Making It: Industry for Development (#10)

MakingItIndustry for Development

2nd quarter 2012

The healthof nations

n Creating impact by design

n Gas flaring n Deadly denim n Quality medicines

for all n Viet Nam

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A quarterly magazine.Stimulating, critical andconstructive. A forum fordiscussion and exchangeabout the intersection ofindustry and development.

NUMBER 1, DECEMBER 2009lWe must let nature inspire us– Gunter Pauli presents analternative business model thatis environmentally friendly andsustainable lHot Topic: Is itpossible to have prosperitywithout growth? Is ‘greengrowth’ really possible?

NUMBER 2, APRIL 2010lThe International EnergyAgency’s Nobuo Tanaka looks atenergy transitions for industry l Energy for all – KandehYumkella and Leena Srivastavaon what needs to be done toimprove energy access

NUMBER 3, JULY 2010l China’s stunning economicrise: interview with minister ofcommerce, Chen Deming l Towards a more productivedebate – Ha-Joon Chang callsfor an acceptance thatindustrial policy can work

NUMBER 4, NOVEMBER 2010l Strengthening productivecapacity – Cheick Sidi Diarraargues that the LDCs should –and can – produce more, andbetter quality, goods l PatriciaFrancis on climate change andtrade l Hot topic: The relevanceof entrepreneurship

NUMBER 5, FEBRUARY 2011lA window of opportunity forworld trade? – Peter Sutherlandassesses the prospects for theconclusion of a multilateraltrade agreement l A path tomutual prosperity –Xiao Ye ontrade between sub-SaharanAfrica and China

NUMBER 6, APRIL 2011l Feeding a crowded world –IFAD’s Kanayo Nwanze arguesthat smallholder farmers musthave opportunities to beentrepreneurs l Nestlé CEOPaul Bulcke on ‘Creating SharedValue’ l Hot Topic: Does energyefficiency lead to increasedenergy consumption?

NUMBER 7, JULY 2011lThe globalization paradox –Dani Rodrik l Unfair share –Thomas Pogge on affluentcountries’ responsibility forincreasing global poverty l Hot topic: Is nuclear powernecessary for a carbon-freefuture?

NUMBER 8, NOVEMBER 2011l Closing the gender gaps –Michelle Bachelet on overcoming thebarriers that prevent women fromseizing economic opportunitiesl Engineering eco-friendly solutions– Carolina Guerra on hazardouswaste in Colombial Hot topic: Growth: the end of theworld as we know it?

NUMBER 9, JANUARY 2012l Jeremy Rifkin on the ThirdIndustrial Revolutionl Morgan Bazilian and KandehYumkella on the new economy:inclusive and sustainablel Hot topic: Climate change,climate action

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EditorialIn terms of international development, it is often taken for grantedthat wealth inevitably leads to health, and that therefore only thecountries with wealthier economies will be able to foster theconditions for a healthier population. In this context, internationaldevelopment efforts usually focus on interventions to kick-starteconomic growth, on the assumption that economic success will helperadicate sickness and disease. But what if the paradigm is flipped, andhealthy populations become a building block for healthy economies?As well as The Wealth of Nations– the title of Adam Smith’s ‘free marketbible’ – should we perhaps also be talking about the ‘health of nations’?

In this issue of Making It, our contributors consider some of themany intersections where productive activities and health concernsmeet. In the keynote article, Professor Klaus Leisinger argues thattackling the cycle of poverty and poor health requires partnershipsalong the entire health value chain, and that pharmaceuticalcompanies have a valuable contribution to make, alongsidegovernments, international organizations and non-governmentalorganizations. Jürgen Reinhardt looks at the pharmaceutical industryfrom a different perspective, examining the prospects for the localproduction of pharmaceuticals in Africa.

Of course, there is much more to health and industry than just thepharmaceutical sector, and other contributors explore issues such asthe risk to garment workers’ health in the name of fashion, the designof health care equipment for those on lower incomes, and thenutritional inadequacies of ‘fast’ or ‘junk’ food. Our Hot Topic offerscontrasting views on efforts to bring an end to gas flaring, a practice allagree is a waste of potential energy, but those who live in the vicinity ofwhere it takes place also claim is damaging their health.

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Editor: Charles Arthur [email protected] Editorial committee: Jean Haas-Makumbi, Kazuki Kitaoka,Wilfried Lütkenhorst (chair), Matilda Muweme, Cormac O’Reilly and Jo Roetzer-Sweetland Cover illustration: Mike King Design: Smith+Bell, UK – www.smithplusbell.com Thanks for assistance to Donna Coleman Printed by GutenbergPress Ltd, Malta –www.gutenberg.com.mton FSC certified paper To view this publicationonline and to participate indiscussions about industry fordevelopment, please visitwww.makingitmagazine.netTo subscribe and receive future issuesof Making It, please send an emailwith your name and address [email protected] It: Industry for Developmentis published by the United NationsIndustrial Development Organization(UNIDO),Vienna International Centre, P.O. Box 300, 1400 Vienna, AustriaTelephone: (+43-1) 26026-0, Fax: (+43-1) 26926-69E-mail: [email protected] © 2012 The UnitedNations Industrial DevelopmentOrganization No part of this publication can beused or reproduced without priorpermission from the editorISSN 2076-8508

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GLOBAL FORUM6 Letters8 No escaping the numbers – Chandran Nair argues that Asia’s burgeoningpopulation means thatindulging in Western-style consumption is not an option10 Hot Topic: Gas flaring –The World Bank-led GlobalGas Flaring Reductionpartnership and NnimmoBassey (chair of Friends of theEarth International) havedifferent views on the currentsituation regarding gas flaring

16 Business matters –news and trends

FEATURES18 Deadly denim – Dominique Muller on how the garment industry hasresponded to the Clean ClothesCampaign’s work to bring an end to the practice of sandblasting jeans

KEYNOTE FEATURE22 Meeting the global health challenge: therole of the pharmaceutical industry –Professor Klaus M. Leisinger, chair of theNovartis Foundation for SustainableDevelopment and advisor to national andinternational organizations, exploressome of the issues at the intersectionbetween industry and health

MakingItIndustryforDevelopment

The designations employed and thepresentation of the material in this magazinedo not imply the expression of any opinionwhatsoever on the part of the Secretariat ofthe United Nations Industrial DevelopmentOrganization (UNIDO) concerning the legalstatus of any country, territory, city or area orof its authorities, or concerning thedelimitation of its frontiers or boundaries, orits economic system or degree ofdevelopment. Designations such as“developed”, “industrialized” and“developing” are intended for statisticalconvenience and do not necessarily express ajudgment about the stage reached by aparticular country or area in the developmentprocess. Mention of firm names orcommercial products does not constitute anendorsement by UNIDO.The opinions, statistical data and estimatescontained in signed articles are theresponsibility of the author(s), includingthose who are UNIDO members of staff, andshould not be considered as reflecting theviews or bearing the endorsement of UNIDO.This document has been produced withoutformal United Nations editing.

Contents

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Number 10, 2nd quarter 2012

36 Country feature – Viet Nam – Risingdragon – Interview with Prime MinisterNguyen Tan Dung40 Good business – Profile of Bangladesh’sViyellatex garment assembly company andinterview with CEO, K. M. Rezaul Hasanat

POLICY BRIEF42 Outcome of the Busan Forumon Aid Effectiveness44 Enabling manufacturingcompetitiveness throughsustainable interventions

46 Endpiece – The Carbon Truston young adults’ attitudes

towards climate change andcarbon footprinting

28 Creating impact by design –D-Rev’s CEO, Krista Donaldson,introduces the non-profitorganization and explains itsphilosophy on designing healthcare equipment for thedeveloping world30 Quality medicines for all –UNIDO’s Jürgen Reinhardt on the latest developmentsregarding the localproduction ofpharmaceuticals in Africa32Watch what you eat! –Sunita Narain of NewDelhi’s Centre for Scienceand Environment on thedangers of junk food

Cover illustrator Mike Kingis a graphic designer andposter artist from Portland,Oregon, USA, who worksprimarily in the musicbusiness. Best known forhis album covers for BenHarper, Jack Johnson, PinkMartini and Elliott Smith,his poster art has beenexhibited in the US andaround the world. His work can be viewed atwww.crashamerica.com

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LETTERS

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Greenwash“Building the architecture forgreen growth” by the Koreanpresident’s representative inthe last issue (Making It, issue9) was a load of greenwash.Too bad that you were takenin. But not everyone is sogullible. This is from a recentarticle in the Financial Times:"South Korea has experiencedone of the fastestdevelopment trajectories ofany nation and has created agrim environmental mess. Itis the fastest growing carbonemitter in the Organizationfor Economic Co-operationand Development.Environmental scientists aretearing their hair out, as Seoulrides rough-shod overinternational standards andagreements while being fetedinternationally for its greenrhetoric."

The billions that SouthKorea is pumping into what itcalls ‘environmental projects’are in fact fundingconstruction work and touristresorts, further eroding theeco-systems already batteredby rapid industrial growth. Asthe FT rightly points out,"Much of the Koreancountryside has already beensavaged by construction andmany so-called green projectsare just an excuse to lay moretarmac, build hotels anddevelop wilderness thatshould be left as animal

habitat.... South Korea’scontinuing land reclamationsof fragile wetlands are anenvironmental disgrace."l John Devine, received byemail.

Women asentrepreneursI strongly support UNIDO’sprogramme of promotingwomen’s rural industries(Making It, issue 8). This effortcontinues a programme thatwe pursued for 26 years inGhana, at the TechnologyConsultancy Centre of theKwame Nkrumah Universityof Science and Technology(KNUST), Kumasi. The workinvolved upgrading thetechnology of existingwomen’s groups processingcassava and corn, extractingvegetable oils and spinningand weaving cotton. Just as inMali, shea butter makingfeatured in our programmeand by upgrading thetechnology women’s groupsin the Northern Region werehelped to export directly tothe Body Shop, aninternationally known beautyproducts manufacturer.Perhaps the most widelyadopted innovation wasbeekeeping using the Kenyatop-bar hive, which was takenup by women throughout thecountry, enabling them toproduce honey to nourishtheir children, as well as tosell to support their families.

To learn more about books

describing the grassrootsindustrial revolution in theturbulent Ghana of thesecond half of the twentiethcentury, please refer to mywebsite. l John W. Powell OBE,www.ghanabooksjwp.comwebsite comment.

I found the “Empoweringwomen entrepreneurs, athome and abroad” articleabout gender equality andfemale entrepreneurshipfascinating (Making It, issue 8).Thank you for discussingsuch an important and timelytopic! I completely agree withJan O’Sullivan that the lack offinancing, experience andtraining are contributingfactors, and also that the lackof high-profile role modelsand networks are otherlimiting factors.

As the founder ofAustralia’s number oneorganization for femaleentrepreneurs, Women asEntrepreneurs, I have beentrying to identify some of thekey challenges women facewhen it comes toentrepreneurship andinvestigate why only 17% ofestablished entrepreneursare women in Australia. Inmy opinion, in order to fixthe global problem of gendergap and enable more womento be successful, we need toaddress and understand themain driving forces behindthe complex system of issues.Some of these forces aredifferences in male andfemale thinking; societyexpectations towards menand women; and also how weraise our boys and girls.

I believe that gender – and

The Global Forum section of Making It is a space for interaction and dis-cussion, and we welcome reactions and responses from readers aboutany of the issues raised in the magazine. Letters for publication inMaking It should be marked ‘For publication’, and sent either by emailto: [email protected] or by post to: The Editor, Making It, Room D2142, UNIDO, PO Box 300, 1400 Wien, Austria. (Letters/emails may be edited for reasons of space).

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other forms of – diversityleads to more sophisticatedthinking and ultimatelymore competitiveeconomies. Greaterrepresentation of femaleleaders will have the power toshape a better world for all ofus. Women have so muchpotential and it is ourresponsibility to leveragethem by providing moreopportunities for women allaround the world, includingongoing support andempowerment of femaleentrepreneurs in bothdeveloped and developingcountries. l Orsi Parkanyi, founder andCEO, Women asEntrepreneurs, Sydney,Australia, received by email.

East Africa: amissedopportunity?In March, industrializationexperts convened inBujumbura, Burundi, toformulate an action plan forthe East AfricanCommunity’s (EAC)Industrialization Policy andStrategy. In his openingaddress, Dr. NyamajejeWeggoro, the EAC Director ofProductive and SocialSectors, boldly proclaimedthat the goal was to “create amodern, competitive, anddynamic industrial sector,fully integrated into theglobal economy”. This grandrhetoric, like many industrial

visions, was worrying:industrialization must workfor, and benefit, citizens; notpromote a global image.

The current industriallandscape in East Africa islargely informal. Forexample, micro and smallenterprises (most with asingle employee) compriseover 70% of Kenya’s non-agricultural employmentand contribute over 90% ofnew jobs. Efforts that ignorethis fact will find themselvesoperating in an idealizedvacuum in which it isassumed that all businessesare managed formally. Fewjobs can be created this way,and exporters that arepropped up by thegovernment – however well-meaning – usually only padthe pockets of executives andbureaucrats, until they fail.

Instead, the focus shouldbe on boosting organicallydeveloped enterprises, whichwould benefit not only a vastnumber of entrepreneurs butalso the local consumerswhose needs they meet everyday. Protecting them isimportant too: thousands ofKenyan textilemanufacturing jobs were lostdue to trade liberalization in1991.

Thankfully, the results ofthe EAC meeting showedmore promise than theoriginally stated goals. Theplan prioritizes intra-regional trade, suggestingthat products could meetlocal demand. A focus on

local supply chain linkagessuggests that many inputs willbe sourced locally. Mentionsof credit guarantee schemesand an incubator for small andmedium enterprisesdemonstratedacknowledgement of theimportance of the regions’most effective job creators. Iapplaud the authors for theseconclusions and challengethem to push further toimplement programmes thatwork effectively in an informallandscape: improve access toskills, tools, and businessservices for microenterprises;and encourage domesticsourcing and subcontracting.These strategies requiresignificant research andimplementation effort, andcan’t simply be tacked on as anafter-thought. l Steve Daniels, editor-in-chief, Makeshift magazine,received by email.

Business fightspoverty It was with pleasure that weshowcased the Making Itwebsite interview with thepopular economist andauthor, Ha-Joon Chang, onour online network, BusinessFights Poverty. Thinkingcreatively about how toharness business to drivelong-term growth and povertyreduction is a common focusof the more than 10,000professionals with whom weconnect.

Two aspects of ProfessorChang’s interview wereparticularly striking. First, theimportance of manufacturingin driving value creation:recently, on the margins of theWorld Economic Forum onAfrica 2012 in Addis Ababa, weco-hosted an event on whatthe latest research has to sayabout the economic benefitsof business in developingcountries, not least throughjob creation. A richerunderstanding of the benefitsacross sectors – includingmanufacturing – is needed toshape strategies for enhancedbusiness performance anddevelopment impact. Thesecond interesting pointraised in the interview isaround industrial policy,which is attracting a growinglevel of interest, includingwith some whom I spoke toduring our Addis event. TheWorld Bank’s ChiefEconomist for Africa, forexample, has recentlysuggested sector-focusedindustrial policy may have arole to play in driving jobcreation. It is clear that aneffective public sector that canencourage innovation,entrepreneurship and jobswill be an important element,alongside a thriving privatesector, in delivering long-termand broad-based prosperity inthe developing world. l Zahid Torres-Rahman,founder and director, Business Fights Poverty,www.businessfightspoverty.org received by email.

