This is an unofficial translation of the interview with Ms. Sigrid Kaag, Assistant Secretary-General and Director of Bureau for External Relations and Advocacy (BERA), United Nations Development Programme (UNDP). It appeared in Nikkei Business on 21 January 2013.

Building a win-win relationship for development

The attitudes of private companies toward development assistance have been changing greatly worldwide. There is a growing recognition among the private sector, especially among the small and medium size enterprises (SMEs), that engagement in development assistance would lead to a win-win relationship for business and developing countries.

Compared to before, the private sector has a better sense of the complexity of development and is taking a more positive stance to engage with developing countries. An increasing number of companies have committed to development assistance around the world and some Japanese companies have also started to engage in such efforts.

Collaboration with UNDP is not the only way for the private sector to support development. Private companies can expand their business in developing countries on their own or through collaboration with other partners. In any case, it is very important to share common awareness of the issues to be addressed among the parties.

The government, the private sector, and civil society each have a respective role in development assistance. The role of the private sector has been actively discussed at the World Economic Forum (Davos Forum) and the UN General Assembly. The concept of Creating Shared Value (CSV), a concept of generating profits while also making social contributions proposed by Prof. Michael Porter from Harvard University, is relevant. It is important that each stakeholder shares a common vision and values for development and cooperates with one another.

This interview was conducted by Ms. Ayako Hirono, a staff writer of Nikkei Business Publications, Inc.

Developing the Base-of-the-Pyramid (BOP) Market in cooperation with the UN

The potential size of the BOP market is said to be five (5) trillion dollars. Western private companies have taken the lead in developing this market. Their strength lies in the partnership with the UN. Japanese private companies have just started to move. The UN has extensive information and human networks that are effective. Making use of all resources is a key to success.

Wellthy Corporation is one of the small and medium sized enterprises (SMEs) in Japan with 130 employees. It has an established reputation for its technology to filter groundwater to a potable level, but does not have any experience in overseas markets. The company made a bold decision to enter the BOP market of Kenya as its first overseas business market and is planning to set up water purification system in March this year. How did they reach the point of introducing their equipment without any business experience in Kenya? A key element in this decision is the presence of the United Nations Development Programme (UNDP).

The UN also needs the private sector

UNDP is one of the UN organizations that provides assistance to developing countries, and is supporting the achievement of the Millennium Development Goals (MDGs) through various programmes. The MDGs are comprised of eight (8) goals including alleviation of extreme poverty and reduction of child mortality. “"For poverty reduction, it is essential to create employment, but this goes beyond the work of the UN. To achieve the MDGs, private sector engagements are critical,"” says Toshiya Nishigori of UNDP Tokyo Office. Only when the private sector can earn reasonable profits, employment will continue.

In 2008, UNDP has launched programmes to facilitate private sector'’s engagement in BOP markets. Business Call to Action (BCtA) is one of its core initiatives. Under BCtA, UNDP and other partners review and approve business proposals that can contribute to the achievement of the MDGs through core business, and facilitate BCtA companies to build networks with relevant partners. In the past, UNDP also implemented a programme called, Growing Sustainable Business (GSB), to support feasibility studies and market studies with private companies. Wellthy Corporation and UNDP agreed to conduct a feasibility study to develop an inclusive business model under the new project succeeding the GSB.

Making use of all resources is a key to success

The first Japanese companies accepted by BCtA were Itochu Corporation and Kurkku Corporation. Under their joint project, they have produced pre-organic cotton in India and were accepted in August 2012. They started their business without knowing about UNDP. Now being part of BCtA, they find facilitation by the UN and exchange of lessons learnt among BCtA companies fruitful.

Whereas 58 (63 as of February 2013) companies are accepted by BCtA, the number of Japanese companies are only two (2) (Itochu and Kurkku joint project is counted as one case). The other company is Unicharm Corporation.

Yamaha Motor Co., Ltd. is one of the successful Japanese pioneers in the BOP market. They have about 40% of the global market share of outboat motors and its presence in the BOP market is prominent. It took them about 50 years to reach this stage. In January, Yamaha agreed to conduct a feasibility study of their water purification system with UNDP in Mauritania. Yamaha is expecting to accelerate business development making use of UNDP's network in the country.

The BOP market is increasingly attractive for Japanese companies that are searching for new market opportunities. The key to success in the BOP market is not to try to do it alone. They can find a powerful partner just nearby to do this together.

This is an unofficial translation of the article that appeared in Nikkei Business on 21 January 2013.