Businesses see profit in aid projects as governments cut back

Cathryn J. Prince

Friday, March 29, 1996 | 11:59 a.m.

GENEVA -- SOMEDAY, companies like DHL Worldwide Express might be known as much for delivering food to hungry people as for overnight courier service to power suits.

"Say governments want packages of food to go to grannies in a multistory flat in Moscow where the lifts don't work," said George Reid of World Aid '96, a nonprofit group in Geneva. "Can Mr. X do it better than the Red Cross?"

The answer might just be yes.

As governments cut foreign aid - Switzerland, for example, cut its emergency aid in half for this year - they leave a gap some businesses are eager to fill. Private enterprises have the savvy for aid work, experts say.

In 1995, British Petroleum spent $29 million helping countries from Colombia to Vietnam. "Since the collapse of communism, it's quite clear governments are cutting back," says Chris Marsden, BP's chief of development aid in London. "We can do things others can't. We're not behaving as a grand philanthropist. We're doing this because we are good businesspeople; we know the value of a good reputation."

This new thinking began partly because there are many relief operations around the world where businesses could do part of the work. For example, the International Federation of the Red Cross has been feeding Mozambique refugees for nearly 10 years, something a delivery company could do as well, said Nick Cater, a London-based writer and researcher in business and aid issues.

Financial vs.

ethical judgment

"There is a big division between those projects that require ethical judgment and those that only need financial judgment," said Mr. Cater. "If no ethical judgment is needed, let commercial companies fill the job, they'll be more cost-effective and probably have better resources."

In Rwanda, US firms such as Brown and Root, a New Orleans-based construction company, were there building shelters, and during the Sudanese famine, American-Sudanese companies delivered food, said Cater.

Experts say the developing world is a market-and-production zone for companies, but once there, companies will become more involved in their employees' health and education, in addition to investing in plant and machinery.

London-based Crown Agents, a royal aid agency that is on the verge of being privatized, will work in 30 places worldwide in Britain's former colonies and in Eastern Europe.

"In nine months of Rwanda, $1.4 billion was spent. There is money to be made on disasters," says David Jamison of Crown Agents, explaining that national governments are starting to use more of their aid money to contract out to private companies for relief work in places like Rwanda.

"I think private companies like us can do better against smaller, more specialized NGOs (nongovernmental organizations) that don't have the skills for large-scale operations. We know where to buy more supplies for the better price," he continues.

Clean water in Goma

In a refugee camp in Goma, Zaire, a small California-based private company, Potable Water, paid by the US government, set up water systems and later said it saved 65,000 lives for several cents each, said Cater.

But some international relief agencies are wary of businesses bulldozing their way into what has always been considered their turf.

"Do we really want DHL or United Parcels delivering food?" said Peter Walker, director of disaster and refugee policy for the International Federation of the Red Cross and Red Crescent Societies. "I think not, because aid agencies have the human value element that companies may not."

Some statistics show that private investment has overtaken relief and developmental aid to foreign countries from NGOs and other agencies by 15 percent, according to the Prince of Wales Business Leaders Forum.

Filling government's aid gap

Companies often have more resources than aid agencies to develop educational and training programs or upgrade infrastructure.

At one time, governments or NGOs would have funded many of BP's programs, such as its $9 million mother-child clinic in Bogota, Colombia, said Fanny Umana in BP's Bogota office. Instead, the company works with the World Bank and local businesses.

"We fit in where the government doesn't have the additional funds or staffing for a program," said Ms. Umana.

"We fit our plans into regional development and help turn parts of the country around socially," she adds.

archive