For further discussion of theissues raised in Making It, pleasevisit the magazine website atwww.makingitmagazine.net andthe social networking Facebooksite. Readers are encouraged tosurf on over to these sites to joinin the online discussion anddebate about industry fordevelopment.


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GLOBAL FORUM

Just as Britain influenced the course ofthe 19th century and the United States ofAmerica the latter half of the 20th, manybelieve that we are now entering the‘Asian century’, that the balance of social,economic and political power is rapidlyshifting from the West to the East. Asiancommentators are jumping on thebandwagon, voicing opinions which canbe summarized as, “It is our time now.We win and you lose”.

In Europe, on the other hand, all of thishas created a great deal of navel-gazing.The rise of Asia, which should not havesurprised anyone, nevertheless seems tohave caught everyone off guard. It is notfully understood and has thus given riseto fears. Underlying these fears is a viewwhich implies that others who are nowseeking the good life are not playing bythe rules (written by the West), or aredoing it by despoiling the world.

And then there is the US, which is inthe throes of an economic slump, theroots of which go to the heart of theinherent, fatal flaw in consumption-ledeconomics: urging people to live beyondtheir means. In the last twenty years, thiswas further aided and abetted by afinance industry that was poorlyregulated. But, predictably, the Americanworld view continues to be: “We are thebest, nothing will change and we willcome roaring back to be the one and onlysuperpower”.

The prevailing views of the politicalelite in all three regions are howevercounter-productive. They hark back to20th century geo-politics, which are wellpast their sell-by date. They all seem tolazily suggest that hegemony anddominance are inevitable, and thereforewill be our collective fate.

What is needed now is a realizationthat the next century will not be Asia’s –or anybody’s. Even if China and Indiabecome economic powerhouses, they

will not be able to dominate globalpolitics the way the West – particularlythe US – did in the 20th century.

The reason for this is the scarcity ofresources – and the demands that will beput on them. Last year, the world’spopulation hit seven billion. It will riseto around 9-10 billion by mid-century,and then peak at somewhere between 12and 15 billion in 2100.

Already, resources are stretched totheir limits. Since Britain launched theIndustrial Revolution, one country afteranother has propelled itself on to theworld stage by systematically plunderingthe world’s land and seas while polluting

its air, either within their own borders oroverseas through colonies, investmentand trade.

Despite three centuries of growthbased on extractive and exploitativeeconomics, as well as the under-pricing –or giving away – of resources,governments and companies still refuseto talk about limits or constraints.Instead, the mantra is of continuinggrowth through the promotion of evermore consumption.

We need to look afresh at how theworld uses and manages its resources.For the West, this will not be easy, as theprivileges of exploitative growth going

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Chandran Nair argues that Asia’s burgeoningpopulation means that indulging in Western-styleconsumption is not an option. The planet’s resources,from oil to water to the rare earth metals essential forhigh-tech manufacturing, won’t support it.


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back two to three centuries will need tobe reshaped. This will be a tough messageto sell at home, but austerity messageswhich promise that the good old days ofnever-ending growth will be back – oncefinancial markets are calmed, debt issuesresolved and Asians consume more – aresimply deliberately misleading.

But Asia can play a crucial role.Nowhere has more potential to addressthese issues than the region that will behome to the vast majority of the world’spopulation over the coming decades. Thefive billion Asians who will be alive inmid-century cannot consume as NorthAmericans do now. Encouraging thosewho are living now to aspire to such agoal, in the name of rebalancing theglobal economy, is the height ofirresponsibility.

Asian political leaders must reject theWestern consumption-driven model ofeconomic growth. In its place, they mustcreate economies where resource-use isconstrained via a true pricing ofenvironmental externalities. This callsfor the establishment of a constrainedform of capitalism – one under whichpeople are still encouraged to pursueprosperity, but in a very differentframework.

This does not mean reintroducingcentral planning, but it does mean havingthe institution of the state take the lead inshaping the incentives under whichcompanies and individuals makedecisions, so as to protect public goods.Taxes and fees must be used to makeresources – be they energy, fisheries,forests, water or land – more expensive, inorder to encourage people to use themfar more efficiently. This will ensuremore equitable access, the lack of whichis the source of most conflicts.

Companies can continue to do all thethings they now do – develop andproduce the goods and services people

need or want. But they must do so in aworld where the external impact of theiractivities and output is properly priced,so that there is no free ride. Inevitablywithin this framework some may notsurvive; their goods and services will bereplaced by others.

This means fully incorporatingeverything from resource extraction andwaste disposal into manufacturing costs.It means building transportinfrastructure that emphasizes publicmobility rather than the individual’sright to car ownership. It means watershould no longer be treated as a freepublic good, and agricultural practicesmust end their over-reliance onchemical inputs instead of labour toincrease farm productivity.

Across Asia, capitalism does not needreplacing, but it must be reshaped if it isto meet the most basic needs of all of thecontinent’s people in the comingdecades. It must operate in a frameworkof strict management of resources, withconstraints on consumption,externalities priced in, and, wherenecessary, with curbs or bans on the useof certain resources.

To establish these frameworks,governments have to make themselvesstronger and more effective than mostare now. This is admittedly a tall order, asvested interests will resist change. But itis a requirement that governmentscannot duck, as their legitimacy willhinge on implementing this trade-off.Only then can economies run in waysthat ensure everyone has fair access tothe resources they need, and that theirenvironmental impact is truly includedin the price companies and individualspay for the goods and services theyconsume.

Taken worldwide, such practices canensure that everyone has a future, in andbeyond the 21st century. n

“Asian political leaders mustreject the Westernconsumption-driven model ofeconomic growth. In its place,they must create economieswhere resource-use isconstrained via a true pricingof environmentalexternalities.”

CHANDRAN NAIR is the founder of theGlobal Institute for Tomorrow (GIFT), anindependent think-tank dedicated toadvancing an understanding of the impactsof globalization through thoughtleadership and positive action to effectchange. He is also the Chairman ofAvantage Ventures, an investment andadvisory firm, based in Hong Kong andBeijing. Until 2004, he was chairman ofEnvironmental Resources Management –Asia-Pacific, establishing the company asAsia’s leading environmental consultancy.He is the author of Consumptionomics:Asia’s Role in Reshaping Capitalism andSaving the Planet, published in 2011.


HOT TOPIC: GAS FLARING

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When crude oil is brought to the surface,gas associated with the oil comes tosurface as well. The gas may be used at theinstallation as fuel for generators, may betransported via pipelines and soldelsewhere, or may be injected into theground. But in areas of the world lackinggas infrastructure and markets, thisassociated gas is usually released into theatmosphere, ignited (flared or burned) orunignited (vented).

Flaring and venting are important safetymeasures at oil production facilities, safelydisposing of gas during emergencies,power and equipment failures, or otherupsets in oil production that mightotherwise pose hazards to workers ornearby residents. But, in many oil-producing countries, the practice goes farbeyond normal operational and safetylevels. (GGFR)

Photographer KADIR VAN LOHUIZEN has coveredconflicts in Africa and elsewhere, but is probablybest known for his long-term projects on seven ofthe world’s rivers and the diamond industry. Hehas received numerous prizes for his work,including two World Press Photo awards. InSeptember 2007, he and ten others established theNOOR agency – www.noorimages.com. To date, hehas published four photo books, includingDiamond Matters: the diamond industry and Aderen.He is based in Amsterdam, the Netherlands.

BENT SVENSSON and MAURICIO O. RÍOSexplain how a World Bank-led partnershipbetween oil-producing countries andcompanies is harnessing potentialopportunities for reducing the waste of avaluable resource.Kazakhstan, one of Central Asia’s major oilproducing countries, has cut gas flaringassociated with oil production by a third injust five years, according to satelliteestimates, thereby reducing CO2emissions equivalent to those emitted byone million cars.

Kazakhstan is one example of a countrythat has achieved important flaringreduction results by implementingprojects like the one undertaken byTengizchevroil (TCO). In 2010, thecompany completed a four-year US$258 million Gas Utilization Project,which has eliminated routine gas flaringin the giant Tengiz oil field.

TCO, a joint venture that includesChevron, ExxonMobil, Kazmunaigaz, andLukArco, has reduced flaring emissions byover 94% since 2000, while simultaneouslyincreasing crude oil production by 147%.

The fact that Kazakhstan, Chevron, andExxonMobil have achieved this flaringreduction is no accident. All three aremembers of the Global Gas FlaringReduction (GGFR) public-privatepartnership. This partnership, launched bythe World Bank in 2002, recently markedanother milestone, with satellite dataestimating a 9% drop in gas flaring

worldwide in 2010. The reduction from 147 billion cubic metres (bcm) in 2009 to138 bcm in 2010 occurred despite a twomillion barrels-a-day increase in crude oilproduction over the same period, andmeans that since 2002 there has beenroughly a 15% drop in gas flaring intensity(the ratio of gas flared to oil productionvolumes).

As the GGFR partnership gets ready tocelebrate its tenth anniversary, this isencouraging news. However, there still is

too much flaring around the world. Whileit is clear that GGFR partners are makingsome good progress, it is also imperativethat flaring reduction efforts are scaled up.

Downward trendOver the past six years, flaring of gasassociated with oil production hasregistered a drop worldwide: between 2005and 2011, gas flaring decreased by almost20% from 172 bcm to 140 bcm, according tolatest satellite estimates commissioned bythe GGFR partnership. This 32 bcmdecline is roughly equivalent to 85 milliontons of CO2 emissions, or to taking some16 million cars off the road.

However, the 140 bcm of gas that werestill flared worldwide in 2011 is equivalentto almost one third of the EuropeanUnion’s annual natural gas consumption.Overall, the flaring of gas adds some 360 million tons of carbon dioxide inannual emissions, roughly equivalent tothe annual emissions from 70 million cars.

Most of the recent estimated reductionswere achieved in Russia and Kazakhstan,

Global Gas Flaring Reductionpartners make progress

What is gas flaring?

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where public and private stakeholdershave increased investments in associatedgas utilization projects. Since the GGFRbegan, Russia and Nigeria have seenimportant reductions but still top the listof flaring countries in 2011, which alsoincludes, amongst others, Algeria, Angola,Canada, China, Iran, Iraq, Kazakhstan,Libya, Saudi Arabia, the USA andVenezuela.

Public-private collaborationThe GGFR partnership brings around thetable representatives of governments ofoil-producing countries, state-ownedcompanies and major international oilcompanies, so that together they canovercome the barriers to reducing gasflaring by sharing global best practices andimplementing country-specificprogrammes.

The GGFR partners have established acollaborative Global Standard for gasflaring reduction. This Standard providesa framework for governments, companies,and other stakeholders to consult eachother, take collaborative action, work onprojects across two or more countries, andreduce barriers to associated gasutilization. GGFR partners commit toavoid flaring from new projects, and toeliminate continuous production flaring,except where no economic alternativesexist.

Specifically, the partnership helpsdeveloping countries overcome barriers toreducing flaring. These barriers includethe high costs of capturing and utilizingthe associated gas currently flared;undeveloped domestic gas markets andlimited access to international markets; alack of financing to put the necessary gasinfrastructure in place; undevelopedregulatory frameworks; and inefficient gas

Challenges aheadAs the international community looks foroptions to reduce greenhouse gasemissions and move toward low-carboneconomies, natural gas is increasinglybecoming an attractive component of theenergy mix in countries around the world,along with renewable energies.

Part of the attractiveness of natural gas isthat it is the least polluting fossil fuel interms of CO2 emissions. Yet, in several oiland gas producing countries, vast amountsof natural gas are still being flared and,therefore, wasted.

Gas flaring wastes resources and harmsthe environment. Flaring deprivesdeveloping countries of an energy sourcethat is cleaner and often cheaper thanothers available, and reduces potential taxrevenue and trade opportunities.

In order to address this wastage, theGGFR partnership aims to help unlock thevalue of currently wasted natural gas byimproving energy efficiency, expandingaccess to energy, and contributing toclimate change mitigation, hencepromoting sustainable development.

A significant reduction of global gasflaring still needs to be achieved in orderto complete the GGFR’s mission with the

pricing systems (mostly due to subsidies).To help governments and companies

overcome these barriers, GGFR’s workfocuses on:l commercialization of associated gas byidentifying potential uses;l regulations for flaring and venting, andthe use of associated gas; l implementation of the Global Standardfor flaring and venting reduction;l capacity-building to obtain carboncredits for flaring and venting reductionprojects.

An enabling environment for gas flaringreduction can be established througheffective legislation, regulation andmarket/economic measures. Specificpolicy measures will depend on eachcountry’s circumstances, and are likely toinclude both upstream and downstreamsectors.

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“Between 2005 and 2011, gas flaring decreased byalmost 20% from 172 billioncubic metres (bcm) to 140 bcm, according to latest satellite estimates.”

360mtons of carbon

dioxide

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Making profits whilegas continues to flare

desired impact. Thus, a major challengefor the next phase of the GGFRpartnership is to bring other key playerson board. Some important flaringcountries and oil companies are still tojoin the GGFR partnership, includingBrazil, Canada, China, and Libya, andRussia’s major oil companies.

Another challenge is the need for fasterimplementation of gas flaring reductionprojects, so that global gas flaringcontinues to decline in greater volumes.For this to occur, all relevant stakeholders– governments, industry, technologydevelopers and financial institutions –need to do their part to “unlock” the valueof this wasted gas.

Initial achievements demonstrate thatgas flaring and venting reduction effortsare not only relevant in today’s energydebate, but also viable, as demonstrated byseveral countries and companies, anddesirable for the obvious environmentaland economic benefits. On the 10thanniversary of the founding of the GGFR,partners need to take these achievementsto the next level.l Bent Svensson is the GGFR programmemanager, and Mauricio O. Ríos is GGFR’scommunications officer.

NNIMMO BASSEY claims that in Nigeriathe authorities’ efforts to curb gas flaringare being thwarted by the big oilcompanies.

While the world dithers on actions to curbthe release of greenhouse gases, oilcompanies in Nigeria are busy pumpingthe gases into the atmosphere through gasflaring, and they are reaping huge profitsas they do so. This is happening eventhough gas flaring in Nigeria wasconfirmed unconstitutional and an abuseof human rights by a High Court inNovember 2005.

Communities living in the oil fields ofNigeria have been complaining abouthuman rights abuses related to gas flaringfor over five decades. Indeed, the act ofroutine gas flaring was outlawed in Nigeriain 1984, when a law on gas re-injectioncame into effect. From that date, oilcompanies were prohibited from engagingin routine gas flaring and could only flarewith a special permit from the responsibleminister. They would also pay a fine.However, these measures proved to beinsufficient.

In 1984, the fine was a mere US$0.003 (0.3 cents) per 28,300 cubic metres of gasflared. It increased in 1988 to US$0.07 per28,300 cubic metres, and in January 2008 toUS$3.50 for every 28..3 cubic metres.

Since the restoration of democraticpolitics in Nigeria in 1999, successiveadministrations set many final dates for

the halting of gas flaring – with none beinghonoured. Gas flaring was supposed toend in 2007, 2008 and 2010!

