities. Getting Asian universities connected to European university exchange networks like ERASMUS and SOCRATES would also be essential.
• Retired experts should be utilized fully in order to cultivate skills through training and in order to enhance the managerial labor force. An example of this model of the use of retired experts may be seen in Volkswagen's calling back of retired top executives to train young engineers in China.
• Europe and Asia should engage in greater education about cultural diversity.
• Efforts by universities to export educational programs should be supported.

4. Environmental Protection

The participants also agreed that it was important to reflect the need for environmental protection in private-sector efforts.

• International companies need to assume responsibility for the environmental impact of their business activities.
• Application of standards like ISO 9000 and ISO 14000 should be promoted with positive incentives like tax holidays for companies that comply.
• Education must be carried out with respect to the fact that quality of environmental standards and higher profits can go hand in hand. At the moment, too many companies still think environmental measurements and higher profits are mutually exclusive.
• A top-down approach of standardization should be promoted. (Big companies should start using uniform standards throughout their entire network.)

5. Transparency and Availability of Information

Finally, the participants concluded that the free flow of information was essential both to private-sector activities and to the development process.

• The transparent and available flow of information should be supported by both the government and the private sector.