The Nigerian National Assembly alsoattempted proposing a new deadline of2012 when the Senate passed a bill thateffectively criminalized it, and raised thelevels of punishment and fines in anattempt to make the fine equal to thecommercial value of the gas being flared.According to some observers, that billfailed to see the light of the day, due partlyto heavy industry pressure.

Public relationsClaims by oil companies that they areworking to reduce gas flaring are best seenin the context of public relations. Thereality is that these companies are busyraising hurdles in the path of halting thecriminal activity, and this is obvious in twokey ways.

Firstly, Shell, ExxonMobil and Chevronare said to be deliberately frustratinggovernment efforts to install real-timemeasurement equipment at 166 gas pointswhich would accurately measure theamount of gas being produced in thecountry. According to the Nigeria’sDirectorate of Petroleum Resources, themeasuring equipment has been installed atonly ten out of the 166 points. This posturecompounds the lack of transparency in theNigerian oil and gas sector, where the trueamount of crude oil extracted in theoilfields remains a mystery. ‰

Emissions from

cars70m


HOT TOPIC

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GLOBAL FORUM

More power plants will have come on-stream by now, but gas-to-power investorscomplain that the flaring oil majors havegenerally refused to cooperate with them,denying them access to the gas that iscurrently being flared. In fact, three yearsafter thirteen companies were prequalifiedby the Nigerian government to gain accessto and harness gas from 180 identifiedonshore and offshore flare sites, the oilcompanies have not granted thesecompanies the access they need.

Secondly, they are vigorously resistingthe moves by the government to bring in aPetroleum Industry Bill (PIB) that woulddemand more transparency, as well asmore socio-economic justice in oil and gassector operations. By the close ofParliament in May 2011, there were sevenversions of the PIB in circulation becauseof intense pressure from those with vestedinterests. In fact, there was only onemention of gas flaring in the version of thePIB that civil society groups believed waslikely to be passed into law at that time.Shockingly, the draft PIB said nothingabout stopping gas flaring.

The World Bank states that gas flaringdecreased in 2009 in Nigeria from 21.3 billion cubic metres to 15.2 billioncubic metres. However, one of the majoroffenders, the Shell PetroleumDevelopment Company (Shell), admittedthat their flares went up 33% in 2010compared to their 2009 figure. Thisclearly shows that whatever may havecaused the decrease in 2009, it was notlikely a result of the oil companies’ actionsto curb the practice.

New flaresOil companies in Nigeria claim that gasflaring became standard industry practicefrom the onset of oil exploitation in

Nigeria because of the lack of a market forthe gas. There is a huge market now, butthe companies are still lighting up newflares.

For example, Shell lit a new one atOpolo-Epie in 2010 (although this hasbeen off for the last few months). They alsolit another one at their Central Oil and GasProcessing Facility at Gbaran-Ubie in thesame year. (Interestingly, anenvironmental evaluation studycommissioned by Shell gave a dubiousverdict, passing off gas flaring as havinghealth and environmental benefits. Forexample, one of the findings of theevaluation was that the incidence ofmalaria in the area declined from 29.1% to

26% after their flare lit up the sky.) AGIP, the Italian oil giant, commenced

flaring at their location at Ondewari,Bayelsa State, in mid-2011. Like Shell’sflares at Oben and elsewhere, this flare isaligned horizontally at ground level atOssiama Creek. The AGIP companyemployees work under heavy guard,mounted by the Nigerian Joint MilitaryTaskforce, and community people passingby in canoes or boats are forced to keeptheir hands in the air whenever they areclose to the location. Local people arehumiliated, while oil companies and theNigerian government continue to reapprofits as gas flaring continues.

Flaring was recently stopped at some

Even in the absence of concrete localizedscientific studies on this issue, there arestudies in other countries with far lessflaring than Nigeria which provideconclusive proof that flaring harms peopleand the ecosystem. The combustion ofassociated gas leads to the release ofparticulate matter, sulphur dioxide,nitrogen oxides and other substances suchas benzene, toluene, xylene etc. which areknown to cause cancers.

According to the United StatesEnvironmental Protection Agency (EPA),“many scientific studies have linkedbreathing particulate matter to a series ofsignificant health problems including:aggravated asthma, increases in respiratorysymptoms like coughing and difficult andpainful breathing, chronic bronchitis,decreased lung function and prematuredeath”. Furthermore, the EPA asserts that“it has been clearly established andaccepted that exposure to benzene and its metabolites causes acute non-lymphocyte leukaemia and a variety ofother blood related disorders”.(Environmental Rights Action)

Impacts on health‰


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GLOBAL FORUM

facilities, for instance, at Shell’s facilities atImiringi (Kolo Creek), Etelebou and JK4. Insome cases, the flaring stopped due to gas-to-power plants coming on-stream in theNiger Delta. These gas-to-power plants areessential in an electricity-poor nation likeNigeria, but, overall, the flaring in theregion remains massive.

Shockingly, the United NationsFramework Convention on ClimateChange (UNFCCC) recently startedaccepting gas-flare-to-power plants asClean Development Mechanism (CDM)projects. For instance, an AGIP project atKwale and a Pan Ocean project at theOvade-Ogharefe oil fields in Delta Statehave been accepted.

CDM projects should fulfill an‘additionality’ requirement (that is, theemissions of greenhouse gases should bereduced to less than would have occurred inthe absence of the registered CDM projectactivity) but these gas-flare-to-power plantsdo not fulfil this requirement, as they arejust partially halting an already illegalactivity. Accepting gas-flare-to-power plantsas registered CDM projects is unethical,and must be stopped.

Carbon reduction exaggeratedSeveral analysts believe that the carbonreduction claims made by oil companiesare grossly exaggerated and that the powerprojects are aiming to utilize gas from gasfields, rather than gas associated with crudeoil extraction. The reason for this is that thegas associated with crude oil extraction ismore expensive to harness than non-associated gas (from gas fields).

In recent years, some projects have beenhyped as keys to halting, or at leastmassively reducing, gas flaring in the NigerDelta. An example of this is the West AfricanGas Pipeline project backed by the WorldBank. The hype did not materialize. It isestimated that 80% of the gas conveyed bythis pipeline is non-associated gas and only20% is associated gas.

The world has been drunk on oil. Theharm done by gas flaring to people living inthe backwaters of the oil fields, and to theplanet at large, must spur decision-makersto stop this destructive practice. Evendrunks are capable of just decisions duringmoments of sobriety. l Nnimmo Bassey is a Nigerianenvironmentalist activist. In 1993, he co-founded Environmental Rights Action (ERA),a Nigerian advocacy non-governmentalorganization, to deal with environmentalhuman rights issues in the country. In 2008,Bassey was elected Chair of Friends of theEarth International, the world’s largestgrassroots environmental network.

“Gas-to-power investorscomplain that the flaringoil majors have generallyrefused to cooperate withthem, denying themaccess to the gas that iscurrently being flared.”

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In front of a Shell gasflare in the Niger Delta.


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nAfrica is one of the fastestgrowing regions in the worldafter escaping the worst ofthe global financial crisis –but the phenomenon ofjobless growth combinedwith the world's youngestpopulation threatensprogress, according to theAfrican Economic Outlook.With the number of youth inAfrica set to double by 2045,the lack of jobs for youngpeople is “an immensechallenge but [is] also the keyto future prosperity”.

energy and water are alreadybeing felt in many countriesand regions and more areforeseeable,” the jointstatement said. (Reuters)

n In May 2012, 20 of the world’sleading off-grid clean energyentrepreneurs wrote to theWorld Bank Group president,Robert Zoellick, requestingUS$500 million in financialcommitments to help themdeliver on the world’s energyaccess goals. The UnitedNations Sustainable Energy forAll campaign seeks to deliveruniversal energy access by 2030.In order to make good on thatpledge, the InternationalEnergy Agency has found that

trends

BUSINESS MATTERS

nWhen Mexico’s legislative bodypassed sweeping climate changelegislation in April 2012, it becameonly the second country in theworld with legally bindingemissions goals to combat climatechange (the other is the UnitedKingdom). The new law willreduce the country’s carbonemissions, end fossil fuelsubsidies, and establish avoluntary carbon trading market.This law builds on Mexico’sprevious commitments to takeaction on climate change. (TheEnergy Collective)

n Scientists from 15 countriesare calling for a better politicalresponse to the provision ofwater and energy to meet thechallenge of feeding a world ofnine billion people within 30years. The joint statement bysome of the world's leadingscience academies was issuedin May, ahead of the G8summit in the United States.The scientists argue thatlooming shortages in waterand energy supplies should betreated as a single issue. “Majorstresses on availability of

China’s determination to tackleenvironmental and healthproblems associated with cookingon traditional cookstoves goesback decades. In the early 1980s,China launched the NationalImproved Stove Program (NISP),the world’s largest publiclyfinanced initiative to improvecookstove efficiency.

China’s domestic cookstovesindustry is one of the world’slargest, with over 100 domesticmanufacturers. Chinesemanufacturers are experts in stovedesign, efficiency, and loweredemissions. China’s participation inthe Global Alliance opens manyavenues for collaboration betweenChinese and stove expertsworldwide.

“China’s experience in thesector makes it a clear leaderamong national implementingpartners of the Alliance,” addedMuthiah. “Its leadership inmanufacturing and exportingclean cookstoves, coupled with itspotential role in stove researchand standards, makes it an idealpartner to help lead outreachefforts in Asia and ultimately scaleup adoption of clean cookingsolutions worldwide.”

In May 2012, China joined theGlobal Alliance for CleanCookstoves, an innovative public-private partnership to save lives,improve livelihoods, empowerwomen, and combat climatechange by creating a thrivingglobal market for clean andefficient household cookingsolutions. China is the 33rdcountry to join the Alliance sinceits inception.

Exposure to smoke fromtraditional cookstoves and openfires – the primary means ofcooking and heating for threebillion people in developingcountries – causes almost twomillion premature deathsannually, with women and youngchildren affected most.

The majority of China’s ruralpopulation, over 800 millionpeople, relies on solid fuels(biomass and coal) for householdcooking and heating. According tothe World Health Organization,more than 380,000 of these peopledie each year as a result.

China joins the Global Alliancefor Clean Cookstoves

“We welcome China’sleadership role in the Alliance,”said Radha Muthiah, ExecutiveDirector of the Global Alliance forClean Cookstoves. “Theirparticipation is a testament to thecountry’s long-standingcommitment to addressing thisdevastating health andenvironmental problem and atremendous boost to a globaleffort to foster the universaladoption of clean cookingsolutions by making them moreaccessible and affordable to thosewho most need them.”

The Alliance’s ‘100 by 20’ goalcalls for the adoption of cleancooking solutions in one hundredmillion households by the year2020. China’s role in this globaleffort will result in greatercollaboration on research andtesting, support for thedevelopment of robust efficiencyand emission standards, andtransformative approaches tomanufacturing cleanercookstoves.

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half of all energy services mustbe provided by off-grid cleanenergy. Unfortunately, today’sinvestments in energy accessare heavily skewed towardtraditional grid extension, withbillions going to large-scalecentralized power projectswhich are often heavilypolluting coal plants. (SierraClub)

nThe resources on whichbusiness relies are becomingdifficult to access and morecostly. Increasing strain oninfrastructure and naturalsystems is likely as patterns ofeconomic growth and wealthchange. Physical assets andsupply chains will be affected by

the unpredictable results of achanging climate. Andbusinesses can expect an evermore complex web ofsustainability legislation andfiscal instruments. But this isnot the whole story. According tothe KPMG report, Expect theUnexpected: Building BusinessValue in a Changing World, thecentral challenge of our age –decoupling human progressfrom resource use andenvironmental decline – can alsobe one of the biggest sources offuture success for business.More corporations arerecognizing that there is valueand opportunity in a broadersense of responsibility beyondthe next quarter’s results; that

what is good for people and theplanet can also be good for thelong term bottom line andshareholder value.

nThe Latin America and theCaribbean region has thepotential to uncouple regionaleconomic growth from fossil fuelconsumption and develop a greeneconomy based on cleaner energysources, while at the same timereducing social inequalities,according to José Rivera, thepermanent secretary of ElSistema EconómicoLatinoamericano y del Caribe(SELA, the Latin American andCaribbean Economic System).SELA is a regionalintergovernmental organization

that groups 28 Latin Americanand Caribbean countries. “Oneout of three Latin Americans isliving in poverty, and nearly 90million people are surviving onless than one dollar a day, so weneed long-term growth that ismore equitable andenvironmentally sustainable,”Rivera told IPS. According toRivera, “it is not a question ofchanging production andconsumption patternsovernight, but of movingforward in that direction,building regional consensus oninvestments, public policies,incentives, subsidies,regulations, training andawareness-raising, andinternational cooperation.” (IPS)

The transformation to agreener economy couldgenerate 15 to 60 millionadditional jobs globally overthe next two decades and lifttens of millions of workers outof poverty, according to a newreport by the Green JobsInitiative.

The study, Working towardssustainable development:Opportunities for decent work andsocial inclusion in a greeneconomy, says that these gainswill depend on whether theright set of policies are put inplace.

At least half of the globalworkforce – the equivalent of1.5 billion people – would beaffected by the transition to agreener economy. Whilechanges would be feltthroughout the economy, eightkey sectors are expected to playa central role: agriculture,forestry, fishing, energy,resource-intensivemanufacturing, recycling,

building and transport.Millions of jobs have already

been created by thistransformation. For example,the renewable energy sectornow employs close to fivemillion workers, more thandoubling the number of jobsfrom 2006-2010. Energyefficiency is another importantsource of green jobs,particularly in theconstruction industry – thesector hardest hit by theeconomic crisis.l The Green Jobs Initiative is apartnership between the UnitedNations Environment Programme(UNEP), the International LabourOrganization (ILO), theInternational Organization ofEmployers (IOE) and theInternational Trade UnionCongress (ITUC).

Transition to green economycould yield up to 60 million jobs

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Workers without proper faceprotection at a denimsandblasting plant outsideof Dhaka, Bangladesh,March 27th 2010. Photo: Allison Joyce 2010

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The Killer Jeans Campaign, launchedin November 2010, called on majorbrands and retailers to stopsandblasting, a method of giving jeans a worn-out look. The processcan seriously damage workers’ healthif performed without suitableprotective equipment. Over 40 majorbrands and retailers have issued aban on sandblasting but, asDominique Muller explains,garment workers are still beingasked to risk their lives for fashion.

DEADLY DENIM

DOMINIQUE MULLERis coordinator of theKiller Jeans Campaignat the InternationalSecretariat of the CleanClothes Campaign,Amsterdam, theNetherlands.

Silicosis, a fatal lung disease, caused by the inhalation ofcrystalline silica, is one of the oldest known occupationaldiseases; it was first observed among stone workers by theRomans. It is usually associated with quarry workers, stonemasons and workers in the gem and mining industries.Silicosis is an incurable and irreversible lung disease andextremely high exposures – such as in the unventilatedjeans sandblasting process – can result in acute silicosiswithin weeks of exposure. Workers die because theycannot breathe properly any more.

In 2004 and 2005, doctors in Turkey started noticing aseries of silicosis cases among young garment workers.This was unusual because silicosis was – until then – seenas an older person’s disease, linked to years of exposure tosilica from stone working or coal mining. The unexpectedoccurrence of a string of cases of acute silicosis in work-ers in their twenties started to form a deadly pattern, andthe medical profession began to publicize the epidemic.

Fast forward to 2012 and over 1,800 cases of garmentworkers with silicosis have been registered in Turkey. Fifty-four people are officially known to have died as a result‰


MakingIt20

pational Safety and Health in the UnitedStates recommended that the use of silicasand as an abrasive blasting material be pro-hibited and that less hazardous materials besubstituted. Only substances containing lessthan 1% silica (in Europe) or 0.5% in the USAcan be used. The sand used to sandblast inTurkey usually comes from local beaches andcontains up to 80% silica. In Bangladesh, thelocal sand comes from nearby rivers. In someinstances, less silica-heavy sand importedfrom China is used but generally local sand ispreferred because it is cheaper.

Despite knowing the dangers, jeans manu-facturers continued to use sandblasting as anormal process to make fashionable lived-inlooking jeans. Indeed, when the governmentof Turkey banned the use of sandblasting inthe production of denim, companies simplymoved production elsewhere – for example, asignificant rise was observed in North Africaas Turkish manufacturers moved there. InAsia too, production increased after 2009.

Clean clothes campaigningThe Clean Clothes Campaign (CCC) launcheda major campaign in late 2010 and, within

of sandblasting jeans in Turkey – mainlyyoung men, many from the same family, andusually migrant workers coming from Geor-gia and Azerbaijan who had been employedwithout contracts, pensions or papers. Manymore workers have not been traced, despitethe extensive efforts of a group of formerworkers and supporters, the Turkish Solidar-ity Committee of Sandblasting Labourers,which succeeded in getting the Turkish gov-ernment to ban sandblasting in the garmentindustry in 2009.

Why jeans?In the mid-1980s, manufacturers began to usetechniques to ‘distress’ the denim in order tomake it look worn. By the 1990s, worn-lookjeans had become popular throughout theWestern world, ushering in the widespreadadoption of sandblasting. As the name im-plies, sand is blasted under high pressure cre-ating an abrasive process to clean, smooth oralter surfaces. Traditionally it has been usedin construction and metal-working.

Sandblasting is used to create wornpatches on the legs, back and knees of denimjeans. In some cases, machines are used, but inmany countries it is done manually by work-ers using hoses filled with sand to blast awayat jeans creating a massively dusty environ-ment. Often workers are not given any form ofprotection, and many simply wind clothsaround their face to protect themselves fromthe sand. One workplace in Bangladesh hasbeen described as like a desert during a sand-storm. It is estimated that almost half of the200 million pairs of jeans exported fromBangladesh each year are sandblasted.

Sandblasting without any concern for thehealth risks is a very inexpensive process.Silica sand is cheap, and manual sandblastingonly requires simple techniques. Denim jeanswith a worn-out or vintage look can be sold ata much higher retail price – up to three timesmore – than ordinary jeans.

Silica exposure, and, in particular, sand-blasting, has long been known to cause sili-cosis. The use of crystalline silica was bannedfor most blasting in the UK as far back as 1950and in other European Union countries in1966. In 1974, the National Institute for Occu-

months, around 40 big name jean producershad publicly signed up to a ban. Some brandswere very quick to stop the process once thedangers were clearly shown. Levi Strauss andCo., for example, were among the first, and has(according to company information) verified,through on-site inspection, that none of its au-thorized suppliers continue to use sandblast-ing at sites where their garments are produced.Levi’s also requires its suppliers to remove allabrasives and sandblasting equipment fromthese sites. In addition, Levi’s also publicly dis-close their official supplier list. Gucci also re-sponded by taking steps to work with localtrade union representatives and non-govern-mental organizations to end the process.

Other brands made less extensive prom-ises, instead stating that they would be phas-ing out sandblasting from their production.Still others stated they had never used theprocess and that never would, without pro-viding any more details. Out of all the brandstargeted in the initial campaign phase, onlyone – Dolce and Gabbana – refused to discussthe issue or provide any details whatsoever.

However, none of the brands agreed to takeresponsibility for the comprehensive screen-ing of workers for silicosis and ensuring thatany affected have proper medical treatmentand access to adequate medical facilities.Companies must take responsibility for theseworkers – if they are tempted to leave respon-sibility for their workers’ health to others fur-ther down the supply chain, this couldprovide local suppliers with the opportunityto cover up potential or real cases of silicosiswhen they arise. This is especially true incountries such as Bangladesh where thedoctor on site is paid for by the factory andmay be the only medical professional avail-able to the workers.

Reality on the groundDespite the bans imposed by many compa-nies, recent research undertaken by CCCpartners in Bangladesh showed a very differ-ent reality. In interviews with workers fromnine factories, nearly half of them identifiedthe labels of brands shown to them as beingmanufactured and sandblasted in the facto-ries in which they worked. These brands in-

“Sandblasting is used tocreate worn patches onthe legs, back and knees

of denim jeans. In...many countries it isdone manually by

workers using hosesfilled with sand to blastaway at jeans creating a

massively dustyenvironment. Often

workers are not givenany form of protection...

It is estimated thatalmost half of the 200million pairs of jeans

exported fromBangladesh each year

are sandblasted. ”

‰


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cluded many which claim to have bannedsandblasting.

There was some evidence that buyer banshave had an impact on the use of sandblast-ing in Bangladesh. For example, severalknown sandblasting units have now closeddown. However, in general, the impact ofbans appears to have been patchy, poorlymonitored and widely circumvented, at leastin the majority of factories the CCC investi-gated. For example, shockingly, the CCCfound that regardless of whether a brand has‘banned’ sandblasting or not, manual sand-blasting still takes place, often at night toavoid detection by auditors or others. In ad-dition, smaller workshops, producing for thelocal market, continue to use manual sand-blasting extensively.

Health and safetyThe CCC’s recent investigation also uncov-ered a pressing need to increase awarenessof the health risks of sandblasting amongworkers. Research shows that although someworkers are aware of the potential dangersof sandblasting, they are prepared to workfor the higher wages offered. It was also dis-

covered that the medical diagnosis and treat-ment available to workers is woefully inade-quate, and that awareness of the link betweengarment sandblasting and silicosis amongmedical practitioners is almost non-existent.Given that the latency period of silicosis canbe up to ten years, the CCC is calling forurgent action to prevent a potential epidemicamong young workers.

In late March, the CCC held an expertsmeeting in Geneva to discuss the continueduse of sandblasting in denim production andthe need to develop proper models of com-pensation workers affected or potentially af-fected by silicosis. During the meeting,workers and medical professionals fromBangladesh, China and Turkey related theirexperiences. The similarities were startling –young workers falling ill after several monthsat work; workers paid higher wages, effec-tively because factory owners knew theirworking lives would be much shorter; andworkers forced to work up to 12 hour shiftsin incredibly dusty environments with littleor no protection from the sand. Once sick,the workers all faced problems in getting aproper diagnosis – partly because they lacked

proper work contracts and therefore couldnot prove a work relationship with the fac-tory, making it possible for a factory to denythe workers had ever worked there and weresuffering from an “occupational” ailment. Inturn, this means that workers are oftendenied social security and pension rights.Doctors told the meeting that colleaguesoften failed to diagnose silicosis because thiswas not a disease they expected to see in ahealthy young garment worker – instead theydiagnosed tuberculosis or a general lungproblem.

A dangerous occupationIn 1995, the World Health Organization(WHO) and the International Labour Organ-ization (ILO) launched an International Pro-gramme on Global Elimination of Silicosisbut, so far, it does not include action on sili-cosis in the garment industry. The CCCwants to ensure that silicosis in the garmentindustry is included in the Programme'ssphere of work, and that garment industry isdefined as a dangerous occupation underILO/WHO rules. This will help raise aware-ness of the possibility of garment workerssuffering from silicosis and help support theCCC’s calls for a ban. A core part of the KillerJeans Campaign is a call for the EuropeanUnion to ban the importation of sandblastedjeans from countries which have not imple-mented a national ban.

The CCC is concerned that the failure ofbrands to change their designs, and/or to in-crease production time to allow suppliers toshift to more labour-intensive and slower fin-ishing techniques, is not helping bring anend to the practice – sometimes clandestineand sometimes overt – of sandblasting. Inorder to really make a difference, companiesmust adapt what they order from factories.They need to help end the demand for jeansthat need to be sandblasted in order to look‘cool’. In 2007, the average import price perpair of jeans imported to the EuropeanUnion from Bangladesh was only €3.89.Given the end price of a pair of jeans andgiven that human life is priceless, it is timebig brands made some serious productionchanges. n

Activists in Belgiumstage an awareness-raising demonstrationdesigned to bringhome to consumers therealities of sandblastedjeans production.

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Meeting the global health

challenge: the role of the

pharmaceuticalindustry by

KlausM.Leisinger,Chairman of the

Novartis Foundationfor SustainableDevelopment


MakingIt24

Health is a crucially important social andeconomic asset – a cornerstone for humandevelopment. Three of the eight MillenniumDevelopment Goals (MDGs) call for specifichealth improvements by 2015: reducing child andmaternal mortality (MDG 4 & 5), and slowing thespread of HIV/AIDS, malaria and tuberculosis(MDG 6). Health is also increasingly viewed asfundamental to the achievement of other MDGs,including eradicating extreme poverty andhunger (MDG 1), achieving universal primaryeducation (MDG 2), promoting gender equalityand empowerment (MDG 3), and ensuringenvironmental sustainability (MDG 7).

Improving global health, particularly amongthe poor, is an international developmentpriority. Worldwide, over the past four decades,impressive advances have been made: deaths of under-fives have dropped to their lowest levelin six decades; more women get skilled helpduring childbirth; more people have access tosafe drinking water and sanitation; and deathsfrom malaria have been reduced by 20%. But enormous challenges remain.

The scale of the challengeAs highlighted in the Millennium DevelopmentGoals Report 2011, in spite of substantialprogress, child mortality remains unacceptablyhigh, notably in sub-Saharan Africa. Worldwide,each year, over eight million children die frompreventable causes and more than 350,000women die from preventable pregnancy andchildbirth-related complications. Progress ismost limited in the lowest income and leastdeveloped countries, particularly among the ruralpoor.

In 2011, about 1.4 billion of the world’s sevenbillion people were living in extreme poverty(measured at US$1.24 a day) and 2.5 billion inabsolute poverty (measured at US$2 a day). Ill-health affects the poor disproportionately: theysuffer from higher levels of disease and die earlierthan the better-off. Along with low incomes, theyface malnourishment, nutritional deficiencies,lack of safe drinking water and sanitary facilities,squalid living conditions, and inadequate access

to basic preventive and curative healthcare.Disease itself reinforces poverty by decreasingpeople’s ability to work and depletingproductivity.

No silver bulletChanging this is a sustainable developmentpriority, but there is no silver bullet: tackling thecycle of poverty and poor health is complex andsomething no single organ of society can doalone. It involves more than reducing the price ofmedicine. It requires partnership along the entirehealth value chain – from researching neglecteddiseases and training personnel, to reorientingpolicy choices and the distribution of resources atglobal, national and local levels.

Global multi-stakeholder approaches thatinclude industry are the solution. Pharmaceuticalcompanies have a valuable contribution to makein fulfilling the right to health – alongsidegovernments, international organizations, non-governmental organizations (NGOs) and others.

The right to healthBeing healthy is a foundation for economicdevelopment and essential to a good quality oflife. Article 25 of the Universal Declaration ofHuman Rights states that “everyone has the rightto a standard of living adequate for the health andwell-being of himself and of his family, includingfood, clothing, housing and medical care.”Fulfilling the right to health is not only aboutensuring the absence of illness, infirmity anddisability; it also means enabling social well-being.

Realizing the basic health rights of the world’spoor includes addressing underlying conditionsfor health, such as adequate nutrition, sanitation,safe water, decent housing and workingconditions. It also means good governance toensure fair allocation of public health resourcesto reduce the burden of disease and preventablemortality.

A primary responsibilityThe main responsibility for ensuring publichealth lies with local governments and national


MakingIt 25

institutions. Governments have the duty torespect, protect and fulfill the right to healthprogressively, within their means. They should dotheir best to ensure availability, accessibility,acceptability and quality of health services –including reforming current healthcare systemsto positively impact the health of the poor.

National economic and social policypriorities determine what resources getallocated to health, education, sanitation andinfrastructure, shaping the state of health of apopulation. Where resources are scarce, toughchoices have to be made, often at the expense ofhealthcare. As a result, the fundamentalbuilding blocks for effective health systems –good governance, primary healthcare policies,

funding of universal coverage, available andaffordable essential medicines and vaccines,well-trained personnel and adequateinfrastructure – are often lacking.

In situations where the right to health is notbeing effectively fulfilled, due to the nature of itscore business, the pharmaceutical industry has aspecial responsibility to contribute, in particular,to improving access to medicines.

Access to medicinesPharmaceutical products play an important rolein healthcare. Along with well-trained andmotivated health professionals, medicines areamong the most effective ways to prevent,alleviate and cure disease. The majority ofillnesses affecting people living in poverty can betreated using the medicines listed on the WorldHealth Organization (WHO) Essential MedicinesList.

Many primary healthcare interventions knownto reduce mortality and the burden of disease(especially infant and maternal) are not costly. Apackage of six vaccines assembled by the WHO,for example, costs less than US$1 and de-worming (which can increase school attendance)costs just 50 cents a year. The price of a state-of-the-art malaria treatment is under US$1 and isavailable in dispersible form for paediatric use.

Today, however, around two billion peopleworldwide – more than 80% of them in low-income countries – have inadequate or no access toessential medicines and vaccines, and many havesubstantial difficulty paying for medical care. Thedeath toll due to deficits in access to medicines isestimated at ten million people a year.

Solving the access puzzleAffordability of medicines is part of the solution,but it is not the only key to unlocking the accesspuzzle: pricing alone does not guarantee access.Also required are professional medical expertiseand functioning, efficient healthcare and supplysystems.

The World Health Report 2010 estimates that asmuch as 20–40% of health spending is wastedthrough inefficiencies such as ineffective use ofmedicines, underuse of generics, use of substandardor counterfeit medicines, inappropriate staff mixand hospital admissions, as well as health system‘leakages’ such as waste, corruption and fraud.

Among the barriers to access, according to theWorking Group on Access to Essential Medicines,are inadequacies in national commitment,human resources, funding from the internationalcommunity for developing countries, and incoordination between international donors. ‰

“Ill-health affects the poordisproportionately: they suffer

from higher levels of disease anddie earlier than the better-off….

Disease itself reinforces poverty bydecreasing people’s ability to work

and depleting productivity.”


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The experience of the Novartis Foundationfor Sustainable Development (NFSD) shows that,even if drugs are given for free (as in the case ofthe anti-leprosy multi-drug therapy by Novartis),effective use cannot be guaranteed withoutconsiderable additional efforts in socialmarketing, product advocacy and securingpatients’ acceptance and compliance – togetherwith the vital contribution of NGOs. To suggestthat access to medicines is just a matter of highprices and patents is to oversimplify.

Ensuring sustainable, equitable access toappropriately used medicines for poor people inlow-income countries is not a one-off event, asmuch as a process involving many actors andactivities over time. Pharmaceutical companiescan be important collaborators in this process.Indeed, target 17 of MDG 8 specifically calls for“global partnership for development” incooperation with pharmaceutical companies toprovide access to affordable essential medicinesin developing countries.

The role of the pharmaceutical industryThe primary function of the research-basedpharmaceutical corporations is to create value bydiscovering and producing effective medicines,vaccines and services that improve patients’ well-being, and can be sold in markets at a profit. As wellas increasing shareholder value, this contributessignificantly to the quality and protection of lifeand helps make the world a better place.

In the past 60 years, innovation and technologyhave driven huge improvements in global health.According to the Human Development Report2010, growth in life expectancy that took over 300years to achieve in developed countries has beensecured by developing countries in just half acentury, thanks largely to innovations inmedicine and other public health interventions.

Intellectual property has played a key role inthis progress. Discovering and developing a newdrug, conducting clinical trials and gainingregulatory approval can cost around US$1 billion.Less than 1% of the compounds examined in pre-clinical stages are cleared for testing in humanbeings, and only 22% of compounds entering

clinical trials successfully reach developmentstage and regulatory approval. Without patents, itis estimated R&D outlays would be reduced by64%, jeopardizing the well-being of futurepatients and the innovation process itself.

Doing no harm and doing goodBeyond innovation, companies hold a widerresponsibility to ‘do no harm,’ by acting withintegrity, complying with national laws,respecting human rights, applying fair labournorms, protecting the environment, and working

against corruption to prevent harm to people,communities and future generations.

There is also a growing social expectation – andmanagement conviction – that it is in a company’senlightened self-interest to ‘do good’ and ‘be partof the solution,’ for example by supporting social,ecological, cultural, or other projects andprogrammes. These are voluntary actionsundertaken because the company feels it ought to– or can – make a difference, particularly in areasclosely linked to its core business expertise. Toensure sustainable success, corporateresponsibility activities have to be professionallymanaged, with clearly defined objectives, cost-

‰

“Ensuring sustainable, equitable

access to appropriately usedmedicines for poor people in low-income countries is not a one-off

event, so much as a processinvolving many actors and

activities over time.Pharmaceutical companies

can be important collaborators in this

process.”


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effectiveness, performance monitoring andaccountability, as well as transparentcommunication.

Among the benefits to a business of adoptingthis wider sense of corporate purpose are theability to create new markets and healthier, moreproductive societies, earn reputational capital;attract quality employees and socially responsibleinvestors; build constructive stakeholderrelationships; and enhance business intelligence.

Delivering on the right to healthNovartis and the NFSD are involved in a widerange of measures to improve patient access tomedicines and health services, including for thepoorest in LDCs. In 2011, an estimated 1.1 billionpeople were protected and treated with Novartisproducts. Of these, 89 million disadvantagedpeople benefited from Novartis access-to-medicine programmes valued at US$1.7 billion.Ninety-four percent of these were malariapatients, through at-cost provision of Coartem®for public sector use. Some 51,000 patientsbenefited from Novartis Gleevec® patientassistance programmes, ranging from co-payment and shared contribution, to fulldonation of the cancer treatment drug. In India, aNovartis social business model, Arogya Parivar,targets the health needs of rural populations atthe bottom of the pyramid by means ofcommunity health educators.

Tackling neglected diseases in the developingworld is the focus of the Novartis Institutes forDeveloping World Medical Research, whichconducts pro bono research on malaria,tuberculosis, dengue fever and diarrhoeal diseases.As well as granting access to its compound library tosupport research, Novartis also partners withcoalitions like the Global Alliance for Vaccines andImmunization, and Medicines for Malaria Venture,to support product development of medicines forpoverty-related and neglected diseases.

Such activities go a long way to improve thehealth of the world’s poor. But more is needed.The access-to-medical-care chain is only asstrong as the weakest link – which may be ashortage of health workers, low morale or weak

management practices. Tackling the entire chainrequires robust partnerships, political will andtrust in each other’s integrity.

Strengthening the chainEveryone in the health value chain shares a moralimperative to improve access to medicines forpoor patients in low-income countries. Thisshared responsibility means working together toachieve what no single actor can do alone. Itincludes pooling expertise and resources toachieve shared goals. And it means developingmutual trust, respect and an understanding ofother parties’ values and priorities.

Innovative alliances, financing mechanismsand cost-sharing models are essential to ensurethat patients worldwide can access existingmedicines. They are also critical to developtreatments for neglected, poverty-related diseaseswhich have little prospect of being profitable.

Industry has a vital contribution to makethrough the responsible use of patents to ensurebroad access to existing life-saving medicines. Thiscan include applying differential pricing strategiesand market segmentation to make medicinesmore affordable for those with low purchasingpower – provided there is political safeguarding toprevent diversion of medicines to mature markets.

Patents – and the intellectual property theyprotect – incentivize the future research anddevelopment needed to find innovative treatmentsfor today’s neglected diseases and tomorrow’semerging health challenges. Through theirresponsible use, with global partnerships for health,we can meet the global health challenge head-on. n

KLAUS M. LEISINGER is Chairman of theNovartis Foundation for SustainableDevelopment. Over the past 30 years, theFoundation has served as a competencecentre for corporate responsibility andinternational health, focused on the poorestof the poor. In addition to his work atNovartis, Klaus Leisinger teaches CorporateEthics and Corporate Social Responsibility at

various universities. He served as United Nations Secretary-General Kofi Annan’s Special Advisor for the UN Global Compact,and is currently a member of the steering committee of GlobalCompact LEAD, the platform for corporate sustainabilityleadership launched in January 2011.


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Amar arrived underweight and listless at ahospital in northern India. It had been fourdays since his diagnosis of severe jaundice ata rural health clinic a few hours from hishome. Had Amar had access to effectivetreatment – phototherapy from intense bluelight for several days – by now he would behome.

Because of Amar’s deteriorating condition,Dr. Kumar, the neonatologist who treatedhim, rushed to start an exchange transfusion.This procedure circulates the newborn’s bloodtwice, filtering the bilirubin – a neurotoxinthat’s natural to our bodies but that becomesdangerous when a newborn’s liver fails to nor-malize its levels. Exchange transfusions forunderweight and premature babies can berisky, especially without highly skilled med-ical staff and modern equipment. But with-out it, Amar was at risk for brain damage, oreven death.

Four days between diagnosis and hospitalarrival isn’t as unusual as it may sound. Homecan be in a village, far from help. Illness maybe masked by other conditions. It is often afinancial hardship for a parent to leave home.

In untangling Amar’s journey before arriv-ing at his hospital, Dr. Kumar learned that theparents had sought medical care early. They’dtaken him to the closest clinic where he wastreated by phototherapy. What went wrong?

The treatment at the rural clinic was inef-fective. The phototherapy device there pro-vided light, but not the right type or intensity.So Amar became sicker even as his parentsand clinic staff sought to treat him.

Global realitiesAmar’s case is not unusual. Working withStanford’s School of Medicine, D-Rev foundthat, based on a sample of clinics in fourIndian provinces, more than 90% of pho-totherapy devices in hospitals did not meetrecommended international standards. Andmany more hospitals had no phototherapy de-vices at all.

Why? – because good devices are too ex-pensive (more than US$3,000), are not de-signed for remote settings, and are too costlyor difficult to maintain. Futhermore, replace-ment bulbs are expensive and difficult tosource, proper use requires access to skilledtraining, and many devices aren’t adjustable –

traditional assumptions about the cost, look,and feel of medical products.

As a non-profit, we focus on saving lives.We have three core tenets: l D-Rev develops world-class products –products that meet international standardsand/or exceed the quality of the best productson the market.l Our products are market-driven, meaningthat they must be radically affordable and ap-propriate for our users and the environmentsin which they live, work and thrive. Buildingin profit margins, and leveraging the market,encourages economic sustainability and scal-able impact.l Our products are user-centric, meaningthat we start, end, and iterate constantly withusers. If users like and see value in products –they use them.

Commitment to impactD-Rev was founded in 2007 – but it took aninjection of young engineers and designersfrom Stanford University with significant on-the-ground experience to catalyze the organ-ization in 2009. D-Rev shifted its focus fromconvincing designers to solve problems facinglow-income populations worldwide, to de-signing and delivering sustainable, scalable,economically-viable products benefitting the

for example, they can’t be used if the child isbeing treated with other devices.

Although moving Western health careproducts out across the world may seem likea beneficial idea, Amar’s case illustrates thedanger of good intentions gone wrong. Atreatment device’s inability to “fit” – econom-ically, practically, or in terms of realisticaccess – can actually increase the risk andimpact of treatable disease.

To understand the problem – and engineera solution – D-Rev visited more than 180 hos-pitals and clinics in low-income settings. Welearned about how doctors, nurses, and othermedical staff worked to treat dangerous, evendeadly, conditions that should be easy to ad-dress. Case in point: the seven million babieseach year who need to be treated for jaundice,but are not.

D-Rev seeks to change this by designingand delivering products that address large-scale, curable health issues. We do thisthrough innovative design (the name refers toour design “revolution”) that challenges

D-Rev’s CEO, Krista Donaldson, introduces the California-based non-profit organization with a mission is to improve thehealth and incomes of people living on less than US$4 a day.

KRISTA DONALDSON has worked at the intersection of designand international development for more than twelve years.Prior to joining D-Rev in 2009, she was a Diplomacy Fellow forthe American Association for the Advancement of Science(AAAS) at the US Department of State. She is a 2010-2012 RainerArnhold Fellow, and a 2011 Pop!Tech Social Innovation Fellow.

CREATING IMPACT BY DESIGN

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4 billion people worldwide who live on lessthan US$4 per day. Although we cultivate aportfolio of products, we currently focus ontwo breakthrough health care solutions: Bril-liance, a radically-affordable phototherapydevice, and the ReMotion JaipurKnee.

Brilliance, now in production in India, notonly meets American Academy of Pediatricsstandards, but is designed to cost US$400retail – a fraction of the cost of traditionalphototherapy devices. Partnering withPhoenix Medical Systems, India’s largestmaker of neo-natal care equipment, providesD-Rev with access to distribution, training,and support systems. Phoenix pays variableroyalties to D-Rev based on the types of insti-tutions they sell Brilliance to. For example, ifBrilliance is sold to a public or rural hospitalwhere the need for phototherapy devices isthe greatest, royalties to D-Rev are less.Phoenix has financial incentive to target low-income facilities.

A very different D-Rev product, the ReMo-tion JaipurKnee, is also positioned to createbroad impact. So far, this innovative device –which started as a student project in StanfordUniversity’s Biodesign program – has alreadyremobilized 3,500 amputees in India and fourother countries. The knee uses a polycentricmechanism already found in high-end pros-

thetic knees, but the ReMotion team adaptedit to plastic for lower-cost, high-quality cen-tralized production. With its full range ofmotion and radically-affordable cost, it has thepotential to transform the lives of above-the-knee amputees in low-income areas.

Working with India’s Jaipur Foot Clinic(Bhagwan Mahaveer Viklang Sahayata Samiti,or BMVSS), D-Rev is scaling-up the deliveryof the knee from the main clinic in Jaipur toall 22 of BMVSS’s clinics, and is currentlymoving to mass production to meet demandsfrom other clinics.

Sustainable partnershipsIt’s rarely viable for for-profit companies todevelop critically-needed products for thefour billion people worldwide who live on lessthan US$4 per day. Healthcare is a categorylargely unaddressed for this market. At D-Rev,we look for critical health and social needs,along with market demand, that can be reme-died through large-market, low-profit designinnovations. Then, working with global part-ners, we fill the gap.

All of our projects leverage in-market in-frastructure and distribution channels.Whereas traditional aid has focused on “build-ing capacity”, we see our partnerships as part-nerships on equal footing. Like other models

optimizing globalization, we often bring newtechnologies and design methods, but ourpartners best understand market intelligence,user insights, and clarity on governance chal-lenges. Based on our staff ’s global experience,we favour centralized or semi-centralizedmanufacturing to maintain consistency andquality – both critical for world-class productsand meeting the needs of our end users. All ofour projects leverage and strengthen local net-works and delivery infrastructures. In movingaway from “aid”, we seek to create tools forhealth care and income generation that enablelower-income societies to help themselves.

While we call ourselves a design firm anddesign incubator, fundamentally we are aproduct company. Unlike traditional designfirms, we take a systems approach and re-sponsibility for impact. Our definition ofdesign is the entire product life cycle – work-ing with partners, we fully execute productsfrom understanding and identifying needs,though scaling and measurement of impact.

A challenge we see in our work is the mis-match between the health priorities of med-ical personnel in low-income areas and thedonors who fund global health projects. Thismismatch was documented late last year bytwo American professors who looked at themajor health issues in 27 low-income coun-tries and tracked the funding. They found thatprivate foundations seem to be responsive toneither preferences nor disease burdens at thenational level. We urge donors to fund globalhealth initiatives that enable people to meettheir own critical needs.

D-Rev’s work is driven by on-the-groundneeds and implementers. Brilliance wasstarted at the request of an Indian doctorwho was frustrated by the unnecessary dis-ability resulting from untreated jaundice –not only on the child, but on his family. TheReMotion JaipurKnee began with BMVSSactively seeking a higher-quality affordableprosthetic.

We want to disrupt markets Our goal at D-Rev goes beyond creating anddelivering products that have long-termimpact. We want to disrupt markets. We wantto set an example that inspires other compa-nies – even our competitors – to raise theirquality standards and to lower their costs.

And ultimately, we want people – no matterwhere they live – to be able to go to their localclinic, wherever it may be, and have confi-dence that the products they rely on for treat-ment will deliver the results their doctorsexpect – and they deserve. n

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Ensuring that patients in the developing worldget access to the medicines they need remainsan unfulfilled desire. This is true in spite of thesignificant progress over the last decade in pro-viding treatment to poor people suffering inparticular from the “big three” pandemics,HIV/AIDS, malaria and tuberculosis. The rea-sons for this access gap are manifold, whichpoints at a need for multiple responses by a di-verse set of actors: policymakers, businesses, civilsociety at large, as well as development partnersat national and international levels alike.

The indispensable role to be played bypublic health agents in alleviating the accesschallenge cannot be overestimated. Deficientpublic health systems in general, and deficientmedicine distribution mechanisms in particu-lar, but also institutional weaknesses (notablyon the part of drug regulatory authorities),medicines pricing and procurement issues, andthe inappropriate use of medicines at the pa-tients’ end, all bear witness to this need.

Recent years have, however, also seen a risein the number of players who advocate thelocal production of pharmaceuticals (LPP) indeveloping countries as one valuable means to

achieve access improvements. A good part ofthe pertinent and lively debate has focused onAfrica, which imports an estimated 70% of itsoverall medicines needs from outside. Whatprompted this interest in the LPP agenda?And why would a stronger local pharmaceuti-cal industry benefit African patients?

Why support pharmaceutical production in Africa?From a public health perspective, the quality,safety and efficacy of medicines that complywith the demands of availability, acceptabilityand affordability at the point of need are thekeys. While no one would seriously questionthese fundamental considerations, industrialdevelopment agents refer to the favourableeconomic effects (e.g. employment, income orforeign exchange gains and technologyspillovers) that a dynamic pharmaceutical in-dustry in Africa can potentially bring about.Presently, only a miniscule portion of the bil-lions of dollars made available for the pro-curement of international medicines – e.g.through the Global Fund to Fight Aids, Tuber-culosis and Malaria (GFATM) – finds its way

Phot

o: W

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/P. V

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Jürgen Reinhardt considersthe role of Africa’spharmaceutical industry

Qualitymedicinesfor all

JÜRGEN REINHARDT isProject Manager at theUNIDO Business,Investment andTechnology ServicesBranch.

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to African suppliers. In addition to the frus-trations voiced about this state of affairs bylocal manufacturers, this fact has also raisedconcerns at political levels about the risk of aperpetuated dependency on outside sourcesfor the supply of medicines.

Of late, public health and industrial devel-opment views on LPP seem to be converging.Under certain conditions – the argument goes– LPP can in fact positively impact health anddevelopment goals at the same time. Medi-cines produced in closer proximity to patientsmay quite practically improve the continuityof supplies and mitigate stock-outs. It is alsolikely that local production would increase thechances for better oversight, quality controland assurance by severely constrained drugregulators, thereby helping to stem the cur-rently observed spread of sub-standard andcounterfeit medicines. More generally, a grow-ing share of locally produced medicines couldhelp prepare the ground for sustainable sup-plies beyond the present ‘era of donations’,which may not last forever. Indeed, fundingconstraints in the wake of the global financialcrisis are starting to be a threat, as illustratedby the recent cancellation of Round 11 of theGFATM.

In view of the many constraints that Africanpharmaceutical manufacturers face as theystrive to supply quality, essential medicines atcompetitive prices, fostering LPP is anythingbut an easy undertaking. The challenges beginwith the frequently observed disconnects be-tween public health and industry/trade poli-cies, and also – for that matter – between theseand science and technology policies, resultingin incoherent policy measures and an absenceof a level playing field between local producersand importers. At the institutional level, weakcapacities and deficient service providers arefurther impediments to the manufacture ofquality medicines. This holds true with regardto national drug regulatory authorities, medi-cines testing labs, bio-equivalence testing fa-cilities, adequate training entities and businessmembership organizations, such as pharma-ceutical manufacturers’ associations. At thesame time, plant-level viability is underminedby human resource shortcomings, lack of

access to finance for the upgrading of facilitiesand processes to reach international qualitystandards, such as current Good Manufactur-ing Practices (GMP), and by the need toimport raw materials, active pharmaceuticalingredients, packaging materials, labels andmost other inputs.

Needed: a holistic approach Commercial viability and quality complianceconsiderations must guide any effort to furtherpromote Africa’s pharmaceutical industry. Thecomplexity of the challenges implies that it isbest to adopt a holistic approach to the sector’sdevelopment. Such an approach requires par-allel and well-coordinated action at policy, in-stitutional and industry levels alike. It alsoneeds to accept that, in spite of its tiny share inthe global context – a mere 1.5% or so, pharma-ceutical production in Africa has been a realityfor many years. An estimated 38 countries haveproduction capacities, albeit displaying largevariations in terms of size and the number ofcompanies, quality adherence and in thestrength of regulatory oversight. Regardingsub-Saharan Africa (SSA), just one country –South Africa – accounts for 70% of production,and just three others – Ghana, Kenya and Nige-ria – together represent a further 20%. Whilethere ought to be room for commercial successbeyond these relative ‘heavyweights’, a quest forLPP in each and every country would, in turn,appear unrealistic.

A UNIDO advisory and capacity-buildingproject, initiated in 2006, is helping to create

an operating environment that allows phar-maceutical manufacturers to better meet thecompetitiveness challenges. The intervention,which focuses on SSA, has shown that thecommercially viable manufacturing of qualitypharmaceuticals is possible. ‘Standard’ refer-ences to the minimum production volumes –such as 1.5 billion tablets per year – needed toallow for economies of scale may be less rele-vant than at first thought. UNIDO researchimplies that issues to do with efficiencies ofproduction are probably much more impor-tant and key to competitiveness. To lift com-panies up to the requisite international qualitylevels, a ‘carrot and stick’ model is needed.This would link incentives, and other govern-ment support, to strict timelines for adher-ence, adopting a GMP roadmap approach.

The AU Pharmaceutical Manufacturing Planfor AfricaThe African Union Commission (AUC), inpartnership with UNIDO, has prepared a busi-ness plan for the accelerated implementationof the Pharmaceutical Manufacturing Plan forAfrica (PMPA), endorsed by African UnionHeads of State in 2007. The business plan ad-vocates a comprehensive approach to the phar-maceutical industry’s development on thecontinent, and its implementation will requireinputs and support from many sides. Partner-ships of varied kinds – e.g. public-private,North-South/South-South, commercial, cor-porate social responsibility-related or non-profit ones – will be key to its success, as will bean ongoing political will at the highest levels toalign a multitude of parties to the PMPA’svision.

Demographic factors, evolving disease pat-terns and overall economic growth projectionsfor Africa mean that the macro prospects forthe pharmaceutical industry’s development inAfrica are intact. If an operating environmentcan be set up that requires – and enables – high-quality production to be the norm, previousnotions of an inherent tension between publichealth and economic development objectivesin supporting LPP will have been overcome forgood. LPP will then contribute its share in pro-viding “quality medicines for all”. n

“A growing share of locallyproduced medicinescould help prepare theground for sustainablesupplies beyond thepresent ‘era of donations’.”

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WATCHWHAT

YOUEAT

Junk food is junk by its very definition. Buthow bad is it, and what are the companiesthat make it not telling people about thisfood? This is what the Centre for Science andEnvironment (CSE) laboratory checked. Theresults were both predictable and alarming.What was equally predictable was the re-sponse of big food companies and theirspokespeople – denials and dismissals.

First the study: the CSE tested all that isreadily available in fast food outlets or asbranded and packaged items in shops acrossthe country. These ranged from instant noo-dles, chips and Indian bhujia, to the ubiqui-tous colas, chicken fries and burgers.

Junk food is defined as food with emptycalories – it provides fat, sugar and salt, with-out nutrition. The CSE study reconfirmedthis, but with a difference. Labels on packagesdo not explain just how much of our daily salt,sugar or fat quota this ‘fun’ food is using up.We are not told that one packet of chips, easilydevoured, supplies half of the recommendeddaily intake in terms of fat and salt. Nor that

SUNITA NARAIN isdirector of the NewDelhi-based Centrefor Science andEnvironment andeditor of thefortnightly magazine,Down To Earth. ‰

Sunita Narain introduces the first comprehensive Indianstudy to look at nutritionalclaims made (or not made) by junk food makers, and how they compare with thebenchmarks for recommendeddaily intakes of salt, sugar,carbohydrates and fats issuedby India’s National Institute ofNutrition and the WorldHealth Organization.

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Morgan Spurlock’s 2004docudrama, Super Size Me,

depicts an experiment heconducted in which he ate threeMcDonald’s meals a day everyday (and nothing else) for 30days. The end result, he claims,was a diet with twice the caloriesrecommended by the USDepartment of Agriculture. Bythe end of the period, Spurlock(left) had gained 25 pounds (11 kg), become quite puffy andsuffered liver dysfunction anddepression.


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smart’, implying their goodness. Then Pep-siCo decided that these chips were heavy onits pocket. So, it changed the means of cook-ing, and then removed the ‘snack-smart’ logoand the declaration of zero-trans fats from thepackets. But, this time, it did not launch anadvertising campaign.

one bottle of cola has twice the recom-mended daily added sugar allowance foradults and children. It is not in the interests ofthe food companies to advertize this. But it isin our interest to know.

The study also found that companies arenot just irresponsible by omission, but alsoby deliberate misrepresentation of factsabout the quantity of unsaturated fat withtrans-isomer fatty acids – trans fats in short– in their products. Trans fats, formed duringthe hydrogenation of vegetable oil, are linkedto serious health problems (particularly to anincreased risk of coronary heart disease).However, in India, the law does not requirecompanies to declare the quantity of transfat in their products. What it does say is thata company can make a “health” claim that itsfood item is trans fat-free, provided that eachserving contains less than 0.2 g.

This regulation misses the mark becausecompanies can determine the size of servingthemselves, and they do. For example, theIndian food giant Haldiram’s takes 10 g,which is less than a mouthful, as the servingsize. That is how it claims to be ‘trans fats-free’. Haldiram’s bhujia, PepsiCo’s Lays’ chipsand ITC Food’s Bingo chips all containedtrans fats, when they claimed otherwise.Companies can get away with this becausenobody is checking.

Take the case of PepsiCo. It went on an ad-vertising spree, saying its potato chips werehealthy because they did not have trans fat andwere cooked in rice bran oil. Film star, Saif AliKhan, was its brand ambassador, urging chil-dren and adults to eat without guilt and to feelcarefree. The chips were branded ‘snack-

The CSE study found the company hasadded insult to injury. First, even what wasclaimed to be trans fats-free had 0.9 g per 100 g. Second, packets of chips manufac-tured in February 2012 had the dangerouslyhigh trans fats levels of 3.7 g per 100 g – muchmore than the recommended daily intake.

Contain around 33% fat,which means that if youmunch a standard-sizedpacket of chips (65-75 g),you will consume abouthalf of the daily fat quota.

High in fats andcarbohydrates, 100 g ofKurkure cheese puffsprovide enough calories tosatisfy one quarter of therecommended dailyquota. If you are fond ofaloo bhujia, you will gethigh doses of salt andtrans fats, along with ahigh amount of calories.

This “tasty and healthy”meal comes with high saltand empty calories. Apacket of noodles hasaround 3 g of salt – therecommended dailyintake is 6 g. The additionof vitamins, as advertisedin Maggi noodles, doesn’tmake it a healthy food, asit has negligible fibre; 70%of it is just carbohydrates.

The fries often eaten witha burger and a soft drinkare laden with fats: 20% isfat and 1.6% is trans fats.Eating a large serving (220 g) means that you willexceed the safe limit fortrans fats. There areadditional trans fats in theaccompanying burger too.

KFC’s Chicken Zingerburger contains 16.9% fat,while McDonald’sMcAloo Tikki burgercontains 8.3% fat.

‰

Fried potato chips Indian snacks Instant noodles Potato fries Burger


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But under India’s weak food regulations, theydid not have to tell people what was in thepacket. It is no surprise then that PepsiCo, inits official rebuttal of the CSE study, said, “Allproducts are fully compliant with regula-tions, including those on labeling.” Clearly,food companies are not in the business of

food, but in the business of profit.Following the CSE tests, two questions

were raised. One, why test junk food whenit is already known to be bad? Two, why testonly packaged food, when all Indiansnacks are said to be equally bad?

First, as the study shows, we do notknow just how bad this food really is. Weshould know more, because it is criticalthat we take informed decisions about ourhealth. Non-communicable diseases – fromhyper-tension to cancer – are a global epi-demic. Bad food and bad lifestyle are majorcauses of these diseases. Indians are espe-cially vulnerable when it comes to diabetes;as compared to Caucasians, they are genet-ically disposed to have more fat thanmuscle and have a greater propensity to puton fat around the abdomen. They are alsotoo poor to cope with the horrendoushealth costs of debilitating diseases, like di-abetes. Therefore, Indian food regulationshave to be even more stringent in limitingquantities of salt, sugar and fat in food.

Secondly, regarding food other thanjunk food, it must be made clear that tra-ditional and local diets are built on theprinciples of moderation and balance. Thetraditional Indian diet, with its diversity ofregional cuisines, celebrates good food.The problem arises when we “Mc-Donaldize” it or “supersize” junk food. Theright thing to do is not to pit junk foodagainst Indian snacks, but to consider howmuch and what we eat. l The Centre for Science and Environmentreport, Eat at your own risk, was published inApril 2012.

The 300 ml serving,consumed with all kinds ofjunk food, contains twicethe amount of sugar (over40 g) recommended as theoptimum daily intake. Anyadditional sugar intake inthe same day will make youfatter.

Regular consumption islikely to make you obese. A KFC two-piece friedchicken (about 250 g)contains nearly 60 g of fat,which is the entire amountrecommended for a whole day.

Pizzas were found to be amuch healthier optionwhen compared with theother junk foods tested.They have low levels of saltand fat, and the level oftrans fats is also low.

Carbonated drinks Fried chicken Pizza

“Our food systems are making people sick,”warned Olivier De Schutter, the United NationsSpecial Rapporteur on the right to food, inMarch 2012 as he presented his report onnutrition to the UN Human Rights Council.

“One in seven people globally areundernourished, and many more suffer fromthe ‘hidden hunger’ of micronutrientdeficiency, while 1.3 billion are overweight orobese.”

“Faced with this public health crisis, wecontinue to prescribe medical remedies:nutrition pills and early-life nutritionstrategies for those lacking in calories;slimming pills, lifestyle advice and caloriecounting for the overweight. But we musttackle the systemic problems that generatepoor nutrition in all its forms,” theindependent expert said.

“The right to food means not only access toan adequate quantity of food, but also the abilityto have a balanced and nutritious diet.Governments must not abstain from theirresponsibility to secure this right.”

De Schutter identified five priority actionsfor placing nutrition at the heart of foodsystems in the developed and developingworld:l taxing unhealthy products;l regulating foods high in saturated fats, saltand sugar;lcracking down on junk food advertising;loverhauling misguided agriculturalsubsidies that make certain ingredientscheaper than others; andlsupporting local food production so thatconsumers have access to healthy, fresh andnutritious foods.

“Urbanization, supermarketization and theglobal spread of modern lifestyles have shakenup traditional food habits. The result is a publichealth disaster,” the Special Rapporteur said.“Governments have been focusing onincreasing calorie availability, but they haveoften been indifferent to what kind of caloriesare on offer, at what price, to whom they areaccessible, and how they are marketed.” n

Five waysto tackledisastrousdiets


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In 1986, a landmark sixth Communist Partycongress made a historic commitment to“economic renovation” (Doi Moi), whichwould open the country to the world andallow private enterprise to operate. Over thesubsequent decades, Viet Nam has undergonedramatic restructuring, from a centrallyplanned to a market-based socialist economy,and the country has emerged as one of Asia’sgreat success stories. Since 1986, the economyhas posted annual per capita growth of 5.3% –faster growth than any other Asian economy,apart from China.

Viet Nam is increasingly integrating intothe global economy, a move formalizedthrough membership of internationalorganizations. The most important of theseare the Association of South-East AsianNations (ASEAN), which Viet Nam joined in1995, the Asia-Pacific Economic Cooperation(APEC) forum, which it joined in 1998, andthe World Trade Organization, of which itbecame a member in January 2007.

Measured by employment, Viet Nam is stillan agrarian society, with around half of thelabour force working in agriculture, forestryand fisheries, but in 2011 the agriculturalsector only accounted for 20% of nominalGDP, down from 40% in 1991. By contrast, in2011, industry contributed 40% of GDP,compared with only around 23% in the early1990s. The services sector has grown in linewith GDP over the past several years, so its

share of GDP has remained steady at about38% of the total.

The Viet Nam Industrial CompetitivenessReport 2011 – the result of a collaborationbetween Viet Nam’s Ministry of Industry andTrade and the United Nations IndustrialDevelopment Organization (UNIDO) –contends that industrialization lies at the coreof Viet Nam’s economic growth. But it arguesthat, in order to sustain current growth levelsin the long-run, Viet Nam needs an industrialpolicy aimed at structural change towardshigh value-added manufacturing sectors.

The report finds that while tradeliberalization in Viet Nam has been one of thedriving forces of economic growth, it is not asufficient factor in triggering structuralchange. Industrial diversification calls forspecific industrial policies that nurtureprivate entrepreneurship and thedevelopment of new manufacturingactivities: the Vietnamese experience is noexception.

In this context, a new strategy is needed topromote structural change. The report callsfor a new industrial policy that focuses on theindustrial transformation of strategic sectorsthat can support sustained growth and reapthe benefits of technological change,innovation and learning. While allmanufacturing sectors are important, thereport argues that a shift towards technologyintensive sectors is needed to promote

Viet NamCOUNTRYFEATURE

Can the dragon

to rise?continue

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industrial deepening and value addition.To achieve this, the report presents five key

policy areas for government action:lThe government of Viet Nam hasundertaken considerable efforts tointernationalize the country’s economy byentering into trade agreements with variousglobal partners. These efforts are paying off,and Viet Nam’s manufactured tradeperformance has been impressive over thelast decade. However, many now questionwhether trade liberalization has triggeredindustrial dynamism and value addition atthe firm level. Evidence shows that theVietnamese industrial sector continues tostruggle to compete in international markets.

Given the challenges that the industrialsector faces, the report advocates that tradeliberalization in Viet Nam be achievedthrough a strategic and controlled approachto both strengthen existing capabilities anddevelop new ones. It argues for the strategic

targeting of Foreign Direct Investment (FDI)and global value chains in order to extract themaximum benefits for production, exportsand employment. The government shouldplay an active part in this process and learnfrom role models in the region.lThe report reveals that Viet Nam isvulnerable to third country competition dueto its concentration on a few labour-intensivemanufacturing sectors. Five of the largest tenlow-tech export products are items ofapparel. To sustain growth rates inmanufactured trade and MVA, Viet Namshould enter into new, high value-addedmanufacturing activities. (Examples of high-tech manufactures include office/dataprocessing/telecom equipment, televisions,transistors, turbines and power-generatingequipment; as well as pharmaceuticals,aerospace, optical/measuring instruments,and cameras.)lViet Nam’s current educational and

vocational training system does not producean adequate level of skills for its workforce.Many firms are forced to retrain workers athigh costs so they are able to work in thosefirms. This reduces Viet Nam’scompetitiveness and makes the country lessattractive to medium- and high-technologymanufacturers looking for lower costproducing countries or alternatives to theirChinese production bases. The governmentshould enact policy actions to boost thecountry’s human resources formanufacturing.lViet Nam lags well behind many othercountries in the region in technologydevelopment. This has resulted in the countrybeing a net importer of technology products,which, given the unsophisticated nature of itsexports, has contributed to a negative tradebalance. Moving up the technology laddercalls for the government and the privatesector to design and implement an agenda toboost the country’s technological andinnovation capacity.l It is increasingly apparent that Viet Namneeds to pay more attention to the quality ofthe FDI it is attracting. While FDI in realestate and investments may be welcome,when there is a capital shortage, it can alsohelp fuel dangerous asset bubbles. Thecurrent structure of FDI also has littlepositive effect on Viet Nam’s trade balance,with many FDI firms relying heavily onimports for production.

All these measures are needed if Viet Nam isto escape the middle-income trap. Thecountry can continue to specialize in export-oriented, labour-intensive manufacturing,which may lead to immiserizing growth – asituation where economic growth couldresult in a country being worse off than beforethe growth, or it can pursue a diversificationstrategy towards higher value-added andtechnology-intensive manufactures. The VietNam Industrial Competitiveness Report 2011argues that, as international competitionmounts and national income rises, Viet Namhas no choice but to choose the latter.

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Viet Nam has achieved an impressive eco-nomic performance over the last decade or so,and industry’s share of GDP has increasedsignificantly. What have been the keys to thistransformation?In the past decade, Viet Nam’s economycontinued to register dynamic development,with sustained GDP growth of over 7% perannum and a structure shifting towardsindustrialization. Viet Nam has maintainedsocio-political stability, and recorded enor-mous achievements in poverty reduction andthe improvement of people’s lives.

These successes can be attributed to thecontinued implementation of a reform policy,in accordance with the specific conditions ofViet Nam, to unleash people’s work capacityand encourage the dynamism and creative-ness of all economic sectors. This helpedcreate a strong momentum for growth. Wehave also developed the socialist-orientedmarket economy mechanism, with alleconomic sectors being equal in front of thelaw. In the process of development, we alwaysensure a harmonious combination ofeconomic growth and socio-cultural develop-ment and poverty reduction. This has helped

unleash the potential and promote theresources of the Vietnamese people from allstrata, and has won the support of the people.

We have been implementing, in a vigorousand consistent manner, the policy of open-ness, diversification and multilateralization ofinternational relations, under the motto: “VietNam is a friend and reliable partner of coun-tries, and a responsible member of the inter-national community.” This has enabled us tocontinue combining our domestic resourceswith international support and cooperation.Viet Nam has diplomatic relations with 179countries, and has established strategic part-nerships and comprehensive cooperationwith most of major powers in the world. Wehave developed economic and trade ties with224 countries and territories, and attractedUS$200bn in Foreign Direct Investment fromover 100 countries and territories.

We highly value the active cooperation andeffective support of countries and interna-tional organizations, including the UnitedNations, which is considered as an importantfactor for Viet Nam’s great achievements insocio-economic development in the past years.The country’s rapid economic developmenthas also created some environmental chal-lenges. What are your plans to cope withthese challenges and to achieve a green econ-omy?It is Viet Nam’s consistent policy to ensurefast, sustainable development, while protect-ing and improving the environment. To thisend, we have been taking numerous meas-ures. We have stepped up the development ofecosystem-based economic sectors in order tomaintain and build on the advantages of“natural capital” in various regions of thecountry, such as the production of food in theRed river and Mekong river deltas, industrialagriculture in the Central Highlands andNorthwest region, aqua-farming in the coastalregion and Mekong river delta, and develop-ment of various eco-economy models, such aseco-tourism.

We are investing in the innovation ofproduction technologies, which are environ-

Interview with HisExcellency Prime MinisterNguyen Tan Dung

Viet NamCOUNTRYFEATURE

Above: Busy traffic outside Bến ThànhMarket in the downtown area of HồChí Minh City, the country’s biggestcity and its economic centre. Opposite page: top: Constructionworker. Viet Nam is making significantinvestments in infrastructure. It already has a more advanced roadinfrastructure than the Philippines andThailand, and electricity networks covermore than 96% of the country;Opposite page: bottom: His ExcellencyPrime Minister Nguyen Tan Dung.

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mentally friendly, low-carbon and energy-resource efficient, and we are developing envi-ronmental services and the recycling industryto deal with the environmental issues arisingfrom industrial development.

We are also completing the policy and legalframeworks to enhance the capacity forresource management, environmental protec-tion and to respond to climate change; and weare raising people’s awareness and applyingadministrative/economic tools to establishenvironmental friendly lifestyles, activitiesand modes of consumption.One notable feature of the period has beenthe extension of the private sector. Howwould you characterize the partnership be-tween the public and private sector in VietNam? It is Viet Nam’s policy to develop the socialist-oriented market economy with various formsof ownership and various economic sectors.These economic sectors operate in accordancewith the law, are equal before the law, growtogether on a long-term basis, and cooperateand compete with one another in a healthymanner. While the state sector is playing thekey role in the national economy, the privatesector is one of the engines of the economy.We have been vigorously implementing aprocess to rearrange, reform and develop thestate-owned enterprises (SOEs), with a focuson the equitization of SOEs, placing them ona level playing field with enterprises fromother sectors. In the coming years, Viet Namwill step up the reform of economic institu-tions to remove obstacles and to facilitate andunleash the development of productive forces,based on the enhanced application of scien-tific and technological developments, onmodernization as a way to increase develop-ment efficiency and mobilization, and by theutilization of all resources for development.How has Viet Nam coped with the global fi-nancial crisis and subsequent global recession?As an economy with a high level of openness,Viet Nam has been significantly affected bythe crisis, especially in relation to trade,exports, foreign investment, tourism, labour,

business community as necessary, timely andeffective. However, Viet Nam has been facing anumber of challenges, such as high inflationand interest rates, and some difficulties inbusiness and production. What will be the next phase of economic de-velopment and what will industrial policylook like in practice?The 2011-2020 socio-economic developmentstrategy of Viet Nam sets out the target ofturning the country into a modern-orientedindustrialized nation by 2020. The policy thatViet Nam is pursuing is to achieve fast andsustainable development, conduct uniformand suitable economic and political reforms,maximize the human factor, and build a self-reliant and independent economy in thecontext of deepened integration.

In the coming period, Viet Nam will focuson the three strategic breakthroughs: we willcomplete the institutionalization of thesocialist-oriented market economy, with afocus on the establishment of a level playingfield and administrative reform; we willquickly develop our human resources, espe-cially high-quality human resources, focusingon a fundamental and comprehensive reformof national education, linking humanresource development with the application ofscience and technology; and we will develop auniform infrastructure system, with somemodern projects focusing on major trans-portation and urban infrastructure.

As for industrial development, Viet Namwill promote the restructuring and modern-ization of this sector in order to enhance itsquality and competitiveness. We will focus ondeveloping key industries and those indus-tries having comparative advantages andstrategic significance for the fast, effective andsustainable development and higher inde-pendence and self-reliance of the economy,while gradually integrating into the globalproduction and distribution chain. Theindustrial sector will shift from extensive tointensive growth, to higher technology-driveninputs and domestic value added, to indus-tries with comparative advantages. n

employment and people’s livelihoods.To respond to the crisis, the Vietnamese

government has enhanced the administra-tion, management and coordination ofgovernment agencies to implement uniformmeasures to control inflation, stabilize themacroeconomic situation and maintain socialwelfare nationwide. These measures includea tightened and cautious monetary policy,ensuring the stability of monetary, credit andbanking systems; a tightened fiscal policy,including public investment cutbacks and areduction in the budget deficit; the promo-tion of production, business and exports, thereduction of the trade deficit, and theimprovement of the balance of payments;poverty reduction; and so on.

To date, the above-mentioned actions haveyielded encouraging and positive results, andhave been praised by the International Mone-tary Fund, the World Bank, investors and the

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The Viyellatex Group is composed of a variety of opera-tional and functional units such as spinning, knitting,dyeing, washing, printing, embroidery, and stitching, allbased in the greater Dhaka area. It supplies knit andwoven garments, mainly t-shirts and shirts for top Euro-pean and American brands, including Puma, Calvin Kleinand Tommy Hilfiger. Monthly production varies from 1.5 to two million pieces, and the Group employs around18,000 people. Vyellatex’s yearly turnover is close toUS$200 million.

As Hasanat explains, the company has come a long wayin a short time. “When I started Vyellatex in 2001, it was justone small garment factory. At that time, I wasn’t concernedabout sustainability. My concern was survival.”

Since then, the company has not only grown to be acommercial success, but has won plaudits for its commit-ment to sustainability by ensuring environmental protec-tion, maintaining robust labour standards, upholdinghuman rights and combating corruption. Viyellatex haswon several awards from international organizations, pri-vate sector forums, local workers’ organizations, and thegovernment of Bangladesh. For example, in 2010, HSBC,the leading international bank, and The Daily Star,Bangladesh's largest English daily newspaper selectedViyellatex as the winner of their annual Green Business

Entrepreneurship award in recognition of the company’smoves to adopt green and energy-saving technology inmanufacturing garments.

In 2009, Viyellatex signed up to the United NationsGlobal Compact, and was subsequently selected by theUnited Nations Economic and Social Commission for Asiaand the Pacific (UNESCAP) as a model for putting theGlobal Compact principles into action in the region. TheUNESCAP report stated that Viyellatex “demonstrates thatthere is an opportunity to make profits, provide worthwhileand well-numerated labour without the need for forcedlabour or other forms of exploitation.”

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In the first of a series focusing on remarkablecompanies that are making waves in the areas of greenindustry and sustainable development, Making Itspoke to K. M. Rezaul Hasanat, Chairman and CEOof the Viyellatex Group, the Bangladeshi textiles andapparel manufacturing company.

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Hasanat explains, “Workers’ welfare committees oper-ate in our factories and, for three consecutive years, we havebeen commended for our practice by the federation of gar-ment workers’ unions. It is not only about providing goodworking conditions, but we also pay 20% more than thenational minimum wage. I told my directors that we havehigh-end customers, so why should we follow the govern-ment’s minimum wage.”

For Hasanat, the logic behind his company’s progressiveapproach to labour relations is simple. “The tangible returnis that, over the last 11 years, we have never had a workers’strike or any problems with the community.”

Viyellatex is also winning accolades for its commitmentto green industry and sustainability. Recalling how hiscompany first started on the road to sustainability, Hasanatsays, “Our first sustainable initiative was all about steam.Releasing steam from our factories was a waste of energy.I sat with my directors and said, ‘Let’s use that steam andhot water’. The result is pre-heated water, free of charge.”

Viyellatex takes steam, which is produced as the outputwastage from the steam supply system for garments anddyeing units, and uses it to heat water boilers to an instant70-80 degrees. The company’s 2010 report to the GlobalReporting Initiative states that the system saves 40% of theprevious cost of heating water.

Other initiatives followed: more than 300,000 litres oftreated effluent water are used for the toilet flushes everyday, saving large volumes of underground water; approxi-mately 45 million litres of rainwater are collected from onefactory roof each year and are then used in textile process-ing, saving valuable underground water and avoiding theexpenditure on chemicals to soften the water; and waterfrom workers’ wash basins is filtered and used to irrigatetrees that are planted in patches throughout the factorycompounds..

Yet another initiative involves the company diversifyinginto tea production. Food leftovers from the workers’lunches and kitchen waste are mixed with cotton dust fromthe spinning mill and are converted into compost fertilizerthat is then sent to the company’s newly purchased teaestate in the north-east of the country.

Hasanat explains that there are clear rewards for green-ing his company. “We can be environmentally friendly but,unless there is a return, we can’t continue the initiative. Weare saving money.”

Asked, if the benefits are so clear, why are other compa-nies not adopting the same sustainable practices, Hasanatreplies, “They don’t see it yet, but my factories are practic-ing steam, water and exhaust recovery, and if they knew howmuch we are saving, they would do it too. Who wouldn’t beinterested?”

At the UN Private Sector Forum 2011 in New York, organ-izations were encouraged to commit to sustainable energy-related activities in support of the UN Sustainable Energyfor All initiative. Viyellatex committed to become a carbon-neutral company by 2016, and announced that it wouldinstall energy-efficient and smart lighting systems, replaceinefficient machines and invest more in renewable energysources.

To the question, ‘apart from saving on costs, what drivessustainability at Viyellatex?’ Hasanat responds frankly,“Membership of the Global Compact, the Global Report-ing Initiative and Sustainable Energy for All provides mewith a benefit. All these awards for environmental initia-tives and corporate social responsibility give us a compet-itive edge. Our customers are inviting me to speak to theirshareholders. They are showcasing me to their customers.When companies negotiate a price with me, I can get a bet-ter price from them, because they don’t want to lose me. I am in a better bargaining position.” n

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By ENNA PARK, Director-General forDevelopment Cooperation, Ministry of ForeignAffairs and Trade, Republic of Korea

On November 29th 2011, over 3,000participants gathered in the Korean city ofBusan to attend the Fourth High LevelForum on Aid Effectiveness. The venue forthis global event holds special meaning. Itwas the city where relief goods arrived afterthe Korean War (1950-1953) and which has,within one generation, been transformedinto the world’s fifth largest port city. Thehistory of Busan offered an inspiringsetting for discussion of the effectivenessof development cooperation.

The international community is facing anumber of global crises. The impact ofeconomic and financial crises, climatechange, food insecurity, energy instability,fragility and conflicts, and naturaldisasters is now much broader in scopeand larger in scale. These multiplechallenges pose a serious threat toachieving sustained growth anddevelopment in developed and developingcountries alike.

While North-South cooperation remainsthe mainstream of developmentcooperation, developing countries andemerging economies are increasinglybecoming vital sources of trade,investment, knowledge, and developmentcooperation. Moreover, non-governmentalorganizations, global programmes, privatefunds and businesses are actively engagingin development cooperation, providinginnovative thinking and approaches todevelopment. The increasingly complex

Busan – a new milestone for effectivedevelopment cooperation

“The Forum demonstratedthat developing countriescan and should take thelead in setting thedevelopment agenda.”

global development architecture presentsboth opportunities and challenges.

With the target year of the MillenniumDevelopment Goals (MDGs) approachingin less than four years, the Busan Forumwas uniquely positioned to address theseglobal challenges and opportunities indevelopment cooperation.

The Busan Forum brought together thebroadest range of stakeholders indevelopment. Several heads of states, over100 ministers from 160 countries, 30 headsof international organizations, around 90 parliamentarians, 300 partners fromcivil society organizations, and more than100 representatives from the private sectorand academia attended the event.

The unprecedented high level ofparticipation reflected the gravity of theinternational community’s responsibilityto take tangible steps to makedevelopment cooperation more effectiveand to bring about better developmentresults where they matter most. Today, alldevelopment actors are tasked withresponding to the increasing call for moreeffectiveness, accountability and, mostimportantly, better results from theirefforts.

The Busan Forum produced meaningfulprogress on deepening the aideffectiveness agenda by making concretecommitments on transparency, ownershipand accountability, and predictability,among others. At the same time, it alsomarked a new beginning. Building on thefoundations laid in Monterrey, Rome,Paris and Accra, the Busan Forumrepresented a turning point in

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development cooperation by making animportant step forward in three ways.

First, it set broader global partnershipsfor effective development cooperation,providing an open platform that embracesdiverse modalities and approaches todevelopment. The outcome document,Busan Partnership for Effective DevelopmentCooperation, was the result of an inclusiveyear-long process of consultation with abroad range of governmental, civil societyand private sector actors in development.It set out common principles,commitments and actions for effectivecooperation in support of internationaldevelopment.

While respecting their differences andcomplementarities, all development actorsrepresented in Busan recognized that theywere all parts of a development agenda inwhich they participate on the basis ofcommon but differential commitments.Most notably, emerging economies, suchas China, India and Brazil, not onlyparticipated in the Busan Forum, but also

endorsed the Busan outcome document.They also agreed to engage in the Busanfollow-up process to shape the natureand working arrangements of the BusanPartnership. Moreover, active participationfrom civil society and the private sector’sexpanded engagement at the Forumprovided a firm basis for more inclusive,effective partnerships for development.

Second, the Busan Forum shifted theparadigm from ‘aid’ to ‘development’.Recognizing the catalytic role of aid toleverage other development resources,the participants put greater importanceon sustainable development results.Taking into account this shift, a numberof global initiatives or ‘Building Blocks’on core development challenges werelaunched at the Busan Forum to makefurther progress on the agreement of theBusan Partnership document on avoluntary basis.

Third, the Forum ushered in a new eraof systematic cooperation among globaldevelopment fora. Departing from the

previous development process led bydonor countries, the Forum demonstratedthat developing countries can and shouldtake the lead in setting the developmentagenda. The participants also recognizedthe role of the United Nations inenhancing effective developmentcooperation, and invited the UnitedNations Development Programme(UNDP), along with the Organization forEconomic Cooperation and Development(OECD), to work together in supportingthe effective functioning of the BusanPartnership. Given the UN’s universalconvening power and its field presence indeveloping countries, redefining the roleof the UN in advancing developmenteffectiveness will be an important issue fora global reflection and discussion.

Ensuring the effectiveness of all forms ofdevelopment cooperation is critical toachieve the MDGs by 2015 and promotesustainable development. The BusanPartnership will serve as a milestone forchange and progress towards this end. n

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By DOUGLAS COMRIE, Managing Director ofB&M Analysts, an organization that providesspecialized support services to drive sustainableindustrial development.

Developing countries face a challenge asthey strive to develop globally competitiveindustries: which industries should theypromote, what policies should they adopt,and what implementation mechanismswill make these policies most effective?

Industrial upgrading initiatives take anumber of potential forms, but onecommon factor seems to be the limitedsuccess in sustaining these initiatives. Thisis particularly problematic when oneconsiders that many funders typicallycommit to providing support over theshort to medium-term, while substantiveindustrial upgrading outcomes are onlylikely to be achieved in the medium tolong-term.

One potential solution to this problem isclustering, and an automotivemanufacturing cluster in South Africarepresents an interesting case study.

Five hundred and forty thousandvehicles were produced in South Africa in2011, of which 272,000 were exported. Thedomestic market is comparatively smalland fragmented, with seven localmanufacturers competing alongsideimports in a market of around 700,000

vehicles. The Southern AfricanDevelopment Community (SADC) marketis growing rapidly, but remainscomparatively small and largely open tothe import of inexpensive, used vehicles.While well-established manufacturingvalue chain competencies exist in SouthAfrica, levels of local content still lagbehind major developed, and emerging,automotive manufacturing economies. As a result, manufacturing costs are, atleast in part, negatively influenced by thelogistical costs associated with shippingparts to South Africa.

In response to these and relatedchallenges, in 2002 the DurbanAutomotive Cluster (DAC) was established,with the primary purpose of developingthe local automotive industry throughknowledge enhancements and enablingcollective efficiency via external scaleeconomies. Instituted as a public-privatepartnership (PPP) between localgovernment and local industry, the DACcurrently has the support of 35 automotivemanufacturing firms, representing over90% of all automotive manufacturingactivity in KwaZulu-Natal province.

The DAC set itself the strategic objectiveof doubling the size of the localautomotive manufacturing industry by2020. This objective is significant to bothpublic and private sector interests, as localmanufacturing value addition would reach€3bn, and total employment almost60,000. Five strategic focus areas wereidentified:l growth through enabling marketlinkages and attracting investment;l supporting increased localization ofparts and enhancing suppliercompetitiveness;l enabling skills development andsupporting improved skills retention;l improving infrastructure, and logisticalreliability and competitiveness;l empowering the greater economic

Enabling manufacturingcompetitiveness throughsustainable interventions

“The Durban AutomotiveCluster’s activities have had ameaningful impact on theindustry, and in particular, onits competitiveness.”


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participation of previously marginalizedpopulation groups.

The DAC is entering its eleventh year ofexistence, and its longevity is, to asignificant extent, a reflection of the corefounding principles. One of the mostimportant of these is strong leadership byindustry. While this should not detractfrom the value of the PPP, it should beacknowledged that industry leadershipserves to entrench industry commitment,ensure the validity of initiatives, andmaintain accountability in respect ofservice delivery.

The practical application of theclustering interventions implemented bythe DAC can be demonstrated by threeexamples:1) Recognizing that procurement-relateddecisions can either support or underminesupplier development, the DAC partneredwith a local tertiary education institutionto develop programmes in automotivepurchasing management. As of 2011, over100 people had qualified from theseprogrammes, representing a majormilestone in the professionalization of theprocurement function.2) To help develop vehicle makers’ suppliercompanies, the DAC implemented aninitiative that has brought ten directsuppliers together to provide support forthe development of 110 suppliercompanies further down the supply chain. 3) When member firms identified ashortage of skilled engineers as a commonproblem, the DAC established a modulargraduate programme in technical skillsdevelopment.

An evaluation of the effectiveness of theDAC is difficult because it was establishedat the same time as a change in ownershipof Toyota South Africa, which subsequentlylaunched a major export programme.Toyota South Africa is not only the largestvehicle manufacturer in South Africa, butalso the only major vehicle manufacturer

operating in this specific part of SouthAfrica, and it has undoubtedly had a majorimpact on the industry in respect of bothgrowth and performance improvement.

However, extremely impressive firm-level performance improvements incertain areas are evident in both thosesuppliers (direct and indirect) that supplyToyota South Africa and those that don’t,which indicates that the clusteringactivities of the DAC have had ameaningful impact on the industry, and inparticular, on its competitiveness.

The experience of the DAC suggests that asuccessful and sustainable clusteringmodel is dependent on a range of keyprinciples, the most fundamental of whichare:lPartnership: a balance between privatesector and public sector objectives andinterests needs to be maintained, with thisprinciple applicable to goals, commitment,time, and funding;l Industry leadership and ownership: thisenables higher levels of commitment fromindustry and ensures validity of clusterinitiatives;lTrust relations: clustering represents apartnership between the public and privatesector that is enabled by cluster facilitators.Transparency, reliability andaccountability are important in therelationships that exist between thevarious parties; lConsistency and credibility: a cluster’scredibility is enabled through reliable andconsistent delivery, with this taking placewithin a framework of defined objectives,transparent leadership and strong trustrelations;l Flexibility: the ability to adapt tochanging external factors is important and,as such, a cluster should be able to adapt toemerging industry threats andopportunities, while keeping within aframework that maintains credibility andaccountability. n


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Looking ahead to the next issue of Making It,which focuses on youth perspectives on globalindustrial development, the Carbon Trustunveils new research that shows Asia's youngadults most likely to favour brands that reducetheir carbon emissions.

A new study from the Carbon Trust revealsa divide between Generation Y's attitude tocarbon reduction in the East and West.The study, which questioned over 2,500young people aged 18-25, across fivecontinents in Brazil, China, South Africa,the Republic of Korea, the UnitedKingdom and the United States ofAmerica, sought to understand whethertomorrow’s consumers are concernedabout climate change and will favourbrands that reduce their carbonemissions.

The research, which was commissionedby the Carbon Trust and conducted byTNS, reveals that Generation Y in China isleading the call for brands to reduce theirimpact on the environment. Eighty-threepercent of young people questioned inChina say they would be more loyal to abrand if they could see it was reducing itscarbon footprint, compared to 73% in theRepublic of Korea, 57% in the USA and55% in the UK. Sixty percent of Chineseyoung adults who participated in theresearch say they would stop buying aproduct if its manufacturer refused tocommit to measuring and reducing itscarbon footprint, followed by 57% inBrazil, 53% in Korea, and 36% and 35% inthe UK and US respectively.

Tom Delay, Chief Executive of theCarbon Trust, comments, “These newfindings are startling. Sixty percent ofyoung adults questioned in China would

stop buying a product if its manufacturerrefused to commit to measuring andreducing its carbon footprint, compared tojust 35% of those in the US. Perhaps it isthe Chinese, and not the US consumer,that really holds the key to unlocking themass demand for the new low carbonproducts necessary to deliver anenvironmentally sustainable economy. Ifglobal brands don’t build internationalcarbon reduction strategies even faster,they risk missing out on the spendingpower of emerging economies.”

There is also evidence that young adultswant brands to be clearly accountable fortheir action on carbon. Eighty-one percentof those questioned in Brazil saidcompanies should be obliged to provideproof of their policy to reduce their carbonfootprint, higher than any other nation.Sixty-eight percent of those surveyedworldwide want to see companies' carbonimpact quantified by an independentorganization. This is highest in China at84% and lowest in the USA at 55%. Acrossall the markets, on average a third of youngconsumers (33%) say they are prepared tobuy a more expensive product if it has alower carbon footprint.

When asked which products andcategories can do the most to reduce theircarbon footprint, 68% of young consumerscited consumer electronics companies inthe top three, followed by consumerhealthcare brands (50%), clothesmanufacturers and retailers (50%), andfood manufacturers and retailers (48%). lThe research was conducted online by TNSbetween February 24th and March 6th 2012.The Carbon Trust is a not-for-profit group withthe mission to accelerate the move to a low-carbon economy.

Climate concern rises in the East

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“The survey of consumersaged 18-25 in China, theRepublic of Korea, SouthAfrica, Brazil, the USA and theUK reveals a divide betweenattitudes to carbon reductionin the East and West.”

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Attitudes to industry

MakingIt 47

Bassey, Nnimmo – To Cook a Continent: DestructiveExtraction and Climate Crisis in Africa

Farmer, Paul – Pathologies of Power: Health, HumanRights, and the New War on the Poor

Hayton, Bill – Vietnam: Rising DragonKenny, Charles – Getting Better: Why Global

Development Is Succeeding – And How We CanImprove the World Even More

Kent, George – Ending Hunger WorldwideLawrence, Felicity – Eat Your Heart Out: Why the food

business is bad for the planet and your healthLeisinger, Klaus – The Role of Corporations in Shaping

Globalization with a Human Face, in Straus J. (ed),The Role of Law and Ethics in the GlobalizedEconomy

Nair, Chandran – Consumptionomics: Asia’s Role inReshaping Capitalism and Saving the Planet

Nestle, Marion – Food Politics: How the Food IndustryInfluences Nutrition and Health

Schwartz, Beverly – Rippling: How Social EntrepreneursSpread Innovation Throughout the World

Vierra, Brian and Vierra, Kimberly – Vietnam BusinessGuide: Getting Started in Tomorrow’s Market Today

d-rev.org – D-Rev is a non-profit technology incubatorwhose mission is to improve the health and incomesof people living on less than US$4 per day.

worldbank.org/ggfr – The World Bank’s Global GasFlaring Reduction public-private partnership.

www.chinadialogue.net – A platform that createscommunication across barriers of language andculture on environment and climate change, toinform, educate and build a global consensus forequitable, constructive and implementable solutions.

www.cleanclothes.org – The Clean Clothes Campaign isan alliance of organizations in 15 Europeancountries. Members include trade unions and non-governmental organizations.

www.cseindia.org – The Centre for Science andEnvironment is a public interest research andadvocacy organization based in New Delhi.

www.eraction.org – Environmental Rights Action is aNigerian advocacy group dedicated to the defence ofthe human ecosystem in terms of human rights.

www.global-inst.com – The Global Institute ForTomorrow (GIFT) is an independent pan-Asian think-and do-tank.

www.novartisfoundation.org – A non-profit-basedorganization that forms part of the corporateresponsibility portfolio of the multinationalpharmaceutical company, Novartis.

www.srfood.org – Website of Olivier De Schutter, UnitedNations Special Rapporteur on the Right to Food.

www.unglobalcompact.org – A strategic policy initiativefor businesses that are committed to aligning theiroperations and strategies with fundamentalprinciples in the areas of human rights, labour, theenvironment and anti-corruption.


FURTHER READING

FURTHER SURFING

Top four products and categories which young adultsthink can do more to reduce their carbon footprints

Consumer electronics

68% thought theycould do more

Consumer healthcare brands50% thought they

could do more

Clothesmanufacturers and

retailers50% thought they

could do more

Food manufacturers and

retailers48% thought they

could do more

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Making It: Industry for Development (#10)